# EDGAR Filing Document

**Accession Number:** 0001845809
**File Stem:** 0001193125-25-174220
**Filing Date:** 2025-8
**Character Count:** 3530298
**Document Hash:** e6379c439f48e4c5934c5af983bca8fa
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001193125-25-174220.hdr.sgml**: 20250806

**ACCESSION NUMBER**: 0001193125-25-174220

**CONFORMED SUBMISSION TYPE**: N-14/A

**PUBLIC DOCUMENT COUNT**: 25

**FILED AS OF DATE**: 20250806

**DATE AS OF CHANGE**: 20250806

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Putnam ETF Trust
- **CENTRAL INDEX KEY:** 0001845809

**ORGANIZATION NAME:**
- **EIN:** 000000000
- **STATE OF INCORPORATION:** DE

**FILING VALUES:**
- **FORM TYPE:** N-14/A
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 333-288406
- **FILM NUMBER:** 251188592

**BUSINESS ADDRESS:**
- **STREET 1:** 100 FEDERAL STREET
- **CITY:** BOSTON
- **STATE:** MA
- **ZIP:** 02111
- **BUSINESS PHONE:** 6177601060

**MAIL ADDRESS:**
- **STREET 1:** 100 FEDERAL STREET
- **CITY:** BOSTON
- **STATE:** MA
- **ZIP:** 02111
**CENTRAL INDEX KEY**: 0001845809

**CENTRAL INDEX KEY**: 0000711402

**CENTRAL INDEX KEY**: 0001845809

**CENTRAL INDEX KEY**: 0000794615

**CENTRAL INDEX KEY**: 0001845809

**CENTRAL INDEX KEY**: 0000205802

**CENTRAL INDEX KEY**: 0001845809

**CENTRAL INDEX KEY**: 0000771951

**CENTRAL INDEX KEY**: 0001845809

**CENTRAL INDEX KEY**: 0000719712

**CENTRAL INDEX KEY**: 0001845809

**CENTRAL INDEX KEY**: 0001005942

**CENTRAL INDEX KEY**: 0001845809

**CENTRAL INDEX KEY**: 0000792288

**CENTRAL INDEX KEY**: 0001845809

**CENTRAL INDEX KEY**: 0000794612

**CENTRAL INDEX KEY**: 0001845809

**CENTRAL INDEX KEY**: 0000857463

**CENTRAL INDEX KEY**: 0001845809

**CENTRAL INDEX KEY**: 0000794616

## Series and Classes Contracts Data

### Franklin California Municipal Income ETF (Series ID: S000094549)

| Class ID   | Class Name                               | Ticker Symbol   |
|:---|:---|:---|
| C000263082 | Franklin California Municipal Income ETF |  |

### PUTNAM CALIFORNIA TAX EXEMPT INCOME TRUST (Series ID: S000005498)

| Class ID   | Class Name      | Ticker Symbol   |
|:---|:---|:---|
| C000014969 | Class A Shares  | PCTEX           |
| C000014971 | Class C Shares  | PCTCX           |
| C000060520 | CLASS Y         |  |
| C000202778 | Class R6 Shares |  |

### Franklin Pennsylvania Municipal Income ETF (Series ID: S000094550)

| Class ID   | Class Name                                 | Ticker Symbol   |
|:---|:---|:---|
| C000263083 | Franklin Pennsylvania Municipal Income ETF |  |

### PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND (Series ID: S000006567)

| Class ID   | Class Name      | Ticker Symbol   |
|:---|:---|:---|
| C000017915 | Class A Shares  | PTEPX           |
| C000039842 | Class C Shares  |  |
| C000060576 | CLASS Y         |  |
| C000202936 | Class R6 Shares |  |

### Franklin Municipal Income ETF (Series ID: S000094551)

| Class ID   | Class Name                    | Ticker Symbol   |
|:---|:---|:---|
| C000263084 | Franklin Municipal Income ETF |  |

### PUTNAM TAX EXEMPT INCOME FUND (Series ID: S000006568)

| Class ID   | Class Name      | Ticker Symbol   |
|:---|:---|:---|
| C000017917 | Class C Shares  |  |
| C000017918 | Class A Shares  | PTAEX           |
| C000060417 | CLASS Y         |  |
| C000202806 | Class R6 Shares |  |

### Franklin Municipal High Yield ETF (Series ID: S000094552)

| Class ID   | Class Name                        | Ticker Symbol   |
|:---|:---|:---|
| C000263085 | Franklin Municipal High Yield ETF |  |

### Putnam Tax-Free High Yield Fund (Series ID: S000003861)

| Class ID   | Class Name      | Ticker Symbol   |
|:---|:---|:---|
| C000010821 | Class C Shares  |  |
| C000010822 | Class A Shares  | PTHAX           |
| C000060536 | CLASS Y         |  |
| C000202841 | Class R6 Shares |  |

### Franklin New York Municipal Income ETF (Series ID: S000094553)

| Class ID   | Class Name                             | Ticker Symbol   |
|:---|:---|:---|
| C000263086 | Franklin New York Municipal Income ETF |  |

### PUTNAM NEW YORK TAX EXEMPT INCOME FUND (Series ID: S000006345)

| Class ID   | Class Name      | Ticker Symbol   |
|:---|:---|:---|
| C000017441 | Class C Shares  |  |
| C000017443 | Class A Shares  | PTEIX           |
| C000060413 | CLASS Y         |  |
| C000202782 | Class R6 Shares |  |

### Franklin Short-Term Municipal Income ETF (Series ID: S000094554)

| Class ID   | Class Name                               | Ticker Symbol   |
|:---|:---|:---|
| C000263087 | Franklin Short-Term Municipal Income ETF |  |

### Putnam Short-Term Municipal Income Fund (Series ID: S000039833)

| Class ID   | Class Name      | Ticker Symbol   |
|:---|:---|:---|
| C000123516 | CLASS A         |  |
| C000123518 | CLASS C         |  |
| C000123520 | CLASS Y         |  |
| C000202822 | Class R6 Shares |  |

### Franklin Massachusetts Municipal Income ETF (Series ID: S000094555)

| Class ID   | Class Name                                  | Ticker Symbol   |
|:---|:---|:---|
| C000263088 | Franklin Massachusetts Municipal Income ETF |  |

### PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND (Series ID: S000006210)

| Class ID   | Class Name      | Ticker Symbol   |
|:---|:---|:---|
| C000017118 | Class C Shares  |  |
| C000017120 | Class A Shares  | PXMAX           |
| C000060571 | CLASS Y         |  |
| C000202927 | Class R6 Shares |  |

### Franklin Minnesota Municipal Income ETF (Series ID: S000094556)

| Class ID   | Class Name                              | Ticker Symbol   |
|:---|:---|:---|
| C000263089 | Franklin Minnesota Municipal Income ETF |  |

### PUTNAM MINNESOTA TAX EXEMPT INCOME FUND II (Series ID: S000006218)

| Class ID   | Class Name      | Ticker Symbol   |
|:---|:---|:---|
| C000017144 | Class A Shares  | PXMNX           |
| C000039836 | Class C Shares  |  |
| C000060573 | CLASS Y         |  |
| C000202929 | Class R6 Shares |  |

### Franklin New Jersey Municipal Income ETF (Series ID: S000094557)

| Class ID   | Class Name                               | Ticker Symbol   |
|:---|:---|:---|
| C000263090 | Franklin New Jersey Municipal Income ETF |  |

### PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND (Series ID: S000006252)

| Class ID   | Class Name      | Ticker Symbol   |
|:---|:---|:---|
| C000017198 | Class A Shares  | PTNJX           |
| C000039838 | Class C Shares  |  |
| C000060575 | CLASS Y         |  |
| C000202931 | Class R6 Shares |  |

### Franklin Ohio Municipal Income ETF (Series ID: S000094558)

| Class ID   | Class Name                         | Ticker Symbol   |
|:---|:---|:---|
| C000263091 | Franklin Ohio Municipal Income ETF |  |

### PUTNAM OHIO TAX EXEMPT INCOME FUND II (Series ID: S000006390)

| Class ID   | Class Name      | Ticker Symbol   |
|:---|:---|:---|
| C000017547 | Class A Shares  | PXOHX           |
| C000039840 | Class C Shares  |  |
| C000060574 | CLASS Y         |  |
| C000202934 | Class R6 Shares |  |

**As filed with the U.S. Securities and Exchange Commission on August 6, 2025** 

**Securities Act File No. 333-288406** 

**UNITED STATES** 

**SECURITIES AND EXCHANGE COMMISSION** 

**Washington, D.C. 20549** 

**FORM N-14** 

**REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933** 

---

| | |
|:---|:---|
| **Pre-Effective Amendment No.** | **[ ]** |
| **Post-Effective Amendment No. 2** | **[ X ]** |

---

**PUTNAM ETF TRUST** 

**(Exact Name of Registrant as Specified in Charter)** 

**100 Federal Street** 

**Boston, MA 02110** 

**(Address of Principal Executive Offices) (Zip Code)** 

**Registrant's telephone number, including area code: (617) 292-1000**

---

| | | |
|:---|:---|:---|
| **Name and address of agent for service:** | **Copy to:** |  |
| **Stephen J. Tate, Vice President** | **Bryan Chegwidden, Esq.** | **James E. Thomas, Esq.** |
| **Putnam Funds Trust** | **Ropes & Gray LLP** | **Ropes & Gray LLP** |
| **100 Federal Street** | **1211 Avenue of the Americas** | **800 Boylston Street** |
| **Boston, Massachusetts 02110** | **New York, New York 10036** | **Boston, Massachusetts 02199** |

---

**Title of Securities Being Registered:** 

Shares of Beneficial Interest, no par value, of Franklin California Municipal Income ETF, Franklin Massachusetts Municipal Income ETF, Franklin Minnesota Municipal Income ETF, Franklin Municipal High Yield ETF, and Franklin Municipal Income ETF, Franklin New Jersey Municipal Income ETF, Franklin New York Municipal Income ETF, Franklin Ohio Municipal Income ETF, Franklin Pennsylvania Municipal Income ETF, and Franklin Short-Term Municipal Income ETF, each a series of the Registrant.

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

The Registrant hereby amends the Registration Statement to delay its effective date until the Registrant shall file a further amendment that specifically states that the Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to Section 8(a), may determine.

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 California Tax Exempt Income Fund**<br> **Putnam Massachusetts Tax Exempt Income Fund**<br> **Putnam Minnesota Tax Exempt Income Fund**<br> **Putnam New Jersey Tax Exempt Income Fund**<br> **Putnam New York Tax Exempt Income Fund**<br> **Putnam Ohio Tax Exempt Income Fund**<br> **Putnam Pennsylvania Tax Exempt Income Fund**<br> **Putnam Short-Term Municipal Income Fund**<br> **Putnam Tax Exempt Income Fund**<br> **Putnam Tax-Free High Yield Fund** | (president photo) (chair photo) |

---

**August 7, 2025** 

Dear Fellow Shareholder:

We are writing to inform you about a transaction that will affect your investment in one or more of Putnam California Tax Exempt Income Fund, 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 Short-Term Municipal Income Fund, Putnam Tax Exempt Income Fund, and Putnam Tax-Free High Yield Fund (each, a "Target Fund" and collectively, the "Target Funds").

We are sending this combined prospectus/information statement (the "Prospectus/Information Statement") to you because you are a shareholder of a Target Fund. Each Target Fund currently operates as a mutual fund. Each Target Fund will be converted into an exchange-traded fund (an "ETF") through the merger of the Target Fund with and into a newly-created ETF formed for this purpose (each such ETF, an "Acquiring ETF" and collectively, the "Acquiring ETFs"). Following each merger, the applicable Target Fund will be liquidated (each such merger and liquidation, a "Merger", and collectively, the "Mergers"). The table below sets forth the Target Fund and corresponding Acquiring ETF for each Merger.

---

| | | |
|:---|:---|:---|
| **Target Fund** |  | **Acquiring ETF** |
| Putnam California Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin California Municipal Income ETF |
| Putnam Massachusetts Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Massachusetts Municipal Income ETF |
| Putnam Minnesota Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Minnesota Municipal Income ETF |
| Putnam New Jersey Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin New Jersey Municipal Income ETF |
| Putnam New York Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin New York Municipal Income ETF |
| Putnam Ohio Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Ohio Municipal Income ETF |
| Putnam Pennsylvania Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Pennsylvania Municipal Income ETF |
| Putnam Short-Term Municipal Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Short-Term Municipal Income ETF |
| Putnam Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Municipal Income ETF |
| Putnam Tax-Free High Yield Fund | ![LOGO](g91160g01a01.jpg) | Franklin Municipal High Yield ETF |

---

------

Each Acquiring ETF is a newly created series of Putnam ETF Trust, a Delaware statutory trust (the "ETF Trust"), that has the same investment objective, investment policies, investment strategies, and portfolio management team as the corresponding Target Fund and substantially similar principal risks (except that the Acquiring ETF is also subject to risks related to its ETF structure). Franklin Advisers, Inc. ("Franklin Advisers" or the "Investment Manager") serves as investment manager to each Target Fund and each Acquiring ETF.

The Mergers will be conducted pursuant to an Agreement and Plan of Reorganization (the "Plan"). The Plan, which is by and among each Target Fund, the ETF Trust, on behalf of each Acquiring ETF, and Franklin Advisers (solely with respect to Section 5(a)), provides for: (i) the acquisition of the assets and assumption of the liabilities of each Target Fund (in each case, following the redemption of any Target Fund shares as is necessary so that each Target Fund shareholder will receive a whole number of Acquiring ETF shares in connection with the Merger) by the corresponding Acquiring ETF in exchange for shares of such Acquiring ETF having an aggregate net asset value equal to the value of such Target Fund shares (following the redemption of any Target Fund shares); (ii) the *pro rata* distribution of such Acquiring ETF shares to the shareholders of the applicable Target Fund, and (iii) the complete liquidation and dissolution of each Target Fund, all upon the terms and conditions set forth in the Plan. The Plan has been filed as an exhibit to each Acquiring ETF's Registration Statement on Form N-14 of which the Prospectus/Information Statement is a part. Each Merger is expected to qualify as a tax-free reorganization under the U.S. Internal Revenue Code of 1986, as amended.

In connection with the Mergers, shareholders who hold their shares of a Target Fund through a brokerage account that can accept shares of an ETF will receive ETF shares of the corresponding Acquiring ETF equal in value to their investment in the Target Fund (following the redemption of any Target Fund shares). As discussed further below, some shareholders may need to take additional action in order to receive shares of an Acquiring ETF in connection with the Mergers. However, the Mergers will not dilute the value of your investment. Cash payments received in redemption of Target Fund shares will be taxable for shareholders who hold shares in a taxable account.

The Trustees of your fund have carefully reviewed the terms of the Mergers and determined unanimously to approve each Merger. Each Merger is currently expected to occur in the fourth quarter of 2025, though any Merger may be delayed. **Shareholder approval of each Merger is not required. This Prospectus/Information Statement is for informational purposes only, and you do not need to do anything in response to receiving it except to confirm whether you have a brokerage account that can accept shares of an ETF and to consider opening such an account, if needed. We are not asking you for a proxy, and you are requested not to send a proxy**.

Details regarding the terms of each Merger, and its potential benefits and costs to shareholders, are discussed in the Prospectus/Information Statement, which we urge you to review carefully. If you have questions about the Mergers, please call a customer service representative at 1-800-225-1581 or contact your financial advisor.

Sincerely yours,

(signature) Robert L. Reynolds President, The Putnam Funds (signature) Barbara M. Baumann, Chair Board of Trustees The Putnam Funds

------

Prospectus/Information Statement

**August 6, 2025** 

Acquisition of the assets and assumption of the liabilities of

Putnam California Tax Exempt Income Fund

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 Short-Term Municipal Income Fund

Putnam Tax Exempt Income Fund

Putnam Tax-Free High Yield Fund

100 Federal Street

Boston, Massachusetts 02110

1-617-292-1000

by and in exchange for shares of

Franklin California Municipal Income ETF

Franklin Massachusetts Municipal Income ETF

Franklin Minnesota Municipal Income ETF

Franklin New Jersey Municipal Income ETF

Franklin New York Municipal Income ETF

Franklin Ohio Municipal Income ETF

Franklin Pennsylvania Municipal Income ETF

Franklin Short-Term Municipal Income ETF

Franklin Municipal Income ETF

Franklin Municipal High Yield ETF

100 Federal Street

Boston, Massachusetts 02110

1-617-292-1000

------

This combined prospectus/information statement ("Prospectus/Information Statement") is an information statement for each Target Fund (as defined below) and a prospectus for each Acquiring ETF (as defined below). The Prospectus/Information Statement relates to the upcoming merger of each Target Fund with and into the respective Acquiring ETF (each, a "Merger" and collectively, the "Mergers"). The table below sets forth the Target Fund and corresponding Acquiring ETF for each Merger.

---

| | | |
|:---|:---|:---|
| **Target Fund** |  | **Acquiring ETF** |
| Putnam California Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin California Municipal Income ETF |
| Putnam Massachusetts Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Massachusetts Municipal Income ETF |
| Putnam Minnesota Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Minnesota Municipal Income ETF |
| Putnam New Jersey Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin New Jersey Municipal Income ETF |
| Putnam New York Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin New York Municipal Income ETF |
| Putnam Ohio Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Ohio Municipal Income ETF |
| Putnam Pennsylvania Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Pennsylvania Municipal Income ETF |
| Putnam Short-Term Municipal Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Short-Term Municipal Income ETF |
| Putnam Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Municipal Income ETF |
| Putnam Tax-Free High Yield Fund | ![LOGO](g91160g01a01.jpg) | Franklin Municipal High Yield ETF |

---

In each Merger, each shareholder of a Target Fund will receive shares of the respective Acquiring ETF having an aggregate net asset value equal to the value of such Target Fund shares at the date of the exchange (following the redemption of any Target Fund shares as is necessary so that the Target Fund shareholder will receive a whole number of Acquiring ETF shares). The Prospectus/Information Statement, which you should read carefully and retain for future reference, sets forth concisely the information you should know about the Mergers and investing in each Acquiring ETF.

**SHAREHOLDER APPROVAL OF EACH MERGER IS NOT REQUIRED. THIS PROSPECTUS/INFORMATION STATEMENT IS FOR INFORMATIONAL PURPOSES ONLY, AND YOU DO NOT NEED TO DO ANYTHING IN RESPONSE TO RECEIVING IT EXCEPT TO CONFIRM WHETHER YOU HAVE A BROKERAGE ACCOUNT THAT CAN ACCEPT SHARES OF AN ETF AND TO CONSIDER OPENING SUCH AN ACCOUNT, IF NEEDED. WE ARE NOT ASKING YOU FOR A PROXY, AND YOU ARE REQUESTED NOT TO SEND A PROXY**.

The terms and conditions of each Merger are further described in this Prospectus/Information Statement and are set forth in the form of Agreement and Plan of Reorganization (the "Plan").

With respect to each Target Fund and Acquiring ETF (each, a "Fund"), the board of trustees of the Funds (the "Board," "Board of Trustees," or "Trustees") unanimously approved the Merger and Plan and determined that participation in the applicable Merger is in the best interests of each Fund and that the interests of existing Fund shareholders will not be diluted as a result of the Merger.

Each Target Fund and each Acquiring ETF is a series of a registered, open-end management investment company, although each Target Fund operates as a mutual fund while each Acquiring ETF will operate as an exchange-traded fund ("ETF"). Each Acquiring ETF is a newly organized series of the ETF Trust (as defined below) and currently has no assets or liabilities. Each Acquiring ETF has been created specifically in connection with the applicable Merger for the purpose of acquiring the assets and assuming the liabilities of the corresponding Target Fund and will not commence operations until the closing date of the Merger. Each Target Fund will be the accounting and performance survivor in its respective

------

Merger, and each Acquiring ETF, as the corporate survivor in the Merger, will adopt the accounting and performance history of Class R6 shares of the corresponding Target Fund.

In order to transact in shares of an Acquiring ETF received as part of a Merger, you must hold your Target Fund shares in a brokerage account that can hold shares of an ETF. If Target Fund shareholders do not hold their shares of a Target Fund through a brokerage account that can hold shares of an ETF, the Acquiring ETF shares they receive as part of a Merger will be held by a transfer agent of the applicable Acquiring ETF as agent for and for the benefit of such Target Fund shareholders for up to nine months. After the expiration of this period, if such Target Fund shareholders have not established an appropriate account to hold the shares and informed the transfer agent of the applicable Acquiring ETF of the new account, the Acquiring ETF shares will be liquidated and the proceeds sent to each such Target Fund shareholder at the shareholder's last address of record at the transfer agent of the Acquiring ETF. This Prospectus/Information Statement includes additional information on the actions that Target Fund shareholders that do not currently hold their Target Fund shares through a brokerage account that can hold shares of an ETF must take in order to transact in shares of an Acquiring ETF as part of a Merger.

The following documents have been filed with the Securities and Exchange Commission (the "SEC") and are incorporated into this Prospectus/Information Statement by reference:

- the statement of additional information relating to this Prospectus/Information Statement, dated August 6, 2025 (the "Merger SAI");

- [the prospectus and statement of additional information of Putnam California Tax Exempt Income Fund, dated January 30, 2025, as supplemented (File Nos. 811-03630 and 002-81011)](http://www.sec.gov/Archives/edgar/data/711402/000092881625000144/a2_put2501027pro.htm);

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam California Tax Exempt Income Fund's Form N-CSR for the fiscal year ended September 30, 2024 (File No. 811-03630)](http://www.sec.gov/Archives/edgar/data/711402/000092881624001969/a2_tsr-20240930.htm); <br>

[the unaudited financial highlights and financial statements included in Putnam California Tax Exempt Income Fund's Form N-CSRS for the six-month period ended March 31, 2025 (File No. 811-03630)](http://www.sec.gov/Archives/edgar/data/711402/000092881625000656/a2_tsr-20250331.htm); <br>

- [the prospectus and statement of additional information of Putnam Massachusetts Tax Exempt Income Fund, dated September 30, 2024, as supplemented (File Nos. 811-04518 and 33-5416)](http://www.sec.gov/Archives/edgar/data/792288/000092881624001564/a2_put2409teifpro.htm);

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Massachusetts Tax Exempt Income Fund's Form N-CSR for the fiscal year ended May 31, 2025 (File No. 811-04518)](http://www.sec.gov/Archives/edgar/data/../../../ix?doc=/Archives/edgar/data/792288/000113322825007791/pmteif-efp16628_ncsr.htm); <br>

- [the prospectus and statement of additional information of Putnam Minnesota Tax Exempt Income Fund, dated September 30, 2024, as supplemented (File Nos. 811-04527 and 33-8916)](http://www.sec.gov/Archives/edgar/data/792288/000092881624001564/a2_put2409teifpro.htm);

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Minnesota Tax Exempt Income Fund's Form N-CSR for the fiscal year ended May 31, 2025 (File No. 811-04527)](http://www.sec.gov/Archives/edgar/data/../../../ix?doc=/Archives/edgar/data/794612/000113322825007776/pmteif-efp16631_ncsr.htm); <br>

------

- [the prospectus and statement of additional information of Putnam New Jersey Tax Exempt Income Fund, dated September 30, 2024, as supplemented (File Nos. 811-05977 and 33-32550)](http://www.sec.gov/Archives/edgar/data/792288/000092881624001564/a2_put2409teifpro.htm);

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam New Jersey Tax Exempt Income Fund's Form N-CSR for the fiscal year ended May 31, 2025 (File No. 811-05977)](http://www.sec.gov/Archives/edgar/data/../../../ix?doc=/Archives/edgar/data/0000857463/000113322825007781/pnjteif-efp16634_ncsr.htm); <br>

- [the prospectus and statement of additional information of Putnam New York Tax Exempt Income Fund, dated March 31, 2025, as supplemented (File Nos. 811-03741 and 002-83909)](http://www.sec.gov/Archives/edgar/data/719712/000092881625000422/a2_put2503030pro.htm);

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam New York Tax Exempt Income Fund's Form N-CSR for the fiscal year ended November 30, 2024 (File No. 811-03741)](http://www.sec.gov/Archives/edgar/data/719712/000092881625000157/tsr-20241130.htm); <br>

[-](http://www.sec.gov/Archives/edgar/data/719712/000113322825007764/pnyteif-efp16652_ncsrs.htm) [the unaudited financial highlights and financial statements included in Putnam New York Tax Exempt Income Fund's Form N-CSRS for the six-month period ended May 31, 2025 (File No. 811-03741);](http://www.sec.gov/Archives/edgar/data/719712/000113322825007764/pnyteif-efp16652_ncsrs.htm) 

- [the prospectus and statement of additional information of Putnam Ohio Tax Exempt Income Fund, dated September 30, 2024, as supplemented (File Nos. 811-04528 and 33-8924)](http://www.sec.gov/Archives/edgar/data/792288/000092881624001564/a2_put2409teifpro.htm);

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Ohio Tax Exempt Income Fund's Form N-CSR for the fiscal year ended May 31, 2025 (File No. 811-04528);](http://www.sec.gov/Archives/edgar/data/../../../ix?doc=/Archives/edgar/data/0000794616/000113322825007783/poteif-efp16637_ncsr.htm) <br>

- [the prospectus and statement of additional information of Putnam Pennsylvania Tax Exempt Income Fund, dated September 30, 2024, as supplemented (File Nos. 811-05802 and 33-28321)](http://www.sec.gov/Archives/edgar/data/792288/000092881624001564/a2_put2409teifpro.htm);

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Pennsylvania Tax Exempt Income Fund's Form N-CSR for the fiscal year ended May 31, 2025 (File No. 811-05802)](http://www.sec.gov/Archives/edgar/data/../../../ix?doc=/Archives/edgar/data/794615/000113322825007779/ppteif-efp16640_ncsr.htm); <br>

[the prospectus and statement of additional information of Putnam Funds Trust on behalf of Putnam Short-Term Municipal Income Fund, dated March 31, 2025, as supplemented (File Nos. 811-07513 and 333-00515)](http://www.sec.gov/Archives/edgar/data/1005942/000092881625000425/0000928816-25-000425-index.html); <br>

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Short-Term Municipal Income Fund's Form N-CSR for the fiscal year ended November 30, 2024 (File No. 811-07513)](http://www.sec.gov/Archives/edgar/data/1005942/000092881625000158/a2_tsr-20241130.htm); <br>

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- [the prospectus and statement of additional information of Putnam Tax Exempt Income Fund, dated January 30, 2025, as supplemented (File Nos. 811-02675 and 002-57165)](http://www.sec.gov/Archives/edgar/data/205802/000092881625000127/a2_put2501011pro.htm);

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Tax Exempt Income Fund's Form N-CSR for the fiscal year ended September 30, 2024 (File No. 811-02675)](http://www.sec.gov/Archives/edgar/data/205802/000092881624001971/tsr-20240930.htm); <br>

[the unaudited financial highlights and financial statements included in Putnam Short-Term Municipal Income Fund's Form N-CSRS for the six-month period ended May 31, 2025 (File No. 811-07513)](http://www.sec.gov/Archives/edgar/data/1005942/000113322825007768/pstmif-efp16649_ncsrs.htm); <br>

- [the unaudited financial highlights and financial statements included in Putnam Tax Exempt Income Fund's Form N-CSRS for the six-month period ended March 31, 2025 (File No. 811-02675)](http://www.sec.gov/Archives/edgar/data/205802/000092881625000658/tsr-20250331.htm);

[the prospectus and statement of additional information of Putnam Tax Free Income Trust on behalf of Putnam Tax-Free High Yield Fund, dated November 30, 2024, as supplemented (File Nos. 811-04345 and 002-98790)](http://www.sec.gov/Archives/edgar/data/771951/000092881624001993/a2_tfit.htm); <br>

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Tax-Free High Yield Fund's Form N-CSR for the fiscal year ended July 31, 2024 (File No. 811-04345)](http://www.sec.gov/Archives/edgar/data/771951/000092881624001596/tsr-20240731.htm); and <br>

- [the unaudited financial highlights and financial statements included in Putnam Tax-Free High Yield Fund's Form N-CSRS for the six-month period ended January 31, 2025 (File No. 811-04345)](http://www.sec.gov/Archives/edgar/data/771951/000092881625000419/tsr-20250131.htm).

Shareholders may obtain free copies of the Merger SAI or any other document incorporated by reference into this Prospectus/Information Statement without charge by visiting www.franklintempleton.com, by calling Putnam Investor Services toll-free at 1-800-225-1581, or by emailing Putnam at funddocuments@putnam.com. This information may also be obtained by contacting the SEC, as described below.

This Prospectus/Information Statement will give you information about the 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 us at 1-800-225-1581 or call your financial advisor.

Each Fund is 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 reports, this Prospectus/Information Statement, 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.

**THE SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS/INFORMATION STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.** 

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**SHARES OF EACH ACQUIRING ETF 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.** 

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**Table of Contents** 

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| | |
|:---|:---|
| **[I. Questions and Answers Regarding the Mergers](#pro91160_1)** | **10** |
| **[II. Comparison of Some Important Features of the Funds](#pro91160_2)** | **18** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Merger 1: Putnam California Tax Exempt Income Fund into Franklin California Municipal Income ETF](#pro91160_3)** | **18** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Merger 2: Putnam Massachusetts Tax Exempt Income Fund into Franklin Massachusetts Municipal Income ETF](#pro91160_4)** | **25** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Merger 3: Putnam Minnesota Tax Exempt Income Fund into Franklin Minnesota Municipal Income ETF](#pro91160_5)** | **32** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Merger 4: Putnam New Jersey Tax Exempt Income Fund into Franklin New Jersey Municipal Income ETF](#pro91160_6)** | **39** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Merger 5: Putnam New York Tax Exempt Income Fund into Franklin New York Municipal Income ETF](#pro91160_7)** | **46** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Merger 6: Putnam Ohio Tax Exempt Income Fund into Franklin Ohio Municipal Income ETF](#pro91160_8)** | **53** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Merger 7: Putnam Pennsylvania Tax Exempt Income Fund into Franklin Pennsylvania Municipal Income ETF](#pro91160_9)** | **60** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Merger 8: Putnam Short-Term Municipal Income Fund into Franklin Short-Term Municipal Income ETF](#pro91160_10)** | **67** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Merger 9: Putnam Tax Exempt Income Fund into Franklin Municipal Income ETF](#pro91160_11)** | **74** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Merger 10: Putnam Tax-Free High Yield Fund into Franklin Municipal High Yield ETF](#pro91160_12)** | **80** |
| **[III. Comparison of Other Key Features of the Funds](#pro91160_13)** | **87** |
| **[IV. Risk Factors](#pro91160_14)** | **90** |
| **[V. Information about the Mergers](#pro91160_15)** | **97** |
| **[VI. Additional Information about the Acquiring ETFs](#pro91160_16)** | **114** |
| **[VII. Other Information](#pro91160_17)** | **126** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Appendix A — Form of Agreement and Plan of Reorganization](#pro91160_18)** | **A-1** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Appendix B — Fundamental and Non-Fundamental Investment Restrictions](#pro91160_19)** | **B-1** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Appendix C — Index Provider Descriptions](#pro91160_20)** | **C-1** |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **[Appendix D — Description of Principal Risks](#pro91160_21)** | **D-1** |

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**I.** **QUESTIONS AND ANSWERS REGARDING THE MERGERS** 

**The responses to the questions that follow provide an overview of key points typically of interest to shareholders regarding a mutual fund merger. These responses are qualified in their entirety by the remainder of this Prospectus/Information Statement, which contains additional information and further details about the Mergers.** 

**WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY** 

***1. What is happening?***

You are receiving this Prospectus/Information Statement because you own shares of one or more of the following Funds: Putnam California Tax Exempt Income Fund, 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 Short-Term Municipal Income Fund, Putnam Tax Exempt Income Fund, or Putnam Tax-Free High Yield Fund (each, a "Target Fund" and collectively, the "Target Funds"). The Board has approved the reorganization of each Target Fund, which currently operates as a mutual fund, into an exchange-traded fund (an "ETF") through a merger with and into the corresponding ETF listed below (each, an "Acquiring ETF" and collectively, the "Acquiring ETFs") as contemplated by the Agreement and Plan of Reorganization (the form of which is attached as Appendix A and described in "*Information About the Mergers - Agreement and Plan of Reorganization*" (each, a "Merger" and collectively, the "Mergers"):

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| | | |
|:---|:---|:---|
| **Target Fund** |  | **Acquiring ETF** |
| Putnam California Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin California Municipal Income ETF |
| Putnam Massachusetts Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Massachusetts Municipal Income ETF |
| Putnam Minnesota Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Minnesota Municipal Income ETF |
| Putnam New Jersey Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin New Jersey Municipal Income ETF |
| Putnam New York Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin New York Municipal Income ETF |
| Putnam Ohio Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Ohio Municipal Income ETF |
| Putnam Pennsylvania Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Pennsylvania Municipal Income ETF |
| Putnam Short-Term Municipal Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Short-Term Municipal Income ETF |
| Putnam Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin Municipal Income ETF |
| Putnam Tax-Free High Yield Fund | ![LOGO](g91160g01a01.jpg) | Franklin Municipal High Yield ETF |

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Shortly before the closing of a Merger, the applicable Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of the applicable Acquiring ETF shares in connection with the Merger, with the Target Fund shareholder receiving cash equal to the net asset value ("NAV") of any redeemed Target Fund shares. Upon the closing of a Merger, all of the assets of the relevant Target Fund will be transferred to the corresponding Acquiring ETF. In exchange, the Acquiring ETF will issue and deliver shares of the Acquiring ETF (the "Merger Shares") to the relevant Target Fund and will also assume all of the liabilities of such Target Fund. The Merger Shares will have an aggregate value equal to the value of the relevant Target Fund's assets net of liabilities (following the redemption of any Target Fund shares) on the exchange date. Immediately after it receives the Merger Shares, the relevant Target Fund will distribute the Merger Shares to its shareholders, pro rata. It is currently anticipated that each Merger will close during the fourth quarter of 2025.

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Each Acquiring ETF is a newly organized series of Putnam ETF Trust ("ETF Trust") and currently has no assets or liabilities. Each Acquiring ETF was created specifically in connection with the applicable Merger for the purpose of acquiring the assets and assuming the liabilities of the corresponding Target Fund and will not commence operations until the closing date of the Merger.

When adopting Rule 17a-8 under the Investment Company Act of 1940, as amended (the "1940 Act"), the Securities and Exchange Commission (the "SEC") stated its view that approval by shareholders of a target fund would be required if the merger would result in a change that, in a context other than a merger, would require shareholder approval under the 1940 Act. These factors generally include increased distribution fees as a result of the merger, materially different advisory contracts, different Trustees or materially different fundamental investment policies as between the target and surviving funds. Shareholder approval of the Mergers is not required because none of the factors requiring a shareholder vote is present.

***2. What will happen to my shares of a Target Fund as a result of the Merger?***

If a Merger is completed with respect to your Target Fund, you will cease to be a shareholder of that Target Fund and will become a shareholder of the corresponding Acquiring ETF. Your shares of a Target Fund will, in effect, be exchanged for a whole number of shares of the corresponding Acquiring ETF equal in aggregate NAV to the Target Fund shares you held on the date of the Merger (following the redemption of any Target Fund shares as described below). The whole number of Merger Shares to be delivered to each Target Fund will be determined, for each share class of the Target Fund, by dividing the value of the Target Fund's net assets attributable to that share class by the net asset value of one Merger Share. Shares of an Acquiring ETF are not issued in fractional shares. As a result, before the closing of the Merger, each Target Fund will, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares at NAV as is necessary so that the shareholder will receive a whole number of the applicable Merger Shares. Such redemption will result in a cash payment, which will be a taxable sale of shares for shareholders who hold shares in a taxable account. Shareholders should consult their tax advisors to determine the effect of the redemption of Target Fund shares.

Shares of an Acquiring ETF will be transferred to a shareholder's brokerage account. For any Target Fund shareholder who holds Target Fund shares through an account that is not permitted to hold a corresponding Acquiring ETF's shares, the Acquiring ETF shares will be held by a transfer agent of the applicable Acquiring ETF as agent for and for the account and benefit of the Target Fund shareholder for up to nine months, after which, if the Target Fund shareholder has not established an appropriate account to hold the shares and informed the transfer agent of the applicable Acquiring ETF of the new account, the shares will be liquidated and proceeds sent to each such Target Fund shareholder at the shareholder's last address of record at the transfer agent of the Acquiring ETF. For more information about the brokerage account needed to hold shares of an Acquiring ETF, see "*Question 16. What do I need to do to prepare for the Mergers?*" below.

After the Mergers, individual shares of each Acquiring ETF may only be purchased and sold on the floor of the New York Stock Exchange Arca, Inc. ("NYSE Arca"), other national securities exchanges, electronic crossing networks and other alternative trading systems. Should a former Target Fund shareholder decide to purchase or sell shares in an Acquiring ETF after a Merger, the shareholder will need to place a trade through a broker who will execute the trade on an exchange at prevailing market prices. Because Acquiring ETF Shares trade at market prices rather than at NAV per share, Acquiring ETF Shares may trade at a price less than (discount) or greater than (premium) the Acquiring ETF's then-current NAV per share. As with all ETFs, your broker may charge a commission for purchase and sale transactions, although ETFs trade with no transaction fees (NTF) on many platforms. In addition, it is the ETF Trust's understanding that the brokerage account statements that Acquiring ETF shareholders will receive from financial intermediaries following the Mergers will provide information on the market

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price of the applicable Acquiring ETF's shares and not the NAV per share of such Acquiring ETF as would be the case for a mutual fund.

***3. Why are Mergers not involving my fund included in the Prospectus/Information Statement?***

To reduce costs, information relating to the Target Funds have been combined into one Prospectus/Information Statement. Accordingly, not all Mergers may be applicable to each shareholder.

***4. Why are the Mergers happening?***

Franklin Advisers, Inc. ("Franklin Advisers" or the "Investment Manager"), the investment advisor for the Target Funds and Acquiring ETFs, has recommended the Mergers because it believes that each Merger is in the best interests of shareholders of the relevant Target Fund and Acquiring ETF. The Investment Manager believes that reorganizing each Target Fund as an ETF through a Merger with the corresponding Acquiring ETF may offer operational advantages, including lower overall operating expenses, potentially more efficient portfolio management, and more flexible trading of Acquiring ETF shares (*i.e.* the ability of shareholders to buy or sell shares throughout the day at current market prices). For more information, please see "*Question 15. What are some features of ETFs that differ from mutual funds*" below. Following the Mergers, shareholders of each Acquiring ETF would be invested in a fund with a lower management fee rate and lower total expense ratio. Please refer to "*Question 4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?*" under the discussion of each Merger for a detailed discussion of the respective Merger's expected impact on management fee rates and total expense ratios. Each Acquiring ETF will have the same investment goal, investment strategies, policies, and restrictions as the corresponding Target Fund, will have substantially similar principal risks (except that the Acquiring ETFs are also subject to risks related to their ETF structure), and will be managed by the same portfolio management team. In addition, each Acquiring ETF will be able to retain the performance track record of the corresponding Target Fund.

The Investment Manager also believes that reorganizing each Target Fund as an ETF may offer commercial benefits, including by helping to differentiate the Target Fund from other municipal bond strategies offered by the Investment Manager or its affiliates and by enhancing the Target Funds' ability to attract assets.

The Trustees serve as Trustees of each of the Funds involved in the Mergers. The Trustees, including all of the Trustees who are not "interested persons" (as defined in the 1940 Act) of your Fund or the Investment Manager (referred to as "Independent Trustees" throughout this Prospectus/Information Statement) have carefully considered the anticipated benefits and costs of each Merger to the shareholders of each Fund. **The Trustees have unanimously determined that each Merger is in the best interests of shareholders of the participating Funds.** 

***5. Is the closing of a Merger between a Target Fund and Acquiring ETF conditioned on the closing of the Merger of any other Target Fund and Acquiring ETF?***

No. The closing of the Merger of each Target Fund and Acquiring ETF is not conditioned on the closing of the Merger of any other Target Fund and Acquiring ETF. Each Merger is subject to certain closing conditions that must be satisfied or waived in order for the Merger to be completed. Although the Investment Manager believes that it is unlikely, it is possible that the Merger of one Target Fund and Acquiring ETF closes while the Merger of one or more other Target Funds and Acquiring ETFs does not close. Unless otherwise stated, the information on the estimated expenses of the combined fund presented in this Prospectus/Information Statement assumes that each Merger is completed.

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***6. Will the Mergers affect the way my investments are managed?***

Generally, no. Each Acquiring ETF will be managed using the same investment goal, principal investment strategies, policies, and restrictions currently used by the corresponding Target Fund and will have substantially similar principal risks (except that the Acquiring ETFs are also subject to risks related to their ETF structure). For a more complete discussion, see the sections of this Prospectus/Information Statement relating to your Merger titled: "*Question 1. How do the investment goals, strategies, policies and restrictions of the Funds compare?"*

Franklin Advisers is the investment manager to each Target Fund and each Acquiring ETF. In addition, the same individuals responsible for the day-to-day portfolio management of a Target Fund as of the date of the Prospectus/Information Statement are expected to be responsible for the day-to-day portfolio management of the corresponding Acquiring ETF after the Mergers. For a more complete discussion, see the sections of this Prospectus/Information Statement relating to your Merger titled: "*Question 3. Who manages the Funds?"*

***7. Are there any differences in risks between the Target Funds and the Acquiring ETFs?***

Many of the principal risks associated with owning shares of an Acquiring ETF are substantially similar to the risks associated with owning shares of the corresponding Target Fund (except that the Acquiring ETF is also subject to risks related to its ETF structure). However, there are certain differences in these risks, including the risks associated with each Acquiring ETF's organization and operation as an ETF.

For a more complete discussion of the risks of each Target Fund and the corresponding Acquiring ETF, see *"Risk Factors - What are the funds' principal investment strategies and related risks?"* below, as well as the section of this Prospectus/Information Statement relating to your Merger titled: *"Question 2. How do the principal investment risks of the Funds compare?"*

***8. Will the expenses of the Acquiring ETFs be lower than the expenses of the Target Funds?***

Yes. Following the Merger, each Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the corresponding Target Fund at all asset levels. In addition, the Acquiring ETFs will be subject to a unitary fee structure, whereby the Investment Manager bears substantially all operating expenses of the Acquiring ETFs. Each Acquiring ETF's contractual (unitary) management fee rate is lower than the corresponding Target Fund's contractual management fee rate at all asset levels.

For a more detailed comparison of the Funds' fees and expenses, see the section of this Prospectus/Information Statement relating to your Merger titled "*Question 4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?"*

***9. How does the investment performance of the Funds compare?***

Each Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations and that will have no performance history prior to the Merger. Each Target Fund will be the "accounting survivor" after the Merger. This means that an Acquiring ETF will adopt the historical accounting records and performance of the corresponding Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

For information about the investment performance of a Target Fund and its corresponding Acquiring ETF, see the section of this Prospectus/Information Statement relating to your Merger titled "*Question 6. How does the investment performance of the Funds compare?"*

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***10. Will my dividends be affected by the merger?***

No. Each Target Fund and each Acquiring ETF normally distribute any net investment income monthly and any net realized capital gains annually, and the Acquiring ETFs are expected to continue to do so after the Mergers.

***11. What are the federal income tax consequences of the Mergers?***

Each Merger is expected to be a tax-free reorganization for federal income tax purposes. However, before each Merger, the applicable Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Shareholders will generally be required to recognize gain or loss upon the receipt of cash for their Target Fund shares.

For additional information about the federal tax consequences of your Merger, see the section of this Prospectus/Information Statement relating to your Merger titled "*What are the federal income tax consequences of the Merger?"* Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

***12. Is there any difference in the procedures for purchasing, selling, and exchanging shares of the funds?***

Yes. The Target Funds and the Acquiring ETFs have different procedures for purchasing, selling, and exchanging shares, which are summarized below in the section "*Comparison of Other Key Features of the Funds—What are the purchase, sale, and exchange procedures of the Target Funds and Acquiring ETFs*." One key difference is that, unlike shares of the Target Funds, shares of the Acquiring ETFs are listed and traded on an exchange, and individual fund shares may only be bought and sold in the secondary market through a broker. In addition, unlike the Target Funds, the Acquiring ETFs do not offer exchange privileges.

***13. Will the value of shares I own change after the Mergers?***

Generally, no. In the Merger, each shareholder of the Target Fund will receive shares of the Acquiring ETF having an aggregate net asset value equal to the value of such Target Fund shares at the date of the exchange (following the redemption of any Target Fund shares as previously described). However, before each Merger, the applicable Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares.

***14. What are the costs associated with the Mergers?***

The aggregate costs associated with the Mergers are estimated to be approximately $1.1 million. These costs represent legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of the Mergers and related transactions contemplated by the Plan (but excluding portfolio repositioning costs and related brokerage costs), and costs associated with the organization and registration of the Acquiring ETFs. With certain limited exceptions, as discussed in the paragraph below, the Investment Manager will bear all direct fees and expenses of the Mergers.

Each Target Fund may make dispositions of certain portfolio holdings prior to its Merger. These sales may result in brokerage commissions and other transaction costs. These costs will be borne by each Target Fund and are not included in the merger costs described in the paragraph above. However, the

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Investment Manager currently does not anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger.

For a more information regarding the costs associated with the Mergers and how those costs will be allocated, see the discussion below under *"Information about the Mergers— Trustees' Considerations Relating to the Mergers—Costs of the Merger"* and "*—Agreement and Plan of Reorganization."* 

***15. What are some features of ETFs that differ from mutual funds?***

The following are some unique features of ETFs that differ from mutual funds:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• <u>Sales of ETF Shares on an Exchange throughout the Day</u>. ETFs provide shareholders with the opportunity
to purchase and sell shares throughout the day at market-determined prices, instead of being required to wait to make a purchase or a redemption at the next calculated NAV per share at the end of the trading day (as is typical for mutual funds).
This means that when a shareholder decides to purchase or sell shares of the ETF, the shareholder can act on that decision immediately by contacting the shareholder's broker to execute the trade. The market price of the ETF may be higher or
lower than the ETF's then-current net asset value per share and may be higher or lower than the ETF's next calculated NAV at the close of the trading day.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• <u>Sales only through a Broker</u>. While a mutual fund's shares may be directly purchased or redeemed
from the fund at NAV, individual shares of ETFs, like the Acquiring ETFs, may only be purchased and sold on a stock exchange through a broker at market prices. Shares of an Acquiring ETF may be purchased or redeemed directly from the Acquiring ETF
only in large blocks of shares ("Creation Units"), and only by an authorized participant ("Authorized Participant"). Once created, shares of an Acquiring ETF may be purchased and sold through a broker or other financial
intermediary on an exchange at market prices. When buying and selling shares through a broker or other financial intermediary, a shareholder may incur brokerage or other charges determined by the broker or financial intermediary, although ETFs trade
with no transaction fees (NTF) on many platforms. In addition, a shareholder of an ETF, such as each Acquiring ETF, may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase shares (bid) and the
lowest price a seller is willing to accept for shares (ask) when buying or selling shares in the secondary market (the "bid-ask spread"). Because ETF shares trade at market prices rather than at NAV,
shares of an ETF may trade at a price less than (discount) or greater than (premium) the ETF's then-current net asset value per share. The trading prices of an ETF's shares in the secondary market will fluctuate continuously throughout
trading hours based on the supply and demand for the ETF's shares and for the underlying securities held by the ETF, economic conditions and other factors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• <u>Transparency</u>. Currently, each Target Fund only provides periodic disclosure of its complete portfolio
holdings (typically monthly on a 15-day lag). Each Acquiring ETF will be a transparent ETF that operates with full transparency for its portfolio holdings. Following the Mergers, the Acquiring ETFs, like other
transparent ETFs, will make their portfolio holdings public each day. This holdings information, along with other information about the Acquiring ETFs, will be available at franklintempleton.com. The transparent portfolio holdings of the Acquiring
ETFs may pose certain risks, in that other market participants could use information about an ETF's portfolio holdings to engage in certain predatory trading practices that may have the potential to harm the ETF and its shareholders, such as
front running the ETF's trades of portfolio securities.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• <u>Single Share Class</u>. A mutual fund, like the Target Funds, may offer multiple share classes with
different sales charges, expenses, and/or minimum investments. The Acquiring ETFs do not issue multiple classes of shares.

In addition, the Acquiring ETFs are subject to certain risks unique to operating as ETFs. For more information, see "*Question 7. Are there any differences in risks between the Target Funds and the Acquiring ETFs?*" above.

***16. What do I need to do to prepare for the Mergers?***

It is important for you to determine whether you hold your shares of a Target Fund in the type of account that can accommodate the ETF shares that will be received in the applicable Merger. If you hold your shares of a Target Fund in an account directly with such Target Fund at the Target Fund's transfer agent or in a brokerage account with a financial intermediary that only allows you to hold mutual fund shares, you will need to set up a brokerage account that allows investment in ETF shares if the applicable Merger is consummated and you wish to transact in shares of the Acquiring ETF.

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| | |
|:---|:---|
| ◾ | <u>Transferring Target Fund Shares to an Already Existing Brokerage Account</u>. Transferring your shares from a Target Fund's transfer agent to a brokerage account should be a simple process. If you have a brokerage account or a relationship with a brokerage firm, please talk to the broker and inform the broker that you would like to transfer a mutual fund position that you hold directly with the applicable Target Fund into your brokerage account. Also inform your broker that such an account will need to be set up to hold ETF shares. If you do not have a brokerage account or a relationship with a brokerage firm, you will need to open an account if the applicable Merger is consummated and you wish to transact in shares of the Acquiring ETF.  |

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| | |
|:---|:---|
| ◾ | <u>Transferring Target Fund Shares from a Non-Accommodating Brokerage Account to a Brokerage Account that Accepts ETF Shares</u>. The broker where you hold Target Fund shares should be able to assist you with confirming whether your account is permitted to invest in ETF shares and, if it is not, transferring your Target Fund shares to an account that can accept ETF shares. Contact your broker right away to make the necessary changes to your account.  |

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You can contact your financial advisor or other financial intermediary for further information. You also may contact Putnam Investor Services at 1-800-225-1581.

***17. What will happen if I don't have a brokerage account that can hold ETF shares at the time of the Mergers?***

If your shares are held in an account that cannot accept ETF shares at the time of the applicable Merger, the Acquiring ETF Shares received by you in such Merger will be held by a transfer agent of the applicable Acquiring ETF as agent for and for your benefit for up to nine months. After the expiration of this period, if you have not established an appropriate account to hold the shares and informed the transfer agent of the applicable Acquiring ETF of the new account, the Acquiring ETF shares will be liquidated and the proceeds sent to you (subject to applicable federal or state laws concerning unclaimed property). The conversion of Acquiring ETF Shares to cash may be subject to fees and expenses and will be a taxable event for shareholders who hold their shares in a taxable account. If you think you don't have a brokerage account that can accept the Acquiring ETF Shares you receive in the applicable Merger, you may contact Franklin Advisers by calling Putnam Investor Services at 1-800-225-1581.

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***18. Are there other circumstances where a Target Fund shareholder will not be able to hold ETF shares?***

Omnibus retirement plan recordkeepers may not be able to include ETF shares on their platforms, and in such a case a retirement plan investor may be required by its retirement plan recordkeeper to redeem a Target Fund's shares prior to a Merger.

In addition, shareholders who hold Target Fund shares in a retirement plan, individual retirement plan or other tax advantaged account ("Plan") for which Putnam Fiduciary Trust Company, LLC ("PFTC") is custodian and who have not exchanged their Target Fund shares for shares of another eligible Putnam mutual fund or redeemed their Target Fund shares before the closing of the relevant Merger would have their Target Fund shares exchanged by PFTC for Class A shares of Putnam Money Market Fund pursuant to the documents governing such Plan. PFTC will provide additional information to these shareholders.

***19. What if I don't want to hold ETF shares?***

If you do not want to receive ETF shares in connection with a Merger, you may redeem your shares of the applicable Target Fund or you may exchange those shares for shares of another eligible mutual fund prior to the Merger. If you do so on or after July 19, 2025, any front-end sales charges applicable to the purchase of Target Fund shares or contingent deferred sales charges applicable to the redemption of Target Fund shares will be waived. If a Target Fund shareholder redeems his or her shares and such shares are held in a taxable account, the shareholder will recognize a taxable gain or loss based on the difference between the redeeming shareholder's tax basis in the shares and the amount that the redeeming shareholder receives for them. Shareholders of a Target Fund may exchange their Target Fund shares for shares of the same class of another Putnam mutual fund, other than a Target Fund, generally without paying any additional sales charges, provided that the fund shares to be acquired in the exchange are available to new investors in such other fund and the shareholder is eligible to invest in such shares. Such an exchange of shares for shares in another fund will generally result in the recognition of taxable gain or loss for shareholders holding shares in a taxable account. As ETFs, the Acquiring ETFs do not provide for the exchange of shares.

***20. Whom do I contact for further information?***

You can contact your financial adviser or other financial intermediary for further information. You also may contact Putnam Investor Services at 1-800-225-1581.

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**II.** **COMPARISON OF SOME IMPORTANT FEATURES OF THE FUNDS** 

**MERGER 1:** 

**PUTNAM CALIFORNIA TAX EXEMPT INCOME FUND** 

**INTO FRANKLIN CALIFORNIA MUNICIPAL INCOME ETF** 

***1. How do the investment goals, strategies, policies and restrictions of the Funds compare?***

The Target Fund operates as a mutual fund, offering shares that are redeemable on each business day at the next calculated daily NAV per share. The Acquiring ETF (together with the Target Fund, the "Funds") operates as an ETF. As an ETF, the Acquiring ETF offers shares that are bought and sold on a national securities exchange, which gives investors the ability to buy their shares throughout the day at the current market price (which may be at a premium or discount to NAV).

*Investment Goal and Strategies* 

The Target Fund and the Acquiring ETF have the same investment goals and investment strategies. While there may be minor differences in how the Acquiring ETF's and the Target Fund's investment goals and strategies are described, the Investment Manager does not believe those differences reflect, and does not expect those differences to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed.

The investment goal of each Fund is to seek as high a level of current income exempt from federal income tax and California personal income tax as the Investment Manager believes is consistent with preservation of capital. Each Fund's investment objective may be changed by the Board without shareholder approval.

Each Fund invests mainly in bonds (including general obligation bonds, revenue obligation bonds, and tender option bonds) that pay interest that is exempt from federal income tax and California personal income tax (but that may be subject to federal and/or California alternative minimum tax ("AMT")), are investment-grade in quality, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests so that at least 90% of the Fund's income distributions are exempt from federal income tax and California personal income tax, except during times of adverse market conditions, when more than 10% of the Fund's income distributions could be subject to these taxes. Such tax-exempt investments in which the Funds invest are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and California personal income tax. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of Fund shareholders, each Fund cannot include these investments for the purpose of complying with the 90% investment policy described above.

Each Fund may invest up to 25% of its total assets in below-investment-grade investments, which are sometimes referred to as "junk bonds." However, each Fund will not invest in investments that are rated lower than BB or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The Funds will not necessarily sell an investment if its rating is reduced after purchase.

The Investment Manager may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Further information about the Target Fund's investment goal and investment strategies is contained in the Prospectus and Statement of Additional Information of the Target Fund, which are on file with the SEC.

*Investment Policies and Restrictions* 

The Target Fund and Acquiring ETF have identical fundamental investment restrictions and non-fundamental investment restrictions. The Funds' fundamental investment restrictions and non-fundamental restrictions are set forth in Appendix B. After the Merger occurs, the combined Fund will be subject to the fundamental investment policies of the Acquiring ETF. Fundamental investment

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restrictions may not be changed without shareholder approval. Non-fundamental investment restrictions may be changed without shareholder approval.

***2. How do the principal investment risks of the Funds compare?***

The principal risks of an investment in the Target Fund are substantially similar to the principal risks of an investment in the Acquiring ETF, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are certain differences between the Acquiring ETF's and the Target Fund's risk disclosure, the Investment Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, the Target Fund and the Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

For more information about how the risks of investing in the Acquiring ETF and the Target Fund compare, see "*Risk Factors*" below.

***3. Who manages the Funds?***

The Target Fund is a standalone trust, and the Acquiring ETF is a series of Putnam ETF Trust. The Target Fund and Putnam ETF Trust are governed by the Board of Trustees, which is responsible for overseeing all business activities of the Funds.

*Investment Manager of the Funds.* The Board has retained the Investment Manager, a global investment management organization based in California, to be the investment manager of both the Target Fund and Acquiring ETF, responsible for making investment decisions for each Fund and managing each Fund's other affairs and business. The Investment Manager's address is One Franklin Parkway, San Mateo, CA 94403-1906. For additional information about the management of the Funds, please see the section entitled "*Additional Information about the Acquiring ETFs*."

*Portfolio Management.* The same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF.

John Bonelli, Michael Conn, Garrett L. Hamilton, Christopher Sperry, and John Wiley are jointly and primarily responsible for the day-to-day management of each of the Target Fund and the Acquiring ETF. Messrs. Bonelli, Conn, Sperry, and Wiley have been portfolio managers of the Target Fund since 2024. Mr. Hamilton has been a portfolio manager of the Target Fund since 2016. Messrs. Bonelli, Conn, Hamilton, Sperry, and Wiley have been portfolio managers of the Acquiring ETF since the Acquiring ETF's inception.

The Statement of Additional Information for the Target Fund dated January 30, 2025, as supplemented, provides, and the Statement of Additional Information for the Acquiring ETF, once filed, will provide, additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio manager's ownership of securities in the Funds. For information on how to obtain a copy of the Statement of Additional Information for each of the Target Fund and the Acquiring ETF, please see the section entitled "*Additional Information about the Acquiring ETFs*."

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***4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?***

Shareholders of the Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy, hold and sell shares of each Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and examples below. The tables show the *pro forma* expenses of the combined Acquiring ETF after giving effect to the Merger, based on pro forma net assets as of March 31, 2025, as if the Merger had taken place on March 31, 2025. The fee tables do not reflect the costs associated with the Merger. Only *pro forma* combined fees and expenses information is provided for the Acquiring ETF because the Acquiring ETF will not commence operations until the Merger is completed.

As shown below, the Merger is expected to result in lower total annual operating expenses for shareholders of the Target Fund.

Target Fund shareholders will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Merger.

**Shareholder fees** *(fees paid directly from your investment)*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Maximum sales charge<br>(load) imposed on<br>purchases (as a percentage<br>of offering price) | Maximum deferred sales charge<br>(load) (as a percentage of original<br>purchase price or redemption<br>proceeds, whichever is lower) |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class A | 4.00% | 1.00%\* |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class C |  | 1.00%\*\* |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class R6 |  |  |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class Y |  |  |
| &nbsp;&nbsp;&nbsp;Franklin California Municipal Income ETF (*pro forma)* |  |  |

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

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Share class | Management<br>fees | Distribution<br>and service<br>(12b-1)<br>fees | Other<br>expenses | Total<br>annual<br>fund<br>operating<br>expenses |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class A | 0.41% | 0.25% | 0.22% | 0.88% |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class C | 0.41% | 1.00% | 0.22% | 1.63% |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class R6 | 0.41% |  | 0.22% | 0.63% |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class Y | 0.41% |  | 0.22% | 0.63% |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin California Municipal Income ETF (*assuming completion of the Merger)*† | 0.35% |  | 0.00% | 0.35% |

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\* Applies only to certain redemptions of shares bought with no initial sales charge.

\*\* This charge is eliminated after one year.

† Does not reflect non-recurring expenses related to the Merger. These
expenses may include legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of
the Merger and related transactions contemplated by the Plan, costs associated with the organization and registration of the Acquiring ETF, and transaction costs associated with liquidating portfolio securities that will not be acquired by the
Acquiring ETF as part of the Merger ("portfolio repositioning"), if any. The Investment Manager will bear all of these non-recurring expenses other than portfolio repositioning costs, and the Investment Manager currently does not
anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. If these expenses had been reflected, *pro forma* other expenses and total annual fund operating expenses would have been the same.

**Example** 

The following hypothetical example is intended to help you compare the cost of investing in the Target Fund's Class A, C, R6, and Y shares with the cost of investing in the Acquiring ETF's shares. It assumes that you invest $10,000 in each 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. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | **1 Year** | **3 Year** | **5 Year** | **10 Year** |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class A | $487 | $671 | $871 | $1447 |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class C | $266 | $516 | $890 | $1739 |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class R6 | $65 | $204 | $355 | $792 |
| &nbsp;&nbsp;&nbsp;Putnam California Tax Exempt Income Fund Class Y | $65 | $204 | $355 | $792 |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin California Municipal Income ETF (*assuming completion of Merger)* | $36 | $112 | $196 | $443 |

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Following the Merger, the Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the Target Fund at all asset levels.

The Target Fund pays a management fee that incorporates asset-level discounts ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Investment Management, LLC ("Putnam Management"), the Target Fund's investment manager for periods prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (excluding net assets of such funds that are invested in, or that are invested in by, other such funds to the extent necessary to avoid "double counting" of those assets) (such other open-end mutual funds, the "Fund Family"). The management fee rate generally declines as the aggregate net assets increase. Class R6 shares of the Target Fund paid the Investment Manager a management fee (after application of Fund Family Breakpoints and any applicable waivers) of 0.41% of average net assets of the Target Fund for the six-month period ended March 31, 2025. Class R6 shares of the Target Fund also pay (subject to any applicable waivers) operating expenses, which were an additional 0.22% of average net assets of the Target Fund for the six-month period ended March 31, 2025.

By contrast, the Acquiring ETF pays an annual all-inclusive management fee (or "unitary fee") of 0.35% to the Investment Manager based on the Acquiring ETF's average daily net assets. The unitary fee is not subject to Fund Family Breakpoints or other asset-level discounts. However, the unitary fee covers all of the other expenses of the Acquiring ETF with limited exceptions. Because the Acquiring ETF has not yet commenced operations, the Acquiring ETF has not paid any management fees to the Investment Manager.

After giving effect to Fund Family Breakpoints in the case of the Target Fund, the Acquiring ETF's contractual (unitary) management fee rate is lower than that of the Target Fund's contractual management

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fee rate at all asset levels. In addition, the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETF, while the Target Fund's management fee does not.

***5. How do the Funds' portfolio turnover rates compare?***

Each Fund pays transaction-related costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when a Fund's shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example above, affect Fund performance.

The Target Fund's portfolio turnover rate for its fiscal year ended September 30, 2024 was 30%. Because the Acquiring ETF has not yet commenced operations, no portfolio turnover rate is available for the Acquiring ETF.

***6. How does the investment performance of the Funds compare?***

The Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Acquiring ETF has been organized solely in connection with the Merger to acquire substantially all of the assets and assume the liabilities of the Target Fund and to continue the business of the Target Fund, except that the Acquiring ETF will operate as an ETF instead of a mutual fund. The Acquiring ETF will have no performance history prior to the Merger.

The Target Fund will be the "accounting survivor" after the Merger. This means that the Acquiring ETF will adopt the historical accounting records and performance of the Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

The bar chart and table below provide some indication of the risks of investing in the Target Fund by showing changes in the Target Fund's Class R6 shares' performance from year-to-year and by showing how the Target Fund's average annual returns for the past one-, five- and ten-year periods compare with the average annual total returns of a broad measure of market performance. The Acquiring ETF will use the Bloomberg Municipal Bond Index as its benchmark, which is the same benchmark that the Target Fund uses.

The performance of the other classes, which is shown in the table below, will differ because the classes bear potentially higher expenses. The Target Fund's past performance, before and after taxes, is not necessarily an indication of how the Acquiring ETF will perform in the future.

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**Annual total returns for Target Fund class R6 shares\***![LOGO](g91160g23t02.jpg)

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| | | |
|:---|:---|:---|
|  Year-to-date performance | through 3/31/2025 | -0.61% |
|  Best calendar quarter | Q4 2023 | 8.67% |
|  Worst calendar quarter | Q1 2022 | -6.30% |

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**Average annual total returns for Target Fund after sales charges** 

For periods ended 12/31/24

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| | | | |
|:---|:---|:---|:---|
|  **Share class** | **1 year** | **5 years** | **10 years** |
|  Class A before taxes | -1.47% | 0.31% | 1.90% |
|  Class C before taxes | 0.88% | 0.35% | 1.69% |
|  Class R6 before taxes<sup>\*</sup> | 2.90% | 1.37% | 2.56% |
|  Class R6 after taxes on distributions<sup>\*</sup> | 2.90% | 1.18% | 2.37% |
|  Class R6 after taxes on distributions and sale of fund shares <sup>\*</sup> | 3.12% | 1.67% | 2.64% |
|  Class Y before taxes | 2.90% | 1.39% | 2.56% |
|  Bloomberg Municipal Bond Index (no deduction for fees, expenses or taxes) | 1.05% | 0.99% | 2.25% |

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

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 IRA, or another tax-advantaged arrangement.

Important data provider notices and terms are available at www.franklintempletondatasources.com. All data is subject to change.

Please remember that past performance is not necessarily an indication of future results. You can obtain updated performance information at franklintempleton.com. For more information about the Fund's benchmark provider, please see Appendix C.

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***7. What are the federal income tax consequences of the Merger?***

The 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 the Target Fund or its shareholders as a direct result of the Merger, and the tax basis and holding period of a shareholder's Target Fund shares are expected to carry over to the Acquiring ETF shares the shareholder receives in the Merger. However, prior to the Merger, the Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Such shareholders will generally be required to recognize gain or loss upon the receipt of cash for their shares if they hold shares in a taxable account. At any time before the consummation of the Merger, a shareholder may redeem Target Fund shares, likely resulting in recognition of gain or loss to such shareholder for federal income tax purposes if Target Fund shares are held in a taxable account.

The Investment Manager currently does not anticipate that there will be any significant realignment of the Target Fund's portfolio holdings in connection with the Merger. Any disposition of portfolio holdings would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders during or with respect to the year of sale, and such distributions would be taxable to shareholders unless shares are held through a qualified retirement plan or other tax-advantaged arrangement.

Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

For additional information, please see "*Questions and Answers Regarding the Mergers,*" "*Risk Factors*," and "*Comparison of Other Key Features of the Funds.*"

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**MERGER 2:** 

**PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND** 

**INTO FRANKLIN MASSACHUSETTS MUNICIPAL INCOME ETF** 

***1. How do the investment goals, strategies, policies and restrictions of the Funds compare?***

The Target Fund operates as a mutual fund, offering shares that are redeemable on each business day at the next calculated daily NAV per share. The Acquiring ETF (together with the Target Fund, the "Funds") operates as an ETF. As an ETF, the Acquiring ETF offers shares that are bought and sold on a national securities exchange, which gives investors the ability to buy their shares throughout the day at the current market price (which may be at a premium or discount to NAV).

*Investment Goal and Strategies* 

The Target Fund and the Acquiring ETF have the same investment goals and investment strategies. While there may be minor differences in how the Acquiring ETF's and the Target Fund's investment goals and strategies are described, the Investment Manager does not believe those differences reflect, and does not expect those differences to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed.

The investment goal of each Fund is to seek as high a level of current income exempt from federal income tax and Massachusetts personal income tax as the Investment Manager believes is consistent with preservation of capital. Each Fund's investment objective may be changed by the Board without shareholder approval.

Each Fund invests mainly in bonds (including general obligation bonds, revenue obligation bonds, and tender option bonds) that pay interest that is exempt from federal income tax and Massachusetts personal income tax (but that may be subject to federal alternative minimum tax ("AMT")), are investment-grade in quality, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests at least 80% of the Fund's net assets in tax-exempt investments. Tax-exempt investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and Massachusetts personal income tax. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of Fund shareholders, each Fund cannot include these investments for the purpose of complying with the 80% investment policy described above.

Each Fund may invest up to 25% of its total assets in below-investment-grade investments, which are sometimes referred to as "junk bonds." However, each Fund will not invest in investments that are rated lower than BB or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The Funds will not necessarily sell an investment if its rating is reduced after purchase.

The Investment Manager may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Further information about the Target Fund's investment goal and investment strategies is contained in the Prospectus and Statement of Additional Information of the Target Fund, which are on file with the SEC.

*Investment Policies and Restrictions* 

The Target Fund and Acquiring ETF have identical fundamental investment restrictions and non-fundamental investment restrictions. The Funds' fundamental investment restrictions and non-fundamental restrictions are set forth in Appendix B. After the Merger occurs, the combined Fund will be subject to the fundamental investment policies of the Acquiring ETF. Fundamental investment restrictions may not be changed without shareholder approval. Non-fundamental investment restrictions may be changed without shareholder approval.

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***2. How do the principal investment risks of the Funds compare?***

The principal risks of an investment in the Target Fund are substantially similar to the principal risks of an investment in the Acquiring ETF, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are certain differences between the Acquiring ETF's and the Target Fund's risk disclosure, the Investment Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, the Target Fund and the Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

For more information about how the risks of investing in the Acquiring ETF and the Target Fund compare, see "*Risk Factors*" below.

***3. Who manages the Funds?***

The Target Fund is a standalone trust, and the Acquiring ETF is a series of Putnam ETF Trust. The Target Fund and Putnam ETF Trust are governed by the Board of Trustees, which is responsible for overseeing all business activities of the Funds.

*Investment Manager of the Funds.* The Board has retained the Investment Manager, a global investment management organization based in California, to be the investment manager of both the Target Fund and Acquiring ETF, responsible for making investment decisions for each Fund and managing each Fund's other affairs and business. The Investment Manager's address is One Franklin Parkway, San Mateo, CA 94403-1906. For additional information about the management of the Funds, please see the section entitled "*Additional Information about the Acquiring ETFs*."

*Portfolio Management.* The same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF.

John Bonelli, Michael Conn, Garrett L. Hamilton, Christopher Sperry, and John Wiley are jointly and primarily responsible for the day-to-day management of each of the Target Fund and the Acquiring ETF. Messrs. Bonelli, Conn, Sperry, and Wiley have been portfolio managers of the Target Fund since 2024. Mr. Hamilton has been a portfolio manager of the Target Fund since 2016. Messrs. Bonelli, Conn, Hamilton, Sperry, and Wiley have been portfolio managers of the Acquiring ETF since the Acquiring ETF's inception.

The Statement of Additional Information for the Target Fund dated September 30, 2024, as supplemented, provides, and the Statement of Additional Information for the Acquiring ETF, once filed, will provide, additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio manager's ownership of securities in the Funds. For information on how to obtain a copy of the Statement of Additional Information for each of the Target Fund and the Acquiring ETF, please see the section entitled "*Additional Information about the Acquiring ETFs*."

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***4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?***

Shareholders of the Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy, hold and sell shares of each Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and examples below. The tables show the *pro forma* expenses of the combined Acquiring ETF after giving effect to the Merger, based on pro forma net assets as of March 31, 2025, as if the Merger had taken place on March 31, 2025. The fee tables do not reflect the costs associated with the Merger. Only *pro forma* combined fees and expenses information is provided for the Acquiring ETF because the Acquiring ETF will not commence operations until the Merger is completed.

As shown below, the Merger is expected to result in lower total annual operating expenses for shareholders of the Target Fund.

Target Fund shareholders will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Merger.

**Shareholder fees** *(fees paid directly from your investment)*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Maximum sales charge<br>(load) imposed on<br>purchases (as a percentage<br>of offering price) | Maximum deferred sales charge<br>(load) (as a percentage of original<br>purchase price or redemption<br>proceeds, whichever is lower) |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class A | 4.00% | 1.00%\* |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class C |  | 1.00%\*\* |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class R6 |  |  |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class Y |  |  |
| &nbsp;&nbsp;&nbsp;Franklin Massachusetts Municipal Income ETF (*pro forma)* |  |  |

---

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Share class | Management<br>fees | Distribution<br>and service<br>(12b-1)<br>fees | Other<br>expenses | Total<br>annual<br>fund<br>operating<br>expenses |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class A | 0.42% | 0.25% | 0.14% | 0.81% |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class C | 0.42% | 1.00% | 0.14% | 1.56% |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class R6 | 0.42% |  | 0.12% | 0.54% |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class Y | 0.42% |  | 0.14% | 0.56% |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Massachusetts Municipal Income ETF(*assuming completion of the Merger)*† | 0.35% |  | 0.00% | 0.35% |

---

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\* Applies only to certain redemptions of shares bought with no initial sales charge.

\*\* This charge is eliminated after one year.

† Does not reflect non-recurring expenses related to the Merger. These
expenses may include legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of
the Merger and related transactions contemplated by the Plan, costs associated with the organization and registration of the Acquiring ETF, and transaction costs associated with liquidating portfolio securities that will not be acquired by the
Acquiring ETF as part of the Merger ("portfolio repositioning"), if any. The Investment Manager will bear all of these non-recurring expenses other than portfolio repositioning costs, and the Investment Manager currently does not
anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. If these expenses had been reflected, *pro forma* other expenses and total annual fund operating expenses would have been the same.

**Example** 

The following hypothetical example is intended to help you compare the cost of investing in the Target Fund's Class A, C, R6, and Y shares with the cost of investing in the Acquiring ETF's shares. It assumes that you invest $10,000 in each 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. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | **1 Year** | **3 Year** | **5 Year** | **10 Year** |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class A | $497 | $647 | $829 | $1356 |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class C | $258 | $491 | $847 | $1651 |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class R6 | $55 | $172 | $300 | $672 |
| &nbsp;&nbsp;&nbsp;Putnam Massachusetts Tax Exempt Income Fund Class Y | $57 | $178 | $311 | $698 |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Massachusetts Municipal Income ETF (*assuming completion of Merger)* | $36 | $112 | $196 | $443 |

---

Following the Merger, the Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the Target Fund at all asset levels.

The Target Fund pays a management fee that incorporates asset-level discounts ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Investment Management, LLC ("Putnam Management"), the Target Fund's investment manager for periods prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (excluding net assets of such funds that are invested in, or that are invested in by, other such funds to the extent necessary to avoid "double counting" of those assets) (such other open-end mutual funds, the "Fund Family"). The management fee rate generally declines as the aggregate net assets increase. Class R6 shares of the Target Fund paid the Investment Manager a management fee (after application of Fund Family Breakpoints and any applicable waivers) of 0.42% of average net assets of the Target Fund for the one-year period ended March 31, 2025. Class R6 shares of the Target Fund also pay (subject to any applicable waivers) operating expenses, which were an additional 0.12% of average net assets of the Target Fund for the one-year period ended March 31, 2025.

By contrast, the Acquiring ETF pays an annual all-inclusive management fee (or "unitary fee") of 0.35% to the Investment Manager based on the Acquiring ETF's average daily net assets. The unitary fee is not subject to Fund Family Breakpoints or other asset-level discounts. However, the unitary fee covers all of the other expenses of the Acquiring ETF with limited exceptions. Because the Acquiring ETF has not yet commenced operations, the Acquiring ETF has not paid any management fees to the Investment Manager.

------

After giving effect to Fund Family Breakpoints in the case of the Target Fund, the Acquiring ETF's contractual (unitary) management fee rate is lower than that of the Target Fund's contractual management fee rate at all asset levels. In addition, the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETF, while the Target Fund's management fee does not.

***5. How do the Funds' portfolio turnover rates compare?***

Each Fund pays transaction-related costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when a Fund's shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example above, affect Fund performance.

The Target Fund's portfolio turnover rate for its fiscal year ended May 31, 2024 was 24%. Because the Acquiring ETF has not yet commenced operations, no portfolio turnover rate is available for the Acquiring ETF.

***6. How does the investment performance of the Funds compare?***

The Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Acquiring ETF has been organized solely in connection with the Merger to acquire substantially all of the assets and assume the liabilities of the Target Fund and to continue the business of the Target Fund, except that the Acquiring ETF will operate as an ETF instead of a mutual fund. The Acquiring ETF will have no performance history prior to the Merger.

The Target Fund will be the "accounting survivor" after the Merger. This means that the Acquiring ETF will adopt the historical accounting records and performance of the Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

The bar chart and table below provide some indication of the risks of investing in the Target Fund by showing changes in the Target Fund's Class R6 shares' performance from year-to-year and by showing how the Target Fund's average annual returns for the past one-, five- and ten-year periods compare with the average annual total returns of a broad measure of market performance. The Acquiring ETF will use the Bloomberg Municipal Bond Index as its benchmark, which is the same benchmark that the Target Fund uses.

The performance of the other classes, which is shown in the table below, will differ because the classes bear potentially higher expenses. The Target Fund's past performance, before and after taxes, is not necessarily an indication of how the Acquiring ETF will perform in the future.

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**Annual total returns for Target Fund class R6 shares\***![LOGO](g91160g30r02.jpg)

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| | | |
|:---|:---|:---|
|  Year-to-date performance | through 3/31/2025 | -0.65% |
|  Best calendar quarter | Q4 2023 | 8.00% |
|  Worst calendar quarter | Q1 2022 | -6.10% |

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**Average annual total returns for Target Fund after sales charges** 

For periods ended 12/31/24

---

| | | | |
|:---|:---|:---|:---|
|  **Share class** | **1 year** | **5 years** | **10 years** |
|  Class A before taxes | -2.56% | -0.19% | 1.31% |
|  Class C before taxes | -0.14% | -0.12% | 1.11% |
|  Class R6 before taxes\* | 1.89% | 0.91% | 1.98% |
|  Class R6 after taxes on distributions\* | 1.89% | 0.91% | 1.97% |
|  Class R6 after taxes on distributions and sale of fund shares\* | 2.38% | 1.29% | 2.17% |
|  Class Y before taxes | 1.76% | 0.89% | 1.97% |
|  Bloomberg Municipal Bond Index (no deduction for fees, expenses or taxes) | 1.05% | 0.99% | 2.25% |

---

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

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 IRA, or another tax-advantaged arrangement.

Important data provider notices and terms are available at www.franklintempletondatasources.com. All data is subject to change.

Please remember that past performance is not necessarily an indication of future results. You can obtain updated performance information at franklintempleton.com. For more information about the Fund's benchmark provider, please see Appendix C.

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***7. What are the federal income tax consequences of the Merger?***

The 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 the Target Fund or its shareholders as a direct result of the Merger, and the tax basis and holding period of a shareholder's Target Fund shares are expected to carry over to the Acquiring ETF shares the shareholder receives in the Merger. However, prior to the Merger, the Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Such shareholders will generally be required to recognize gain or loss upon the receipt of cash for their shares if they hold shares in a taxable account. At any time before the consummation of the Merger, a shareholder may redeem Target Fund shares, likely resulting in recognition of gain or loss to such shareholder for federal income tax purposes if Target Fund shares are held in a taxable account.

The Investment Manager currently does not anticipate that there will be any significant realignment of the Target Fund's portfolio holdings in connection with the Merger. Any disposition of portfolio holdings would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders during or with respect to the year of sale, and such distributions would be taxable to shareholders unless shares are held through a qualified retirement plan or other tax-advantaged arrangement.

Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

For additional information, please see "*Questions and Answers Regarding the Mergers,*" "*Risk Factors*," and "*Comparison of Other Key Features of the Funds.*"

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**MERGER 3:** 

**PUTNAM MINNESOTA TAX EXEMPT INCOME FUND** 

**INTO FRANKLIN MINNESOTA MUNICIPAL INCOME ETF** 

***1. How do the investment goals, strategies, policies and restrictions of the Funds compare?***

The Target Fund operates as a mutual fund, offering shares that are redeemable on each business day at the next calculated daily NAV per share. The Acquiring ETF (together with the Target Fund, the "Funds") operates as an ETF. As an ETF, the Acquiring ETF offers shares that are bought and sold on a national securities exchange, which gives investors the ability to buy their shares throughout the day at the current market price (which may be at a premium or discount to NAV).

*Investment Goal and Strategies* 

The Target Fund and the Acquiring ETF have the same investment goals and investment strategies. While there may be minor differences in how the Acquiring ETF's and the Target Fund's investment goals and strategies are described, the Investment Manager does not believe those differences reflect, and does not expect those differences to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed.

The investment goal of each Fund is to seek as high a level of current income exempt from federal income tax and Minnesota personal income tax as the Investment Manager believes is consistent with preservation of capital. Each Fund's investment objective may be changed by the Board without shareholder approval.

Each Fund invests mainly in bonds (including general obligation bonds, revenue obligation bonds, and tender option bonds) that pay interest that is exempt from federal income tax and Minnesota personal income tax (but that may be subject to federal alternative minimum tax ("AMT")), are investment-grade in quality, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests at least 80% of the Fund's net assets in tax-exempt investments. Tax-exempt investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and Minnesota personal income tax. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of Fund shareholders, each Fund cannot include these investments for the purpose of complying with the 80% investment policy described above.

Each Fund may invest up to 25% of its total assets in below-investment-grade investments, which are sometimes referred to as "junk bonds." However, each Fund will not invest in investments that are rated lower than BB or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The Funds will not necessarily sell an investment if its rating is reduced after purchase.

The Investment Manager may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Further information about the Target Fund's investment goal and investment strategies is contained in the Prospectus and Statement of Additional Information of the Target Fund, which are on file with the SEC.

*Investment Policies and Restrictions* 

The Target Fund and Acquiring ETF have identical fundamental investment restrictions and non-fundamental investment restrictions. The Funds' fundamental investment restrictions and non-fundamental restrictions are set forth in Appendix B. After the Merger occurs, the combined Fund will be subject to the fundamental investment policies of the Acquiring ETF. Fundamental investment restrictions may not be changed without shareholder approval. Non-fundamental investment restrictions may be changed without shareholder approval.

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***2. How do the principal investment risks of the Funds compare?***

The principal risks of an investment in the Target Fund are substantially similar to the principal risks of an investment in the Acquiring ETF, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are certain differences between the Acquiring ETF's and the Target Fund's risk disclosure, the Investment Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, the Target Fund and the Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

For more information about how the risks of investing in the Acquiring ETF and the Target Fund compare, see "*Risk Factors*" below.

***3. Who manages the Funds?***

The Target Fund is a standalone trust, and the Acquiring ETF is a series of Putnam ETF Trust. The Target Fund and Putnam ETF Trust are governed by the Board of Trustees, which is responsible for overseeing all business activities of the Funds.

*Investment Manager of the Funds.* The Board has retained the Investment Manager, a global investment management organization based in California, to be the investment manager of both the Target Fund and Acquiring ETF, responsible for making investment decisions for each Fund and managing each Fund's other affairs and business. The Investment Manager's address is One Franklin Parkway, San Mateo, CA 94403-1906. For additional information about the management of the Funds, please see the section entitled "*Additional Information about the Acquiring ETFs*."

*Portfolio Management.* The same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF.

John Bonelli, Michael Conn, Garrett L. Hamilton, Christopher Sperry, and John Wiley are jointly and primarily responsible for the day-to-day management of each of the Target Fund and the Acquiring ETF. Messrs. Bonelli, Conn, Sperry, and Wiley have been portfolio managers of the Target Fund since 2024. Mr. Hamilton has been a portfolio manager of the Target Fund since 2016. Messrs. Bonelli, Conn, Hamilton, Sperry, and Wiley have been portfolio managers of the Acquiring ETF since the Acquiring ETF's inception.

The Statement of Additional Information for the Target Fund dated September 30, 2024, as supplemented, provides, and the Statement of Additional Information for the Acquiring ETF, once filed, will provide, additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio manager's ownership of securities in the Funds. For information on how to obtain a copy of the Statement of Additional Information for each of the Target Fund and the Acquiring ETF, please see the section entitled "*Additional Information about the Acquiring ETFs*."

***4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?***

Shareholders of the Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy, hold and sell shares of each Fund.

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You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and examples below. The tables show the *pro forma* expenses of the combined Acquiring ETF after giving effect to the Merger, based on pro forma net assets as of March 31, 2025, as if the Merger had taken place on March 31, 2025. The fee tables do not reflect the costs associated with the Merger. Only *pro forma* combined fees and expenses information is provided for the Acquiring ETF because the Acquiring ETF will not commence operations until the Merger is completed.

As shown below, the Merger is expected to result in lower total annual operating expenses for shareholders of the Target Fund.

Target Fund shareholders will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Merger.

**Shareholder fees** *(fees paid directly from your investment)*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Maximum sales charge<br>(load) imposed on<br>purchases (as a percentage<br>of offering price) | Maximum deferred sales charge<br>(load) (as a percentage of original<br>purchase price or redemption<br>proceeds, whichever is lower) |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class A | 4.00% | 1.00%\* |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class C |  | 1.00%\*\* |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class R6 |  |  |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class Y |  |  |
| &nbsp;&nbsp;&nbsp;Franklin Minnesota Municipal Income ETF (*pro forma)* |  |  |

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Share class | Management<br>fees | Distribution<br>and service<br>(12b-1)<br>fees | Other<br>expenses | Total<br>annual<br>fund<br>operating<br>expenses |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class A | 0.42% | 0.25% | 0.18 | 0.85% |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class C | 0.42% | 1.00% | 0.18% | 1.60% |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class R6 | 0.42% |  | 0.14% | 0.56% |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class Y | 0.42% |  | 0.18% | 0.60% |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Minnesota Municipal Income ETF (*assuming completion of the Merger)*† | 0.35% |  | 0.00% | 0.35% |

---

\* Applies only to certain redemptions of shares bought with no initial sales charge.

\*\* This charge is eliminated after one year.

† Does not reflect non-recurring expenses related to the Merger. These
expenses may include legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of
the Merger and related transactions contemplated by the Plan, costs associated with the organization and registration of the Acquiring ETF, and transaction costs associated with liquidating portfolio securities that will not be acquired by the
Acquiring ETF as part of the Merger ("portfolio repositioning"), if any. The Investment Manager will bear all of these non-recurring expenses other than portfolio repositioning costs, and the Investment Manager currently does not
anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. If these expenses had been reflected, *pro forma* other expenses and total annual fund operating expenses would have been the same.

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**Example** 

The following hypothetical example is intended to help you compare the cost of investing in the Target Fund's Class A, C, R6, and Y shares with the cost of investing in the Acquiring ETF's shares. It assumes that you invest $10,000 in each 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. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | **1 Year** | **3 Year** | **5 Year** | **10 Year** |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class A | $483 | $659 | $851 | $1404 |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class C | $262 | $504 | $869 | $1695 |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class R6 | $57 | $178 | $311 | $698 |
| &nbsp;&nbsp;&nbsp;Putnam Minnesota Tax Exempt Income Fund Class Y | $61 | $191 | $332 | $745 |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Minnesota Municipal Income ETF (*assuming completion of Merger)* | $36 | $112 | $196 | $443 |

---

Following the Merger, the Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the Target Fund at all asset levels.

The Target Fund pays a management fee that incorporates asset-level discounts ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Investment Management, LLC ("Putnam Management"), the Target Fund's investment manager for periods prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (excluding net assets of such funds that are invested in, or that are invested in by, other such funds to the extent necessary to avoid "double counting" of those assets) (such other open-end mutual funds, the "Fund Family"). The management fee rate generally declines as the aggregate net assets increase. Class R6 shares of the Target Fund paid the Investment Manager a management fee (after application of Fund Family Breakpoints and any applicable waivers) of 0.42% of average net assets of the Target Fund for the one-year period ended March 31, 2025. Class R6 shares of the Target Fund also pay (subject to any applicable waivers) operating expenses, which were an additional 0.14% of average net assets of the Target Fund for the one-year period ended March 31, 2025.

By contrast, the Acquiring ETF pays an annual all-inclusive management fee (or "unitary fee") of 0.35% to the Investment Manager based on the Acquiring ETF's average daily net assets. The unitary fee is not subject to Fund Family Breakpoints or other asset-level discounts. However, the unitary fee covers all of the other expenses of the Acquiring ETF with limited exceptions. Because the Acquiring ETF has not yet commenced operations, the Acquiring ETF has not paid any management fees to the Investment Manager.

After giving effect to Fund Family Breakpoints in the case of the Target Fund, the Acquiring ETF's contractual (unitary) management fee rate is lower than that of the Target Fund's contractual management fee rate at all asset levels. In addition, the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETF, while the Target Fund's management fee does not.

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***5. How do the Funds' portfolio turnover rates compare?***

Each Fund pays transaction-related costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when a Fund's shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example above, affect Fund performance.

The Target Fund's portfolio turnover rate for its fiscal year ended May 31, 2024 was 18%. Because the Acquiring ETF has not yet commenced operations, no portfolio turnover rate is available for the Acquiring ETF.

***6. How does the investment performance of the Funds compare?***

The Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Acquiring ETF has been organized solely in connection with the Merger to acquire substantially all of the assets and assume the liabilities of the Target Fund and to continue the business of the Target Fund, except that the Acquiring ETF will operate as an ETF instead of a mutual fund. The Acquiring ETF will have no performance history prior to the Merger.

The Target Fund will be the "accounting survivor" after the Merger. This means that the Acquiring ETF will adopt the historical accounting records and performance of the Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

The bar chart and table below provide some indication of the risks of investing in the Target Fund by showing changes in the Target Fund's Class R6 shares' performance from year-to-year and by showing how the Target Fund's average annual returns for the past one-, five- and ten-year periods compare with the average annual total returns of a broad measure of market performance. The Acquiring ETF will use the Bloomberg Municipal Bond Index as its benchmark, which is the same benchmark that the Target Fund uses.

The performance of the other classes, which is shown in the table below, will differ because the classes bear potentially higher expenses. The Target Fund's past performance, before and after taxes, is not necessarily an indication of how the Acquiring ETF will perform in the future.

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**Annual total returns for Target Fund class R6 shares\***![LOGO](g91160g37y08.jpg)

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| | | |
|:---|:---|:---|
|  Year-to-date performance | through 3/31/2025 | -0.37% |
|  Best calendar quarter | Q4 2023 | 8.08% |
|  Worst calendar quarter | Q1 2022 | -5.31% |

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**Average annual total returns for Target Fund after sales charges** 

For periods ended 12/31/24

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| | | | |
|:---|:---|:---|:---|
|  **Share class** | **1 year** | **5 years** | **10 years** |
|  Class A before taxes | -2.67% | -0.11% | 1.34% |
|  Class C before taxes | -0.37% | -0.04% | 1.13% |
|  Class R6 before taxes\* | 1.68% | 0.99% | 2.02% |
|  Class R6 after taxes on distributions\* | 1.68% | 0.94% | 1.98% |
|  Class R6 after taxes on distributions and sale of fund shares\* | 2.23% | 1.31% | 2.16% |
|  Class Y before taxes | 1.64% | 0.96% | 2.00% |
|  Bloomberg Municipal Bond Index (no deduction for fees, expenses or taxes) | 1.05% | 0.99% | 2.25% |

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

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 IRA, or another tax-advantaged arrangement.

Important data provider notices and terms are available at www.franklintempletondatasources.com. All data is subject to change.

Please remember that past performance is not necessarily an indication of future results. You can obtain updated performance information at franklintempleton.com. For more information about the Fund's benchmark provider, please see Appendix C.

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***7. What are the federal income tax consequences of the Merger?***

The 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 the Target Fund or its shareholders as a direct result of the Merger, and the tax basis and holding period of a shareholder's Target Fund shares are expected to carry over to the Acquiring ETF shares the shareholder receives in the Merger. However, prior to the Merger, the Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Such shareholders will generally be required to recognize gain or loss upon the receipt of cash for their shares if they hold shares in a taxable account. At any time before the consummation of the Merger, a shareholder may redeem Target Fund shares, likely resulting in recognition of gain or loss to such shareholder for federal income tax purposes if Target Fund shares are held in a taxable account.

The Investment Manager currently does not anticipate that there will be any significant realignment of the Target Fund's portfolio holdings in connection with the Merger. Any disposition of portfolio holdings would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders during or with respect to the year of sale, and such distributions would be taxable to shareholders unless shares are held through a qualified retirement plan or other tax-advantaged arrangement.

Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

For additional information, please see "*Questions and Answers Regarding the Mergers,*" "*Risk Factors*," and "*Comparison of Other Key Features of the Funds.*"

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**MERGER 4:** 

**PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND** 

**INTO FRANKLIN NEW JERSEY MUNICIPAL INCOME ETF** 

***1. How do the investment goals, strategies, policies and restrictions of the Funds compare?***

The Target Fund operates as a mutual fund, offering shares that are redeemable on each business day at the next calculated daily NAV per share. The Acquiring ETF (together with the Target Fund, the "Funds") operates as an ETF. As an ETF, the Acquiring ETF offers shares that are bought and sold on a national securities exchange, which gives investors the ability to buy their shares throughout the day at the current market price (which may be at a premium or discount to NAV).

*Investment Goal and Strategies* 

The Target Fund and the Acquiring ETF have the same investment goals and investment strategies. While there may be minor differences in how the Acquiring ETF's and the Target Fund's investment goals and strategies are described, the Investment Manager does not believe those differences reflect, and does not expect those differences to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed.

The investment goal of each Fund is to seek as high a level of current income exempt from federal income tax and New Jersey personal income tax as the Investment Manager believes is consistent with preservation of capital. Each Fund's investment objective may be changed by the Board without shareholder approval.

Each Fund invests mainly in bonds (including general obligation bonds, revenue obligation bonds, and tender option bonds) that pay interest that is exempt from federal income tax and New Jersey personal income tax (but that may be subject to federal alternative minimum tax ("AMT")), are investment-grade in quality, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests at least 80% of the Fund's net assets in tax-exempt investments. Tax-exempt investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and New Jersey personal income tax. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of Fund shareholders, each Fund cannot include these investments for the purpose of complying with the 80% investment policy described above.

Each Fund may invest up to 25% of its total assets in below-investment-grade investments, which are sometimes referred to as "junk bonds." However, each Fund will not invest in investments that are rated lower than BB or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The Funds will not necessarily sell an investment if its rating is reduced after purchase.

The Investment Manager may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Further information about the Target Fund's investment goal and investment strategies is contained in the Prospectus and Statement of Additional Information of the Target Fund, which are on file with the SEC.

*Investment Policies and Restrictions* 

The Target Fund and Acquiring ETF have identical fundamental investment restrictions and non-fundamental investment restrictions. The Funds' fundamental investment restrictions and non-fundamental restrictions are set forth in Appendix B. After the Merger occurs, the combined Fund will be subject to the fundamental investment policies of the Acquiring ETF. Fundamental investment restrictions may not be changed without shareholder approval. Non-fundamental investment restrictions may be changed without shareholder approval.

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***2. How do the principal investment risks of the Funds compare?***

The principal risks of an investment in the Target Fund are substantially similar to the principal risks of an investment in the Acquiring ETF, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are certain differences between the Acquiring ETF's and the Target Fund's risk disclosure, the Investment Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, the Target Fund and the Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

For more information about how the risks of investing in the Acquiring ETF and the Target Fund compare, see "*Risk Factors*" below.

***3. Who manages the Funds?***

The Target Fund is a standalone trust, and the Acquiring ETF is a series of Putnam ETF Trust. The Target Fund and Putnam ETF Trust are governed by the Board of Trustees, which is responsible for overseeing all business activities of the Funds.

*Investment Manager of the Funds.* The Board has retained the Investment Manager, a global investment management organization based in California, to be the investment manager of both the Target Fund and Acquiring ETF, responsible for making investment decisions for each Fund and managing each Fund's other affairs and business. The Investment Manager's address is One Franklin Parkway, San Mateo, CA 94403-1906. For additional information about the management of the Funds, please see the section entitled "*Additional Information about the Acquiring ETFs*."

*Portfolio Management.* The same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF.

John Bonelli, Michael Conn, Garrett L. Hamilton, Christopher Sperry, and John Wiley are jointly and primarily responsible for the day-to-day management of each of the Target Fund and the Acquiring ETF. Messrs. Bonelli, Conn, Sperry, and Wiley have been portfolio managers of the Target Fund since 2024. Mr. Hamilton has been a portfolio manager of the Target Fund since 2016. Messrs. Bonelli, Conn, Hamilton, Sperry, and Wiley have been portfolio managers of the Acquiring ETF since the Acquiring ETF's inception.

The Statement of Additional Information for the Target Fund dated September 30, 2024, as supplemented, provides, and the Statement of Additional Information for the Acquiring ETF, once filed, will provide, additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio manager's ownership of securities in the Funds. For information on how to obtain a copy of the Statement of Additional Information for each of the Target Fund and the Acquiring ETF, please see the section entitled "*Additional Information about the Acquiring ETFs*."

***4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?***

Shareholders of the Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy, hold and sell shares of each Fund.

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You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and examples below. The tables show the *pro forma* expenses of the combined Acquiring ETF after giving effect to the Merger, based on pro forma net assets as of March 31, 2025, as if the Merger had taken place on March 31, 2025. The fee tables do not reflect the costs associated with the Merger. Only *pro forma* combined fees and expenses information is provided for the Acquiring ETF because the Acquiring ETF will not commence operations until the Merger is completed.

As shown below, the Merger is expected to result in lower total annual operating expenses for shareholders of the Target Fund.

Target Fund shareholders will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Merger.

**Shareholder fees** *(fees paid directly from your investment)*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Maximum sales charge<br>(load) imposed on<br>purchases (as a percentage<br>of offering price) | Maximum deferred sales charge<br>(load) (as a percentage of original<br>purchase price or redemption<br>proceeds, whichever is lower) |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund Class A | 4.00% | 1.00%\* |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund Class C |  | 1.00%\*\* |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund Class R6 |  |  |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund Class Y |  |  |
| &nbsp;&nbsp;&nbsp;Franklin New Jersey Municipal Income ETF (*pro forma)* |  |  |

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

---

| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Share class | Management<br>fees | Distribution<br>and service<br>(12b-1)<br>fees | Other<br>expenses | Total<br>annual<br>fund<br>operating<br>expenses |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund Class A | 0.42% | 0.25% | 0.15% | 0.82% |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund Class C | 0.42% | 1.00% | 0.15% | 1.57% |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund Class R6 | 0.42% |  | 0.14% | 0.56% |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund Class Y | 0.42% |  | 0.15% | 0.57% |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin New Jersey Municipal Income ETF (*assuming completion of the Merger)*† | 0.35% |  | 0.00% | 0.35% |

---

\* Applies only to certain redemptions of shares bought with no initial sales charge.

\*\* This charge is eliminated after one year.

† Does not reflect non-recurring expenses related to the Merger. These
expenses may include legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of
the Merger and related transactions contemplated by the Plan, costs associated with the organization and registration of the Acquiring ETF, and transaction costs associated with liquidating portfolio securities that will not be acquired by the
Acquiring ETF as part of the Merger ("portfolio repositioning"), if any. The Investment Manager will bear all of these non-recurring expenses other than portfolio repositioning costs, and the Investment Manager currently does not
anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. If these expenses had been reflected, *pro forma* other expenses and total annual fund operating expenses would have been the same.

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**Example** 

The following hypothetical example is intended to help you compare the cost of investing in the Target Fund's Class A, C, R6, and Y shares with the cost of investing in the Acquiring ETF's shares. It assumes that you invest $10,000 in each 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. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | **1 Year** | **3 Year** | **5 Year** | **10 Year** |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund - Class A | $480 | $651 | $836 | $1371 |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund - Class C | $260 | $496 | $856 | $1665 |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund - Class R6 | $57 | $178 | $311 | $698 |
| &nbsp;&nbsp;&nbsp;Putnam New Jersey Tax Exempt Income Fund - Class Y | $58 | $182 | $317 | $711 |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin New Jersey Municipal Income ETF (*assuming completion of Merger)* | $36 | $112 | $196 | $443 |

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Following the Merger, the Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the Target Fund at all asset levels.

The Target Fund pays a management fee that incorporates asset-level discounts ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Investment Management, LLC ("Putnam Management"), the Target Fund's investment manager for periods prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (excluding net assets of such funds that are invested in, or that are invested in by, other such funds to the extent necessary to avoid "double counting" of those assets) (such other open-end mutual funds, the "Fund Family"). The management fee rate generally declines as the aggregate net assets increase. Class R6 shares of the Target Fund paid the Investment Manager a management fee (after application of Fund Family Breakpoints and any applicable waivers) of 0.42% of average net assets of the Target Fund for the one-year period ended March 31, 2025. Class R6 shares of the Target Fund also pay (subject to any applicable waivers) operating expenses, which were an additional 0.14% of average net assets of the Target Fund for the one-year period ended March 31, 2025.

By contrast, the Acquiring ETF pays an annual all-inclusive management fee (or "unitary fee") of 0.35% to the Investment Manager based on the Acquiring ETF's average daily net assets. The unitary fee is not subject to Fund Family Breakpoints or other asset-level discounts. However, the unitary fee covers all of the other expenses of the Acquiring ETF with limited exceptions. Because the Acquiring ETF has not yet commenced operations, the Acquiring ETF has not paid any management fees to the Investment Manager.

After giving effect to Fund Family Breakpoints in the case of the Target Fund, the Acquiring ETF's contractual (unitary) management fee rate is lower than that of the Target Fund's contractual management fee rate at all asset levels. In addition, the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETF, while the Target Fund's management fee does not.

***5. How do the Funds' portfolio turnover rates compare?***

Each Fund pays transaction-related costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may

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result in higher taxes when a Fund's shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example above, affect Fund performance.

The Target Fund's portfolio turnover rate for its fiscal year ended May 31, 2024 was 13%. Because the Acquiring ETF has not yet commenced operations, no portfolio turnover rate is available for the Acquiring ETF.

***6. How does the investment performance of the Funds compare?***

The Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Acquiring ETF has been organized solely in connection with the Merger to acquire substantially all of the assets and assume the liabilities of the Target Fund and to continue the business of the Target Fund, except that the Acquiring ETF will operate as an ETF instead of a mutual fund. The Acquiring ETF will have no performance history prior to the Merger.

The Target Fund will be the "accounting survivor" after the Merger. This means that the Acquiring ETF will adopt the historical accounting records and performance of the Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

The bar chart and table below provide some indication of the risks of investing in the Target Fund by showing changes in the Target Fund's Class R6 shares' performance from year-to-year and by showing how the Target Fund's average annual returns for the past one-, five- and ten-year periods compare with the average annual total returns of a broad measure of market performance. The Acquiring ETF will use the Bloomberg Municipal Bond Index as its benchmark, which is the same benchmark that the Target Fund uses.

The performance of the other classes, which is shown in the table below, will differ because the classes bear potentially higher expenses. The Target Fund's past performance, before and after taxes, is not necessarily an indication of how the Acquiring ETF will perform in the future.

**Annual total returns for Target Fund class R6 shares\***![LOGO](g91160g43y08.jpg)

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| | | |
|:---|:---|:---|
|  Year-to-date performance | through 3/31/2025 | -0.55% |
|  Best calendar quarter | Q4 2023 | 7.41% |
|  Worst calendar quarter | Q1 2022 | -5.82% |

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**Average annual total returns for Target Fund after sales charges** 

For periods ended 12/31/24

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| | | | |
|:---|:---|:---|:---|
|  **Share class** | **1 year** | **5 years** | **10 years** |
|  Class A before taxes | -2.29% | 0.28% | 1.71% |
|  Class C before taxes | 0.14% | 0.36% | 1.51% |
|  Class R6 before taxes\* | 2.16% | 1.39% | 2.38% |
|  Class R6 after taxes on distributions\* | 2.16% | 1.38% | 2.35% |
|  Class R6 after taxes on distributions and sale of fund shares\* | 2.62% | 1.75% | 2.54% |
|  Class Y before taxes | 2.04% | 1.36% | 2.37% |
|  Bloomberg Municipal Bond Index (no deduction for fees, expenses or taxes) | 1.05% | 0.99% | 2.25% |

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

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 IRA, or another tax-advantaged arrangement.

Important data provider notices and terms are available at www.franklintempletondatasources.com. All data is subject to change.

Please remember that past performance is not necessarily an indication of future results. You can obtain updated performance information at franklintempleton.com. For more information about the Fund's benchmark provider, please see Appendix C.

***7. What are the federal income tax consequences of the Merger?***

The 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 the Target Fund or its shareholders as a direct result of the Merger, and the tax basis and holding period of a shareholder's Target Fund shares are expected to carry over to the Acquiring ETF shares the shareholder receives in the Merger. However, prior to the Merger, the Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Such shareholders will generally be required to recognize gain or loss upon the receipt of cash for their shares if they hold shares in a taxable account. At any time before the consummation of the Merger, a shareholder may redeem Target Fund shares, likely resulting in recognition of gain or loss to such shareholder for federal income tax purposes if Target Fund shares are held in a taxable account.

The Investment Manager currently does not anticipate that there will be any significant realignment of the Target Fund's portfolio holdings in connection with the Merger. Any disposition of portfolio holdings would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders during or with respect to the year of sale, and such distributions would be taxable to shareholders unless shares are held through a qualified retirement plan or other tax-advantaged arrangement.

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Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

For additional information, please see "*Questions and Answers Regarding the Mergers,*" "*Risk Factors*," and "*Comparison of Other Key Features of the Funds.*"

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**MERGER 5:** 

**PUTNAM NEW YORK TAX EXEMPT INCOME FUND** 

**INTO FRANKLIN NEW YORK MUNICIPAL INCOME ETF** 

***1. How do the investment goals, strategies, policies and restrictions of the Funds compare?***

The Target Fund operates as a mutual fund, offering shares that are redeemable on each business day at the next calculated daily NAV per share. The Acquiring ETF (together with the Target Fund, the "Funds") operates as an ETF. As an ETF, the Acquiring ETF offers shares that are bought and sold on a national securities exchange, which gives investors the ability to buy their shares throughout the day at the current market price (which may be at a premium or discount to NAV).

*Investment Goal and Strategies* 

The Target Fund and the Acquiring ETF have the same investment goals and investment strategies. While there may be minor differences in how the Acquiring ETF's and the Target Fund's investment goals and strategies are described, the Investment Manager does not believe those differences reflect, and does not expect those differences to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed.

The investment goal of each Fund is to seek as high a level of current income exempt from federal income tax and New York State and City personal income tax as the Investment Manager believes is consistent with preservation of capital. Each Fund's investment objective may be changed by the Board without shareholder approval.

Each Fund invests mainly in bonds (including general obligation bonds, revenue obligation bonds, and tender option bonds) that pay interest that is exempt from federal income tax and New York State and City personal income taxes (but that may be subject to federal alternative minimum tax ("AMT")), are investment-grade in quality, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests so that at least 90% of the Fund's income distributions are exempt from federal income tax and New York State and City personal income taxes, except during times of adverse market conditions, when more than 10% of the Fund's income distributions could be subject to these taxes. Such tax-exempt investments in which the Fund invests are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and New York State and City personal income tax. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of Fund shareholders, each Fund cannot include these investments for the purpose of complying with the 90% investment policy described above.

Each Fund may invest up to 25% of its total assets in below-investment-grade investments, which are sometimes referred to as "junk bonds." However, each Fund will not invest in investments that are rated lower than B or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. Also, each Fund may only invest up to 10% of its total assets in investments that are rated B or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The Funds will not necessarily sell an investment if its rating is reduced after purchase.

The Investment Manager may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Further information about the Target Fund's investment goal and investment strategies is contained in the Prospectus and Statement of Additional Information of the Target Fund, which are on file with the SEC.

*Investment Policies and Restrictions* 

The Target Fund and Acquiring ETF have identical fundamental investment restrictions and non-fundamental investment restrictions. The Funds' fundamental investment restrictions and non-fundamental restrictions are set forth in Appendix B. After the Merger occurs, the combined Fund will be subject to the fundamental investment policies of the Acquiring ETF. Fundamental investment restrictions may not be changed without shareholder approval. Non-fundamental investment restrictions may be changed without shareholder approval.

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***2. How do the principal investment risks of the Funds compare?***

The principal risks of an investment in the Target Fund are substantially similar to the principal risks of an investment in the Acquiring ETF, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are certain differences between the Acquiring ETF's and the Target Fund's risk disclosure, the Investment Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, the Target Fund and the Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

For more information about how the risks of investing in the Acquiring ETF and the Target Fund compare, see "*Risk Factors*" below.

***3. Who manages the Funds?***

The Target Fund is a standalone trust, and the Acquiring ETF is a series of Putnam ETF Trust. The Target Fund and Putnam ETF Trust are governed by the Board of Trustees, which is responsible for overseeing all business activities of the Funds.

*Investment Manager of the Funds.* The Board has retained the Investment Manager, a global investment management organization based in California, to be the investment manager of both the Target Fund and Acquiring ETF, responsible for making investment decisions for each Fund and managing each Fund's other affairs and business. The Investment Manager's address is One Franklin Parkway, San Mateo, CA 94403-1906. For additional information about the management of the Funds, please see the section entitled "*Additional Information about the Acquiring ETFs*."

*Portfolio Management.* The same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF.

John Bonelli, Michael Conn, Garrett L. Hamilton, Christopher Sperry, and John Wiley are jointly and primarily responsible for the day-to-day management of each of the Target Fund and the Acquiring ETF. Messrs. Bonelli, Conn, Sperry, and Wiley have been portfolio managers of the Target Fund since 2024. Mr. Hamilton has been a portfolio manager of the Target Fund since 2016. Messrs. Bonelli, Conn, Hamilton, Sperry, and Wiley have been portfolio managers of the Acquiring ETF since the Acquiring ETF's inception.

The Statement of Additional Information for the Target Fund dated March 31, 2025, as supplemented, provides, and the Statement of Additional Information for the Acquiring ETF, once filed, will provide, additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio manager's ownership of securities in the Funds. For information on how to obtain a copy of the Statement of Additional Information for each of the Target Fund and the Acquiring ETF, please see the section entitled "*Additional Information about the Acquiring ETFs*."

***4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?***

Shareholders of the Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy, hold and sell shares of each Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which

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are not reflected in the table and examples below. The tables show the *pro forma* expenses of the combined Acquiring ETF after giving effect to the Merger, based on pro forma net assets as of March 31, 2025, as if the Merger had taken place on March 31, 2025. The fee tables do not reflect the costs associated with the Merger. Only *pro forma* combined fees and expenses information is provided for the Acquiring ETF because the Acquiring ETF will not commence operations until the Merger is completed.

As shown below, the Merger is expected to result in lower total annual operating expenses for shareholders of the Target Fund.

Target Fund shareholders will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Merger.

**Shareholder fees** *(fees paid directly from your investment)*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Maximum sales charge<br>(load) imposed on<br>purchases (as a percentage<br>of offering price) | Maximum deferred sales charge<br>(load) (as a percentage of original<br>purchase price or redemption<br>proceeds, whichever is lower) |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund Class A | 4.00% | 1.00%\* |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund Class C |  | 1.00%\*\* |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund Class R6 |  |  |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund Class Y |  |  |
| &nbsp;&nbsp;&nbsp;Franklin New York Municipal Income ETF (*pro forma)* |  |  |

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

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Management<br>fees | Distribution<br>and service<br>(12b-1)<br>fees | Other<br>expenses | Total<br>annual<br>fund<br>operating<br>expenses |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund Class A | 0.42% | 0.25% | 0.12% | 0.79% |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund Class C | 0.42% | 1.00% | 0.12% | 1.54% |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund Class R6 | 0.42% |  | 0.11% | 0.53% |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund Class Y | 0.42% |  | 0.12% | 0.54% |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin New York Municipal Income ETF (*assuming completion of the Merger)*† | 0.35% |  | 0.00% | 0.35% |

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\* Applies only to certain redemptions of shares bought with no initial sales charge.

\*\* This charge is eliminated after one year.

† Does not reflect non-recurring expenses related to the Merger. These
expenses may include legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of
the Merger and related transactions contemplated by the Plan, costs associated with the organization and registration of the Acquiring ETF, and transaction costs associated with liquidating portfolio securities that will not be acquired by the
Acquiring ETF as part of the Merger ("portfolio repositioning"), if any. The Investment Manager will bear all of these non-recurring expenses other than portfolio repositioning costs, and the Investment Manager currently does not
anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. If these expenses had been reflected, *pro forma* other expenses and total annual fund operating expenses would have been the same.

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**Example** 

The following hypothetical example is intended to help you compare the cost of investing in the Target Fund's Class A, C, R6, and Y shares with the cost of investing in the Acquiring ETF's shares. It assumes that you invest $10,000 in each 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. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | **1 Year** | **3 Year** | **5 Year** | **10 Year** |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund - Class A | $477 | $642 | $821 | $1338 |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund - Class C | $257 | $487 | $839 | $1632 |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund - Class R6 | $54 | $170 | $297 | $665 |
| &nbsp;&nbsp;&nbsp;Putnam New York Tax Exempt Income Fund - Class Y | $55 | $173 | $302 | $678 |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin New York Municipal Income ETF (*assuming completion of Merger)* | $36 | $112 | $196 | $443 |

---

Following the Merger, the Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the Target Fund at all asset levels.

The Target Fund pays a management fee that incorporates asset-level discounts ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Investment Management, LLC ("Putnam Management"), the Target Fund's investment manager for periods prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (excluding net assets of such funds that are invested in, or that are invested in by, other such funds to the extent necessary to avoid "double counting" of those assets) (such other open-end mutual funds, the "Fund Family"). The management fee rate generally declines as the aggregate net assets increase. Class R6 shares of the Target Fund paid the Investment Manager a management fee (after application of Fund Family Breakpoints and any applicable waivers) of 0.42% of average net assets of the Target Fund for the one-year period ended March 31, 2025. Class R6 shares of the Target Fund also pay (subject to any applicable waivers) operating expenses, which were an additional 0.11% of average net assets of the Target Fund for the one-year period ended March 31, 2025.

By contrast, the Acquiring ETF pays an annual all-inclusive management fee (or "unitary fee") of 0.35% to the Investment Manager based on the Acquiring ETF's average daily net assets. The unitary fee is not subject to Fund Family Breakpoints or other asset-level discounts. However, the unitary fee covers all of the other expenses of the Acquiring ETF with limited exceptions. Because the Acquiring ETF has not yet commenced operations, the Acquiring ETF has not paid any management fees to the Investment Manager.

After giving effect to Fund Family Breakpoints in the case of the Target Fund, the Acquiring ETF's contractual (unitary) management fee rate is lower than that of the Target Fund's contractual management fee rate at all asset levels. In addition, the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETF, while the Target Fund's management fee does not.

***5. How do the Funds' portfolio turnover rates compare?***

Each Fund pays transaction-related costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may

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result in higher taxes when a Fund's shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example above, affect Fund performance.

The Target Fund's portfolio turnover rate for its fiscal year ended November 30, 2024 was 17%. Because the Acquiring ETF has not yet commenced operations, no portfolio turnover rate is available for the Acquiring ETF.

***6. How does the investment performance of the Funds compare?***

The Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Acquiring ETF has been organized solely in connection with the Merger to acquire substantially all of the assets and assume the liabilities of the Target Fund and to continue the business of the Target Fund, except that the Acquiring ETF will operate as an ETF instead of a mutual fund. The Acquiring ETF will have no performance history prior to the Merger.

The Target Fund will be the "accounting survivor" after the Merger. This means that the Acquiring ETF will adopt the historical accounting records and performance of the Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

The bar chart and table below provide some indication of the risks of investing in the Target Fund by showing changes in the Target Fund's Class R6 shares' performance from year-to-year and by showing how the Target Fund's average annual returns for the past one-, five- and ten-year periods compare with the average annual total returns of a broad measure of market performance. The Acquiring ETF will use the Bloomberg Municipal Bond Index as its benchmark, which is the same benchmark that the Target Fund uses.

The performance of the other classes, which is shown in the table below, will differ because the classes bear potentially higher expenses. The Target Fund's past performance, before and after taxes, is not necessarily an indication of how the Acquiring ETF will perform in the future.

**Annual total returns for Target Fund class R6 shares\***![LOGO](g91160g50y01.jpg)

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| | | |
|:---|:---|:---|
| Year-to-date performance | through 3/31/2025 | -0.98% |
| Best calendar quarter | Q4 2023 | 8.98% |
| Worst calendar quarter | Q1 2022 | -6.44% |

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**Average annual total returns for Target Fund after sales charges** 

For periods ended 12/31/24

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| | | | |
|:---|:---|:---|:---|
| **Share class** | **1 year** | **5 years** | **10 years** |
| Class A before taxes | -2.23% | -0.03% | 1.57% |
| Class C before taxes | 0.09% | 0.04% | 1.37% |
| Class R6 before taxes<sup>\*</sup> | 2.24% | 1.05% | 2.24% |
| Class R6 after taxes on distributions\* | 2.24% | 1.04% | 2.22% |
| Class R6 after taxes on distributions and sale of fund shares\* | 2.76% | 1.47% | 2.42% |
| Class Y before taxes | 2.10% | 1.04% | 2.24% |
| Bloomberg Municipal Bond Index (no deduction for fees, expenses or taxes) | 1.05% | 0.99% | 2.25% |

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

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 IRA, or another tax-advantaged arrangement.

Important data provider notices and terms are available at www.franklintempletondatasources.com. All data is subject to change.

Please remember that past performance is not necessarily an indication of future results. You can obtain updated performance information at franklintempleton.com. For more information about the Fund's benchmark provider, please see Appendix C.

***7. What are the federal income tax consequences of the Merger?***

The 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 the Target Fund or its shareholders as a direct result of the Merger, and the tax basis and holding period of a shareholder's Target Fund shares are expected to carry over to the Acquiring ETF shares the shareholder receives in the Merger. However, prior to the Merger, the Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Such shareholders will generally be required to recognize gain or loss upon the receipt of cash for their shares if they hold shares in a taxable account. At any time before the consummation of the Merger, a shareholder may redeem Target Fund shares, likely resulting in recognition of gain or loss to such shareholder for federal income tax purposes if Target Fund shares are held in a taxable account.

The Investment Manager currently does not anticipate that there will be any significant realignment of the Target Fund's portfolio holdings in connection with the Merger. Any disposition of portfolio holdings would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders during or with respect to the year of sale, and such distributions would be taxable to shareholders unless shares are held through a qualified retirement plan or other tax-advantaged arrangement.

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Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

For additional information, please see "*Questions and Answers Regarding the Mergers,*" "*Risk Factors*," and "*Comparison of Other Key Features of the Funds.*"

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**MERGER 6:** 

**PUTNAM OHIO TAX EXEMPT INCOME FUND** 

**INTO FRANKLIN OHIO MUNICIPAL INCOME ETF** 

***1. How do the investment goals, strategies, policies and restrictions of the Funds compare?***

The Target Fund operates as a mutual fund, offering shares that are redeemable on each business day at the next calculated daily NAV per share. The Acquiring ETF (together with the Target Fund, the "Funds") operates as an ETF. As an ETF, the Acquiring ETF offers shares that are bought and sold on a national securities exchange, which gives investors the ability to buy their shares throughout the day at the current market price (which may be at a premium or discount to NAV).

*Investment Goal and Strategies* 

The Target Fund and the Acquiring ETF have the same investment goals and investment strategies. While there may be minor differences in how the Acquiring ETF's and the Target Fund's investment goals and strategies are described, the Investment Manager does not believe those differences reflect, and does not expect those differences to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed.

The investment goal of each Fund is to seek as high a level of current income exempt from federal income tax and Ohio personal income tax as the Investment Manager believes is consistent with preservation of capital. Each Fund's investment objective may be changed by the Board without shareholder approval.

Each Fund invests mainly in bonds (including general obligation bonds, revenue obligation bonds, and tender option bonds) that pay interest that is exempt from federal income tax and Ohio personal income tax (but that may be subject to federal alternative minimum tax ("AMT")), are investment-grade in quality, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests at least 80% of the Fund's net assets in tax-exempt investments. Tax-exempt investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and Ohio personal income tax. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of Fund shareholders, each Fund cannot include these investments for the purpose of complying with the 80% investment policy described above.

Each Fund may invest up to 25% of its total assets in below-investment-grade investments, which are sometimes referred to as "junk bonds." However, each Fund will not invest in investments that are rated lower than BB or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The Funds will not necessarily sell an investment if its rating is reduced after purchase.

The Investment Manager may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Further information about the Target Fund's investment goal and investment strategies is contained in the Prospectus and Statement of Additional Information of the Target Fund, which are on file with the SEC.

*Investment Policies and Restrictions* 

The Target Fund and Acquiring ETF have identical fundamental investment restrictions and non-fundamental investment restrictions. The Funds' fundamental investment restrictions and non-fundamental restrictions are set forth in Appendix B. After the Merger occurs, the combined Fund will be subject to the fundamental investment policies of the Acquiring ETF. Fundamental investment restrictions may not be changed without shareholder approval. Non-fundamental investment restrictions may be changed without shareholder approval.

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***2. How do the principal investment risks of the Funds compare?***

The principal risks of an investment in the Target Fund are substantially similar to the principal risks of an investment in the Acquiring ETF, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are certain differences between the Acquiring ETF's and the Target Fund's risk disclosure, the Investment Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, the Target Fund and the Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

For more information about how the risks of investing in the Acquiring ETF and the Target Fund compare, see "*Risk Factors*" below.

***3. Who manages the Funds?***

The Target Fund is a standalone trust, and the Acquiring ETF is a series of Putnam ETF Trust. The Target Fund and Putnam ETF Trust are governed by the Board of Trustees, which is responsible for overseeing all business activities of the Funds.

*Investment Manager of the Funds.* The Board has retained the Investment Manager, a global investment management organization based in California, to be the investment manager of both the Target Fund and Acquiring ETF, responsible for making investment decisions for each Fund and managing each Fund's other affairs and business. The Investment Manager's address is One Franklin Parkway, San Mateo, CA 94403-1906. For additional information about the management of the Funds, please see the section entitled "*Additional Information about the Acquiring ETFs*."

*Portfolio Management.* The same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF.

John Bonelli, Michael Conn, Garrett L. Hamilton, Christopher Sperry, and John Wiley are jointly and primarily responsible for the day-to-day management of each of the Target Fund and the Acquiring ETF. Messrs. Bonelli, Conn, Sperry, and Wiley have been portfolio managers of the Target Fund since 2024. Mr. Hamilton has been a portfolio manager of the Target Fund since 2016. Messrs. Bonelli, Conn, Hamilton, Sperry, and Wiley have been portfolio managers of the Acquiring ETF since the Acquiring ETF's inception.

The Statement of Additional Information for the Target Fund dated September 30, 2024, as supplemented, provides, and the Statement of Additional Information for the Acquiring ETF, once filed, will provide, additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio manager's ownership of securities in the Funds. For information on how to obtain a copy of the Statement of Additional Information for each of the Target Fund and the Acquiring ETF, please see the section entitled "*Additional Information about the Acquiring ETFs*."

***4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?***

Shareholders of the Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy, hold and sell shares of each Fund.

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You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and examples below. The tables show the *pro forma* expenses of the combined Acquiring ETF after giving effect to the Merger, based on pro forma net assets as of March 31, 2025, as if the Merger had taken place on March 31, 2025. The fee tables do not reflect the costs associated with the Merger. Only *pro forma* combined fees and expenses information is provided for the Acquiring ETF because the Acquiring ETF will not commence operations until the Merger is completed.

As shown below, the Merger is expected to result in lower total annual operating expenses for shareholders of the Target Fund.

Target Fund shareholders will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Merger.

**Shareholder fees** *(fees paid directly from your investment)*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Maximum sales charge<br>(load) imposed on<br>purchases (as a percentage<br>of offering price) | Maximum deferred sales charge<br>(load) (as a percentage of original<br>purchase price or redemption<br>proceeds, whichever is lower) |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund Class A | 4.00% | 1.00%\* |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund Class C |  | 1.00%\*\* |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund Class R6 |  |  |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund Class Y |  |  |
| &nbsp;&nbsp;&nbsp;Franklin Ohio Municipal Income ETF (*pro forma)* |  |  |

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

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Management<br>fees | Distribution<br>and service<br>(12b-1)<br>fees | Other<br>expenses | Total<br>annual<br>fund<br>operating<br>expenses |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund Class A | 0.42% | 0.25% | 0.22% | 0.89% |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund Class C | 0.42% | 1.00% | 0.22% | 1.64% |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund Class R6 | 0.42% |  | 0.19% | 0.61% |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund Class Y | 0.42% |  | 0.22% | 0.64% |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Ohio Municipal Income ETF (*assuming completion of the Merger)*† | 0.35% |  | 0.00% | 0.35% |

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\* Applies only to certain redemptions of shares bought with no initial sales charge.

\*\* This charge is eliminated after one year.

† Does not reflect non-recurring expenses related to the Merger. These
expenses may include legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of
the Merger and related transactions contemplated by the Plan, costs associated with the organization and registration of the Acquiring ETF, and transaction costs associated with liquidating portfolio securities that will not be acquired by the
Acquiring ETF as part of the Merger ("portfolio repositioning"), if any. The Investment Manager will bear all of these non-recurring expenses other than portfolio repositioning costs, and the Investment Manager currently does not
anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. If these expenses had been reflected, *pro forma* other expenses and total annual fund operating expenses would have been the same.

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**Example** 

The following hypothetical example is intended to help you compare the cost of investing in the Target Fund's Class A, C, R6, and Y shares with the cost of investing in the Acquiring ETF's shares. It assumes that you invest $10,000 in each 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. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | **1 Year** | **3 Year** | **5 Year** | **10 Year** |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund - Class A | $487 | $671 | $871 | $1448 |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund - Class C | $266 | $516 | $890 | $1740 |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund - Class R6 | $62 | $195 | $340 | $761 |
| &nbsp;&nbsp;&nbsp;Putnam Ohio Tax Exempt Income Fund - Class Y | $65 | $204 | $355 | $796 |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Ohio Municipal Income ETF (*assuming completion of Merger)* | $36 | $112 | $196 | $443 |

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Following the Merger, the Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the Target Fund at all asset levels.

The Target Fund pays a management fee that incorporates asset-level discounts ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Investment Management, LLC ("Putnam Management"), the Target Fund's investment manager for periods prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (excluding net assets of such funds that are invested in, or that are invested in by, other such funds to the extent necessary to avoid "double counting" of those assets) (such other open-end mutual funds, the "Fund Family"). The management fee rate generally declines as the aggregate net assets increase. Class R6 shares of the Target Fund paid the Investment Manager a management fee (after application of Fund Family Breakpoints and any applicable waivers) of 0.42% of average net assets of the Target Fund for the one-year period ended March 31, 2025. Class R6 shares of the Target Fund also pay (subject to any applicable waivers) operating expenses, which were an additional 0.19% of average net assets of the Target Fund for the one-year period ended March 31, 2025.

By contrast, the Acquiring ETF pays an annual all-inclusive management fee (or "unitary fee") of 0.35% to the Investment Manager based on the Acquiring ETF's average daily net assets. The unitary fee is not subject to Fund Family Breakpoints or other asset-level discounts. However, the unitary fee covers all of the other expenses of the Acquiring ETF with limited exceptions. Because the Acquiring ETF has not yet commenced operations, the Acquiring ETF has not paid any management fees to the Investment Manager.

After giving effect to Fund Family Breakpoints in the case of the Target Fund, the Acquiring ETF's contractual (unitary) management fee rate is lower than that of the Target Fund's contractual management fee rate at all asset levels. In addition, the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETF, while the Target Fund's management fee does not.

***5. How do the Funds' portfolio turnover rates compare?***

Each Fund pays transaction-related costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may

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result in higher taxes when a Fund's shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example above, affect Fund performance.

The Target Fund's portfolio turnover rate for its fiscal year ended May 31, 2024 was 14%. Because the Acquiring ETF has not yet commenced operations, no portfolio turnover rate is available for the Acquiring ETF.

***6. How does the investment performance of the Funds compare?***

The Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Acquiring ETF has been organized solely in connection with the Merger to acquire substantially all of the assets and assume the liabilities of the Target Fund and to continue the business of the Target Fund, except that the Acquiring ETF will operate as an ETF instead of a mutual fund. The Acquiring ETF will have no performance history prior to the Merger.

The Target Fund will be the "accounting survivor" after the Merger. This means that the Acquiring ETF will adopt the historical accounting records and performance of the Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

The bar chart and table below provide some indication of the risks of investing in the Target Fund by showing changes in the Target Fund's Class R6 shares' performance from year-to-year and by showing how the Target Fund's average annual returns for the past one-, five- and ten-year periods compare with the average annual total returns of a broad measure of market performance. The Acquiring ETF will use the Bloomberg Municipal Bond Index as its benchmark, which is the same benchmark that the Target Fund uses.

The performance of the other classes, which is shown in the table below, will differ because the classes bear potentially higher expenses. The Target Fund's past performance, before and after taxes, is not necessarily an indication of how the Acquiring ETF will perform in the future.

**Annual total returns for Target Fund class R6 shares\***![LOGO](g91160g57u07.jpg)

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| | | |
|:---|:---|:---|
| Year-to-date performance | through 3/31/2025 | -0.39% |
| Best calendar quarter | Q4 2023 | 7.66% |
| Worst calendar quarter | Q1 2022 | -5.55% |

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**Average annual total returns for Target Fund after sales charges** 

For periods ended 12/31/24

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| | | | |
|:---|:---|:---|:---|
| **Share class** | **1 year** | **5 years** | **10 years** |
| Class A before taxes | -2.38% | -0.08% | 1.35% |
| Class C before taxes | -0.06% | -0.02% | 1.14% |
| Class R6 before taxes\* | 1.98% | 1.02% | 2.03% |
| Class R6 after taxes on distributions\* | 1.97% | 0.97% | 2.01% |
| Class R6 after taxes on distributions and sale of fund shares\* | 2.46% | 1.40% | 2.22% |
| Class Y before taxes | 1.94% | 0.99% | 2.00% |
| Bloomberg Municipal Bond Index (no deduction for fees, expenses or taxes) | 1.05% | 0.99% | 2.25% |

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

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 IRA, or another tax-advantaged arrangement.

Important data provider notices and terms are available at www.franklintempletondatasources.com. All data is subject to change.

Please remember that past performance is not necessarily an indication of future results. You can obtain updated performance information at franklintempleton.com. For more information about the Fund's benchmark provider, please see Appendix C.

***7. What are the federal income tax consequences of the Merger?***

The 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 the Target Fund or its shareholders as a direct result of the Merger, and the tax basis and holding period of a shareholder's Target Fund shares are expected to carry over to the Acquiring ETF shares the shareholder receives in the Merger. However, prior to the Merger, the Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Such shareholders will generally be required to recognize gain or loss upon the receipt of cash for their shares if they hold shares in a taxable account. At any time before the consummation of the Merger, a shareholder may redeem Target Fund shares, likely resulting in recognition of gain or loss to such shareholder for federal income tax purposes if Target Fund shares are held in a taxable account.

The Investment Manager currently does not anticipate that there will be any significant realignment of the Target Fund's portfolio holdings in connection with the Merger. Any disposition of portfolio holdings would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders during or with respect to the year of sale, and such distributions would be taxable to shareholders unless shares are held through a qualified retirement plan or other tax-advantaged arrangement.

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Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

For additional information, please see "*Questions and Answers Regarding the Mergers,*" "*Risk Factors*," and "*Comparison of Other Key Features of the Funds.*"

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**MERGER 7:** 

**PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND** 

**INTO FRANKLIN PENNSYLVANIA MUNICIPAL INCOME ETF** 

***1. How do the investment goals, strategies, policies and restrictions of the Funds compare?***

The Target Fund operates as a mutual fund, offering shares that are redeemable on each business day at the next calculated daily NAV per share. The Acquiring ETF (together with the Target Fund, the "Funds") operates as an ETF. As an ETF, the Acquiring ETF offers shares that are bought and sold on a national securities exchange, which gives investors the ability to buy their shares throughout the day at the current market price (which may be at a premium or discount to NAV).

*Investment Goal and Strategies* 

The Target Fund and the Acquiring ETF have the same investment goals and investment strategies. While there may be minor differences in how the Acquiring ETF's and the Target Fund's investment goals and strategies are described, the Investment Manager does not believe those differences reflect, and does not expect those differences to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed.

The investment goal of each Fund is to seek as high a level of current income exempt from federal income tax and Pennsylvania personal income tax as the Investment Manager believes is consistent with preservation of capital. Each Fund's investment objective may be changed by the Board without shareholder approval.

Each Fund invests mainly in bonds (including general obligation bonds, revenue obligation bonds, and tender option bonds) that pay interest that is exempt from federal income tax and Pennsylvania personal income tax (but that may be subject to federal alternative minimum tax ("AMT")), are investment-grade in quality, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests at least 80% of the fund's net assets in tax-exempt investments. Tax-exempt investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and Pennsylvania personal income tax. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of Fund shareholders, each Fund cannot include these investments for the purpose of complying with the 80% investment policy described above.

Each Fund may invest up to 25% of its total assets in below-investment-grade investments, which are sometimes referred to as "junk bonds." However, each Fund will not invest in investments that are rated lower than BB or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The Funds will not necessarily sell an investment if its rating is reduced after purchase.

The Investment Manager may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Further information about the Target Fund's investment goal and investment strategies is contained in the Prospectus and Statement of Additional Information of the Target Fund, which are on file with the SEC.

*Investment Policies and Restrictions* 

The Target Fund and Acquiring ETF have identical fundamental investment restrictions and non-fundamental investment restrictions. The Funds' fundamental investment restrictions and non-fundamental restrictions are set forth in Appendix B. After the Merger occurs, the combined Fund will be subject to the fundamental investment policies of the Acquiring ETF. Fundamental investment restrictions may not be changed without shareholder approval. Non-fundamental investment restrictions may be changed without shareholder approval.

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***2. How do the principal investment risks of the Funds compare?***

The principal risks of an investment in the Target Fund are substantially similar to the principal risks of an investment in the Acquiring ETF, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are certain differences between the Acquiring ETF's and the Target Fund's risk disclosure, the Investment Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, the Target Fund and the Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

For more information about how the risks of investing in the Acquiring ETF and the Target Fund compare, see "*Risk Factors*" below.

***3. Who manages the Funds?***

The Target Fund is a standalone trust, and the Acquiring ETF is a series of Putnam ETF Trust. The Target Fund and Putnam ETF Trust are governed by the Board of Trustees, which is responsible for overseeing all business activities of the Funds.

*Investment Manager of the Funds.* The Board has retained the Investment Manager, a global investment management organization based in California, to be the investment manager of both the Target Fund and Acquiring ETF, responsible for making investment decisions for each Fund and managing each Fund's other affairs and business. The Investment Manager's address is One Franklin Parkway, San Mateo, CA 94403-1906. For additional information about the management of the Funds, please see the section entitled "*Additional Information about the Acquiring ETFs*."

*Portfolio Management.* The same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF.

John Bonelli, Michael Conn, Garrett L. Hamilton, Christopher Sperry, and John Wiley are jointly and primarily responsible for the day-to-day management of each of the Target Fund and the Acquiring ETF. Messrs. Bonelli, Conn, Sperry, and Wiley have been portfolio managers of the Target Fund since 2024. Mr. Hamilton has been a portfolio manager of the Target Fund since 2016. Messrs. Bonelli, Conn, Hamilton, Sperry, and Wiley have been portfolio managers of the Acquiring ETF since the Acquiring ETF's inception.

The Statement of Additional Information for the Target Fund dated September 30, 2024, as supplemented, provides, and the Statement of Additional Information for the Acquiring ETF, once filed, will provide, additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio manager's ownership of securities in the Funds. For information on how to obtain a copy of the Statement of Additional Information for each of the Target Fund and the Acquiring ETF, please see the section entitled "*Additional Information about the Acquiring ETFs*."

***4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?***

Shareholders of the Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy, hold and sell shares of each Fund.

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You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and examples below. The tables show the *pro forma* expenses of the combined Acquiring ETF after giving effect to the Merger, based on pro forma net assets as of March 31, 2025, as if the Merger had taken place on March 31, 2025. The fee tables do not reflect the costs associated with the Merger. Only *pro forma* combined fees and expenses information is provided for the Acquiring ETF because the Acquiring ETF will not commence operations until the Merger is completed.

As shown below, the Merger is expected to result in lower total annual operating expenses for shareholders of the Target Fund.

Target Fund shareholders will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Merger.

**Shareholder fees** *(fees paid directly from your investment)*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Maximum sales charge<br>(load) imposed on<br>purchases (as a percentage<br>of offering price) | Maximum deferred sales charge<br>(load) (as a percentage of original<br>purchase price or redemption<br>proceeds, whichever is lower) |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund Class A | 4.00% | 1.00%\* |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund Class C |  | 1.00%\*\* |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund Class R6 |  |  |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund Class Y |  |  |
| &nbsp;&nbsp;&nbsp;Franklin Pennsylvania Municipal Income ETF (*pro forma)* |  |  |

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

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Management<br>fees | Distribution<br>and service<br>(12b-1)<br>fees | Other<br>expenses | Total<br>annual<br>fund<br>operating<br>expenses |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund Class A | 0.42% | 0.25% | 0.19% | 0.86% |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund Class C | 0.42% | 1.00% | 0.19% | 1.61% |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund Class R6 | 0.42% |  | 0.17% | 0.59% |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund Class Y | 0.42% |  | 0.19% | 0.61% |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Pennsylvania Municipal Income ETF (*assuming completion of the Merger)*† | 0.35% |  | 0.00% | 0.35% |

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\* Applies only to certain redemptions of shares bought with no initial sales charge.

\*\* This charge is eliminated after one year.

† Does not reflect non-recurring expenses related to the Merger. These
expenses may include legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of
the Merger and related transactions contemplated by the Plan, costs associated with the organization and registration of the Acquiring ETF, and transaction costs associated with liquidating portfolio securities that will not be acquired by the
Acquiring ETF as part of the Merger ("portfolio repositioning"), if any. The Investment Manager will bear all of these non-recurring expenses other than portfolio repositioning costs, and the Investment Manager currently does not
anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. If these expenses had been reflected, *pro forma* other expenses and total annual fund operating expenses would have been the same.

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**Example** 

The following hypothetical example is intended to help you compare the cost of investing in the Target Fund's Class A, C, R6, and Y shares with the cost of investing in the Acquiring ETF's shares. It assumes that you invest $10,000 in each 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. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | **1 Year** | **3 Year** | **5 Year** | **10 Year** |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund - Class A | $484 | $663 | $857 | $1418 |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund - Class C | $264 | $508 | $876 | $1710 |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund - Class R6 | $60 | $189 | $330 | $739 |
| &nbsp;&nbsp;&nbsp;Putnam Pennsylvania Tax Exempt Income Fund - Class Y | $62 | $195 | $340 | $762 |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Ohio Municipal Income ETF (*assuming completion of Merger)* | $36 | $112 | $196 | $443 |

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Following the Merger, the Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the Target Fund at all asset levels.

The Target Fund pays a management fee that incorporates asset-level discounts ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Investment Management, LLC ("Putnam Management"), the Target Fund's investment manager for periods prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (excluding net assets of such funds that are invested in, or that are invested in by, other such funds to the extent necessary to avoid "double counting" of those assets) (such other open-end mutual funds, the "Fund Family"). The management fee rate generally declines as the aggregate net assets increase. Class R6 shares of the Target Fund paid the Investment Manager a management fee (after application of Fund Family Breakpoints and any applicable waivers) of 0.42% of average net assets of the Target Fund for the one-year period ended March 31, 2025. Class R6 shares of the Target Fund also pay (subject to any applicable waivers) operating expenses, which were an additional 0.17% of average net assets of the Target Fund for the one-year period ended March 31, 2025.

By contrast, the Acquiring ETF pays an annual all-inclusive management fee (or "unitary fee") of 0.35% to the Investment Manager based on the Acquiring ETF's average daily net assets. The unitary fee is not subject to Fund Family Breakpoints or other asset-level discounts. However, the unitary fee covers all of the other expenses of the Acquiring ETF with limited exceptions. Because the Acquiring ETF has not yet commenced operations, the Acquiring ETF has not paid any management fees to the Investment Manager.

After giving effect to Fund Family Breakpoints in the case of the Target Fund, the Acquiring ETF's contractual (unitary) management fee rate is lower than that of the Target Fund's contractual management fee rate at all asset levels. In addition, the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETF, while the Target Fund's management fee does not.

***5. How do the Funds' portfolio turnover rates compare?***

Each Fund pays transaction-related costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may

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result in higher taxes when a Fund's shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example above, affect Fund performance.

The Target Fund's portfolio turnover rate for its fiscal year ended May 31, 2024 was 22%. Because the Acquiring ETF has not yet commenced operations, no portfolio turnover rate is available for the Acquiring ETF.

***6. How does the investment performance of the Funds compare?***

The Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Acquiring ETF has been organized solely in connection with the Merger to acquire substantially all of the assets and assume the liabilities of the Target Fund and to continue the business of the Target Fund, except that the Acquiring ETF will operate as an ETF instead of a mutual fund. The Acquiring ETF will have no performance history prior to the Merger.

The Target Fund will be the "accounting survivor" after the Merger. This means that the Acquiring ETF will adopt the historical accounting records and performance of the Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

The bar chart and table below provide some indication of the risks of investing in the Target Fund by showing changes in the Target Fund's Class R6 shares' performance from year-to-year and by showing how the Target Fund's average annual returns for the past one-, five- and ten-year periods compare with the average annual total returns of a broad measure of market performance. The Acquiring ETF will use the Bloomberg Municipal Bond Index as its benchmark, which is the same benchmark that the Target Fund uses.

The performance of the other classes, which is shown in the table below, will differ because the classes bear potentially higher expenses. The Target Fund's past performance, before and after taxes, is not necessarily an indication of how the Acquiring ETF will perform in the future.

**Annual total returns for Target Fund class R6 shares\***![LOGO](g91160g64u08.jpg)

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| | | |
|:---|:---|:---|
| Year-to-date performance | through 3/31/2025 | -0.41% |
| Best calendar quarter | Q4 2023 | 8.57% |
| Worst calendar quarter | Q1 2022 | -5.83% |

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**Average annual total returns for Target Fund after sales charges** 

For periods ended 12/31/24

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| | | | |
|:---|:---|:---|:---|
| **Share class** | **1 year** | **5 years** | **10 years** |
| Class A before taxes | -1.51% | 0.19% | 1.61% |
| Class C before taxes | 0.72% | 0.25% | 1.41% |
| Class R6 before taxes\* | 2.88% | 1.29% | 2.29% |
| Class R6 after taxes on distributions\* | 2.88% | 1.28% | 2.28% |
| Class R6 after taxes on distributions and sale of fund shares\* | 3.06% | 1.63% | 2.45% |
| Class Y before taxes | 2.86% | 1.26% | 2.27% |
| Bloomberg Municipal Bond Index (no deduction for fees, expenses or taxes) | 1.05% | 0.99% | 2.25% |

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

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 IRA, or another tax-advantaged arrangement.

Important data provider notices and terms are available at www.franklintempletondatasources.com. All data is subject to change.

Please remember that past performance is not necessarily an indication of future results. You can obtain updated performance information at franklintempleton.com. For more information about the Fund's benchmark provider, please see Appendix C.

***7. What are the federal income tax consequences of the Merger?***

The 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 the Target Fund or its shareholders as a direct result of the Merger, and the tax basis and holding period of a shareholder's Target Fund shares are expected to carry over to the Acquiring ETF shares the shareholder receives in the Merger. However, prior to the Merger, the Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Such shareholders will generally be required to recognize gain or loss upon the receipt of cash for their shares if they hold shares in a taxable account. At any time before the consummation of the Merger, a shareholder may redeem Target Fund shares, likely resulting in recognition of gain or loss to such shareholder for federal income tax purposes if Target Fund shares are held in a taxable account.

The Investment Manager currently does not anticipate that there will be any significant realignment of the Target Fund's portfolio holdings in connection with the Merger. Any disposition of portfolio holdings would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders during or with respect to the year of sale, and such distributions would be taxable to shareholders unless shares are held through a qualified retirement plan or other tax-advantaged arrangement.

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Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

For additional information, please see "*Questions and Answers Regarding the Mergers,*" "*Risk Factors*," and "*Comparison of Other Key Features of the Funds.*"

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**MERGER 8:** 

**PUTNAM SHORT-TERM MUNICIPAL INCOME FUND** 

**INTO FRANKLIN SHORT-TERM MUNICIPAL INCOME ETF** 

***1. How do the investment goals, strategies, policies and restrictions of the Funds compare?***

The Target Fund operates as a mutual fund, offering shares that are redeemable on each business day at the next calculated daily NAV per share. The Acquiring ETF (together with the Target Fund, the "Funds") operates as an ETF. As an ETF, the Acquiring ETF offers shares that are bought and sold on a national securities exchange, which gives investors the ability to buy their shares throughout the day at the current market price (which may be at a premium or discount to NAV).

*Investment Goal and Strategies* 

The Target Fund and the Acquiring ETF have the same investment goals and investment strategies. While there may be minor differences in how the Acquiring ETF's and the Target Fund's investment goals and strategies are described, the Investment Manager does not believe those differences reflect, and does not expect those differences to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed.

The investment goal of each Fund is to seek as high a level of current income exempt from federal income tax as the Investment Manager believes is consistent with preservation of capital. Each Fund's investment objective may be changed by the Board without shareholder approval.

Each Fund invests mainly in bonds (including general obligation bonds, revenue obligation bonds, and tender option bonds) that pay interest that is exempt from federal income tax (but that may be subject to federal alternative minimum tax ("AMT")) and that have short-term maturities (i.e., three years or less). The bonds each Fund invests in are mainly investment-grade in quality. Under normal circumstances, each Fund invests at least 80% of the Fund's net assets in tax-exempt investments, which for purposes of this policy include investments paying interest subject to the federal AMT for individuals. Such tax-exempt investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from federal income tax. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. The Investment Manager may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Further information about the Target Fund's investment goal and investment strategies is contained in the Prospectus and Statement of Additional Information of the Target Fund, which are on file with the SEC.

*Investment Policies and Restrictions* 

The Target Fund and Acquiring ETF have identical fundamental investment restrictions and non-fundamental investment restrictions. The Funds' fundamental investment restrictions and non-fundamental restrictions are set forth in Appendix B. After the Merger occurs, the combined Fund will be subject to the fundamental investment policies of the Acquiring ETF. Fundamental investment restrictions may not be changed without shareholder approval. Non-fundamental investment restrictions may be changed without shareholder approval.

***2. How do the principal investment risks of the Funds compare?***

The principal risks of an investment in the Target Fund are substantially similar to the principal risks of an investment in the Acquiring ETF, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are certain differences between the Acquiring ETF's and the Target Fund's risk disclosure, the Investment

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Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, the Target Fund and the Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

For more information about how the risks of investing in the Acquiring ETF and the Target Fund compare, see "*Risk Factors*" below.

***3. Who manages the Funds?***

The Target Fund is a series of the Putnam Funds Trust, and the Acquiring ETF is a series of Putnam ETF Trust. Putnam Funds Trust and Putnam ETF Trust are governed by the Board of Trustees, which is responsible for overseeing all business activities of the Funds.

*Investment Manager of the Funds.* The Board has retained the Investment Manager, a global investment management organization based in California, to be the investment manager of both the Target Fund and Acquiring ETF, responsible for making investment decisions for each Fund and managing each Fund's other affairs and business. The Investment Manager's address is One Franklin Parkway, San Mateo, CA 94403-1906. For additional information about the management of the Funds, please see the section entitled "*Additional Information about the Acquiring ETFs*."

*Portfolio Management.* The same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF.

Benjamin C. Barber, James Conn, Garrett L. Hamilton, Francisco Rivera, and Daniel Workman are jointly and primarily responsible for the day-to-day management of each of the Target Fund and the Acquiring ETF. Messrs. Barber, Conn, Rivera, and Workman have been portfolio managers of the Target Fund since 2024. Mr. Hamilton has been a portfolio manager of the Target Fund since 2016. Messrs. Barber, Conn, Hamilton, Rivera, and Workman have been portfolio managers of the Acquiring ETF since the Acquiring ETF's inception.

The Statement of Additional Information for the Target Fund dated March 31, 2025, as supplemented, provides, and the Statement of Additional Information for the Acquiring ETF, once filed, will provide, additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio manager's ownership of securities in the Funds. For information on how to obtain a copy of the Statement of Additional Information for each of the Target Fund and the Acquiring ETF, please see the section entitled "*Additional Information about the Acquiring ETFs*."

***4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?***

Shareholders of the Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy, hold and sell shares of each Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and examples below. The tables show the *pro forma* expenses of the combined Acquiring ETF after giving effect to the Merger, based on pro forma net assets as of March 31, 2025, as if the Merger had taken place on March 31, 2025. The fee tables do not reflect the costs associated with the Merger. Only *pro forma* combined fees and expenses information is provided for the Acquiring ETF because the Acquiring ETF will not commence operations until the Merger is completed.

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As shown below, the Merger is expected to result in lower total annual operating expenses for shareholders of the Target Fund.

Target Fund shareholders will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Merger.

**Shareholder fees** *(fees paid directly from your investment)*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Maximum sales charge<br>(load) imposed on<br>purchases (as a percentage<br>of offering price) | Maximum deferred sales charge<br>(load) (as a percentage of original<br>purchase price or redemption<br>proceeds, whichever is lower) |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund Class A | 2.25% | 1.00%\* |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund Class C |  | 1.00%\*\* |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund Class R6 |  |  |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund Class Y |  |  |
| &nbsp;&nbsp;&nbsp;Franklin Short-Term Municipal Income ETF (*pro forma)* |  |  |

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

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Management<br>fees | Distribution<br>and service<br>(12b-1)<br>fees | Other<br>expenses | Total<br>annual<br>fund<br>operating<br>expenses | Expense<br>reimbursement | Total annual<br>fund operating<br>expenses after<br>expense<br>reimbursement |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund Class A | 0.27% | 0.25% | 0.20% | 0.72% | (0.11)%# | 0.61% |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund Class C | 0.27% | 1.00% | 0.20% | 1.47% | (0.11)%# | 1.36% |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund Class R6 | 0.27% |  | 0.17% | 0.44% | (0.11)%# | 0.33% |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund Class Y | 0.27% |  | 0.20% | 0.47% | (0.11)%# | 0.36% |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Short-Term Municipal Income ETF (*assuming completion of the Merger)*† | 0.20% |  | 0.00% | 0.20% | N/A | 0.20% |

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\* Applies only to certain redemptions of shares bought with no initial sales charge.

\*\* This charge is eliminated after one year.

# Reflects Franklin Advisers' contractual obligation to limit certain fund expenses through March 31, 2026. This obligation may be modified or discontinued only with approval of the Board of Trustees.

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† Does not reflect non-recurring expenses related to the Merger. These
expenses may include legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of
the Merger and related transactions contemplated by the Plan, costs associated with the organization and registration of the Acquiring ETF, and transaction costs associated with liquidating portfolio securities that will not be acquired by the
Acquiring ETF as part of the Merger ("portfolio repositioning"), if any. The Investment Manager will bear all of these non-recurring expenses other than portfolio repositioning costs, and the Investment Manager currently does not
anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. If these expenses had been reflected, *pro forma* other expenses and total annual fund operating expenses would have been the same.

**Example** 

The following hypothetical example is intended to help you compare the cost of investing in the Target Fund's Class A, C, R6, and Y shares with the cost of investing in the Acquiring ETF's shares. It assumes that you invest $10,000 in each 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. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | **1 Year** | **3 Year** | **5 Year** | **10 Year** |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund - Class A | $286 | $439 | $606 | $1090 |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund - Class C | $238 | $454 | $792 | $1543 |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund - Class R6 | $34 | $131 | $237 | $548 |
| &nbsp;&nbsp;&nbsp;Putnam Short-Term Municipal Income Fund - Class Y | $37 | $140 | $252 | $582 |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Short-Term Municipal Income ETF (*assuming completion of Merger)* | $20 | $63 | $112 | $254 |

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Following the Merger, the Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the Target Fund at all asset levels.

The Target Fund pays a management fee that incorporates asset-level discounts ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Investment Management, LLC ("Putnam Management"), the Target Fund's investment manager for periods prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (excluding net assets of such funds that are invested in, or that are invested in by, other such funds to the extent necessary to avoid "double counting" of those assets) (such other open-end mutual funds, the "Fund Family"). The management fee rate generally declines as the aggregate net assets increase. Class R6 shares of the Target Fund paid the Investment Manager a management fee (after application of Fund Family Breakpoints and any applicable waivers) of 0.27% of average net assets of the Target Fund for the one-year period ended March 31, 2025. Class R6 shares of the Target Fund also pay (subject to any applicable waivers) operating expenses, which were an additional 0.17% of average net assets of the Target Fund for the one-year period ended March 31, 2025.

By contrast, the Acquiring ETF pays an annual all-inclusive management fee (or "unitary fee") of 0.20% to the Investment Manager based on the Acquiring ETF's average daily net assets. The unitary fee is not subject to Fund Family Breakpoints or other asset-level discounts. However, the unitary fee covers all of the other expenses of the Acquiring ETF with limited exceptions. Because the Acquiring ETF has not yet commenced operations, the Acquiring ETF has not paid any management fees to the Investment Manager.

After giving effect to Fund Family Breakpoints in the case of the Target Fund, the Acquiring ETF's contractual (unitary) management fee rate is lower than that of the Target Fund's contractual management fee rate at all asset levels. In addition, the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETF, while the Target Fund's management fee does not.

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***5. How do the Funds' portfolio turnover rates compare?***

Each Fund pays transaction-related costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when a Fund's shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example above, affect Fund performance.

The Target Fund's portfolio turnover rate for its fiscal year ended November 30, 2024 was 38%. Because the Acquiring ETF has not yet commenced operations, no portfolio turnover rate is available for the Acquiring ETF.

***6. How does the investment performance of the Funds compare?***

The Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Acquiring ETF has been organized solely in connection with the Merger to acquire substantially all of the assets and assume the liabilities of the Target Fund and to continue the business of the Target Fund, except that the Acquiring ETF will operate as an ETF instead of a mutual fund. The Acquiring ETF will have no performance history prior to the Merger.

The Target Fund will be the "accounting survivor" after the Merger. This means that the Acquiring ETF will adopt the historical accounting records and performance of the Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

The bar chart and table below provide some indication of the risks of investing in the Target Fund by showing changes in the Target Fund's Class R6 shares' performance from year-to-year and by showing how the Target Fund's average annual returns for the past one-, five- and ten-year periods compare with the average annual total returns of a broad measure of market performance and an additional index with characteristics relevant to the fund. The Acquiring ETF will use the Bloomberg 3-year Municipal Bond Index as its benchmark, which is the same benchmark that the Target Fund uses.

The performance of the other classes, which is shown in the table below, will differ because the classes bear potentially higher expenses. The Target Fund's past performance, before and after taxes, is not necessarily an indication of how the Acquiring ETF will perform in the future.

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**Annual total returns for Target Fund class R6 shares\***![LOGO](g91160g72y08.jpg)

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| | | |
|:---|:---|:---|
| Year-to-date performance | through 3/31/2025 | 0.96% |
| Best calendar quarter | Q4 2023 | 2.89% |
| Worst calendar quarter | Q1 2022 | -2.40% |

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**Average annual total returns for Target Fund after sales charges** 

For periods ended 12/31/24

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| | | | |
|:---|:---|:---|:---|
| **Share class** | **1 year** | **5 years** | **10 years** |
| Class A before taxes | 0.54% | 0.94% | 1.04% |
| Class C before taxes | 1.19% | 0.65% | 0.72% |
| Class R6 before taxes<sup>\*</sup> | 3.24% | 1.68% | 1.55% |
| Class R6 after taxes on distributions<sup>\*</sup> | 3.24% | 1.63% | 1.52% |
| Class R6 after taxes on distributions and sale of fund shares<sup>\*</sup> | 3.32% | 1.74% | 1.56% |
| Class Y before taxes | 3.11% | 1.66% | 1.53% |
| Bloomberg Municipal Bond Index (no deduction for fees, expenses or taxes) | 1.05% | 0.99% | 2.25% |
| Bloomberg 3-year Municipal Bond Index (no deduction for fees, expenses or taxes) | 2.04% | 1.07% | 1.35% |

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

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 IRA, or another tax-advantaged arrangement.

Important data provider notices and terms are available at www.franklintempletondatasources.com. All data is subject to change.

Please remember that past performance is not necessarily an indication of future results. You can obtain updated performance information at franklintempleton.com. For more information about the Fund's benchmark provider, please see Appendix C.

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***7. What are the federal income tax consequences of the Merger?***

The 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 the Target Fund or its shareholders as a direct result of the Merger, and the tax basis and holding period of a shareholder's Target Fund shares are expected to carry over to the Acquiring ETF shares the shareholder receives in the Merger. However, prior to the Merger, the Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Such shareholders will generally be required to recognize gain or loss upon the receipt of cash for their shares if they hold shares in a taxable account. At any time before the consummation of the Merger, a shareholder may redeem Target Fund shares, likely resulting in recognition of gain or loss to such shareholder for federal income tax purposes if Target Fund shares are held in a taxable account.

The Investment Manager currently does not anticipate that there will be any significant realignment of the Target Fund's portfolio holdings in connection with the Merger. Any disposition of portfolio holdings would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders during or with respect to the year of sale, and such distributions would be taxable to shareholders unless shares are held through a qualified retirement plan or other tax-advantaged arrangement.

Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

For additional information, please see "*Questions and Answers Regarding the Mergers,*" "*Risk Factors*," and "*Comparison of Other Key Features of the Funds.*"

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**MERGER 9:** 

**PUTNAM TAX EXEMPT INCOME FUND** 

**INTO FRANKLIN MUNICIPAL INCOME ETF** 

***1. How do the investment goals, strategies, policies and restrictions of the Funds compare?***

The Target Fund operates as a mutual fund, offering shares that are redeemable on each business day at the next calculated daily NAV per share. The Acquiring ETF (together with the Target Fund, the "Funds") operates as an ETF. As an ETF, the Acquiring ETF offers shares that are bought and sold on a national securities exchange, which gives investors the ability to buy their shares throughout the day at the current market price (which may be at a premium or discount to NAV).

*Investment Goal and Strategies* 

The Target Fund and the Acquiring ETF have the same investment goals and investment strategies. While there may be minor differences in how the Acquiring ETF's and the Target Fund's investment goals and strategies are described, the Investment Manager does not believe those differences reflect, and does not expect those differences to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed.

The investment goal of each Fund is to seek as high a level of current income exempt from federal income tax as the Investment Manager believes is consistent with preservation of capital. Each Fund's investment objective may be changed by the Board without shareholder approval.

Each Fund invests mainly in bonds (including general obligation bonds, revenue obligation bonds, and tender option bonds) that pay interest that is exempt from federal income tax (but that may be subject to federal alternative minimum tax ("AMT")), are investment-grade in quality, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests at least 80% of the Fund's net assets in tax-exempt investments, which for purposes of this policy exclude investments paying interest subject to the federal AMT for individuals. Such tax-exempt investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and the applicable state's income tax. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of Fund shareholders, each Fund cannot include these investments for the purpose of complying with the 80% investment policy described above.

Each Fund may invest up to 25% of its total assets in below-investment-grade investments, which are sometimes referred to as "junk bonds." However, each Fund will not invest in investments that are rated lower than BB or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The Funds will not necessarily sell an investment if its rating is reduced after purchase.

The Investment Manager may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Further information about the Target Fund's investment goal and investment strategies is contained in the Prospectus and Statement of Additional Information of the Target Fund, which are on file with the SEC.

*Investment Policies and Restrictions* 

The Target Fund and Acquiring ETF have identical fundamental investment restrictions and non-fundamental investment restrictions. The Funds' fundamental investment restrictions and non-fundamental restrictions are set forth in Appendix B. After the Merger occurs, the combined Fund will be subject to the fundamental investment policies of the Acquiring ETF. Fundamental investment restrictions may not be changed without shareholder approval. Non-fundamental investment restrictions may be changed without shareholder approval.

***2. How do the principal investment risks of the Funds compare?***

The principal risks of an investment in the Target Fund are substantially similar to the principal risks of an investment in the Acquiring ETF, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are certain differences between the Acquiring ETF's and the Target Fund's risk disclosure, the Investment

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Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, the Target Fund and the Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

For more information about how the risks of investing in the Acquiring ETF and the Target Fund compare, see "*Risk Factors*" below.

***3. Who manages the Funds?***

The Target Fund is a standalone trust, and the Acquiring ETF is a series of Putnam ETF Trust. The Target Fund and Putnam ETF Trust are governed by the Board of Trustees, which is responsible for overseeing all business activities of the Funds.

*Investment Manager of the Funds.* The Board has retained the Investment Manager, a global investment management organization based in California, to be the investment manager of both the Target Fund and Acquiring ETF, responsible for making investment decisions for each Fund and managing each Fund's other affairs and business. The Investment Manager's address is One Franklin Parkway, San Mateo, CA 94403-1906. For additional information about the management of the Funds, please see the section entitled "*Additional Information about the Acquiring ETFs*."

*Portfolio Management.* The same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF.

Benjamin C. Barber, James Conn, Garrett L. Hamilton, Francisco Rivera, and Daniel Workman are jointly and primarily responsible for the day-to-day management of each of the Target Fund and the Acquiring ETF. Messrs. Barber, Conn, Rivera, and Workman have been portfolio managers of the Target Fund since 2024. Mr. Hamilton has been a portfolio manager of the Target Fund since 2016. Messrs. Barber, Conn, Hamilton, Rivera, and Workman have been portfolio managers of the Acquiring ETF since the Acquiring ETF's inception.

The Statement of Additional Information for the Target Fund dated January 30, 2025, as supplemented, provides, and the Statement of Additional Information for the Acquiring ETF, once filed, will provide, additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio manager's ownership of securities in the Funds. For information on how to obtain a copy of the Statement of Additional Information for each of the Target Fund and the Acquiring ETF, please see the section entitled "*Additional Information about the Acquiring ETFs*."

***4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?***

Shareholders of the Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy, hold and sell shares of each Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and examples below. The tables show the *pro forma* expenses of the combined Acquiring ETF after giving effect to the Merger, based on pro forma net assets as of March 31, 2025, as if the Merger had taken place on March 31, 2025. The fee tables do not reflect the costs associated with the Merger. Only *pro forma* combined fees and expenses information is provided for the Acquiring ETF because the Acquiring ETF will not commence operations until the Merger is completed.

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As shown below, the Merger is expected to result in lower total annual operating expenses for shareholders of the Target Fund.

Target Fund shareholders will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Merger.

**Shareholder fees** *(fees paid directly from your investment)*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Maximum sales charge<br>(load) imposed on<br>purchases (as a percentage<br>of offering price) | Maximum deferred sales charge<br>(load) (as a percentage of original<br>purchase price or redemption<br>proceeds, whichever is lower) |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund Class A | 4.00% | 1.00%\* |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund Class C |  | 1.00%\*\* |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund Class R6 |  |  |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund Class Y |  |  |
| &nbsp;&nbsp;&nbsp;Franklin Municipal Income ETF (*pro forma)* |  |  |

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

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Management<br>fees | Distribution<br>and service<br>(12b-1)<br>fees | Other<br>expenses | Total<br>annual<br>fund<br>operating<br>expenses |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund Class A | 0.41% | 0.25% | 0.30% | 0.96% |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund Class C | 0.41% | 1.00% | 0.30% | 1.71% |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund Class R6 | 0.41% |  | 0.28% | 0.69% |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund Class Y | 0.41% |  | 0.30% | 0.71% |
| &nbsp;&nbsp;&nbsp;*Pro Forma –* Franklin Municipal Income ETF (*assuming completion of the Merger)*† | 0.30% |  | 0.00% | 0.30% |

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\* Applies only to certain redemptions of shares bought with no initial sales charge.

\*\* This charge is eliminated after one year.

† Does not reflect non-recurring expenses related to the Merger. These
expenses may include legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of
the Merger and related transactions contemplated by the Plan, costs associated with the organization and registration of the Acquiring ETF, and transaction costs associated with liquidating portfolio securities that will not be acquired by the
Acquiring ETF as part of the Merger ("portfolio repositioning"), if any. The Investment Manager will bear all of these non-recurring expenses other than portfolio repositioning costs, and the Investment Manager currently does not
anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. If these expenses had been reflected, *pro forma* other expenses and total annual fund operating expenses would have been the same.

**Example** 

The following hypothetical example is intended to help you compare the cost of investing in the Target Fund's Class A, C, R6, and Y shares with the cost of investing in the Acquiring ETF's shares. It assumes that you invest $10,000 in each 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

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each Fund's operating expenses remain the same. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | **1 Year** | **3 Year** | **5 Year** | **10 Year** |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund - Class A | $494 | $694 | $910 | $1533 |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund - Class C | $274 | $540 | $930 | $1823 |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund - Class R6 | $70 | $220 | $383 | $858 |
| &nbsp;&nbsp;&nbsp;Putnam Tax Exempt Income Fund - Class Y | $73 | $228 | $397 | $887 |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Municipal Income ETF (*assuming completion of Merger)* | $31 | $97 | $169 | $380 |

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Following the Merger, the Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the Target Fund at all asset levels.

The Target Fund pays a management fee that incorporates asset-level discounts ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Investment Management, LLC ("Putnam Management"), the Target Fund's investment manager for periods prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (excluding net assets of such funds that are invested in, or that are invested in by, other such funds to the extent necessary to avoid "double counting" of those assets) (such other open-end mutual funds, the "Fund Family"). The management fee rate generally declines as the aggregate net assets increase. Class R6 shares of the Target Fund paid the Investment Manager a management fee (after application of Fund Family Breakpoints and any applicable waivers) of 0.41% of average net assets of the Target Fund for the six-month period ended March 31, 2025. Class R6 shares of the Target Fund also pay (subject to any applicable waivers) operating expenses, which were an additional 0.28% of average net assets of the Target Fund for the six-month period ended March 31, 2025.

By contrast, the Acquiring ETF pays an annual all-inclusive management fee (or "unitary fee") of 0.30% to the Investment Manager based on the Acquiring ETF's average daily net assets. The unitary fee is not subject to Fund Family Breakpoints or other asset-level discounts. However, the unitary fee covers all of the other expenses of the Acquiring ETF with limited exceptions. Because the Acquiring ETF has not yet commenced operations, the Acquiring ETF has not paid any management fees to the Investment Manager.

After giving effect to Fund Family Breakpoints in the case of the Target Fund, the Acquiring ETF's contractual (unitary) management fee rate is lower than that of the Target Fund's contractual management fee rate at all asset levels. In addition, the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETF, while the Target Fund's management fee does not.

***5. How do the Funds' portfolio turnover rates compare?***

Each Fund pays transaction-related costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when a Fund's shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example above, affect Fund performance.

The Target Fund's portfolio turnover rate for its fiscal year ended September 30, 2024 was 35%. Because the Acquiring ETF has not yet commenced operations, no portfolio turnover rate is available for the Acquiring ETF.

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***6. How does the investment performance of the Funds compare?***

The Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Acquiring ETF has been organized solely in connection with the Merger to acquire substantially all of the assets and assume the liabilities of the Target Fund and to continue the business of the Target Fund, except that the Acquiring ETF will operate as an ETF instead of a mutual fund. The Acquiring ETF will have no performance history prior to the Merger.

The Target Fund will be the "accounting survivor" after the Merger. This means that the Acquiring ETF will adopt the historical accounting records and performance of the Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

The bar chart and table below provide some indication of the risks of investing in the Target Fund by showing changes in the Target Fund's Class R6 shares' performance from year-to-year and by showing how the Target Fund's average annual returns for the past one-, five- and ten-year periods compare with the average annual total returns of a broad measure of market performance. The Acquiring ETF will use the Bloomberg Municipal Bond Index as its benchmark, which is the same benchmark that the Target Fund uses.

The performance of the other classes, which is shown in the table below, will differ because the classes bear potentially higher expenses. The Target Fund's past performance, before and after taxes, is not necessarily an indication of how the Acquiring ETF will perform in the future.

**Annual total returns for Target Fund class R6 shares\***![LOGO](g91160g78u08.jpg)

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| | | |
|:---|:---|:---|
| Year-to-date performance | through 3/31/2025 | -0.53% |
| Best calendar quarter | Q4 2023 | 9.05% |
| Worst calendar quarter | Q1 2022 | -6.58% |

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**Average annual total returns for Target Fund after sales charges** 

For periods ended 12/31/24

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| | | | |
|:---|:---|:---|:---|
| **Share class** | **1 year** | **5 years** | **10 years** |
| Class A before taxes | -1.75% | 0.12% | 1.80% |
| Class C before taxes | 0.59% | 0.18% | 1.58% |
| Class R6 before taxes<sup>\*</sup> | 2.50% | 1.20% | 2.46% |
| Class R6 after taxes on distributions<sup>\*</sup> | 2.50% | 1.10% | 2.30% |
| Class R6 after taxes on distributions and sale of fund shares<sup>\*</sup> | 2.92% | 1.58% | 2.58% |
| Class Y before taxes | 2.61% | 1.20% | 2.45% |
| Bloomberg Municipal Bond Index (no deduction for fees, expenses or taxes) | 1.05% | 0.99% | 2.25% |

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

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 IRA, or another tax-advantaged arrangement.

Important data provider notices and terms are available at www.franklintempletondatasources.com. All data is subject to change.

Please remember that past performance is not necessarily an indication of future results. You can obtain updated performance information at franklintempleton.com. For more information about the Fund's benchmark provider, please see Appendix C.

***7. What are the federal income tax consequences of the Merger?***

The 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 the Target Fund or its shareholders as a direct result of the Merger, and the tax basis and holding period of a shareholder's Target Fund shares are expected to carry over to the Acquiring ETF shares the shareholder receives in the Merger. However, prior to the Merger, the Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Such shareholders will generally be required to recognize gain or loss upon the receipt of cash for their shares if they hold shares in a taxable account. At any time before the consummation of the Merger, a shareholder may redeem Target Fund shares, likely resulting in recognition of gain or loss to such shareholder for federal income tax purposes if Target Fund shares are held in a taxable account.

The Investment Manager currently does not anticipate that there will be any significant realignment of the Target Fund's portfolio holdings in connection with the Merger. Any disposition of portfolio holdings would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders during or with respect to the year of sale, and such distributions would be taxable to shareholders unless shares are held through a qualified retirement plan or other tax-advantaged arrangement.

Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

For additional information, please see "*Questions and Answers Regarding the Mergers,*" "*Risk Factors*," and "*Comparison of Other Key Features of the Funds.*"

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**MERGER 10:** 

**PUTNAM TAX-FREE HIGH YIELD FUND** 

**INTO FRANKLIN MUNICIPAL HIGH YIELD ETF** 

***1. How do the investment goals, strategies, policies and restrictions of the Funds compare?***

The Target Fund operates as a mutual fund, offering shares that are redeemable on each business day at the next calculated daily NAV per share. The Acquiring ETF (together with the Target Fund, the "Funds") operates as an ETF. As an ETF, the Acquiring ETF offers shares that are bought and sold on a national securities exchange, which gives investors the ability to buy their shares throughout the day at the current market price (which may be at a premium or discount to NAV).

*Investment Goal and Strategies* 

The Target Fund and the Acquiring ETF have the same investment goals and investment strategies. While there may be minor differences in how the Acquiring ETF's and the Target Fund's investment goals and strategies are described, the Investment Manager does not believe those differences reflect, and does not expect those differences to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed.

The investment goal of each Fund is to seek high current income exempt from federal income tax. Each Fund's investment objective may be changed by the Board without shareholder approval.

Each Fund invests mainly in bonds (including general obligation bonds, revenue obligation bonds, and tender option bonds) that pay interest that is exempt from federal income tax (but that may be subject to federal alternative minimum tax ("AMT")), are a combination of below-investment-grade (sometimes referred to as "junk bonds") and investment-grade securities, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests at least 80% of the Fund's net assets in tax-exempt investments. Such tax-exempt investments in which the Fund invests are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from federal income tax. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of Fund shareholders, each Fund cannot include these investments for the purpose of complying with the 80% investment policy described above.

The Investment Manager may consider, among other factors, credit, interest rate and prepayment risks, as well as general market conditions, when deciding whether to buy or sell investments.

Further information about the Target Fund's investment goal and investment strategies is contained in the Prospectus and Statement of Additional Information of the Target Fund, which are on file with the SEC.

*Investment Policies and Restrictions* 

The Target Fund and Acquiring ETF have identical fundamental investment restrictions and non-fundamental investment restrictions. The Funds' fundamental investment restrictions and non-fundamental restrictions are set forth in Appendix B. After the Merger occurs, the combined Fund will be subject to the fundamental investment policies of the Acquiring ETF. Fundamental investment restrictions may not be changed without shareholder approval. Non-fundamental investment restrictions may be changed without shareholder approval.

***2. How do the principal investment risks of the Funds compare?***

The principal risks of an investment in the Target Fund are substantially similar to the principal risks of an investment in the Acquiring ETF, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are

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certain differences between the Acquiring ETF's and the Target Fund's risk disclosure, the Investment Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, the Target Fund and the Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

For more information about how the risks of investing in the Acquiring ETF and the Target Fund compare, see "*Risk Factors*" below.

***3. Who manages the Funds?***

The Target Fund is a series of Putnam Tax-Free Income Trust, and the Acquiring ETF is a series of Putnam ETF Trust. Putnam Tax-Free Income Trust and Putnam ETF Trust are governed by the Board of Trustees, which is responsible for overseeing all business activities of the Funds.

*Investment Manager of the Funds.* The Board has retained the Investment Manager, a global investment management organization based in California, to be the investment manager of both the Target Fund and Acquiring ETF, responsible for making investment decisions for each Fund and managing each Fund's other affairs and business. The Investment Manager's address is One Franklin Parkway, San Mateo, CA 94403-1906. For additional information about the management of the Funds, please see the section entitled "*Additional Information about the Acquiring ETFs*."

*Portfolio Management.* The same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF.

Benjamin C. Barber, James Conn, Garrett L. Hamilton, Francisco Rivera, and Daniel Workman are jointly and primarily responsible for the day-to-day management of each of the Target Fund and the Acquiring ETF. Messrs. Barber, Conn, Rivera, and Workman have been portfolio managers of the Target Fund since 2024. Mr. Hamilton has been a portfolio manager of the Target Fund since 2016. Messrs. Barber, Conn, Hamilton, Rivera, and Workman have been portfolio managers of the Acquiring ETF since the Acquiring ETF's inception.

The Statement of Additional Information for the Target Fund dated November 30, 2024, as supplemented, provides, and the Statement of Additional Information for the Acquiring ETF, once filed, will provide, additional information about the portfolio managers' compensation, other accounts managed by the portfolio managers, and the portfolio manager's ownership of securities in the Funds. For information on how to obtain a copy of the Statement of Additional Information for each of the Target Fund and the Acquiring ETF, please see the section entitled "*Additional Information about the Acquiring ETFs*."

***4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?***

Shareholders of the Funds pay various fees and expenses, either directly or indirectly. The tables below show the fees and expenses that you would pay if you were to buy, hold and sell shares of each Fund. You may pay other fees, such as brokerage commissions and other fees to financial intermediaries, which are not reflected in the table and examples below. The tables show the *pro forma* expenses of the combined Acquiring ETF after giving effect to the Merger, based on pro forma net assets as of March 31, 2025, as if the Merger had taken place on March 31, 2025. The fee tables do not reflect the costs

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associated with the Merger. Only *pro forma* combined fees and expenses information is provided for the Acquiring ETF because the Acquiring ETF will not commence operations until the Merger is completed.

As shown below, the Merger is expected to result in lower total annual operating expenses for shareholders of the Target Fund.

Target Fund shareholders will not pay any sales load, contingent deferred sales charge, brokerage commission, redemption fee, or other transaction fee in connection with the receipt of ETF shares from the Merger.

**Shareholder fees** *(fees paid directly from your investment)*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Maximum sales charge<br>(load) imposed on<br>purchases (as a percentage<br>of offering price) | Maximum deferred sales charge<br>(load) (as a percentage of original<br>purchase price or redemption<br>proceeds, whichever is lower) |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund Class A | 4.00% | 1.00%\* |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund Class C |  | 1.00%\*\* |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund Class R6 |  |  |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund Class Y |  |  |
| &nbsp;&nbsp;&nbsp;Franklin Municipal High Yield ETF (*pro forma)* |  |  |

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

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | Management<br>fees | Distribution<br>and service<br>(12b-1)<br>fees | Other<br>expenses | Total<br>annual<br>fund<br>operating<br>expenses |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund Class A | 0.46% | 0.25% | 0.19% | 0.90% |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund Class C | 0.46% | 1.00% | 0.19% | 1.65% |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund Class R6 | 0.46% |  | 0.17% | 0.63% |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund Class Y | 0.46% |  | 0.19% | 0.65% |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Municipal High Yield ETF (*assuming completion of the Merger)*† | 0.35% |  | 0.00% | 0.35% |

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\* Applies only to certain redemptions of shares bought with no initial sales charge.

\*\* This charge is eliminated after one year.

† Does not reflect non-recurring expenses related to the Merger. These
expenses may include legal and accounting expenses, portfolio transfer taxes (if any), the costs of printing and mailing this Prospectus/Information Statement, SEC filing fees, other similar expenses incurred in connection with the consummation of
the Merger and related transactions contemplated by the Plan, costs associated with the organization and registration of the Acquiring ETF, and transaction costs associated with liquidating portfolio securities that will not be acquired by the
Acquiring ETF as part of the Merger ("portfolio repositioning"), if any. The Investment Manager will bear all of these non-recurring expenses other than portfolio repositioning costs, and the Investment Manager currently does not
anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. If these expenses had been reflected, *pro forma* other expenses and total annual fund operating expenses would have been the same.

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**Example** 

The following hypothetical example is intended to help you compare the cost of investing in the Target Fund's Class A, C, R6, and Y shares with the cost of investing in the Acquiring ETF's shares. It assumes that you invest $10,000 in each 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. Only the first year of each period in the example takes into account the expense reimbursement described above. Your actual costs may be higher or lower.

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;Share class | **1 Year** | **3 Year** | **5 Year** | **10 Year** |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund - Class A | $488 | $676 | $879 | $1465 |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund - Class C | $268 | $520 | $896 | $1753 |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund - Class R6 | $64 | $201 | $350 | $786 |
| &nbsp;&nbsp;&nbsp;Putnam Tax-Free High Yield Fund - Class Y | $66 | $207 | $361 | $808 |
| &nbsp;&nbsp;&nbsp;*Pro Forma -* Franklin Municipal High Yield ETF (*assuming completion of Merger)* | $36 | $112 | $196 | $443 |

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Following the Merger, the Acquiring ETF is expected to have a total expense ratio that is lower than that of each share class of the Target Fund at all asset levels.

The Target Fund pays a management fee that incorporates asset-level discounts ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Investment Management, LLC ("Putnam Management"), the Target Fund's investment manager for periods prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (excluding net assets of such funds that are invested in, or that are invested in by, other such funds to the extent necessary to avoid "double counting" of those assets) (such other open-end mutual funds, the "Fund Family"). The management fee rate generally declines as the aggregate net assets increase. Class R6 shares of the Target Fund paid the Investment Manager a management fee (after application of Fund Family Breakpoints and any applicable waivers) of 0.46% of average net assets of the Target Fund for the one-year period ended March 31, 2025. Class R6 shares of the Target Fund also pay (subject to any applicable waivers) operating expenses, which were an additional 0.17% of average net assets of the Target Fund for the one-year period ended March 31, 2025.

By contrast, the Acquiring ETF pays an annual all-inclusive management fee (or "unitary fee") of 0.35% to the Investment Manager based on the Acquiring ETF's average daily net assets. The unitary fee is not subject to Fund Family Breakpoints or other asset-level discounts. However, the unitary fee covers all of the other expenses of the Acquiring ETF with limited exceptions. Because the Acquiring ETF has not yet commenced operations, the Acquiring ETF has not paid any management fees to the Investment Manager.

After giving effect to Fund Family Breakpoints in the case of the Target Fund, the Acquiring ETF's contractual (unitary) management fee rate is lower than that of the Target Fund's contractual management fee rate at all asset levels. In addition, the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETF, while the Target Fund's management fee does not.

***5. How do the Funds' portfolio turnover rates compare?***

Each Fund pays transaction-related costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may

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result in higher taxes when a Fund's shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example above, affect Fund performance.

The Target Fund's portfolio turnover rate for its fiscal year ended July 31, 2024 was 25%. Because the Acquiring ETF has not yet commenced operations, no portfolio turnover rate is available for the Acquiring ETF.

***6. How does the investment performance of the Funds compare?***

The Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Acquiring ETF has been organized solely in connection with the Merger to acquire substantially all of the assets and assume the liabilities of the Target Fund and to continue the business of the Target Fund, except that the Acquiring ETF will operate as an ETF instead of a mutual fund. The Acquiring ETF will have no performance history prior to the Merger.

The Target Fund will be the "accounting survivor" after the Merger. This means that the Acquiring ETF will adopt the historical accounting records and performance of the Target Fund (specifically, the Target Fund's Class R6 shares). The Target Fund's past performance is not necessarily an indication of how the Acquiring ETF will perform in the future.

The bar chart and table below provide some indication of the risks of investing in the Target Fund by showing changes in the Target Fund's Class R6 shares' performance from year-to-year and by showing how the Target Fund's average annual returns for the past one-, five- and ten-year periods compare with the average annual total returns of a broad measure of market performance. The Acquiring ETF will use the Bloomberg Municipal Bond Index as its benchmark, which is the same benchmark that the Target Fund uses.

The performance of the other classes, which is shown in the table below, will differ because the classes bear potentially higher expenses. The Target Fund's past performance, before and after taxes, is not necessarily an indication of how the Acquiring ETF will perform in the future.

**Annual total returns for Target Fund class R6 shares\***![LOGO](g91160g84y08.jpg)

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| | | |
|:---|:---|:---|
| Year-to-date performance | through 3/31/2025 | -0.16% |
| Best calendar quarter | Q4 2023 | 8.83% |
| Worst calendar quarter | Q1 2022 | -6.57% |

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**Average annual total returns for Target Fund after sales charges** 

For periods ended 12/31/24

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| | | | |
|:---|:---|:---|:---|
| **Share class** | **1 year** | **5 years** | **10 years** |
| Class A before taxes | 1.23% | 0.87% | 2.80% |
| Class C before taxes | 3.65% | 0.93% | 2.60% |
| Class R6 before taxes\* | 5.73% | 1.96% | 3.48% |
| Class R6 after taxes on distributions\* | 5.73% | 1.87% | 3.36% |
| Class R6 after taxes on distributions and sale of fund shares\* | 5.08% | 2.32% | 3.53% |
| Class Y before taxes | 5.70% | 1.94% | 3.47% |
| Bloomberg Municipal Bond Index (no deduction for fees, expenses or taxes) | 1.05% | 0.99% | 2.25% |

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

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 IRA, or another tax-advantaged arrangement.

Important data provider notices and terms are available at www.franklintempletondatasources.com. All data is subject to change.

Please remember that past performance is not necessarily an indication of future results. You can obtain updated performance information at franklintempleton.com. For more information about the Fund's benchmark provider, please see Appendix C.

***7. What are the federal income tax consequences of the Merger?***

The 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 the Target Fund or its shareholders as a direct result of the Merger, and the tax basis and holding period of a shareholder's Target Fund shares are expected to carry over to the Acquiring ETF shares the shareholder receives in the Merger. However, prior to the Merger, the Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. Such shareholders will generally be required to recognize gain or loss upon the receipt of cash for their shares if they hold shares in a taxable account. At any time before the consummation of the Merger, a shareholder may redeem Target Fund shares, likely resulting in recognition of gain or loss to such shareholder for federal income tax purposes if Target Fund shares are held in a taxable account.

The Investment Manager currently does not anticipate that there will be any significant realignment of the Target Fund's portfolio holdings in connection with the Merger. Any disposition of portfolio holdings would result in brokerage commissions and other transaction costs, and may result in the realization of capital gains that would be distributed to shareholders during or with respect to the year of sale, and such distributions would be taxable to shareholders unless shares are held through a qualified retirement plan or other tax-advantaged arrangement.

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Certain other tax consequences are discussed below under "*Information about the Mergers—Federal Income Tax Consequences*."

For additional information, please see "*Questions and Answers Regarding the Mergers,*" "*Risk Factors*," and "*Comparison of Other Key Features of the Funds.*"

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**III. COMPARISON OF OTHER KEY FEATURES OF THE FUNDS** 

***What are the purchase, sale, and exchange procedures of the Target Funds and Acquiring ETFs?***

The Target Funds and the Acquiring ETFs have different procedures for purchasing, selling, and exchanging shares, which are summarized below.

<u>Target Funds</u> 

You can open an account, purchase and/or sell a Target Fund's shares, or exchange them for shares of another Putnam fund by contacting your financial professional or by calling Putnam Investor Services at 1-800-225-1581. When opening an account, you must complete and mail a Putnam account application, along with a check made payable to the Target Fund, to: Putnam Investor Services, P.O. Box 219697, Kansas City, MO 64121-9697. The minimum initial investment of $500 is currently waived, although each Target Fund 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 a Target 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, for exchanges only, online at www.franklintempleton.com. Some restrictions may apply.

The price of each Target Fund's shares is based on its net asset value. The net asset value 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.

Each Target Fund sells its shares at the offering price, which is the net asset value plus any applicable sales charge (class A shares only).

Each Target Fund's prospectus provides information under the sections entitled "*Fund summary—Purchase and sale of fund shares*," "*How do I buy fund shares?*," and "*How do I sell or exchange fund shares*" with respect to the procedures applicable to purchases, exchanges, and sales of the shares of the Target Fund.

<u>Acquiring ETFs</u> 

Shares of each Acquiring ETF are sold without a sales charge. Like other ETFs, shares of each Acquiring ETF are generally purchased and redeemed in creation unit aggregations through authorized participants. An Acquiring ETF's creation units generally can be purchased or redeemed in-kind in exchange for securities, cash, and cash equivalents included in a tracking basket designed to closely track the daily performance of the Acquiring ETF. Only authorized participants may engage in creation and redemption transactions directly with an Acquiring ETF.

Shares of each Acquiring ETF are listed and traded on an exchange, and individual fund shares may only be bought and sold in the secondary market through a broker. The Acquiring ETFs do not impose any minimum investment for shares purchased on an exchange. These transactions are made at market prices that may vary throughout the day and may be greater than an Acquiring ETF's NAV (premium) or less than an Acquiring ETF's NAV (discount). As a result, you may pay more than NAV when you purchase shares, and receive less than NAV when you sell shares, in the secondary market. If you buy or sell shares in the secondary market, you will generally incur customary brokerage commissions and charges and you may also incur the cost of the spread between the price at which a dealer will buy an Acquiring ETF's

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shares and the somewhat higher price at which a dealer will sell shares. Due to such commissions and charges and spread costs, frequent trading may detract significantly from investment returns.

The Acquiring ETFs do not offer exchange privileges.

For additional information regarding the procedures applicable to purchases and sales of the shares of the Acquiring ETFs, see the section entitled "*Additional Information about the Acquiring ETFs"—Purchase and sale of fund shares*," "*Additional Information about the Acquiring ETFs—Shareholder information—Additional information about the fund*," and "*Additional information about the Acquiring ETFs—Shareholder information—Buying and selling shares in the secondary market*" below.

***What are the distribution arrangements for the Target Funds and Acquiring ETFs?***

Franklin Distributors, LLC (the "Distributor") serves as the principal underwriter for shares of each Target Fund and each Acquiring ETF pursuant to a distributor's contract between the Distributor and each Fund (a "Distribution Agreement"). Each Distribution Agreement is subject to annual approval by the Board of Trustees. Each Distribution Agreement is terminable without penalty with 60 days' written notice (in the case of a Distribution Agreement relating to a Target Fund) or 90 days' written notice (in the case of a Distribution Agreement relating to an Acquiring ETF), by the Board of Trustees, by vote of holders of a majority of the respective Fund's outstanding shares, as applicable, or by the Distributor. The Distributor is an indirect, wholly-owned broker/dealer subsidiary of Franklin Templeton. The Distributor's address is One Franklin Parkway, San Mateo, CA 94403-1906.

<u>Target Funds</u> 

Each Target Fund offers Class A, Class C, Class R6, and Class Y shares. Each Target Fund has adopted a Plan Pursuant to Rule 18f-3 under the 1940 Act (collectively, the "Rule 18f-3 Plan"). Under the Rule 18f-3 Plan, shares of each class of each Target Fund represent an equal pro rata interest in such Target Fund and, generally, have identical voting, dividend, liquidation, and other rights, preferences, powers, restrictions, limitations, qualifications and terms and conditions, subject to certain exceptions set forth in each Target Fund's Prospectus and Statement of Additional Information.

Each Target Fund is 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 the Distributor or one of its affiliates).

In order to pay for the marketing of Fund shares and services provided to shareholders, each Target Fund has adopted distribution and service (12b-1) plans with respect to its Class A and Class C shares. The Target Funds' 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 C shares. The Trustees currently limit payments on Class A shares to 0.25% of average net assets. Because these fees are paid out of a Target Fund's assets on an ongoing basis, they will increase the cost of your investment. The Distributor and its affiliates also make additional payments to dealers that do not increase your fund expenses, as described below.

The Distributor and its affiliates also pay additional compensation to selected dealers in recognition of their marketing support and/or program servicing. These payments may create an incentive for a dealer firm or its representatives to recommend or offer shares of a Target Fund or other Putnam funds to its customers. These additional payments are made by the Distributor and its affiliates and do not increase the amount paid by you or the Target Funds. The additional payments to dealers by the Distributor and its affiliates are generally based on one or more of the following factors: average net assets of a Target Fund attributable to that dealer, sales or net sales of a Target Fund attributable to that dealer, or

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reimbursement of ticket charges (fees that a dealer firm charges its representatives for effecting transactions in Target Fund shares), or on the basis of a negotiated lump sum payment for services provided.

<u>Acquiring ETFs</u> 

Each Acquiring ETF offers only a single class of shares.

The Distributor distributes creation units for each Acquiring ETF on an agency basis, does not maintain a secondary market in shares of the Acquiring ETFs, and has no role in determining the investment policies of the Acquiring ETFs or the securities that are purchased or sold by the Acquiring ETFs.

Each Acquiring ETF has adopted a distribution and service plan pursuant to Rule 12b-1 under the 1940 Act that authorizes the Acquiring ETFs to pay distribution fees in connection with the sale and distribution of its shares and service fees in connection with the provision of ongoing shareholder support services. No Rule 12b-1 fees are currently paid by the Acquiring ETFs, and there are no current plans to impose these fees. However, in the event Rule 12b-1 fees are charged in the future, because these fees are paid out of an Acquiring ETF's assets on an ongoing basis, these fees will increase the cost of your investment in an Acquiring ETF.

Investors may purchase shares of an Acquiring ETF on an exchange through intermediaries (including any broker, intermediary, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator and any other institution that offers shares of the fund to its customers). In addition to distribution and service plans, the Investment Manager and its affiliates may make payments to intermediaries that do not increase your fund expenses, as described below.

The Investment Manager and its affiliates also pay additional compensation to selected intermediaries in recognition of their marketing support and/or program servicing. These payments may create an incentive for an intermediary firm or its representatives to recommend or offer shares of an Acquiring ETF or other Putnam funds to its customers. These additional payments are made by the Investment Manager and its affiliates and do not increase the amount paid by you or the Acquiring ETFs. The additional payments to intermediaries by the Investment Manager and its affiliates are generally based on one or more of the following factors: average net assets of an Acquiring ETF attributable to that intermediary, sales or net sales of an Acquiring ETF attributable to that intermediary, or reimbursement of ticket charges (fees that an intermediary firm charges its representatives for effecting transactions in Acquiring ETF shares), or on the basis of a negotiated lump sum payment for services provided.

***What are other key features of the Funds?***

<u>Other Service Providers</u> 

*Target Funds.* Putnam Investor Services, Inc. 100 Federal Street, Boston, MA 02110, serves as the investor servicing agent (transfer, plan and dividend disbursing agent) for each Target Fund. JPMorgan Chase Bank, N.A., 270 Park Avenue, New York, NY 10017-2070, serves as custodian for each Target Fund. PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Boston, Massachusetts 02210, serves as the independent registered public accounting firm of the Target Funds.

*Acquiring ETFs.* The Bank of New York Mellon, 240 Greenwich Street, New York, New York 10286, serves as transfer agent, dividend paying-agent, and custodian for each Acquiring ETF. PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Boston, Massachusetts 02210, serves as the independent registered public accounting firm of the Acquiring ETFs.

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<u>Fiscal Years</u> 

The fiscal/tax year end of Putnam Massachusetts Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam Ohio Tax Exempt Income Fund, and Putnam Pennsylvania Tax Exempt Income Fund is May 31. The fiscal/tax year end of Putnam Tax-Free High Yield Fund is July 31. The fiscal/tax year end of Putnam Tax Exempt Income Fund and Putnam California Tax Exempt Income Fund is September 30. The fiscal/tax year end of Putnam Short-Term Municipal Income Fund and Putnam New York Tax Exempt Income Fund is November 30. The fiscal/tax year end of each Acquiring ETF will be the same as the fiscal/tax year of the corresponding Target Fund.

<u>Dividends and Distributions</u> 

Each Target Fund and each Acquiring ETF earns dividends, interest, and other income from its investments, and distributes this income (less expenses) to shareholders as dividends. Each Fund also realizes capital gains from its investments and distributes these gains (less any losses) as capital gain distributions. If you purchased Acquiring ETF shares in the secondary market, your broker is responsible for distributing the income and capital gain distributions to you. Each Fund normally distributes any net investment income monthly and any net realized capital gains annually.

<u>Tax</u> 

Each Target Fund and each Acquiring ETF has elected and intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code").

The Acquiring ETFs, as ETFs, may present certain tax efficiencies for investors as compared to the Target Funds, as mutual funds. ETFs typically redeem their shares with in-kind distributions of assets, and they typically do not recognize capital gain on the in-kind redemption of their shares. In contrast, when portfolio securities are sold within a Target Fund, the sale can cause the recognition of capital gains within such Target Fund that generally would cause a taxable distribution to all of its shareholders—even if the shareholders may have an unrealized loss on their overall investment in the Target Fund. As a result, if the Acquiring ETFs were to create and redeem their shares in kind, shareholders of the Acquiring ETFs may pay less in taxes while they hold shares of the Acquiring ETFs than they would if they held similar investments in a Target Fund. However, although the securities held by the Target Funds could be disposed of by the Acquiring ETFs without recognizing gain, the portfolio investments of the Target Funds historically have not generated significant amounts of capital gain. In addition, the Acquiring ETFs expect that they will typically create and redeem their shares in cash. Accordingly, any tax efficiencies offered by the Acquiring ETFs are unlikely to be material. For more information about the tax implications of investments in the Funds, see the section "Fund distributions and taxes" in each Target Fund's and each Acquiring ETF's prospectus and the section "Taxes" in each Target Fund's and each Acquiring ETF's Statement of Additional Information.

**IV.** **Risk Factors** 

***What are the principal risks of each Acquiring ETF, and how do they compare with those of the corresponding Target Fund?***

The principal risks of an investment in a Target Fund are substantially similar to the principal risks of an investment in the corresponding Acquiring ETF, except that, as a shareholder of an Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while

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there are certain differences between each Target Fund's and the corresponding Acquiring ETF's risk disclosure, the Investment Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, a Target Fund and the corresponding Acquiring ETF may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

The main risks that could adversely affect the value of each Acquiring ETF's shares and the total return on an investment in each Acquiring ETF include:

> the risk that the value of investments in the Acquiring ETF'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, outbreaks of infectious illnesses or other widespread public health issues, and factors related to a specific issuer, asset class geography, industry or sector.

> the risk that these and other factors may lead to increased volatility and reduced liquidity in the Acquiring ETF's portfolio holdings, may negatively impact the Acquiring ETF's performance, and may exacerbate other risks to which the Acquiring ETF is subject.

> the risk that the value of the Acquiring ETF's investments is likely to fall if interest rates rise and the potential for this risk to be greater for longer-term fixed income securities.

> the risk that, if an issuer calls or redeems an investment during a time of declining interest rates, the Acquiring ETF might have to reinvest the proceeds in an investment offering a lower yield, and therefore, the Acquiring ETF might not benefit from any increase in value as a result of declining interest rates.

> the risk that the issuers of the Acquiring ETF's investments may default on payment of interest or principal and the potential for this risk to be greater for below-investment grade fixed income securities, which can be more sensitive to changes in markets, credit conditions, and interest rates and may be considered speculative.

> the risk that fixed income investments may be more susceptible to downgrades or defaults during economic downturns or other periods of economic stress.

> the risk that the interest the Acquiring ETF receives might be taxable.

> the risk that the general obligation bonds in which the Acquiring ETF may invest may be vulnerable to legal limits on a government's power to raise revenue or increase taxes, as well as economic or other developments that can reduce revenues.

> the risk that, because investors in revenue obligation bonds can look only to the revenue generated by the project or the private company operating the project rather than the credit of the state or local government authority issuing the bonds, the revenue obligation bonds in which the Acquiring ETF may invest are typically subject to greater credit risk than general obligation bonds.

> the risk that the Acquiring ETF may invest up to 15% of its net assets in illiquid investments, which may be considered speculate and which may be difficult to sell.

> ***For each Acquiring ETF except Franklin Short-Term Municipal ETF:*** the risk that the Acquiring ETF may leverage its assets through the use of proceeds received through tender option bond transactions, the risk that the market prices of tender option bonds may be highly sensitive to changes in market rates and may decrease significantly when market rates increase, and the risk that tender option bonds are subject to restrictions on resale and are highly sensitive to changes in interest rates and the value of the underlying bond.

> ***For each Acquiring ETF except Franklin Municipal High Yield ETF:*** the risk that, since the Acquiring ETF invests in tax-exempt bonds, which, to be treated as tax-exempt under the Code, may be issued only by limited types of issuers for limited types of projects, the Acquiring ETF's investments may be focused in certain market segments and, consequently, that the Acquiring ETF may be more vulnerable to fluctuations in the values of the securities it holds than a fund that invests more broadly.

> ***For each Acquiring ETF except Franklin Short-Term Municipal Income ETF, Franklin Municipal Income ETF, and Franklin Municipal High Yield ETF:*** the risk that the Acquiring ETF's performance will be closely tied to the economic and political conditions in the particular state indicated by its name, and can be more volatile than the performance of a more geographically diversified fund.

> ***For each Acquiring ETF except Franklin Short-Term Municipal Income ETF, Franklin Municipal Income ETF, and Franklin Municipal High Yield ETF:*** the risk that, to the extent the Acquiring ETF invests in securities of issuers located outside of the particular state indicated by its name, the Acquiring ETF may also be exposed to the risks affecting other states.

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> ***For Franklin Municipal High Yield ETF only:*** the risk that, because the Acquiring ETF may invest significantly in particular segments of the tax-exempt debt market, it may be more vulnerable to fluctuations in the values of the securities it holds than a fund that invests more broadly.

> ***For Franklin California Municipal Income ETF only:*** the risk that certain provisions of the California Constitution and state statutes limit the taxing and spending authority of California's government entities, which could impair the ability of California issuers to pay principal and/or interest on their obligations.

Each Acquiring ETF is subject to the risk that shareholders will purchase or redeem large quantities of its shares. Each Acquiring ETF may be an investment option for mutual funds that are managed by the Investment Manager and its affiliates as "funds of funds." Additionally, other investors from time to time may make substantial investments in an Acquiring ETF, and such shareholders may at times be considered to control the Acquiring ETF. In addition, a large number of shareholders may collectively purchase or redeem an Acquiring ETF's shares in large amounts rapidly or unexpectedly. Large shareholder transactions may adversely affect an Acquiring ETF's liquidity and net assets. These redemptions may also adversely affect an Acquiring ETF's performance, if the Acquiring ETF is forced to sell securities, which may also increase the Acquiring ETF's brokerage costs.

There is no guarantee that the investment techniques, analyses, or judgments that the Investment Manager applies in making investment decisions for an Acquiring ETF will produce the intended outcome or that the investments the Investment Manager selects for an Acquiring ETF will perform as well as other securities that were not selected for the Acquiring ETF. The Investment Manager, or an Acquiring ETF's other service providers, may experience disruptions or operating errors that could negatively impact the Acquiring ETF.

You can lose money by investing in an Acquiring ETF. An Acquiring ETF may not achieve its goal, and it is not intended to be a complete investment program. An investment in an Acquiring ETF is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

In addition, each Acquiring ETF is subject to the following risks related to its ETF structure, which are not risks of the corresponding Target Fund:

> *Fluctuation of NAV and share price risk.* Shares may trade at a larger premium or discount to NAV than shares of other ETFs. The NAV of the Acquiring ETF will generally fluctuate with changes in the market value of the Acquiring ETF's holdings. The Acquiring ETF's shares can be bought and sold in the secondary market at market prices. Disruptions to creations and redemptions, the existence of extreme market volatility or potential lack of an active trading market for the Acquiring ETF's shares may result in the Acquiring ETF's shares trading significantly above (at a premium) or below (at a discount) to NAV or to the intraday value of the Acquiring ETF's holdings. In addition, in stressed market conditions or periods of market disruption or volatility, the market for the Acquiring ETF's shares may become less liquid in response to deteriorating liquidity in the markets for the Acquiring ETF's underlying portfolio holdings.

> *Trading issues risk.* The Acquiring ETF has no public trading history. There can be no assurance that an active trading market will develop or be maintained or that the market for the Acquiring ETF's shares will operate as intended, which could lead to the Acquiring ETF's shares trading at wider spreads and larger premiums and discounts to NAV than other actively managed ETFs. As a result, it may cost investors more to trade Acquiring ETF shares than shares of other ETFs. There is no guarantee that the Acquiring ETF will be able to attract market makers and authorized participants. Market makers and authorized participants are not obligated to make a market in the Acquiring ETF's shares or to submit

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purchase and redemption orders for creation units. The market prices of the Acquiring ETF's shares are expected to fluctuate, in some cases materially, in response to changes in the Acquiring ETF's NAV, the intraday value of the Acquiring ETF's holdings and supply and demand for the Acquiring ETF's shares. The Investment Manager cannot predict whether the Acquiring ETF's shares will trade above, below or at their NAV or the intraday value of the Acquiring ETF's holdings. During such periods, investors may incur significant losses if they sell shares.

The securities held by the Acquiring ETF may be traded in markets that close at a different time than the exchange on which the Acquiring ETF's shares are listed. Liquidity in those securities may be reduced after the applicable closing times. Accordingly, during the time when the exchange is open but after the applicable market closing, fixing or settlement times, bid-ask spreads on the exchange and the corresponding premium or discount to the shares' NAV may widen.

> *Authorized participant concentration risk.* Only an authorized participant may engage in creation and redemption transactions directly with the Acquiring ETF. The Acquiring ETF may have a limited number of financial institutions that act as authorized participants, none of which are obligated to engage in creation and/ or redemption transactions. To the extent that those authorized participants do not engage in creation and redemption orders, there may be a significantly diminished trading market for the Acquiring ETF's shares or its shares may trade at a discount (or premium) to NAV and possibly face trading halts and/or de-listing.

> *Cash transactions risk.* Unlike certain ETFs, the Acquiring ETF may effect creations and redemptions in cash or partially in cash. Therefore, it may be required to sell portfolio securities and subsequently recognize gains on such sales that the Acquiring ETF might not have recognized if it were to distribute portfolio securities in-kind. As such, investments in the Acquiring ETF's shares may be less tax-efficient than an investment in an ETF that distributes portfolio securities entirely in-kind.

***What are the funds' principal investment strategies and related risks?***

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;**Fund** | **Principal Investment Strategies** |
| &nbsp;&nbsp;&nbsp; Franklin California Municipal Income ETF<br> Putnam California Tax Exempt Income Fund | The Investment Manager pursues each Fund's goal by investing mainly in tax-exempt investments that are investment-grade in quality. Under normal circumstances, the Investment Manager invests so that at least 90% of each Fund's income distributions are exempt from federal income tax and California personal income tax, except during times of adverse market conditions, when more than 10% of the Fund's income distributions could be subject to these taxes. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. |
| &nbsp;&nbsp;&nbsp; Franklin Massachusetts Municipal Income ETF<br> Putnam Massachusetts Tax Exempt Income Fund<br> Franklin Minnesota Municipal Income ETF<br> Putnam Minnesota Tax Exempt Income Fund<br> Franklin New Jersey Municipal Income ETF<br> Putnam New Jersey Tax Exempt Income Fund<br> Franklin Ohio Municipal Income ETF<br> Putnam Ohio Tax Exempt Income Fund<br> Franklin Pennsylvania Municipal Income ETF<br> Putnam Pennsylvania Tax Exempt Income Fund | The Investment Manager pursues each Fund's goal by investing mainly in tax-exempt investments that are investment-grade in quality. Under normal circumstances, the Investment Manager invests at least 80% of each Fund's net assets in tax-exempt investments. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. Certain states may impose additional requirements on the composition of a Fund's portfolio in order for distributions from that Fund to be exempt from state taxes. |
| &nbsp;&nbsp;&nbsp; Franklin New York Municipal Income ETF<br> Putnam New York Tax Exempt Income Fund | The Investment Manager pursues each Fund's goal by investing mainly in tax-exempt investments that are investment-grade in quality. Under normal circumstances, the |

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| | |
|:---|:---|
|  | Investment Manager invests so that at least 90% of each Fund's income distributions are exempt from federal income tax and New York State and City personal income taxes, except during times of adverse market conditions, when more than 10% of the Fund's income distributions could be subject to these taxes. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. |
| &nbsp;&nbsp;&nbsp; Franklin Short-Term Municipal Income ETF<br> Putnam Short-Term Municipal Income Fund | The Investment Manager pursues each Fund's goal by investing mainly in bonds that pay interest that is exempt from federal income tax (but that may be subject to federal alternative minimum tax ("AMT")) and that have short-term maturities (i.e., three years or less). The Investment Manager invests mainly in investment-grade bonds. Under normal circumstances, the Investment Manager invests at least 80% of each Fund's net assets in tax-exempt investments, which for purposes of this policy include investments paying interest subject to the federal AMT for individuals. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. |
| &nbsp;&nbsp;&nbsp; Franklin Municipal Income ETF<br> Putnam Tax Exempt Income Fund | The Investment Manager pursues each Fund's goal by investing mainly in bonds that pay interest that is exempt from federal income tax (but that may be subject to federal alternative minimum tax ("AMT")), are investment-grade in quality, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests at least 80% of its net assets in tax-exempt investments, which for purposes of this policy exclude investments paying interest subject to the federal AMT for individuals. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. |
| &nbsp;&nbsp;&nbsp; Franklin Municipal High Yield ETF<br> Putnam Tax-Free High Yield Fund | The Investment Manager pursues each Fund's goal by investing mainly in bonds that pay interest that is exempt from federal income tax (but that may be subject to federal alternative minimum tax ("AMT")), are a combination of below-investment-grade and investment-grade securities, and have intermediate- to long-term maturities (i.e., three years or longer). Under normal circumstances, each Fund invests at least 80% of its net assets in tax-exempt investments. This investment policy cannot be changed without the approval of the applicable Fund's shareholders. |

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The principal risks of an investment in an Acquiring ETF are substantially similar to the principal risks of an investment in the corresponding Target Fund, except that, as a shareholder of the Acquiring ETF, you would also subject to risks related to its ETF structure (as further described below). In addition, while there are certain differences between an Acquiring ETF's risk disclosure and that of the corresponding Target Fund, the Investment Manager does not expect the differences in the disclosure or description of such risks to result in or reflect any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. For example, an Acquiring ETF and the corresponding Target Fund may use different terminology to describe the risks applicable to their respective principal investment strategies and the differences may reflect a clarification of the risks associated with an investment in the Acquiring ETF.

The following charts identify the principal risks that could adversely affect the value of each Fund's shares and the total return on an investment in each Fund. Each of these principal risks are described in Appendix D.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Principal Risks** | **Putnam**<br> **California**<br> **Tax**<br> **Exempt**<br> **Income**<br> **Fund** | **Franklin**<br> **California**<br> **Municipal**<br> **Income**<br> **ETF** | **Putnam**<br> **Massachusetts**<br> **Tax Exempt**<br> **Income Fund** | **Franklin**<br> **Massachusetts**<br> **Municipal**<br> **Income ETF** | **Putnam**<br> **Minnesota**<br> **Tax Exempt<br>Income**<br> **Fund** | **Franklin**<br> **Minnesota**<br> **Municipal**<br> **Income**<br> **ETF** |
| &nbsp;&nbsp;Alternative minimum tax risk | | | | | | |
| &nbsp;&nbsp;Authorized participant concentration risk | | X | | X | | X |
| &nbsp;&nbsp;Cash transactions risk | | X | | X | | X |
| &nbsp;&nbsp;Credit risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Derivatives | X | X | X | X | X | X |
| &nbsp;&nbsp;Fluctuation of net asset value and share price risk | | X | | X | | X |
| &nbsp;&nbsp;Focus of investments | X | X | X | X | X | X |
| &nbsp;&nbsp;General obligations | X | X | X | X | X | X |
| &nbsp;&nbsp;Interest rate risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Large shareholder transaction risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Liquidity and illiquid investments | X | X | X | X | X | X |
| &nbsp;&nbsp;Management and operational risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Market risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Other investments | X | X | X | X | X | X |
| &nbsp;&nbsp;Portfolio turnover rate | X | X | X | X | X | X |
| &nbsp;&nbsp;Revenue obligations | X | X | X | X | X | X |
| &nbsp;&nbsp;Tax-exempt investments | X | X | X | X | X | X |
| &nbsp;&nbsp;Temporary defensive strategies | X | X | X | X | X | X |
| &nbsp;&nbsp;Tender option bonds | X | X | X | X | X | X |
| &nbsp;&nbsp;Trading issues risk | | X | | X | | X |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Principal Risks** | **Putnam**<br> **New**<br> **Jersey Tax<br>Exempt**<br> **Income**<br> **Fund** | **Franklin**<br> **New**<br> **Jersey**<br> **Municipal<br>Income**<br> **ETF** | **Putnam New<br>York Tax**<br> **Exempt<br>Income Fund** | **Franklin New**<br> **York**<br> **Municipal<br>Income ETF** | **Putnam<br>Ohio Tax**<br> **Exempt**<br> **Income**<br> **Fund** | **Franklin**<br> **Ohio**<br> **Municipal**<br> **Income ETF** |
| &nbsp;&nbsp;Alternative minimum tax risk | | | | | | |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Principal Risks** | **Putnam New<br>Jersey Tax<br>Exempt<br>Income Fund** | **Franklin New<br>Jersey<br>Municipal<br>Income ETF** | **Putnam New<br>York Tax<br>Exempt<br>Income Fund** | **Franklin New<br>York<br>Municipal<br>Income ETF** | **Putnam<br>Ohio Tax<br>Exempt<br>Income Fund** | **Franklin Ohio<br>Municipal<br>Income ETF** |
| &nbsp;&nbsp;Authorized participant concentration risk | | X | | X | | X |
| &nbsp;&nbsp;Cash transactions risk | | X | | X | | X |
| &nbsp;&nbsp;Credit risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Derivatives | X | X | X | X | X | X |
| &nbsp;&nbsp;Fluctuation of net asset value and share price risk | | X | | X | | X |
| &nbsp;&nbsp;Focus of investments | X | X | X | X | X | X |
| &nbsp;&nbsp;General obligations | X | X | X | X | X | X |
| &nbsp;&nbsp;Interest rate risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Large shareholder transaction risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Liquidity and illiquid investments | X | X | X | X | X | X |
| &nbsp;&nbsp;Management and operational risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Market risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Other investments | X | X | X | X | X | X |
| &nbsp;&nbsp;Portfolio turnover rate | X | X | X | X | X | X |
| &nbsp;&nbsp;Revenue obligations | X | X | X | X | X | X |
| &nbsp;&nbsp;Tax-exempt investments | X | X | X | X | X | X |
| &nbsp;&nbsp;Temporary defensive strategies | X | X | X | X | X | X |
| &nbsp;&nbsp;Tender option bonds | X | X | X | X | X | X |
| &nbsp;&nbsp;Trading issues risk | | X | | X | | X |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Principal Risks** | **Putnam<br>Pennsylvania<br>Tax Exempt<br>Income Fund** | **Franklin<br>Pennsylvania<br>Municipal<br>Income ETF** | **Putnam<br>Short-Term<br>Municipal<br>Income Fund** | **Franklin<br>Short-Term<br>Municipal<br>Income ETF** | **Putnam Tax<br>Exempt<br>Income Fund** | **Franklin<br>Municipal<br>Income ETF** |
| &nbsp;&nbsp;Alternative minimum tax risk | | | X | X | | |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Principal Risks** | **Putnam<br>Pennsylvania<br>Tax Exempt<br>Income Fund** | **Franklin<br>Pennsylvania<br>Municipal<br>Income ETF** | **Putnam<br>Short-Term<br>Municipal<br>Income Fund** | **Franklin<br>Short-Term<br>Municipal<br>Income ETF** | **Putnam Tax<br>Exempt<br>Income Fund** | **Franklin<br>Municipal<br>Income ETF** |
| &nbsp;&nbsp;Authorized participant concentration risk | | X | | X | | X |
| &nbsp;&nbsp;Cash transactions risk | | X | | X | | X |
| &nbsp;&nbsp;Credit risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Derivatives | X | X | X | X | X | X |
| &nbsp;&nbsp;Fluctuation of net asset value and share price risk | | X | | X | | X |
| &nbsp;&nbsp;Focus of investments | X | X | X | X | X | X |
| &nbsp;&nbsp;General obligations | X | X | X | X | X | X |
| &nbsp;&nbsp;Interest rate risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Large shareholder transaction risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Liquidity and illiquid investments | X | X | X | X | X | X |
| &nbsp;&nbsp;Management and operational risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Market risk | X | X | X | X | X | X |
| &nbsp;&nbsp;Other investments | X | X | X | X | X | X |
| &nbsp;&nbsp;Portfolio turnover rate | X | X | X | X | X | X |
| &nbsp;&nbsp;Revenue obligations | X | X | X | X | X | X |
| &nbsp;&nbsp;Tax-exempt investments | X | X | X | X | X | X |
| &nbsp;&nbsp;Temporary defensive strategies | X | X | X | X | X | X |
| &nbsp;&nbsp;Tender option bonds | X | X | | | X | X |
| &nbsp;&nbsp;Trading issues risk | | X | | X | | X |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Principal Risks** | **Putnam Tax-Free High Yield**<br> **Fund** | **Franklin Municipal High Yield ETF** |
| &nbsp;&nbsp;&nbsp; Alternative minimum tax risk | | |
| &nbsp;&nbsp;&nbsp; Authorized participant concentration risk | | X |
| &nbsp;&nbsp;&nbsp; Cash transactions risk | | X |
| &nbsp;&nbsp;&nbsp; Credit risk | X | X |
| &nbsp;&nbsp;&nbsp; Derivatives | X | X |
| &nbsp;&nbsp; Fluctuation of net asset value and share price risk | | X |
| &nbsp;&nbsp;&nbsp; Focus of investments | X | X |
| &nbsp;&nbsp;&nbsp; General obligations | X | X |
| &nbsp;&nbsp;&nbsp; Interest rate risk | X | X |
| &nbsp;&nbsp;&nbsp; Large shareholder transaction risk | X | X |
| &nbsp;&nbsp;&nbsp; Liquidity and illiquid investments | X | X |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Principal Risks** | **Putnam Tax-Free High Yield**<br> **Fund** | **Franklin Municipal High**<br> **Yield ETF** |
| &nbsp;&nbsp;&nbsp; Management and operational risk | X | X |
| &nbsp;&nbsp;&nbsp; Market risk | X | X |
| &nbsp;&nbsp;&nbsp; Other investments | X | X |
| &nbsp;&nbsp;&nbsp; Portfolio turnover rate | X | X |
| &nbsp;&nbsp;&nbsp; Revenue obligations | X | X |
| &nbsp;&nbsp;&nbsp; Tax-exempt investments | X | X |
| &nbsp;&nbsp; Temporary defensive strategies | X | X |
| &nbsp;&nbsp;&nbsp; Tender option bonds | X | X |
| &nbsp;&nbsp;&nbsp; Trading issues risk | | X |

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**V.** **Information about the Mergers** 

**General.** Pursuant to an Agreement and Plan of Reorganization (the "Plan"), each Target Fund will be reorganized with and into the corresponding Acquiring ETF, as indicated below (each, an "Acquiring ETF" and collectively, the "Acquiring ETFs"). A form of the Plan is attached to this Prospectus/Information Statement as Appendix A.

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| | | |
|:---|:---|:---|
| **<u>Target Fund</u>** |  | **<u>Acquiring ETF</u>** |
| Putnam California Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg) | Franklin California Municipal Income ETF |
| Putnam Massachusetts Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg)  | Franklin Massachusetts Municipal Income ETF |
| Putnam Minnesota Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg)  | Franklin Minnesota Municipal Income ETF |
| Putnam New Jersey Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg)  | Franklin New Jersey Municipal Income ETF |
| Putnam New York Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg)  | Franklin New York Municipal Income ETF |
| Putnam Ohio Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg)  | Franklin Ohio Municipal Income ETF |
| Putnam Pennsylvania Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg)  | Franklin Pennsylvania Municipal Income ETF |
| Putnam Short-Term Municipal Income Fund | ![LOGO](g91160g01a01.jpg)  | Franklin Short-Term Municipal Income ETF |
| Putnam Tax Exempt Income Fund | ![LOGO](g91160g01a01.jpg)  | Franklin Municipal Income ETF |
| Putnam Tax-Free High Yield Fund | ![LOGO](g91160g01a01.jpg)  | Franklin Municipal High Yield ETF |

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Although the term "merger" is used for ease of reference, the transactions are structured as a transfer of all of the assets of each Target Fund to the respective Acquiring ETF in exchange for the assumption by the respective Acquiring ETF of all of the liabilities of the Target Fund and for the issuance and delivery to the Target Fund of shares of the respective Acquiring ETF (the Merger Shares) equal in aggregate net asset value to the value of the assets transferred to the Acquiring ETF on the date of the exchange (following the redemption of any Target Fund shares, as described below).

After receipt of the Merger Shares, each Acquiring ETF will distribute the Merger Shares to its shareholders, in proportion to their existing shareholdings, in complete liquidation of each Target Fund, and the legal existence of each Target Fund will be terminated. Each shareholder of each Target Fund will receive a whole number of Merger Shares equal in aggregate value at the date of the exchange to the aggregate value of the shareholder's Target Fund shares (following the redemption of any Target Fund shares, as described below). In addition, shortly before the closing of a Merger, the applicable Target Fund shall, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Merger Shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. The whole number of Merger Shares to be delivered to each Target Fund will be determined, for each share class of the Target Fund, by dividing the value of the Target Fund's net assets attributable to that share class by the net asset value of one Merger Share.

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The Trustees have voted unanimously to approve the Mergers.

Please see "*Federal Income Tax Consequences*" for information about the expected tax consequences of the Mergers.

**WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY** 

**Trustees' Considerations Relating to the Mergers.** The Trustees, who served as Trustees of each of the Target Funds and Acquiring ETFs involved in the Mergers, carefully considered the anticipated benefits and costs of each Merger from the perspective of the relevant Target Fund and the relevant Acquiring ETF. Following their review, the Trustees, including the Independent Trustees, determined that each Merger would be in the best interests of the relevant Target Fund and the relevant Acquiring ETF and their respective shareholders and that the interests of existing shareholders of each such Fund would not be diluted by the Merger. The Trustees unanimously approved the Mergers and the Plan.

In approving each Merger, the Board considered the following factors:

*ETF structural matters.* The Trustees considered the Investment Manager's belief that converting the Target Fund into an ETF may provide certain structural advantages. The Trustees noted that potential benefits of the ETF structure to shareholders included: (1) less cash drag on performance because the Acquiring ETF is not required to buy back or redeem shares directly from retail shareholders and, as a result, portfolio managers do not have to maintain cash in order to provide liquidity for redemptions, and (2) more flexible trading of ETF shares because investors have the ability to buy or sell ETF shares throughout the day at the current market price. The Trustees observed that, although the use of in-kind transactions in connection with creations and redemptions of Acquiring ETF Shares potentially could contribute to lower portfolio transaction costs, the Acquiring ETFs expect that they will typically create and redeem their shares in cash and that, as such, the reduction in portfolio transaction costs is unlikely to be material.

The Trustees considered that, while actively-managed mutual funds generally provide only periodic disclosure of their complete portfolio holdings (in the case of the Target Fund, monthly, on or before fifteen calendar days after the end of each month), transparent active ETFs (like the Acquired Fund) operate with full, daily transparency of their portfolio holdings. The Trustees noted that this daily transparency allows for trading participants to manage their risk and more accurately price shares in the secondary market. The Trustees also observed that it also offers financial advisors and their clients an understanding of their portfolio risk each day. The Trustees weighed these benefits against the possibility that other market participants could use information about an ETF's portfolio holdings to engage in certain predatory trading practices that may have the potential to harm the ETF and its shareholders, such as front running the ETF's trades of portfolio securities.

The Trustees also considered the Investment Manager's belief that, although the ETF structure in general offers certain tax efficiencies for investors compared to the traditional mutual fund structure, those advantages, if any, are unlikely to be material in the case of the Acquiring ETFs. The Trustees noted that, while the tax treatment of ETFs and mutual funds is the same, ETFs typically acquire securities from and deliver securities to Authorized Participants in the creation and redemption process on an in-kind basis and avoid the realization of taxable capital gains within the ETF in such transactions. The Trustees further noted that, accordingly, investors in an ETF frequently are only subject to capital gains taxes on their investment in the ETF when they sell their ETF shares. The Trustees considered that, in contrast, when portfolio securities are sold within a mutual fund, the sale can cause the recognition of capital gains

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within the mutual fund that generally would cause a taxable distribution to all shareholders of the mutual fund—even if the shareholders may have an unrealized loss on their overall mutual fund investment. The Trustees also considered that these tax efficiencies may be of limited value in the case of portfolios, like the Target Funds', that emphasize investments in municipal bonds that may be less likely to result in capital appreciation than, for example, investments in equity securities, and that these tax efficiencies may be of less importance to tax-exempt investors. The Trustees further observed that, because the Acquiring ETFs are initially likely to transact in cash, rather than in kind, such advantages are unlikely to apply.

*Other considerations relating to the Merger.* The Trustees considered that shareholders of the Target Fund must have a brokerage account that is permitted to hold ETF shares in order to transact in Acquiring ETF Shares. The Trustees noted that, for any Target Fund shareholder who holds Target Fund shares through an account that is not permitted to hold a corresponding Acquiring ETF's shares, the Acquiring ETF's shares will be held by a transfer agent of the applicable Acquiring ETF as agent for and for the account and benefit of the Target Fund shareholder for up to nine months. The Trustees further noted that, after the expiration of that period, if the Target Fund shareholder has not established an appropriate account to hold the shares and informed the transfer agent of the applicable Acquiring ETF of the new account, the shares will be liquidated and the proceeds sent to each such Target Fund shareholder at the shareholder's last address of record at the transfer agent of the Acquiring ETF.

The Trustees considered that there may be circumstances in which a Target Fund shareholder will not be able to hold Acquiring ETF shares. The Trustees noted, for example, that omnibus retirement plan recordkeepers may not be able to include ETF shares on their platforms, and in such a case a retirement plan investor may be required by its retirement plan recordkeeper to redeem their Target Fund shares prior to the Merger. In addition, the Trustees noted that shareholders who hold Target Fund shares in a Plan for which PFTC is custodian and who have not exchanged their Target Fund shares for shares of another eligible Putnam mutual fund or redeemed their Target Fund shares before the closing of the relevant Merger would have their Target Fund shares exchanged by PFTC for Class A shares of Putnam Money Market Fund pursuant to the documents governing such Plan. The Trustees observed that PFTC will provide additional information to these shareholders. The Trustees noted that the Investment Manager had informed them that there were relatively few Target Fund shareholders who would be affected in this regard.

The Trustees considered that, because the Acquiring ETF does not issue fractional shares, the Target Fund will, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares as is necessary so that the shareholder will receive a whole number of Acquiring ETF shares, with the Target Fund shareholder receiving cash equal to the NAV of any redeemed Target Fund shares. The Trustees observed that the proceeds of this redemption will result in a cash payment to those Target Fund shareholders, which is expected to be *de minimis* and will be a taxable event to such shareholders, to the extent the shares were held in a taxable account.

The Trustees considered that, effective on or around July 19, 2025, the Investment Manager would waive any front-end sales charges applicable to the purchase of Target Fund shares and any contingent deferred sales charges applicable to the redemption of Target Fund shares. The Trustees observed that, in light of this waiver, shareholders of the Target Fund who do not wish to receive shares of the Acquiring ETF in connection with the Merger would have an opportunity to redeem their Target Fund shares before the Merger without incurring sales charges.

*Investment matters.* In evaluating the Merger, the Trustees analyzed the underlying investment rationale articulated by the Investment Manager. The Trustees noted that the Target Fund and Acquiring ETF currently have the same investment goals and seek those goals by employing the same investment strategies. The Trustees noted that, although there may be minor differences in how the Acquiring ETF's

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and the Target Fund's investment goals and strategies are described, those differences are not intended to reflect, nor intended to result in, any material differences in how the Acquiring ETF will be managed relative to how the Target Fund is currently managed. The Trustees considered that the Target Fund and Acquiring ETF have the same Investment Manager, noting the Investment Manager's representation that it would be able to manage the Target Fund's investment strategies equally effectively in an ETF structure. The Trustees also noted that the Target Fund and the Acquiring ETF have the same portfolio management team, and that the same individuals responsible for the day-to-day portfolio management of the Target Fund will be responsible for the day-to-day portfolio management of the Acquiring ETF following the closing of the Merger.

*Risks.* The Trustees considered that many of the principal risks associated with owning shares of the Acquiring ETF are substantially similar to the risks associated with owning shares of the Target Fund (except that the Acquiring ETF is also subject to risks related to its ETF structure). The Trustees noted, however, that there are certain differences in these risks, including the risks associated with the Acquiring ETF's organization and operation as an ETF.

*Performance.* The Trustees reviewed the historical investment performance of the Target Fund. The Trustees considered that the Acquiring ETF is a newly-formed "shell" fund that has not yet commenced operations. The Trustees noted that, following the Merger, each Target Fund would be the accounting survivor and the Acquiring ETF would assume the historical performance of Class R6 shares of the Target Fund. The Trustees noted that the Acquiring ETF will be able to maintain the Target Fund's performance track record, which will assist in marketing and distribution efforts.

*Management fee and ongoing fund expenses.* The Investment Manager informed the Trustees of its expectation that following the Merger, the management fee rate of the Acquiring ETF will be lower than the management fee rate of the Target Fund and the total expense ratio of the Acquiring ETF will be lower than the total expense ratio for each of the Target Fund's share classes.

The Trustees noted that the Target Fund, but not the Acquiring ETF, pays management fees that incorporate asset-level breakpoints ("Fund Family Breakpoints") based on the monthly average of the aggregate net assets of other open-end mutual funds sponsored by Putnam Management, the Target Fund's investment manager prior to July 15, 2024 (including open-end mutual funds managed by Franklin Advisers that have been deemed to be sponsored by Putnam Management for this purpose) (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) ("Fund Family Assets"). The Trustees considered the Investment Manager's representation that, at every level of Fund Family Assets, the Acquiring ETF would pay a management fee that is lower as a percentage of net assets than the management fee paid by the corresponding Target Fund. The Trustees also observed that the Acquiring ETF's unitary management fee includes substantially all operating expenses of the Acquiring ETFs, while the Target Fund's contractual management fees do not. The Trustees noted that this obligation to bear fund expenses is part of the Acquiring ETF's management contract with the Investment Manager and, therefore, cannot be changed without approval of Acquiring ETF shareholders.

Additional information that the Trustees considered is presented in "*Questions and Answers Regarding the Mergers— 4. Why are the Mergers happening?*" and in "*Question 4. How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger?*" under the discussion of each Merger.

*Tax matters.* The Trustees also considered the tax effects of the Merger. The Trustees took into account the fact that, although this result is not free from doubt, the Merger is expected to be a tax-free transaction for federal income tax purposes. They also took into account other anticipated tax effects of the Merger, including the fact that redemptions of any Target Fund shares in connection with the Merger would be taxable to

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shareholders holding shares through taxable accounts and that the existing tax attributes of the Target Fund are expected to carry over to the Acquiring ETF. These and other federal income tax consequences are discussed below under "*Federal Income Tax Consequences*."

*Costs of the Merger.* The Trustees took into account the expected costs of the Merger, including accounting fees, SEC filing fees and legal fees. The Trustees weighed these costs against the expected benefits of the Merger. The Trustees considered that, with certain limited exceptions (including transaction costs associated with the repositioning of the Target Fund's portfolio holdings prior to its Merger, if any), the Investment Manager will bear all direct fees and expenses of the Merger, including legal and accounting expenses, portfolio transfer taxes (if any), or other similar expenses incurred by the Target Fund and the Acquiring ETF in connection with the consummation of the Merger. The Trustees observed that the Investment Manager currently does not anticipate any significant portfolio repositioning or related transaction costs in connection with the Merger. Additional information that the Trustees considered is presented in "*Questions and Answers Regarding the Mergers—14. What are the costs associated with the Mergers.*"

*Other factors.* The Trustees also took into account a number of other factors, including the Investment Manager's belief that reorganizing the Target Fund as an ETF may offer commercial benefits by helping to differentiate the Target Fund from other municipal bond strategies offered by the Investment Manager or its affiliates and by enhancing the Target Funds' ability to attract assets.

**Agreement and Plan of Reorganization.** The Mergers 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 Plan in its entirety in Appendix A.

The Plan provides that each Acquiring ETF will acquire all of the assets of the corresponding Target Fund in exchange for the assumption by the Acquiring ETF of all of the liabilities of the Target Fund and for the issuance of a whole number of Merger Shares having an aggregate net asset value equal to the value of the assets of the Target Fund attributable to shares of the Target Fund (following the redemption of any Target Fund shares, as described below) transferred to the Acquiring ETF on the Exchange Date (defined below) less the value of the liabilities of the Target Fund attributable to shares of the Target Fund (following the redemption of any Target Fund shares) assumed by the Acquiring ETF on the Exchange Date. The whole number of Merger Shares to be delivered to each Target Fund will be determined, for each share class of the Target Fund, by dividing the value of the Target Fund's net assets attributable to that share class by the net asset value of one Merger Share. Valuations for the Mergers will be determined as of such time and date as may be agreed upon by the parties (the "Valuation Time"). The shares will be issued on the business day (the "Exchange Date") following the Valuation Time. Shares of an Acquiring ETF are not issued in fractional shares. As a result, before the closing of the Merger, each Target Fund will, for each shareholder of record of the Target Fund, redeem such number and/or fractional number of Target Fund shares at NAV as is necessary so that the shareholder will receive a whole number of Merger Shares in connection with the Merger.

Each Acquiring ETF will issue the Merger Shares to the corresponding Target Fund, registered in the name of the Target Fund. Immediately following its receipt of the Merger Shares on the Exchange Date, each Target Fund will distribute the Merger Shares, pro rata, to its shareholders of record as of the close of business on the Exchange Date. Each Acquiring ETF will then, in accordance with written instructions furnished by the corresponding Target Fund, re-register the Merger Shares in the names of the shareholders of the Target Fund in an amount representing the whole number of Merger Shares due the shareholder. As a result of the Mergers, each shareholder of a Target Fund will receive a whole number of Merger Shares as has the same aggregate net asset value as the Target Fund shares held by the shareholder (following the redemption of any Target Fund shares as described above) on the Exchange Date.

The consummation of the Mergers is subject to the conditions set forth in the Plan. The Plan may be terminated and a Merger abandoned at any time before the Exchange Date by mutual consent of the applicable Acquiring ETF and Target 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.

A Target Fund will liquidate any of its portfolio securities that the corresponding Acquiring ETF indicates it does not wish to acquire. The Plan provides that this liquidation will be substantially completed before the Exchange Date, unless the relevant Acquiring ETF and Target Fund agree otherwise. Shareholders of the relevant Target Fund will bear the portfolio trading costs associated with

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this liquidation to the extent that it is completed before the Exchange Date. To the extent that the liquidation is not completed by the Exchange Date, shareholders of the relevant combined fund will bear these costs. The Investment Manager currently does not anticipate the Target Funds liquidating any significant portfolio securities in connection with the Mergers.

The Investment Manager will bear all direct fees and expenses, including legal and accounting expenses, portfolio transfer taxes (if any), or other similar expenses incurred by each Target Fund and each Acquiring ETF in connection with the consummation of the Mergers, except that (1) each Target Fund will bear the transaction costs associated with liquidating portfolio securities that will not be acquired by the corresponding Acquiring ETF as part of its Merger ("portfolio repositioning"), if any, and (2) to the extent that any payment by a Target Fund or Acquiring ETF of such fees or expenses would result in its disqualification as a "regulated investment company" within the meaning of Section 851 of the Code, would prevent a Merger from qualifying as a "reorganization" described in Section 368(a)(1) of the Code, or would otherwise result in the imposition of tax on any Target Fund or Acquiring ETF, such fees and expenses will be paid directly by the party incurring them. The aggregate costs associated with the Mergers are estimated to be approximately $1.1 million.

The Investment Manager currently does not anticipate any significant portfolio repositioning or related transaction costs in connection with the Mergers.

**Description of the Merger Shares.** The Merger Shares are shares of beneficial interest issued by ETF Trust. Each Merger Share issued by ETF Trust has a pro rata interest in the assets of the corresponding Acquiring ETF. Merger Shares have no pre-emptive, exchange, subscription or conversion rights and are freely transferable. Each Share is entitled to participate equally in dividends and distributions declared by the Board with respect to the relevant Acquiring ETF, and in the net distributable assets of such Acquiring ETF on liquidation. Each Acquiring ETF is an actively managed ETF. Like other ETFs, shares of each Acquiring ETF are generally purchased and redeemed in creation unit aggregations through authorized participants, shares of each Acquiring ETF are listed and traded on a stock exchange, and individual investors can purchase or sell shares in less than creation unit sizes and for cash in the secondary market through a broker.

Target Fund shareholders receiving Merger Shares will not pay an initial sales charge on the shares. Your Merger Shares also will not be subject to a contingent deferred sales charge, whether or not your Target Fund shares were subject to such a charge.

For more detail on the characteristics of the Merger Shares, please see "*Additional Information about the Acquiring ETFs"—Purchase and sale of fund shares*" and "*Additional information about the Acquiring ETFs—Shareholder information—Buying and selling shares in the secondary market.*"

**Comparison of Shareholder Rights.** The following is only a discussion of certain principal differences between the governing documents for the Target Funds, each organized as a Massachusetts business trust or series thereof, and the Acquiring ETFs, each a series of Putnam ETF Trust, a Delaware statutory trust. Although not all of the Target Funds are governed by the same governing documents, the provisions of their governing documents are substantially similar. This discussion is not a complete description of the Target Funds' or Acquiring ETFs' governing documents.

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|  | **Target Funds** | **Acquiring ETFs** | **Summary of Material<br>Differences**<br>|
| &nbsp;&nbsp;&nbsp;**Shareholder Liability** | The Declaration of Trust provides that neither the Trust, nor the Trustees, nor any officer, employee or agent of the Trust shall have any power to bind personally any shareholder or to call upon any shareholder for the payment of any sum of money or assessment other than such as the shareholder may personally agree to pay. The Declaration of Trust also provides that, in case any shareholder or former shareholder shall be held to be personally liable solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason, the shareholder or former shareholder (or his or her heirs, executors, administrators or other legal representative or in the case of a corporation or other entity, its corporate or other general successor) shall be entitled to be held harmless from and indemnified against all loss and expense arising from such liability, but only out of the assets of the particular series of shares of which he or she is or was a Shareholder. | The Declaration of Trust provides that the shareholders shall not be personally liable for the debts, liabilities, obligations and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or any series. The Declaration of Trust provides that the shareholders, as such, shall have the same limitation of personal liability as is extended to Stockholders of a private corporation for profit organized under the General Corporation Law of the State of Delaware. The Declaration of Trust also provides that, if any shareholder or former shareholder of any series is held personally liable solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason, the shareholder or former shareholder (or his or her heirs, executors, administrators or other legal representatives or, in the case of any entity, its general successor) shall be entitled out of the assets belonging to the applicable series (or the Trust in the event a shareholder holds shares of the Trust and not a series) to be held harmless from and indemnified against all loss and expense arising from such liability.<br>| None. |
| &nbsp;&nbsp;&nbsp;**Voting Powers** | Each whole share is entitled to one vote as to any matter on which it is entitled to vote and each fractional Share shall be entitled to a proportionate fractional vote.<br>The shareholders have the power to vote only (i) for the election of Trustees as provided in the Declaration of Trust, (ii) for the removal of Trustees as provided in the Declaration of | A shareholder of a series of the Trust shall be entitled to one vote for each dollar of net asset value per share of such series, on any matter on which such shareholder is entitled to vote and each fractional dollar amount shall be entitled to a proportionate fractional vote.<br>The shareholders have the power to vote only (i) for the election of Trustees as and to | For the Target Funds, each whole share is entitled to one vote, and fractional shares are entitled to a proportionate fractional vote. For the Acquiring ETFs, each dollar of net asset value per share is entitled to one vote, and each fractional dollar amount is entitled to a proportionate fractional |

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|  | Trust, (iii) with respect to any Investment Manager as provided in the Declaration of Trust to the extent required by applicable law, (iv) with respect to any termination of this Trust to the extent and as provided in the Declaration of Trust, (v) with respect to any amendment of this Declaration of Trust to the extent and as provided in the Declaration of Trust, and (vi) with respect to such additional matters relating to the Trust as may be required by the Declaration of Trust, the Bylaws or any registration of the Trust with the SEC or any state, or as the Trustees may consider necessary or desirable<br>There is no cumulative voting in the election of Trustees.<br>On any matter submitted to a vote of shareholders, all shares of the Trust then entitled to vote shall, except as otherwise provided in the Bylaws, be voted in the aggregate as a single class without regard to series or classes of shares, except (1) when required by the 1940 Act or when the Trustees shall have determined that the matter affects one or more series or classes of shares materially differently, shares shall be voted by individual series or class; and (2) when the Trustees have determined that the matter affects only the interests of one or more series or classes, only shareholders of such series or classes shall be entitled to vote thereon<br>| the extent provided in the Declaration of Trust, (ii) with respect to such additional matters relating to the Trust as may be required by federal law, or any registration of the Trust with the SEC or any state and, and (iii) as the Trustees may otherwise consider necessary or desirable.<br>There is no cumulative voting for Trustees.<br>On any matters submitted to a vote of the shareholders, all shares of the Trust then entitled to vote shall be voted in aggregate, except: (a) when required by the 1940 Act, shares shall be voted by individual series or class; (b) when the matter involves any action that the Trustees have determined will affect only the interests of one or more series, then only shareholders of such series shall be entitled to vote thereon; and (c) when the matter involves any action that the Trustees have determined will affect only the interests of one or more classes, then only the shareholders of such class or classes shall be entitled to vote thereon. | vote.<br>Target Fund shareholders have the power to vote for the removal of Trustees, as provided in the Declaration of Trust, and with respect to any Investment Manager, as provided in the Declaration of Trust to the extent required by applicable law. |
| &nbsp;&nbsp;&nbsp;**Shareholder Quorum; Adjournment; Required Vote** | Thirty percent of shares entitled to vote on a particular matter shall be a quorum for the transaction of business on that matter at a shareholders' meeting, except that where any provision of law or of the Declaration of Trust or the Bylaws requires that holders of | Except when a larger quorum is required by federal law or the requirements of any securities exchange on which shares are listed for trading, the presence in person or by proxy of shareholders owning shares representing one-third (1/3) or more of the total combined | Shareholder quorum for the Target Funds is thirty percent of shares entitled to vote, whereas shareholder quorum for the Acquiring ETFs is one-third of the total combined voting power of the shares entitled to |

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| any series or class shall vote as an individual series or class, then thirty percent of the aggregate number of shares of that series or class entitled to vote shall be necessary to constitute a quorum for the transaction of business by that series or class.<br>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 such 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 such matter. Upon motion of the chair of the meeting, the question of adjournment may be (but is not required by the Bylaws to 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 adjourned and, if approved, such adjournment shall take place without further notice other than announcement at the meeting at which the adjournment is taken. Unless a proxy is otherwise limited in this regard, any shares present and entitled to vote at a meeting, including any 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. Any proposal for which sufficient favorable votes have been received may (but need not) be acted upon and considered final | voting power of all shares of each series or class, or of the Trust, as applicable, entitled to vote shall be a quorum for the transaction of business at a shareholders' meeting with respect to such series or class or with respect to the entire Trust, respectively.<br>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 such 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 such matter. Upon motion of the chair of the meeting, the question of adjournment may (but is not required by the Trust's By-laws to 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 adjourned. Unless a proxy is otherwise limited in this regard, any shares present and entitled to vote at a shareholders' meeting, including any 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. At any adjourned meeting, the Trust may transact any business which might have been transacted at the original meeting. Any proposal for which sufficient favorable votes have been received may (but need not) be acted upon and considered final and effective regardless of whether the | vote. |

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|  | and effective regardless of whether the meeting is adjourned to permit additional solicitation with respect to any other proposal that is properly before the meeting.<br>Except when a larger vote is required by any provision of law or of the Declaration of Trust or the Bylaws, a majority of the shares voted shall decide any questions and a plurality shall elect a Trustee, provided that where any provision of law or of the Declaration of Trust or the Bylaws requires that the holders of any series or class shall vote as an individual series or class then a majority of the shares of that series or class voted on the matter (or a plurality with respect to the election of a Trustee) shall decide that matter insofar as that series or class is concerned. | shareholders' meeting is adjourned to permit additional solicitation with respect to any other proposal that is properly before the meeting.<br>At all meetings of the shareholders, a quorum being present, the Trustees shall be elected by a vote of a plurality of the votes cast by shareholders present in person or by proxy and all other matters shall be decided by a majority of the votes cast affirmatively or negatively by shareholders present in person or by proxy; provided, that if the Declaration of Trust, the Trust's By-laws or applicable federal law permits or requires that shares be voted on any matter by individual series or classes, then a majority of the votes cast by the shareholders of that series or class present in person or by proxy shall decide that matter insofar as that series or class is concerned; provided, further, that if the matter to be voted on is one for which by express provision of the 1940 Act, a greater vote is required, then in such case such express provision shall control the decision of such matter.<br>|  |
| &nbsp;&nbsp;&nbsp; **Trustee Power**<br> **to Amend Organizational Document** | The Declaration of Trust may be amended at any time by an instrument in writing signed by a majority of the then Trustees when authorized to do so by a vote of the shareholders, provided that shareholder authorization shall not be required in the case of any amendment (i) having the purpose of changing the name of the Trust or of supplying any omission, curing any ambiguity or curing, correcting or supplementing any defective or inconsistent provision contained herein or (ii) which is determined by the Trustees in their sole discretion not to have | The Declaration of Trust may be amended and/or amended and restated at any time by (i) an instrument in writing signed by a majority of the Trustees then holding office or (ii) adoption by a majority of the Trustees then holding office of a resolution specifying the restatement and/or amendment. No vote or consent of any shareholder shall be required for any amendment to the Declaration of Trust except (i) as determined by the Trustees or (ii) as required by federal law including the 1940 Act, but only to the extent so required. | Amendments to the Target Fund Declaration of Trust require shareholder approval except to change the name of the Trust, fix omissions, ambiguities, deficiencies, or inconsistencies, or when the Trustees determine that the amendment would have no material adverse effect on affected shareholders.<br>Amendments to the Acquiring ETF Declaration of Trust do not require shareholder |

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|  | a material adverse effect on the shareholders of any series or class of shares.<br>The Bylaws may be amended or repealed, in whole or in part, by a majority of the Trustees then in office. The Bylaws may not be amended by shareholders. | The Certificate of Trust of the Trust may be restated and/or amended by any Trustee as necessary or desirable to reflect any change in the information set forth therein, and any such restatement and/or amendment shall be effective immediately upon filing with the Office of the Secretary of the State of Delaware or upon such future date as may be stated therein.<br>The By-Laws may be restated, amended, supplemented or repealed by a majority vote of the Trustees then in office.<br>| approval except as required by the Declaration of Trust or applicable federal law. |
| &nbsp;&nbsp;&nbsp; **Termination of**<br> **the Trust or**<br> **Any Series or**<br> **Class** | The Trust or any series or class of any series may be terminated at any time (i) by the Trustees by written notice to the shareholders of the Trust or to the shareholders of the particular series or class, as the case may be, or (ii) by the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of each series or class entitled to vote, or (2) 67% or more of the shares of each series or class entitled to vote and present at a meeting called for this purpose if more than 50% of the outstanding shares of each series or class entitled to vote are present at the meeting in person or by proxy.<br>| The Trust may be dissolved at any time by the Trustees (without shareholder approval or prior notice). Any series of shares may be dissolved at any time by the Trustees (without shareholder approval or prior notice). Any class may be terminated at any time by the Trustees (without shareholder approval or prior notice). Any action to dissolve the Trust shall be deemed to also be an action to dissolve each series, and to terminate each class. | Termination of the Target Funds (or any series or class thereof) requires approval by the Trustees (with written notice to shareholders) or a shareholder vote.<br>Termination of the Acquiring ETFs (or any series or class thereof) requires Trustee approval (without shareholder approval or prior notice to shareholders). |
| &nbsp;&nbsp;&nbsp;**Reorganization** | Except as otherwise required by applicable law, the Trustees may, without shareholder approval, authorize the Trust or any series or class to merge, consolidate or reorganize with any other entity (including another series or class of the Trust), or to sell or exchange all or substantially all of the assets of the Trust or of any series or class, in each case upon such terms and for such consideration as they may determine to be in the best interests of the Trust or of the | The Trustees may, without shareholder approval unless such approval is required by the 1940 Act, (i) cause the Trust to convert or merge, reorganize or consolidate with or into one or more trusts, partnerships, limited liability companies, associations, corporations or other business entities (or a series of any of the foregoing to the extent permitted by law) (including trusts, partnerships, limited liability companies, associations, corporations or other business entities created | The surviving or resulting entity in a reorganization of the Acquiring ETF must be an open-end management investment company under the 1940 Act or a series thereof, whereas no such requirement exists for reorganizations of the Target Funds. The Acquiring ETF governing documents also explicitly authorize the Trustees to approve (without shareholder |

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**Federal Income Tax Consequences.** Each Merger is expected to be a tax-free reorganization for U.S. federal income tax purposes. As a condition to each Fund's obligation to consummate the transactions contemplated by the Plan, the Funds will receive a tax opinion from Ropes & Gray LLP, counsel to the Funds (which opinion will be based on certain factual representations and customary assumptions and subject to certain qualifications), substantially to the effect that, with respect to the Merger of each Target Fund and its corresponding Acquiring ETF, 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 U.S. federal income tax purposes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the acquisition by the Acquiring ETF of substantially all of the assets of the Target Fund solely in
exchange for Merger Shares and the assumption by the Acquiring ETF of the liabilities of the Target Fund followed by the distribution by the Target to its shareholders of Merger Shares in complete liquidation of the Target Fund, all pursuant to the
Plan, will constitute a reorganization within the meaning of Section 368(a) of the Code, and the Target Fund and the Acquiring ETF will each be a "party to a reorganization" within the meaning of Section 368(b) of the Code;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) under Sections 361 and 357 of the Code, no gain or loss will be recognized by the Target Fund upon the
transfer of its assets to the Acquiring ETF pursuant to the Plan in exchange for Merger Shares and the assumption of the Target Fund's liabilities by the Acquiring ETF or upon the distribution of Merger Shares by the Target Fund to its
shareholders in liquidation of the Target Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) under Section 354 of the Code, no gain or loss will be recognized by shareholders of the Target Fund
upon the exchange of their shares of the Target Fund for Merger Shares (except with respect to cash received by such Target Fund shareholders in redemption of Target Fund shares prior to the Merger);

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) under Section 1223(1) of the Code, a Target 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 purposes as having held the Target Fund shares exchanged therefor, provided that the shareholder
held those Target Fund shares as capital assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) under Section 1032 of the Code, no gain or loss will be recognized by the Acquiring ETF upon the
receipt of the assets of the Target Fund in exchange for Merger Shares and the assumption by the Acquiring ETF of the liabilities of the Target Fund;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) under Section 362(b) of the Code, the Acquiring ETF's tax basis in the assets of the Target Fund
transferred to the Acquiring ETF pursuant to the Plan will be the same as the Target Fund's tax basis immediately prior to the transfer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) under Section 1223(2) of the Code, the holding period in the hands of the Acquiring ETF of each Target
Fund asset transferred to the Acquiring ETF pursuant to the Plan will include the period during which such asset was held or treated for federal income tax purposes as held by the Target Fund; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) the Acquiring ETF will succeed to and take into account the items of the Target 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.

The following discussion applies to the Merger of each Target Fund and its corresponding Acquiring ETF, except as otherwise noted below:

ETF Trust, on behalf of the Acquiring ETF, will file the tax opinion with the SEC after completion of the Merger. The opinion will be based on factual certifications made by officers of the Target Fund and the Acquiring ETF and will also be based on customary assumptions and subject to certain qualifications. The opinion is not a guarantee that the tax consequences of the Merger will be as described above. There is no assurance that the Internal Revenue Service will agree with the opinion. If the Merger were consummated but did not qualify as a tax-free reorganization, Target Fund shareholders would recognize a taxable gain or loss equal to the difference between their tax basis in their Target Fund shares and the fair market value of the shares of the Acquiring ETF received.

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Although the Merger is expected to be a tax-free reorganization for federal income tax purposes, there will nonetheless be tax implications. Portfolio assets of the Target Fund may be sold in connection with the 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 Target Fund's tax basis in the assets. Any net capital gains recognized in these sales will be distributed to 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 gains over net realized long-term capital losses) during or with respect to the year of sale. These distributions will be taxable to shareholders.

Shares of the Acquiring ETF are not issued in fractional shares. As a result, the Target Fund will, for each Target Fund shareholder of record, redeem at NAV shortly before the Merger such number and/or fractional number of the shareholder's shares of the Target Fund as is necessary so that the shareholder will receive a whole number of Acquiring ETF shares in connection with the Merger. Such redemption will result in a cash payment, which will be a taxable sale of shares for shareholders who hold shares in a taxable account. Shareholders should consult their tax advisors to determine the effect of the redemption of Target Fund shares.

Shares of the Acquiring ETF will be transferred to a shareholder's brokerage account. For Target Fund shareholders that hold Target Fund shares through accounts that are not permitted to hold the Acquiring ETF's shares, such Acquiring ETF shares may be held by a transfer agent of the Acquiring ETF as agent for and for the account and benefit of such Target Fund shareholders for up to nine months, after which they will be liquidated and proceeds sent to each such Target Fund shareholder at the shareholder's last address of record at the transfer agent of the Acquiring ETF.

Assuming the Merger qualifies as a tax-free reorganization, as expected, the Acquiring ETF will succeed to the tax attributes of the Target Fund upon the closing of the Merger, including any capital loss carryovers that could have been used by the Target Fund to offset its future realized capital gains, if any, for U.S. federal income tax purposes. The Merger is not expected to independently result in limitations on the Acquiring ETF's ability to use any capital loss carryforwards of the Target Fund. However, the capital loss carryforwards may subsequently become subject to an annual limitation as a result of sales of Acquiring ETF shares or other reorganization transactions in which the Acquiring ETF might engage post-Merger.

The above description of the U.S. federal income tax consequences of the Merger is made without regard to the particular facts and circumstances of any shareholder. Shareholders of the Target Fund should consult their tax advisers regarding the effect, if any, of the Merger with respect to the Target Fund in light of their individual circumstances. Since the foregoing discussion relates only to certain U.S. federal income tax consequences of the Merger, each shareholder of the Target Fund should also consult such shareholder's tax advisers as to the state, local and non-U.S. tax consequences, if any, of the Merger with respect to the Target Fund based upon the shareholder's particular circumstances.

**Capitalization.** The following table sets forth as of April 30, 2025, on an unaudited basis, the capitalizations of the Funds. The table also shows the pro forma capitalization of the Acquiring ETFs as adjusted to give effect to the Mergers as of April 30, 2025. Before the closing of a Merger, for each shareholder of record, the Target Fund will redeem at NAV such number and/or fractional number of each record shareholder's shares of the Target Fund as is necessary so that the shareholder will receive a whole number of Acquiring ETF shares in connection with the Merger. At the closing of each Merger, shareholders of the Target Funds will receive the applicable Acquiring ETF Shares based on the relative NAVs per share of the applicable Funds (following the redemption of any Target Fund shares as previously described) on the Closing Date.

*<u>Putnam California Tax Exempt Income Fund into Franklin California Municipal Income ETF</u>*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**(Unaudited)** | **Target**<br> **Fund –<br>Class A<sup>2</sup>** | **Target<br>Fund –<br>Class C<sup>2</sup>** | **Target<br>Fund –<br>Class**<br> **R6<sup>2</sup>** | **Target**<br> **Fund –<br>Class Y<sup>2</sup>** | **Acquiring <br>ETF<sup>3</sup>** | **Pro Forma<br>Adjustment** | **Pro Forma –<br>Acquiring<br>ETF after<br>Merger<br>(estimated)** |
| &nbsp;&nbsp;&nbsp;Net assets ($) | 589917698 | 5120802 | 3910510 | 85167962 | N/A | N/A | 684116972 |
| &nbsp;&nbsp;&nbsp;Total shares outstanding | 82569474 | 711865 | 545382 | 11883222 | N/A | (296156)**<sup>4</sup>** | 95413787 |
| &nbsp;&nbsp;&nbsp;Net asset value per share ($)**<sup>1</sup>** | 7.14 | 7.19 | 7.17 | 7.17 | N/A | N/A | 7.17 |

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*<u>Putnam Massachusetts Tax Exempt Income Fund into Franklin Massachusetts Municipal Income ETF</u>*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**(Unaudited)** | **Target**<br> **Fund –<br>Class A<sup>2</sup>** | **Target<br>Fund –<br>Class C<sup>2</sup>** | **Target<br>Fund –<br>Class**<br> **R6<sup>2</sup>** | **Target**<br> **Fund –<br>Class Y<sup>2</sup>** | **Acquiring <br>ETF<sup>3</sup>** | **Pro Forma<br>Adjustment** | **Pro Forma –<br>Acquiring<br>ETF after<br>Merger<br>(estimated)** |
| &nbsp;&nbsp;&nbsp;Net assets ($) | 116789610 | 2567513 | 1105626 | 111918004 | N/A | N/A | 232380753 |
| &nbsp;&nbsp;&nbsp;Total shares outstanding | 13301768 | 291899 | 125565 | 12705916 | N/A | (48150)**<sup>4</sup>** | 26376998 |
| &nbsp;&nbsp;&nbsp;Net asset value per share ($)**<sup>1</sup>** | 8.78 | 8.80 | 8.81 | 8.81 | N/A | N/A | 8.81 |

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*<u>Putnam Minnesota Tax Exempt Income Fund into Franklin Minnesota Municipal Income ETF</u>*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**(Unaudited)** | **Target**<br> **Fund –<br>Class A<sup>2</sup>** | **Target<br>Fund –<br>Class C<sup>2</sup>** | **Target<br>Fund –<br>Class R6<sup>2</sup>** | **Target Fund**<br> **– Class Y<sup>2</sup>** | **Acquiring <br>ETF<sup>3</sup>** | **Pro Forma<br>Adjustment** | **Pro Forma –<br>Acquiring<br>ETF after<br>Merger<br>(estimated)** |
| &nbsp;&nbsp;&nbsp;Net assets ($) | 50520633 | 2640855 | 5011274 | 124466375 | N/A | N/A | 182639137 |
| &nbsp;&nbsp;&nbsp;Total shares outstanding | 5922207 | 310046 | 586101 | 14562770 | N/A | (19834)**<sup>4</sup>** | 21361290 |
| &nbsp;&nbsp;&nbsp;Net asset value per share ($)**<sup>1</sup>** | 8.53 | 8.52 | 8.55 | 8.55 | N/A | N/A | 8.55 |

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*<u>Putnam New Jersey Tax Exempt Income Fund into Franklin New Jersey Municipal Income ETF</u>*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**(Unaudited)** | **Target**<br> **Fund –<br>Class A<sup>2</sup>** | **Target<br>Fund –<br>Class C<sup>2</sup>** | **Target<br>Fund –<br>Class R6<sup>2</sup>** | **Target**<br> **Fund –<br>Class Y<sup>2</sup>** | **Acquiring <br>ETF<sup>3</sup>** | **Pro Forma<br>Adjustment** | **Pro Forma –<br>Acquiring<br>ETF after<br>Merger<br>(estimated)** |
| &nbsp;&nbsp;&nbsp;Net assets ($) | 115901226 | 4943698 | 1280138 | 24533823 | N/A | N/A | 146658885 |
| &nbsp;&nbsp;&nbsp;Total shares outstanding | 13628758 | 580379 | 150274 | 2878355 | N/A | (24259)**<sup>4</sup>** | 17213507 |
| &nbsp;&nbsp;&nbsp;Net asset value per share ($)**<sup>1</sup>** | 8.50 | 8.52 | 8.52 | 8.52 | N/A | N/A | 8.52 |

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*<u>Putnam New York Tax Exempt Income Fund into Franklin New York Municipal Income ETF</u>*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**(Unaudited)** | **Target**<br> **Fund –<br>Class A<sup>2</sup>** | **Target<br>Fund –<br>Class C<sup>2</sup>** | **Target**<br> **Fund –**<br> **Class R6<sup>2</sup>** | **Target**<br> **Fund –<br>Class Y<sup>2</sup>** | **Acquiring <br>ETF<sup>3</sup>** | **Pro Forma<br>Adjustment** | **Pro Forma –<br>Acquiring<br>ETF after<br>Merger<br>(estimated)** |
| &nbsp;&nbsp;&nbsp;Net assets ($) | 508711210 | 8131135 | 142484125 | 58140940 | N/A | N/A | 717467410 |
| &nbsp;&nbsp;&nbsp;Total shares outstanding | 66113641 | 1057179 | 18508091 | 7551911 | N/A | (49557)**<sup>4</sup>** | 93181245 |
| &nbsp;&nbsp;&nbsp;Net asset value per share ($)**<sup>1</sup>** | 7.69 | 7.69 | 7.70 | 7.70 | N/A | N/A | 7.70 |

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*<u>Putnam Ohio Tax Exempt Income Fund into Franklin Ohio Municipal Income ETF</u>*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**(Unaudited)** | **Target**<br> **Fund –<br>Class A<sup>2</sup>** | **Target<br>Fund –<br>Class C<sup>2</sup>** | **Target**<br> **Fund –**<br> **Class**<br> **R6<sup>2</sup>** | **Target**<br> **Fund –<br>Class Y<sup>2</sup>** | **Acquiring <br>ETF<sup>3</sup>** | **Pro Forma<br>Adjustment** | **Pro Forma –<br>Acquiring<br>ETF after<br>Merger<br>(estimated)** |
| &nbsp;&nbsp;&nbsp;Net assets ($) | 51745148 | 879909 | 2625560 | 26141596 | N/A | N/A | 81392213 |
| &nbsp;&nbsp;&nbsp;Total shares outstanding | 6354482 | 108082 | 321650 | 3205852 | N/A | (15640)**<sup>4</sup>** | 9974426 |
| &nbsp;&nbsp;&nbsp;Net asset value per share ($)**<sup>1</sup>** | 8.14 | 8.14 | 8.16 | 8.15 | N/A | N/A | 8.16 |

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*<u>Putnam Pennsylvania Tax Exempt Income Fund into Franklin Pennsylvania Municipal Income ETF</u>*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**(Unaudited)** | **Target**<br> **Fund –<br>Class A<sup>2</sup>** | **Target<br>Fund –<br>Class C<sup>2</sup>** | **Target<br>Fund –<br>Class R6<sup>2</sup>** | **Target**<br> **Fund –<br>Class Y<sup>2</sup>** | **Acquiring <br>ETF<sup>3</sup>** | **Pro Forma<br>Adjustment** | **Pro Forma –<br>Acquiring<br>ETF after<br>Merger<br>(estimated)** |
| &nbsp;&nbsp;&nbsp;Net assets ($) | 82435880 | 2869207 | 650424 | 11109436 | N/A | N/A | 97064947 |
| &nbsp;&nbsp;&nbsp;Total shares outstanding | 9830100 | 341965 | 77457 | 1323027 | N/A | (17173)**<sup>4</sup>** | 11555376 |
| &nbsp;&nbsp;&nbsp;Net asset value per share ($)**<sup>1</sup>** | 8.39 | 8.39 | 8.40 | 8.40 | N/A | N/A | 8.40 |

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*<u>Putnam Short-Term Municipal Income Fund into Franklin Short-Term Municipal Income ETF</u>*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**(Unaudited)** | **Target**<br> **Fund –<br>Class A<sup>2</sup>** | **Target<br>Fund –<br>Class C<sup>2</sup>** | **Target<br>Fund –<br>Class R6<sup>2</sup>** | **Target**<br> **Fund –<br>Class Y<sup>2</sup>** | **Acquiring <br>ETF<sup>3</sup>** | **Pro Forma<br>Adjustment** | **Pro Forma –<br>Acquiring<br>ETF after<br>Merger<br>(estimated)** |
| &nbsp;&nbsp;&nbsp;Net assets ($) | 23734488 | 164193 | 7139514 | 131549562 | N/A | N/A | 162587757 |
| &nbsp;&nbsp;&nbsp;Total shares outstanding | 2413932 | 16762 | 726833 | 13384125 | N/A | (14941)**<sup>4</sup>** | 16556593 |

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; Net asset<br> value per<br> share ($)**<sup>1</sup>** | 9.83 | 9.80 | 9.82 | 9.83 | N/A | 9.82 |

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*<u>Putnam Tax Exempt Income Fund into Franklin Municipal Income ETF</u>*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**(Unaudited)** | **Target**<br> **Fund –<br>Class A<sup>2</sup>** | **Target<br>Fund –<br>Class C<sup>2</sup>** | **Target<br>Fund –<br>Class**<br> **R6<sup>2</sup>** | **Target**<br> **Fund –<br>Class Y<sup>2</sup>** | **Acquiring <br>ETF<sup>3</sup>** | **Pro Forma<br>Adjustment** | **Pro Forma –<br>Acquiring<br>ETF after<br>Merger<br>(estimated)** |
| &nbsp;&nbsp;&nbsp; Net assets ($) | 479619086 | 3209445 | 8440416 | 63986973 | N/A | N/A | 555255920 |
| &nbsp;&nbsp;&nbsp; Total shares<br> outstanding | 63111323 | 421133 | 1108639 | 8396535 | N/A | (74128)**<sup>4</sup>** | 72963502 |
| &nbsp;&nbsp;&nbsp; Net asset<br> value per<br> share ($)**<sup>1</sup>** | 7.60 | 7.62 | 7.61 | 7.62 | N/A | N/A | 7.61 |

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*<u>Putnam Tax-Free High Yield Fund into Franklin Municipal High Yield ETF</u>*

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| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**(Unaudited)** | **Target**<br> **Fund –<br>Class A<sup>2</sup>** | **Target<br>Fund –<br>Class C<sup>2</sup>** | **Target<br>Fund –<br>Class**<br> **R6<sup>2</sup>** | **Target**<br> **Fund –<br>Class Y<sup>2</sup>** | **Acquiring <br>ETF<sup>3</sup>** | **Pro Forma<br>Adjustment** | **Pro Forma –<br>Acquiring<br>ETF after<br>Merger<br>(estimated)** |
| &nbsp;&nbsp;&nbsp; Net assets ($) | 448971670 | 9426332 | 3164785 | 197844851 | N/A | N/A | 659407638 |
| &nbsp;&nbsp;&nbsp; Total shares<br> outstanding | 39899970 | 835292 | 279932 | 17502358 | N/A | (214379)**<sup>4</sup>** | 58303173 |
| &nbsp;&nbsp;&nbsp; Net asset<br> value per<br> share ($)**<sup>1</sup>** | 11.25 | 11.29 | 11.31 | 11.30 | N/A | N/A | 11.31 |

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<sup>1</sup> Per share amounts may not reconcile due to rounding of net assets and/or shares outstanding.

<sup>2</sup> Holders of Class A, Class C, Class R6, and Class Y shares of the Target Fund will receive shares of the Acquiring ETF upon the closing of the Merger as contemplated in the Plan. The Acquiring ETF does not offer multiple share classes.

<sup>3</sup> The Acquiring ETF is a shell fund without any shares outstanding and, therefore, no estimated capitalization is available.

<sup>4</sup> Reflects adjustments related to the issuance of shares resulting from the Merger.

**VI.** **Additional Information about the Acquiring ETFs** 

Unless otherwise noted, references to "fund" in this section refer to each Acquiring ETF, and references to the "Predecessor Fund" refer to the corresponding Target Fund.

**<u>Purchase and sale of fund shares</u>**

Shares of the fund are listed and traded on an exchange, and individual fund shares may only be bought and sold in the secondary market through a broker or dealer at market price. These transactions, which do not involve the fund, are made at market prices that may vary throughout the day, rather than at net asset

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value. Shares of the fund may trade at a price greater than the fund's net asset value (premium) or less than the fund's net asset value (discount). An investor may incur costs attributable to the difference between the highest price a buyer is willing to pay to purchase shares (bid) and the lowest price a seller is willing to accept for shares (ask) when buying or selling fund shares in the secondary market (the "bid-ask spread"). Recent information, including information regarding the fund's net asset value, market price, premiums and discounts, and bid-ask spread, is available at www.franklintempleton.com.

**<u>Tax information</u>**

The fund intends to distribute income that is exempt from federal income tax and personal income tax of the state identified in the fund's name, as applicable, but distributions will be subject to federal income tax to the extent attributable to other income, including income earned by the fund on investments in taxable securities or capital gains realized on the disposition of its investments.

**<u>Financial intermediary compensation</u>**

If you purchase the fund through a broker/dealer or other financial intermediary (such as a bank or financial professional), 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.

**<u>Fund management</u>**

**Investment manager** 

Franklin Advisers, One Franklin Parkway, San Mateo, CA 94403-1906, is the fund's investment manager, responsible for making investment decisions for the fund and managing the fund's other affairs and business. Franklin Advisers is a wholly-owned subsidiary of Franklin Resources, Inc. ("Resources"). Together, Franklin Advisers and its affiliates manage, as of May 31, 2025, $1.57 trillion in assets, and have been in the investment management business since 1947.

Under an agreement with the Investment Manager, Putnam Management, 100 Federal Street, Boston, MA 02110, serves as the fund's sub-adviser, responsible for providing certain advisory and related services. Putnam Management is an indirect, wholly-owned subsidiary of Resources. The Investment Manager (and not the fund) will pay a monthly fee to Putnam Management based on the costs of Putnam Management in providing these services to the fund, which may include a mark-up determined and revised from time to time in accordance with Franklin Templeton's transfer pricing policy, in line with applicable tax/transfer pricing regulations, but not to exceed 15% over such costs.

The Investment Manager has retained FTIML, Cannon Place, 78 Cannon Street, London, EC4N 6HL, England, to make investment decisions for such fund assets as may be designated from time to time by the Investment Manager. FTIML is not currently managing any fund assets. If FTIML were to manage any fund assets, the Investment Manager (and not the fund) would pay a monthly sub-management fee to FTIML for its services at the annual rate of 0.20% of the average net asset value of any fund assets managed by FTIML. FTIML is an indirect subsidiary of Resources.

Pursuant to the arrangements described above, 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.

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The fund pays an annual all-inclusive management fee to the Investment Manager based on the fund's average daily net assets at the following rate:

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp; Franklin California Municipal Income ETF | 0.35% |
| &nbsp;&nbsp;&nbsp; Franklin Massachusetts Municipal Income ETF | 0.35% |
| &nbsp;&nbsp;&nbsp; Franklin Minnesota Municipal Income ETF | 0.35% |
| &nbsp;&nbsp;&nbsp; Franklin New Jersey Municipal Income ETF | 0.35% |
| &nbsp;&nbsp;&nbsp; Franklin New York Municipal Income ETF | 0.35% |
| &nbsp;&nbsp;&nbsp; Franklin Ohio Municipal Income ETF | 0.35% |
| &nbsp;&nbsp;&nbsp; Franklin Pennsylvania Municipal Income ETF | 0.35% |
| &nbsp;&nbsp;&nbsp; Franklin Short-Term Municipal Income ETF | 0.20% |
| &nbsp;&nbsp;&nbsp; Franklin Municipal Income ETF | 0.30% |
| &nbsp;&nbsp;&nbsp; Franklin Municipal High Yield ETF | 0.35% |

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The management fee is calculated and accrued daily. The management fee covers all of the other expenses of the fund with limited exceptions.

A discussion regarding the basis for the Trustees' approval of the fund's investment management contract and sub-management contracts will be available in the fund's next report on Form N-CSR.

• **Portfolio managers.** The portfolio managers identified below are jointly and primarily
responsible for the day-to-day management of the fund's portfolio.

*<u>Franklin California Municipal Income ETF, Franklin Massachusetts Municipal Income ETF, Franklin Minnesota Municipal Income ETF, Franklin New Jersey Municipal Income ETF, Franklin New York Municipal Income ETF, Franklin Ohio Municipal Income ETF, and Franklin Pennsylvania Municipal Income ETF:</u>*

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;<u>Portfolio managers</u> | <u>Joined fund</u> | <u>Joined<br>Predecessor Fund</u> | <u>Employer</u> | <u>Positions over past<br>five years</u><br>|
| &nbsp;&nbsp;&nbsp; John Bonelli | Since inception | 2024 | **Franklin Advisers**<br> 2010 – Present | Portfolio Manager |
| &nbsp;&nbsp;&nbsp; Michael Conn | Since inception | 2024 | **Franklin Advisers**<br> 2001 – Present | Portfolio Manager |
| &nbsp;&nbsp;&nbsp; Garrett L. Hamilton | Since inception | 2016 | **Franklin Advisers**<br> July 2024 – Present<br> **Putnam Management**<br> 2016 – July 2024 | Portfolio Manager<br>Portfolio Manager |
| &nbsp;&nbsp;&nbsp; Christopher Sperry | Since inception | 2024 | **Franklin Advisers**<br> 1996 – Present | Portfolio Manager |
| &nbsp;&nbsp;&nbsp; John Wiley | Since inception | 2024 | **Franklin Advisers**<br> 1989 – Present | Portfolio Manager |

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*<u>Franklin Short-Term Municipal Income ETF, Franklin Municipal Income ETF, and Franklin Municipal High Yield ETF:</u>*

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| | | | | |
|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;<u>Portfolio managers</u> | <u>Joined fund</u> | <u>Joined<br>Predecessor Fund</u> | <u>Employer</u> | <u>Positions over past<br>five years</u><br>|
| &nbsp;&nbsp;&nbsp; Benjamin C. Barber | Since inception | 2024 | **Franklin Advisers**<br> 2020 – Present<br> **Goldman Sachs Asset**<br> **Management**<br> 1999 – 2020 | Portfolio Manager |
| &nbsp;&nbsp;&nbsp; James Conn | Since inception | 2024 | **Franklin Advisers**<br> 1996 – Present | Portfolio Manager |
| &nbsp;&nbsp;&nbsp; Garrett L. Hamilton | Since inception | 2016 | **Franklin Advisers**<br> July 2024 – Present<br> **Putnam Management**<br> 2016 – July 2024 | Portfolio Manager<br>Portfolio Manager |
| &nbsp;&nbsp;&nbsp; Francisco Rivera | Since inception | 2024 | **Franklin Advisers**<br> 1994 – Present | Portfolio Manager |
| &nbsp;&nbsp;&nbsp; Daniel Workman | Since inception | 2024 | **Franklin Advisers**<br> 2003 – Present | Portfolio Manager |

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The fund's SAI provides additional information about portfolio manager compensation, other accounts that they manage and their ownership of fund shares.

**<u>Shareholder information</u>**

**Valuation of fund shares** 

The fund issues and redeems shares at its net asset value per share only in aggregations of a specified number of shares called "Creation Units," which are generally issued in exchange for portfolio securities and/or cash. The net asset value per share 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.

The fund's tax-exempt investments are generally valued at fair value on the basis of valuations provided by an independent pricing service approved by the fund's Trustees. Such services determine valuations for normal institutional-size trading units of such securities using information with respect to transactions in the bond being valued, quotations from bond dealers, market transactions in comparable securities, and various relationships, generally recognized by institutional traders, between securities. To the extent a pricing service is unable to value a security or provides a valuation that the Investment Manager does not believe accurately reflects the security's fair value, the security will be valued at fair value by the Investment Manager.

The fund's most recent net asset value is available at www.franklintempleton.com or by calling 1-800-225-1581.

**Additional information about the fund** 

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The fund is an actively managed ETF. Like other ETFs, shares of the fund are generally purchased and redeemed in creation unit aggregations through authorized participants, shares of the fund are listed and traded on a stock exchange, and individual investors can purchase or sell shares in less than creation unit sizes and for cash in the secondary market through a broker.

<u>Derivative actions</u> 

The fund is a series of Putnam ETF Trust (the "Trust"). The Trust's Amended and Restated Agreement and Declaration of Trust imposes certain conditions on derivative actions that are not otherwise required by law, including, in the case of any claim not arising under the federal securities laws, a requirement that the holders of 10% or more of the total outstanding shares of the applicable fund join the request to commence the action. Although these conditions are intended to permit legitimate inquiries and claims while avoiding the time, expense, distraction, and other harm that can be caused to a fund or its shareholders as a result of spurious shareholder demands and derivative actions, they may make it more difficult or costly for fund shareholders to bring derivative actions on behalf of the Trust.

<u>Information on the fund's website</u> 

The fund will disclose its top 10 holdings and related portfolio information monthly beginning on or after 5 business days after the end of each month at www.franklintempleton.com. The fund discloses its complete portfolio holdings, including the name, identifier, market value and weight of each security and instrument in the portfolio, at www.franklintempleton.com on each business day, before commencement of trading in shares on the listing exchange. The fund will also disclose its complete portfolio holdings as of the end of the prior month on a monthly basis beginning on or before the 15th calendar day after the end of each month. Recent information, including information regarding the fund's net asset value, market price, premiums and discounts, and bid/ask spread, is also available at www.franklintempleton.com.

**Buying and selling shares in the secondary market** 

Shares of the fund are listed and traded on an exchange, and individual fund shares may only be bought and sold in the secondary market through a broker. The fund does not impose any minimum investment for shares of the fund purchased on an exchange. These transactions are made at market prices that may vary throughout the day and may be greater than the fund's net asset value (premium) or less than the fund's net asset value (discount). As a result, you may pay more than net asset value when you purchase shares, and receive less than net asset value when you sell shares, in the secondary market. If you buy or sell shares in the secondary market, you will generally incur customary brokerage commissions and charges and you may also incur the cost of the spread between the price at which a dealer will buy fund shares and the somewhat higher price at which a dealer will sell shares. Due to such commissions and charges and spread costs, frequent trading may detract significantly from investment returns.

The fund is designed to offer investors an investment that can be bought and sold frequently in the secondary market without impact on the fund, and such trading activity is designed to enable the market price of fund shares to remain at or close to net asset value. Accordingly, the Board of Trustees has not adopted policies and procedures designed to discourage excessive or short-term trading by these investors.

The fund accommodates frequent purchases and redemptions of creation units by authorized participants and does not place a limit on purchases or redemptions of creation units by these investors. The fund reserves the right, but does not have the obligation, to reject any purchase or redemption transaction

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(subject to legal and regulatory limits regarding redemption transactions) at any time. In addition, the fund reserves the right to impose restrictions on disruptive, excessive, or short-term trading.

**Precautionary notes** 

<u>Note to registered investment companies</u> 

Section 12(d)(1) of the Investment Company Act of 1940, as amended (the "1940 Act"), restricts investments by registered investment companies in the securities of other investment companies, including shares of the fund. Registered investment companies are permitted to invest in the fund beyond the limits set forth in Section 12(d)(1), subject to certain terms and conditions, including that such investment companies enter into an agreement with the fund.

<u>Note to authorized participants regarding continuous offering</u> 

Certain legal risks may exist that are unique to authorized participants purchasing creation units directly from the fund. Because new creation units may be issued on an ongoing basis, at any point a "distribution," as such term is used in the Securities Act of 1933 (the "Securities Act"), could be occurring. As a broker-dealer, certain activities that you perform may, depending on the circumstances, result in your being deemed a participant in a distribution, in a manner which could render you a statutory underwriter and subject you to the prospectus delivery and liability provisions of the Securities Act.

For example, you may be deemed a statutory underwriter if you purchase creation units from the fund, break them down into individual fund shares, and sell such shares directly to customers, or if you choose to couple the creation of a supply of new fund shares with an active selling effort involving solicitation of secondary market demand for fund shares. A determination of whether a person is an underwriter for purposes of the Securities Act depends upon all of the facts and circumstances pertaining to that person's activities, and the examples mentioned here should not be considered a complete description of all the activities that could lead to a categorization as an underwriter.

Dealers who are not "underwriters" but are participating in a distribution (as opposed to engaging in ordinary secondary market transactions), and thus dealing with shares as part of an "unsold allotment" within the meaning of Section 4(a)(3)(C) of the Securities Act, will be unable to take advantage of the prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act. This is because the prospectus delivery exemption in Section 4(a)(3) of the Securities Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. As a result, you should note that dealers who are not underwriters but are participating in a distribution (as opposed to engaging in ordinary secondary market transactions) and thus dealing with the shares that are part of an overallotment within the meaning of Section 4(a)(3)(A) of the Securities Act would be unable to take advantage of the prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act. Firms that incur a prospectus-delivery obligation with respect to shares of the fund are reminded that, under Rule 153 under the Securities Act, a prospectus delivery obligation under Section 5(b)(2) of the Securities Act owed to an exchange member in connection with a sale on an exchange is satisfied by the fact that the prospectus is available at the exchange upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to transactions on an exchange.

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Certain affiliates of the fund may purchase and resell fund shares pursuant to this prospectus.

<u>Note to secondary market investors</u> 

The Depository Trust Company ("DTC"), a limited trust company and securities depository that facilitates the clearance and settlement of trades for its participating banks and broker-dealers, has executed an agreement with the fund's distributor, Franklin Distributors, LLC (the "Distributor"). DTC, or its nominee, is the registered owner of all outstanding shares of the fund. The Investment Manager will not have any record of your ownership. Your ownership of shares will be shown on the records of DTC and the DTC participant broker through which you hold the shares. Your broker will provide you with account statements, confirmations of your purchases and sales, and tax information. Your broker will also be responsible for distributing income and capital gain distributions and for sending you shareholder reports and other information as may be required.

**Costs associated with creations and redemptions** 

The fund generally imposes a creation transaction fee and a redemption transaction fee to offset transfer and other transaction costs associated with the issuance and redemption of creation units of shares. Information about the procedures regarding creation and redemption of creation units and the applicable transaction fees is included in the SAI.

**<u>Distribution plans and payments to intermediaries</u>**

**Principal distributor** 

The Distributor distributes creation units for the fund on an agency basis, does not maintain a secondary market in shares of the fund, and has no role in determining the investment policies of the fund or the securities that are purchased or sold by the fund. The Distributor is an indirect, wholly-owned broker/dealer subsidiary of Resources.

The Distributor's address is One Franklin Parkway, San Mateo, CA 94403-1906.

Intermediaries may receive compensation from the Investment Manager, the Distributor, and/or their respective affiliates, for providing recordkeeping and administrative services, as well as other retirement plan expenses, and compensation for services intended to result in the sale of fund shares. These payments are described in more detail in this section and in the SAI.

**Distribution and service plan** 

The fund has adopted a distribution and service plan pursuant to Rule 12b-1 under the 1940 Act that authorizes the fund to pay distribution fees in connection with the sale and distribution of its shares and service fees in connection with the provision of ongoing shareholder support services. No Rule 12b-1 fees are currently paid by the fund, and there are no current plans to impose these fees. However, in the event Rule 12b-1 fees are charged in the future, because these fees are paid out of the fund's assets on an ongoing basis, these fees will increase the cost of your investment in the fund.

No dealer, sales representative, or any other person has been authorized to give any information or to make any representations, other than those contained in this prospectus and in the related SAI, in connection with the offer contained in this prospectus. If given or made, such other information or representations must not be relied upon as having been authorized by the fund or the Distributor. This

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prospectus and the related SAI do not constitute an offer by the fund or by the Distributor to sell shares of the fund to or to buy shares of the fund from any person to whom it is unlawful to make such offer.

**Payments to intermediaries** 

Investors may purchase shares of the fund on an exchange through intermediaries (including any broker, intermediary, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator and any other institution that offers shares of the fund to its customers). In addition to distribution and service plans, the Investment Manager and its affiliates may make payments to intermediaries that do not increase your fund expenses, as described below.

The Investment Manager and its affiliates also pay additional compensation to selected intermediaries 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 an intermediary 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 the Investment Manager 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 intermediaries by the Investment Manager and its affiliates are generally based on one or more of the following factors: average net assets of a fund attributable to that intermediary, sales or net sales of a fund attributable to that intermediary, or reimbursement of ticket charges (fees that an intermediary 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 intermediaries engaging in significant sales of Putnam fund shares. These payments are individually negotiated with each intermediary firm, taking into account the marketing support services provided by the intermediary, including business planning assistance, educating intermediary personnel about the Putnam funds and shareholder financial planning needs, placement on the intermediary's preferred or recommended fund company list, access to sales meetings, sales representatives and management representatives of the intermediary, market data, as well as the size of the intermediary's relationship with the Investment Manager.

Program servicing payments, are paid in some instances to intermediaries in connection with investments in the fund through intermediary platforms and other investment programs. These payments are made for program or platform services provided by the intermediary, including shareholder recordkeeping, reporting, or transaction processing, as well as services rendered in connection with intermediary platform development and maintenance, fund/investment selection and monitoring, or other similar services.

You can find a list of all intermediaries to which the Investment Manager and its affiliates made marketing support and/ or program servicing payments in the SAI, which is on file with the SEC and is also available at franklintempleton.com. You can also find other details in the SAI about the payments made by the Investment Manager and its affiliates and the services provided by your intermediary. Your intermediary may charge you fees or commissions in addition to those disclosed in this prospectus. You can also ask your intermediary about any payments it receives from the Investment Manager and its affiliates and any services your intermediary provides, as well as about fees and/or commissions it charges.

**Other payments** 

The Investment Manager and its affiliates may make other payments (including payments in connection with educational seminars or conferences) or allow other promotional incentives to intermediaries to the

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extent permitted by SEC and NASD (as adopted by FINRA) rules and by other applicable laws and regulations.

**<u>Fund distributions and taxes</u>**

*All funds*: The fund has elected and intends to qualify and be eligible to be treated each taxable year as a regulated investment company as described in Subchapter M of the Internal Revenue Code of 1986, as amended. A regulated investment company generally is not subject to tax at the corporate level on income and gains from investments that are distributed to shareholders. However, the fund's failure to qualify and be eligible for treatment as a regulated investment company in any taxable year would result in corporate-level taxation, and consequently a reduction in income available for distribution to shareholders.

The fund earns dividends, interest, and other income from its investments, and distributes this income (less expenses) to shareholders as dividends. The fund also realizes capital gains from its investments and distributes these gains (less any losses) as capital gain distributions. If you purchased your shares in the secondary market, your broker is responsible for distributing the income and capital gain distributions to you. The fund normally declares and distributes any net investment income monthly and any net realized capital gains annually.

*Franklin California Municipal Income ETF only:* 

Fund distributions that the fund properly reports to you as "exempt-interest dividends" are generally not subject to federal income taxation. Other fund distributions will generally be taxable to you as ordinary income or treated as long-term capital gain included in your net capital gain and taxable to individuals at reduced rates. In addition, distributions that the fund properly reports to you as (i) "exempt-interest dividends" for federal income tax purposes derived from interest on California qualifying state and local obligations that are tax-exempt pursuant to California state law or (ii) dividends derived from interest on qualifying obligations of the United States, the District of Columbia and certain United States possessions will generally be exempt from the California personal income tax (but not California franchise and corporate income tax). Distributions are so treated whether paid in cash or reinvested in additional shares.

If you receive social security or railroad retirement benefits, you should consult your tax advisor to determine what effect, if any, an investment in the fund may have on the federal taxation of your benefits. California does not tax any portion of social security or railroad retirement benefits. In addition, an investment in the fund may result in liability for federal or California AMT for individual shareholders.

In order for any portion of the fund's distributions to be exempt from California state personal income tax, the fund and its investments must meet certain requirements. The fund or its investments may fail to meet the state's requirements for a variety of reasons, which may increase the amount of taxes payable by shareholders. In addition, the fund's distributions may be subject to other state or local taxes. Please refer to the SAI for further information concerning the taxation of fund distributions by California.

The fund may at times buy tax-exempt investments at a discount from the price at which they were originally issued, especially during periods of rising interest rates. For federal income tax and California personal income tax purposes, some or all of this market discount will be included in the fund's ordinary income and will be taxable to you as such when it is distributed.

*Franklin Massachusetts Municipal Income ETF, Franklin Minnesota Municipal Income ETF, Franklin New Jersey Municipal Income ETF, Franklin Ohio Municipal Income ETF, and Franklin Pennsylvania Municipal Income ETF only:* 

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Fund distributions that the fund properly reports to you as "exempt-interest dividends" are generally not subject to federal income taxation. Other fund distributions will generally be taxable to you as ordinary income or treated as long-term capital gain included in your net capital gain and taxable to individuals at reduced rates. In addition, distributions that the fund properly reports to you as (i) "exempt-interest dividends" for federal income tax purposes derived from interest on qualifying state and local obligations that are tax-exempt pursuant to the relevant state's law or (ii) dividends derived from interest on qualifying obligations of the United States and certain of its possessions will generally be exempt from the personal income tax (if any) of that state, provided that, in the case of "exempt-interest dividends," the relevant state permits such pass through treatment. Distributions are so treated whether paid in cash or reinvested in additional shares.

If you receive social security or railroad retirement benefits, you should consult your tax advisor to determine what effect, if any, an investment in the fund may have on the federal taxation of your benefits. In addition, an investment in the fund may result in liability for federal AMT for individual shareholders.

In order for any portion of the fund's distributions to be exempt from the relevant state's personal income tax, the fund and its investments must meet certain requirements that vary according to the relevant state. The fund or its investments may fail to meet the relevant state's requirements for a variety of reasons, which may increase the amount of taxes payable by shareholders. In addition, the fund's distributions may be subject to other state or local taxes, such as a state's AMT. Please refer to the SAI for further information concerning the taxation of fund distributions by the relevant state.

The fund may at times buy tax-exempt investments at a discount from the price at which they were originally issued, especially during periods of rising interest rates. For federal income tax, state and local, and personal income tax purposes, some or all of this market discount will be included in the fund's ordinary income and will be taxable to you as such when it is distributed.

*Franklin Municipal High Yield ETF, Franklin Municipal Income ETF and Franklin Short-Term Municipal Income ETF only:* 

Fund distributions that the fund properly reports to you as "exempt-interest dividends" are generally not subject to federal income taxation. Other fund distributions will generally be taxable to you as ordinary income or treated as long-term capital gain included in your net capital gain and taxable to individuals at reduced rates. Distributions are so treated whether paid in cash or reinvested in additional shares.

If you receive social security or railroad retirement benefits, you should consult your tax advisor to determine what effect, if any, an investment in the fund may have on the federal taxation of your benefits. In addition, an investment in the fund may result in liability for federal AMT for individual shareholders.

The fund may at times buy tax-exempt investments at a discount from the price at which they were originally issued, especially during periods of rising interest rates. For federal income tax purposes, some or all of this market discount will be included in the fund's ordinary income and will be taxable to you as such when it is distributed.

*Franklin New York Municipal Income ETF only:* 

Fund distributions that the fund properly reports to you as "exempt-interest dividends" are generally not subject to federal income taxation. Other fund distributions will generally be taxable to you as ordinary income or treated as long-term capital gain included in your net capital gain and taxable to individuals at reduced rates. In addition, distributions that the fund properly reports to you as (i) "exempt-interest dividends" for federal income tax purposes derived from interest on New York qualifying state and local

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obligations that are tax-exempt pursuant to New York State law or (ii) dividends derived from interest on qualifying obligations of the United States and its possessions will generally be exempt from the New York State personal income tax and the New York City personal income and unincorporated business taxes (but not from New York State corporate franchise and New York City general corporation taxes). Distributions are so treated whether paid in cash or reinvested in additional shares. Interest on indebtedness incurred or continued to purchase or carry shares of the fund generally will not be deductible for New York State personal income tax or for New York City personal income and unincorporated business tax purposes.

If you receive social security or railroad retirement benefits, you should consult your tax advisor to determine what effect, if any, an investment in the fund may have on the federal taxation of your benefits. New York does not tax any portion of social security or railroad retirement benefits. In addition, an investment in the fund may result in liability for federal AMT for individual shareholders.

In order for any portion of the fund's distributions to be exempt from New York State personal income tax and New York City personal income tax, the fund and its investments must meet certain requirements. The fund or its investments may fail to meet the state's or city's requirements for a variety of reasons, which may increase the amount of taxes payable by shareholders. In addition, the fund's distributions may be subject to other state or local taxes. Please refer to the SAI for further information concerning the taxation of fund distributions by New York State and City.

The fund may at times buy tax-exempt investments at a discount from the price at which they were originally issued, especially during periods of rising interest rates. For federal income tax and New York State and City personal income tax purposes, some or all of this market discount will be included in the fund's ordinary income and will be taxable to you as such when it is distributed.

*All funds:* 

For federal income tax purposes, distributions of net investment income other than "exempt-interest dividends" are generally taxable to you as ordinary income. Generally, gains realized by the fund on the sale or exchange of investments are taxable to you, even though the income from such investments generally is tax-exempt. 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 and gains on the sale of or prepayment on bonds characterized as market discount are generally taxable to you as ordinary income. Distributions are taxable in the manner described in this paragraph whether you receive them in cash or reinvest them in additional shares of the fund or other Putnam funds.

Distributions other than "exempt-interest dividends" 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 to find out the distribution schedule for your fund.

The fund's investments in discount and certain other debt obligations may cause the fund to recognize taxable income in excess of the cash generated by such obligations. Thus, the fund 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.

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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 of your shares generally also will be subject to tax. Any such gain or loss will be long-term or short-term depending on how long you have held your shares.

The above is a general summary of the tax implications of investing in the fund. Please refer to the 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.

**Other tax considerations** 

Unlike other ETFs, the securities exchanged for a creation unit will not correspond pro rata to the positions in the fund's portfolio, and the fund will effect its creations and redemptions partially or wholly for cash rather than on an in-kind basis. Because of this, the fund may be unable to realize certain tax benefits associated with in-kind transfers of portfolio securities that may be realized by other ETFs. Shareholders may be subject to tax on gains they would not otherwise have been subject to and/or at an earlier date than if the fund had effected redemptions wholly on an in-kind basis.

Authorized participants should consult their tax advisors about the U.S. federal, state, local and non-U.S. tax consequences of purchasing and redeeming creation units in the fund.

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**VII.** **Other Information** 

**Share ownership.** As of June 30, 2025, the Acquiring ETFs were not operational and, therefore, had no shareholders.

As of June 30, 2025, the officers and Trustees of each Target Fund as a group owned less than 1% of the outstanding shares of each class of the fund. As of June 30, 2025, to the knowledge of each Target Fund, the following shareholders owned of record or beneficially 5% or more of the outstanding shares of the classes of the Fund as set forth below:

*<u>Putnam California Tax Exempt Income Fund</u>*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share**<br> **class owned** |
| &nbsp;&nbsp;&nbsp; A | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 12.62% |
| &nbsp;&nbsp;&nbsp; A | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 11.62% |
| &nbsp;&nbsp;&nbsp; A | MLPF&S FOR THE SOLE BENEFIT OF<br> IT'S CUSTOMERS<br> ATTN FUND ADMINISTRATION<br> 4800 DEER LAKE DR E FL 3<br> JACKSONVILLE FL 32246-6484 | 9.91% |
| &nbsp;&nbsp;&nbsp; A | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 5.19% |
| &nbsp;&nbsp;&nbsp; A | J.P. MORGAN SECURITIES LLC.<br> FOR THE EXCLUSIVE BENEFIT OF<br> CUSTOMERS<br> 4 CHASE METROTECH CENTER<br> 3RD FL MUTUAL FUND DEPT<br> BROOKLYN NY 11245-0003 | 5.01% |
| &nbsp;&nbsp;&nbsp; C | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 25.80% |
| &nbsp;&nbsp;&nbsp; C | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 20.10% |
| &nbsp;&nbsp;&nbsp; C | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 11.81% |
| &nbsp;&nbsp;&nbsp; C | J.P. MORGAN SECURITIES LLC.<br> FOR THE EXCLUSIVE BENEFIT OF<br> CUSTOMERS<br> 4 CHASE METROTECH CENTER<br> 3RD FL MUTUAL FUND DEPT<br> BROOKLYN NY 11245-0003 | 7.16% |
| &nbsp;&nbsp;&nbsp; C | MLPF&S FOR THE SOLE BENEFIT OF<br> IT'S CUSTOMERS<br> ATTN FUND ADMINISTRATION<br> 4800 DEER LAKE DR E FL 3<br> JACKSONVILLE FL 32246-6484 | 6.64% |
| &nbsp;&nbsp;&nbsp;R6 | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD | 98.35% |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share<br>class owned** |
|  | SAINT LOUIS MO 63131-3710 |  |
| &nbsp;&nbsp;&nbsp;Y | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 25.29% |
| &nbsp;&nbsp;&nbsp;Y | MERRILL LYNCH FOR THE SOLE BENEFIT<br> OF IT'S CUSTOMERS<br> ATTN FUND ADMINISTRATION<br> 4800 DEERLAKE DR E FL3<br> JACKSONVILLE FL 32246-6484 | 15.07% |
| &nbsp;&nbsp;&nbsp;Y | CHARLES SCHWAB & CO INC<br> CLEARING ACCOUNT<br> FOR THE EXCLUSIVE BENEFIT OF<br> THEIR CUSTOMERS<br> 101 MONTGOMERY ST<br> SAN FRANCISCO CA 94104-4141 | 11.30% |
| &nbsp;&nbsp;&nbsp;Y | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 10.31% |
| &nbsp;&nbsp;&nbsp;Y | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 7.26% |
| &nbsp;&nbsp;&nbsp;Y | UBS WM USA<br> 0O0 11011 6100<br> OMNI ACCOUNT M/F<br> SPEC CDY A/C EXCL BEN CUST UBSFSI<br> 1000 HARBOR BLVD<br> WEEHAWKEN NJ 07086-6761 | 7.15% |
| &nbsp;&nbsp;&nbsp;Y | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 6.15% |
| &nbsp;&nbsp;&nbsp;Y | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 5.91% |

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*<u>Putnam Massachusetts Tax Exempt Income Fund</u>*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share<br>class owned** |
| &nbsp;&nbsp;&nbsp;A | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 14.33% |
| &nbsp;&nbsp;&nbsp; A  | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS | 11.41% |

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| | | |
|:---|:---|:---|
|  | CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 |  |
| &nbsp;&nbsp;&nbsp;A | MLPF&S FOR THE SOLE BENEFIT OF<br> IT'S CUSTOMERS<br> ATTN FUND ADMINISTRATION<br> 4800 DEER LAKE DR E FL 3<br> JACKSONVILLE FL 32246-6484 | 7.99% |
| &nbsp;&nbsp;&nbsp;A | CHARLES SCHWAB & CO INC<br> SPECIAL CUSTODY ACCOUNT<br> FBO THEIR CUSTOMERS<br> ATTN MUTUAL FUNDS<br> 211 MAIN ST<br> SAN FRANCISCO CA 94105-1901 | 5.43% |
| &nbsp;&nbsp;&nbsp;A | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 5.17% |
| &nbsp;&nbsp;&nbsp;C | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 25.20% |
| &nbsp;&nbsp;&nbsp;C | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 19.93% |
| &nbsp;&nbsp;&nbsp;C | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 18.99% |
| &nbsp;&nbsp;&nbsp;C | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 12.13% |
| &nbsp;&nbsp;&nbsp;C | CHARLES SCHWAB & CO INC<br> SPECIAL CUSTODY ACCOUNT<br> FBO THEIR CUSTOMERS<br> ATTN MUTUAL FUNDS<br> 211 MAIN ST<br> SAN FRANCISCO CA 94105-1901 | 7.03% |
| &nbsp;&nbsp;&nbsp;C | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 6.01% |
| &nbsp;&nbsp;&nbsp; R6 | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 88.40% |
| &nbsp;&nbsp;&nbsp;R6 | PERSHING LLC<br> PO BOX 2052<br> JERSEY CITY NJ 07303-2052 | 11.00% |
| &nbsp;&nbsp;&nbsp;Y | AMERICAN ENTERPRISE INVESTMENT SVC  | 33.58% |

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| | | |
|:---|:---|:---|
|  | FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 33.58% |
| &nbsp;&nbsp;&nbsp;Y | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 22.75% |
| &nbsp;&nbsp;&nbsp;Y | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 14.65% |
| &nbsp;&nbsp;&nbsp;Y | MLPF&S FOR THE SOLE BENEFIT OF<br> IT'S CUSTOMERS<br> ATTN FUND ADMINISTRATION<br> 4800 DEERLAKE DR E FL3<br> JACKSONVILLE FL 32246-6484 | 8.04% |
| &nbsp;&nbsp;&nbsp;Y | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 6.76% |

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*<u>Putnam Minnesota Tax Exempt Income Fund</u>*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share<br>class owned** |
| &nbsp;&nbsp;&nbsp;A | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 16.54% |
| &nbsp;&nbsp;&nbsp;A | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 13.68% |
| &nbsp;&nbsp;&nbsp;A | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 12.63% |
| &nbsp;&nbsp;&nbsp;A | CHARLES SCHWAB & CO INC<br> SPECIAL CUSTODY ACCOUNT<br> FBO THEIR CUSTOMERS<br> ATTN MUTUAL FUNDS<br> 211 MAIN ST<br> SAN FRANCISCO CA 94105-1901 | 7.55% |
| &nbsp;&nbsp;&nbsp;C | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 19.58% |
| &nbsp;&nbsp;&nbsp;C | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE | 15.64% |

---

------

---

| | | |
|:---|:---|:---|
|  | SAN DIEGO CA 92121-3091 |  |
| &nbsp;&nbsp;&nbsp;C | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 9.10% |
| &nbsp;&nbsp;&nbsp;C | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 8.60% |
| &nbsp;&nbsp;&nbsp;C | CATHERINE A SMITH &<br> WILLIAM V SMITH TTEES<br> CATHERINE A SMITH REVOCABLE TRUST<br> U/A DTD 03/30/2010<br> 55780 120TH AVE<br> WEST CONCORD MN 55985-4006 | 5.71% |
| &nbsp;&nbsp;&nbsp;C | PHILLIP S & ELIZABETH A DANIELSON<br> JTWROS TOD PHILLIP S & ELIZABETH A<br> DANIELSON REV TR DTD 09/09/2024<br> SUBJECT TO STA TOD RULES<br> 1993 STILLWATER ST<br> WHITE BEAR LK MN 55110-6511 | 5.55% |
| &nbsp;&nbsp;&nbsp;R6 | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 76.72% |
| &nbsp;&nbsp;&nbsp;R6 | WELLS FARGO CLEARING SERVICES<br> A/C 1319-4122<br> 1 N JEFFERSON AVE<br> SAINT LOUIS MO 63103-2287 | 7.74% |
| &nbsp;&nbsp;&nbsp;Y | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 28.48% |
| &nbsp;&nbsp;&nbsp;Y | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 25.36% |
| &nbsp;&nbsp;&nbsp;Y | CHARLES SCHWAB & CO INC<br> SPECIAL CUSTODY A/C FBO CUSTOMERS<br> ATTN MUTUAL FUNDS<br> 101 MONTGOMERY ST<br> SAN FRANCISCO CA 94104-4141 | 17.82% |
| &nbsp;&nbsp;&nbsp;Y | UBS WM USA<br> 0O0 11011 6100<br> OMNI ACCOUNT M/F<br> SPEC CDY A/C EXCL BEN CUST UBSFSI<br> 1000 HARBOR BLVD<br> WEEHAWKEN NJ 07086-6761 | 11.10% |
| &nbsp;&nbsp;&nbsp;Y | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 9.45% |

---

------

*<u>Putnam New Jersey Tax Exempt Income Fund</u>*

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share<br>class owned** |
| &nbsp;&nbsp;&nbsp;A | J.P. MORGAN SECURITIES LLC.<br> FOR THE EXCLUSIVE BENEFIT OF<br> CUSTOMERS<br> 4 CHASE METROTECH CENTER<br> 3RD FL MUTUAL FUND DEPT<br> BROOKLYN NY 11245-0003 | 22.41% |
| &nbsp;&nbsp;&nbsp;A | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 10.34% |
| &nbsp;&nbsp;&nbsp;A | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 9.13% |
| &nbsp;&nbsp;&nbsp;A | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 8.19% |
| &nbsp;&nbsp;&nbsp;A | MLPF&S FOR THE SOLE BENEFIT OF<br> IT'S CUSTOMERS<br> ATTN FUND ADMINISTRATION<br> 4800 DEER LAKE DR E FL 3<br> JACKSONVILLE FL 32246-6484 | 7.31% |
| &nbsp;&nbsp;&nbsp;C | J.P. MORGAN SECURITIES LLC.<br> FOR THE EXCLUSIVE BENEFIT OF<br> CUSTOMERS<br> 4 CHASE METROTECH CENTER<br> 3RD FL MUTUAL FUND DEPT<br> BROOKLYN NY 11245-0003 | 66.53% |
| &nbsp;&nbsp;&nbsp;C | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 7.75% |
| &nbsp;&nbsp;&nbsp;C | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 7.58% |
| &nbsp;&nbsp;&nbsp;R6 | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 84.24% |
| &nbsp;&nbsp;&nbsp;R6 | PERSHING LLC<br> PO BOX 2052<br> JERSEY CITY NJ 07303-2052 | 14.92% |
| &nbsp;&nbsp;&nbsp;Y | MLPF&S FOR THE SOLE BENEFIT OF<br> IT'S CUSTOMERS<br> ATTN FUND ADMINISTRATION<br> 4800 DEERLAKE DR E FL3<br> JACKSONVILLE FL 32246-6484 | 34.66% |

---

------

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share**<br> **class owned** |
| &nbsp;&nbsp;&nbsp;Y | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 14.04% |
| &nbsp;&nbsp;&nbsp;Y | RAYMOND JAMES<br> OMNIBUS FOR MUTUAL FUNDS<br> HOUSE ACCT FIRM 92500015<br> ATTN: COURTNEY WALLER<br> 880 CARILLON PKWY<br> ST PETERSBURG FL 33716-1100 | 12.89% |
| &nbsp;&nbsp;&nbsp;Y | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 9.87% |
| &nbsp;&nbsp;&nbsp;Y | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 8.53% |
| &nbsp;&nbsp;&nbsp;Y | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 6.03% |

---

*<u>Putnam New York Tax Exempt Income Fund</u>*

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share**<br> **class owned** |
| &nbsp;&nbsp;&nbsp;A | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 13.50% |
| &nbsp;&nbsp;&nbsp;A | J.P. MORGAN SECURITIES LLC.<br> FOR THE EXCLUSIVE BENEFIT OF<br> CUSTOMERS<br> 4 CHASE METROTECH CENTER<br> 3RD FL MUTUAL FUND DEPT<br> BROOKLYN NY 11245-0003 | 12.60% |
| &nbsp;&nbsp;&nbsp;A | MLPF&S FOR THE SOLE BENEFIT OF<br> IT'S CUSTOMERS<br> ATTN FUND ADMINISTRATION<br> 4800 DEER LAKE DR E FL 3<br> JACKSONVILLE FL 32246-6484 | 8.47% |
| &nbsp;&nbsp;&nbsp;A | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 6.45% |
| &nbsp;&nbsp;&nbsp;A | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT-- | 5.91% |

---

------

---

| | | |
|:---|:---|:---|
|  | ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 |  |
| &nbsp;&nbsp;&nbsp;A | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 5.72% |
| &nbsp;&nbsp;&nbsp;C | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 23.79% |
| &nbsp;&nbsp;&nbsp;C | J.P. MORGAN SECURITIES LLC.<br> FOR THE EXCLUSIVE BENEFIT OF<br> CUSTOMERS<br> 4 CHASE METROTECH CENTER<br> 3RD FL MUTUAL FUND DEPT<br> BROOKLYN NY 11245-0003 | 22.27% |
| &nbsp;&nbsp;&nbsp;C | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 8.07% |
| &nbsp;&nbsp;&nbsp;C | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 5.49% |
| &nbsp;&nbsp;&nbsp; R6 | J.P. MORGAN SECURITIES LLC.<br> FOR THE EXCLUSIVE BENEFIT OF<br> CUSTOMERS<br> 4 CHASE METROTECH CENTER<br> 3RD FL MUTUAL FUND DEPT<br> BROOKLYN NY 11245-0003 | 96.27% |
| &nbsp;&nbsp;&nbsp;Y | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 13.99% |
| &nbsp;&nbsp;&nbsp;Y | MLPF&S FOR THE SOLE BENEFIT OF<br> IT'S CUSTOMERS<br> ATTN FUND ADMINISTRATION<br> 4800 DEERLAKE DR E FL3<br> JACKSONVILLE FL 32246-6484 | 12.83% |
| &nbsp;&nbsp;&nbsp;Y | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 12.05% |
| &nbsp;&nbsp;&nbsp;Y | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 10.65% |
| &nbsp;&nbsp;&nbsp;Y | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE | 10.48% |

---

------

---

| | | |
|:---|:---|:---|
|  | 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 |  |
| &nbsp;&nbsp;&nbsp;Y | RAYMOND JAMES<br> OMNIBUS FOR MUTUAL FUNDS<br> HOUSE ACCT FIRM 92500015<br> ATTN: COURTNEY WALLER<br> 880 CARILLON PKWY<br> ST PETERSBURG FL 33716-1100 | 9.62% |
| &nbsp;&nbsp;&nbsp;Y | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 7.39% |
| &nbsp;&nbsp;&nbsp;Y | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 6.83% |

---

*<u>Putnam Ohio Tax Exempt Income Fund</u>*

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share<br>class owned** |
| &nbsp;&nbsp;&nbsp;A | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 14.10% |
| &nbsp;&nbsp;&nbsp;A | RAYMOND JAMES<br> OMNIBUS FOR MUTUAL FUNDS<br> HOUSE ACCT FIRM 92500015<br> ATTN: COURTNEY WALLER<br> 880 CARILLON PKWY<br> ST PETERSBURG FL 33716-1100 | 10.65% |
| &nbsp;&nbsp;&nbsp;A | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 7.43% |
| &nbsp;&nbsp;&nbsp;A | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 7.09% |
| &nbsp;&nbsp;&nbsp;C | CHARLES SCHWAB & CO INC<br> SPECIAL CUSTODY ACCOUNT<br> FBO THEIR CUSTOMERS<br> ATTN MUTUAL FUNDS<br> 211 MAIN ST<br> SAN FRANCISCO CA 94105-1901 | 24.68% |
| &nbsp;&nbsp;&nbsp;C | JAMES E TURNER TTEE<br> JAMES E TURNER REVOCABLE TRUST<br> U/A DTD 02/27/1998<br> 6401 COUPLES LN<br> LIMA OH 45801-8600 | 21.55% |
| &nbsp;&nbsp;&nbsp;C | RAYMOND JAMES<br> OMNIBUS FOR MUTUAL FUNDS<br> HOUSE ACCT FIRM 92500015<br> ATTN: COURTNEY WALLER<br> 880 CARILLON PKWY | 21.37% |

---

------

---

| | | |
|:---|:---|:---|
|  | ST PETERSBURG FL 33716-1100 |  |
| &nbsp;&nbsp;&nbsp;C | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 14.44% |
| &nbsp;&nbsp;&nbsp;C | J.P. MORGAN SECURITIES LLC.<br> FOR THE EXCLUSIVE BENEFIT OF<br> CUSTOMERS<br> 4 CHASE METROTECH CENTER<br> 3RD FL MUTUAL FUND DEPT<br> BROOKLYN NY 11245-0003 | 5.36% |
| &nbsp;&nbsp;&nbsp;R6 | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 99.65% |
| &nbsp;&nbsp;&nbsp;Y | RAYMOND JAMES<br> OMNIBUS FOR MUTUAL FUNDS<br> HOUSE ACCT FIRM 92500015<br> ATTN: COURTNEY WALLER<br> 880 CARILLON PKWY<br> ST PETERSBURG FL 33716-1100 | 40.48% |
| &nbsp;&nbsp;&nbsp;Y | UBS WM USA<br> 0O0 11011 6100<br> OMNI ACCOUNT M/F<br> SPEC CDY A/C EXCL BEN CUST UBSFSI<br> 1000 HARBOR BLVD<br> WEEHAWKEN NJ 07086-6761 | 15.32% |
| &nbsp;&nbsp;&nbsp;Y | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 14.57% |
| &nbsp;&nbsp;&nbsp;Y | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 6.76% |
| &nbsp;&nbsp;&nbsp;Y | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 6.21% |
| &nbsp;&nbsp;&nbsp;Y | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 5.29% |

---

*<u>Putnam Pennsylvania Tax Exempt Income Fund</u>*

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share<br>class owned** |
| &nbsp;&nbsp;&nbsp;A | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL | 18.15% |

---

------

---

| | | |
|:---|:---|:---|
|  | JERSEY CITY NJ 07310-1995 |  |
| &nbsp;&nbsp;&nbsp; A | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 13.10% |
| &nbsp;&nbsp;&nbsp; A | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 7.07% |
| &nbsp;&nbsp;&nbsp; A | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 6.54% |
| &nbsp;&nbsp;&nbsp; A | CHARLES SCHWAB & CO INC<br> SPECIAL CUSTODY ACCOUNT<br> FBO THEIR CUSTOMERS<br> ATTN MUTUAL FUNDS<br> 211 MAIN ST<br> SAN FRANCISCO CA 94105-1901 | 5.45% |
| &nbsp;&nbsp;&nbsp; C | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 27.41% |
| &nbsp;&nbsp;&nbsp; C | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 14.58% |
| &nbsp;&nbsp;&nbsp; C | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 11.21% |
| &nbsp;&nbsp;&nbsp; C | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 7.24% |
| &nbsp;&nbsp;&nbsp; C | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 7.17% |
| &nbsp;&nbsp;&nbsp; R6 | PERSHING LLC<br> PO BOX 2052<br> JERSEY CITY NJ 07303-2052 | 43.62% |
| &nbsp;&nbsp;&nbsp; R6 | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 36.58% |
| &nbsp;&nbsp;&nbsp; R6 | NATIONAL FINANCIAL SERVICES LLC<br> 499 WASHINGTON BLVD<br> JERSEY CITY NJ 07310-1995 | 13.74% |
| &nbsp;&nbsp;&nbsp; Y | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT-- | 18.64% |

---

------

---

| | | |
|:---|:---|:---|
|  | ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 |  |
| &nbsp;&nbsp;&nbsp; Y | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 15.75% |
| &nbsp;&nbsp;&nbsp; Y | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 14.88% |
| &nbsp;&nbsp;&nbsp; Y | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 9.96% |
| &nbsp;&nbsp;&nbsp; Y | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 9.92% |
| &nbsp;&nbsp;&nbsp; Y | UBS WM USA<br> 0O0 11011 6100<br> OMNI ACCOUNT M/F<br> SPEC CDY A/C EXCL BEN CUST UBSFSI<br> 1000 HARBOR BLVD<br> WEEHAWKEN NJ 07086-6761 | 8.17% |
| &nbsp;&nbsp;&nbsp; Y | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 6.38% |

---

*<u>Putnam Short-Term Municipal Income Fund</u>*

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share**<br> **class owned** |
| &nbsp;&nbsp;&nbsp; A | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 42.05% |
| &nbsp;&nbsp;&nbsp; A | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 7.56% |
| &nbsp;&nbsp;&nbsp; A | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 7.09% |
| &nbsp;&nbsp;&nbsp; A | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 6.77% |
| &nbsp;&nbsp;&nbsp;A | BERTHA GRUENBERG TTEE | 6.32% |

---

------

---

| | | |
|:---|:---|:---|
|  | THE BERTHA GRUENBERG LIVING TRUST<br> U/A DTD 05/20/2020<br> 8429 OAKDALE AVE<br> WINNETKA CA 91306-1439 |  |
| &nbsp;&nbsp;&nbsp; A | CHARLES SCHWAB & CO INC<br> SPECIAL CUSTODY ACCOUNT<br> FBO THEIR CUSTOMERS<br> ATTN MUTUAL FUNDS<br> 211 MAIN ST<br> SAN FRANCISCO CA 94105-1901 | 5.65% |
| &nbsp;&nbsp;&nbsp; C | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 55.86% |
| &nbsp;&nbsp;&nbsp; C | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 37.34% |
| &nbsp;&nbsp;&nbsp; C | THOMAS HAYNES &<br> VICKIE HAYNES JTWROS<br> 120 SUZANNE DR<br> CLINTON TN 37716-2218 | 6.02% |
| &nbsp;&nbsp;&nbsp; R6 | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 97.26% |
| &nbsp;&nbsp;&nbsp; Y | CHARLES SCHWAB & CO INC<br> SPECIAL CUSTODY A/C FBO CUSTOMERS<br> ATTN MUTUAL FUNDS<br> 101 MONTGOMERY ST<br> SAN FRANCISCO CA 94104-4141 | 47.57% |
| &nbsp;&nbsp;&nbsp; Y | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 28.13% |
| &nbsp;&nbsp;&nbsp; Y | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 12.63% |
| &nbsp;&nbsp;&nbsp; Y | RAYMOND JAMES<br> OMNIBUS FOR MUTUAL FUNDS<br> HOUSE ACCT FIRM 92500015<br> ATTN: COURTNEY WALLER<br> 880 CARILLON PKWY<br> ST PETERSBURG FL 33716-1100 | 6.82% |

---

*<u>Putnam Tax Exempt Income Fund</u>*

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share**<br> **class owned** |
| &nbsp;&nbsp;&nbsp; A | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD | 16.56% |

---

------

---

| | | |
|:---|:---|:---|
|  | SAINT LOUIS MO 63131-3710 |  |
| &nbsp;&nbsp;&nbsp; A | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 10.19% |
| &nbsp;&nbsp;&nbsp; A | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 6.41% |
| &nbsp;&nbsp;&nbsp; A | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 6.37% |
| &nbsp;&nbsp;&nbsp; A | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 5.58% |
| &nbsp;&nbsp;&nbsp; C | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 21.34% |
| &nbsp;&nbsp;&nbsp; C | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 14.87% |
| &nbsp;&nbsp;&nbsp; C | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 11.53% |
| &nbsp;&nbsp;&nbsp; C | CHARLES SCHWAB & CO INC<br> SPECIAL CUSTODY ACCOUNT<br> FBO THEIR CUSTOMERS<br> ATTN MUTUAL FUNDS<br> 211 MAIN ST<br> SAN FRANCISCO CA 94105-1901 | 8.08% |
| &nbsp;&nbsp;&nbsp; C | RAYMOND JAMES<br> OMNIBUS FOR MUTUAL FUNDS<br> HOUSE ACCT FIRM 92500015<br> ATTN: COURTNEY WALLER<br> 880 CARILLON PKWY<br> ST PETERSBURG FL 33716-1100 | 7.64% |
| &nbsp;&nbsp;&nbsp; C | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 5.11% |
| &nbsp;&nbsp;&nbsp;R6 | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD | 91.29% |

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| | | |
|:---|:---|:---|
|  | SAINT LOUIS MO 63131-3710 |  |
| &nbsp;&nbsp;&nbsp;R6 | PERSHING LLC<br> PO BOX 2052<br> JERSEY CITY NJ 07303-2052 | 6.43% |
| &nbsp;&nbsp;&nbsp;Y | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 17.67% |
| &nbsp;&nbsp;&nbsp;Y | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 14.45% |
| &nbsp;&nbsp;&nbsp;Y | UBS WM USA<br> 0O0 11011 6100<br> OMNI ACCOUNT M/F<br> SPEC CDY A/C EXCL BEN CUST UBSFSI<br> 1000 HARBOR BLVD<br> WEEHAWKEN NJ 07086-6761 | 11.66% |
| &nbsp;&nbsp;&nbsp;Y | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 8.28% |
| &nbsp;&nbsp;&nbsp;Y | MLPF&S FOR THE SOLE BENEFIT OF<br> IT'S CUSTOMERS<br> ATTN FUND ADMINISTRATION<br> 4800 DEERLAKE DR E FL3<br> JACKSONVILLE FL 32246-6484 | 8.27% |
| &nbsp;&nbsp;&nbsp;Y | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 8.16% |
| &nbsp;&nbsp;&nbsp;Y | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 7.32% |
| &nbsp;&nbsp;&nbsp;Y | RAYMOND JAMES<br> OMNIBUS FOR MUTUAL FUNDS<br> HOUSE ACCT FIRM 92500015<br> ATTN: COURTNEY WALLER<br> 880 CARILLON PKWY<br> ST PETERSBURG FL 33716-1100 | 7.14% |
| &nbsp;&nbsp;&nbsp;Y | CHARLES SCHWAB & CO INC<br> CLEARING ACCOUNT<br> FOR THE EXCLUSIVE BENEFIT OF<br> THEIR CUSTOMERS<br> 101 MONTGOMERY ST<br> SAN FRANCISCO CA 94104-4141 | 6.96% |
| &nbsp;&nbsp;&nbsp;Y | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 5.79% |

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*<u>Putnam Tax-Free High Yield Fund</u>*

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Class** | **Shareholder name and address** | **Percentage of Target Fund share**<br> **class owned** |
| &nbsp;&nbsp;&nbsp;A | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 10.75% |
| &nbsp;&nbsp;&nbsp;A | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 10.28% |
| &nbsp;&nbsp;&nbsp;A | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 8.58% |
| &nbsp;&nbsp;&nbsp;A | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 7.92% |
| &nbsp;&nbsp;&nbsp;A | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 7.02% |
| &nbsp;&nbsp;&nbsp;C | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 28.34% |
| &nbsp;&nbsp;&nbsp;C | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 24.91% |
| &nbsp;&nbsp;&nbsp;C | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 16.08% |
| &nbsp;&nbsp;&nbsp;C | PERSHING, LLC<br> 1 PERSHING PLZ<br> JERSEY CITY NJ 07399-0001 | 8.10% |
| &nbsp;&nbsp;&nbsp;R6 | EDWARD D JONES & CO<br> FOR THE BENEFIT OF CUSTOMERS<br> 12555 MANCHESTER RD<br> SAINT LOUIS MO 63131-3710 | 68.56% |
| &nbsp;&nbsp;&nbsp;R6 | PERSHING LLC<br> PO BOX 2052<br> JERSEY CITY NJ 07303-2052 | 11.78% |
| &nbsp;&nbsp;&nbsp;R6 | OPPENHEIMER & CO INC. FBO<br> LISA A HANSON | 9.64% |

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| | | |
|:---|:---|:---|
|  | OMEGA<br> 233 3RD AVE S APT 102<br> EDMONDS WA 98020-3570 |  |
| &nbsp;&nbsp;&nbsp;R6 | OPPENHEIMER & CO INC. FBO<br> LORI J NOBLES OMEGA<br> 135 2ND AVE N APT 102<br> EDMONDS WA 98020-3177 | 9.63% |
| &nbsp;&nbsp;&nbsp;Y | CHARLES SCHWAB & CO INC<br> CLEARING ACCOUNT<br> FOR THE EXCLUSIVE BENEFIT OF<br> THEIR CUSTOMERS<br> 101 MONTGOMERY ST<br> SAN FRANCISCO CA 94104-4141 | 21.81% |
| &nbsp;&nbsp;&nbsp;Y | UBS WM USA<br> 0O0 11011 6100<br> OMNI ACCOUNT M/F<br> SPEC CDY A/C EXCL BEN CUST UBSFSI<br> 1000 HARBOR BLVD<br> WEEHAWKEN NJ 07086-6761 | 13.20% |
| &nbsp;&nbsp;&nbsp;Y | NATIONAL FINANCIAL SERVICES LLC<br> FOR THE EXCLUSIVE BENEFIT OF OUR<br> CUSTOMERS<br> 499 WASHINGTON BLVD<br> ATTN: MUTUAL FUNDS DEPT 4TH FL<br> JERSEY CITY NJ 07310-1995 | 10.32% |
| &nbsp;&nbsp;&nbsp;Y | J.P. MORGAN SECURITIES LLC.<br> FOR THE EXCLUSIVE BENEFIT OF<br> CUSTOMERS<br> 4 CHASE METROTECH CENTER<br> 3RD FL MUTUAL FUND DEPT<br> BROOKLYN NY 11245-0003 | 9.94% |
| &nbsp;&nbsp;&nbsp;Y | AMERICAN ENTERPRISE INVESTMENT SVC<br> FBO # 41999970<br> 707 2ND AVE S<br> MINNEAPOLIS MN 55402-2405 | 9.68% |
| &nbsp;&nbsp;&nbsp;Y | WELLS FARGO CLEARING SERVICES, LLC<br> SPECIAL CUSTODY ACCT FOR THE<br> EXCLUSIVE BENEFIT OF CUSTOMER<br> 2801 MARKET ST<br> SAINT LOUIS MO 63103-2523 | 7.21% |
| &nbsp;&nbsp;&nbsp;Y | LPL FINANCIAL<br> --OMNIBUS CUSTOMER ACCOUNT--<br> ATTN: LINDSAY O'TOOLE<br> 4707 EXECUTIVE DRIVE<br> SAN DIEGO CA 92121-3091 | 6.77% |
| &nbsp;&nbsp;&nbsp;Y | MORGAN STANLEY SMITH BARNEY LLC<br> FOR THE EXCLUSIVE BENEFIT OF ITS<br> CUSTOMERS<br> 1 NEW YORK PLAZA FL 12<br> NEW YORK NY 10004-1965 | 6.63% |

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**Availability of financial and other information.** Information about each Target Fund and each Acquiring ETF is included in such Target Fund's and Acquiring ETF's Prospectus. The Prospectus of each Target Fund is incorporated by reference into and is considered a part of this Prospectus/Information Statement. Additional information about each Target Fund and each Acquiring ETF is included in its Statement of Additional Information. The SAI relating to this Prospectus/Information Statement is also considered part of this Prospectus/Information Statement and is incorporated by reference into this Prospectus/Information Statement. Information about the Target Funds is also included in the applicable Target Funds' Form N-CSR filing with respect to its fiscal year ended May 31 (Putnam Massachusetts Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam Ohio Tax Exempt Income Fund, and Putnam Pennsylvania Tax Exempt Income Fund), July 31 (Putnam Tax Free High Yield Fund), September 30 (Putnam California Tax Exempt Income Fund and Putnam Tax-Exempt Income Fund) or November 30 (Putnam New York Tax Exempt Income Fund and Putnam Short-Term Municipal Income Fund).

You may request a free copy of each Fund's Prospectus and SAI, and the Target Funds' Form N-CSR filing, the SAI relating to this Prospectus/Information Statement, and other information by contacting Putnam Investor Services at 1-800-225-1581.

The Target Funds, and ETF Trust, on behalf of the Acquiring ETFs, file Information materials, reports and other information with the SEC in accordance with the informational requirements of the Securities Exchange Act of 1934 and the 1940 Act. These materials can be viewed on the EDGAR database on the SEC's Internet site at http://www.sec.gov, and may be obtained, after paying a duplicating fee, by electronic request at the following email address: publicinfo@sec.gov.

**Duplicate mailings.** As permitted by SEC rules, the Investment Manager's policy is to send a single copy of the Prospectus/Information Statement to shareholders who share the same last name and address, unless a shareholder previously has requested otherwise. If you would prefer to receive your own copy of the Prospectus/Information 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.

**WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY** 

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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 [ ], 2025 in Boston, Massachusetts, by and among Putnam Funds Trust, a Massachusetts business trust ("Funds Trust"), on behalf of its Putnam Short-Term Municipal Income Fund ("Short Term Fund") series, Putnam Tax Free Income Trust, a Massachusetts business trust ("Tax Free Trust"), on behalf of its Putnam Tax-Free High Yield Fund ("Tax Free Fund") series, Putnam California Tax Exempt Income Fund ("CA Fund"), a Massachusetts business trust, Putnam Massachusetts Tax Exempt Income Fund ("MA Fund"), a Massachusetts business trust, Putnam Minnesota Tax Exempt Income Fund ("MN Fund"), a Massachusetts business trust, Putnam New Jersey Tax Exempt Income Fund ("NJ Fund"), a Massachusetts business trust, Putnam New York Tax Exempt Income Fund ("NY Fund"), a Massachusetts business trust, Putnam Ohio Tax Exempt Income Fund ("OH Fund"), a Massachusetts business trust, Putnam Pennsylvania Tax Exempt Income Fund ("PA Fund"), a Massachusetts business trust, Putnam Tax Exempt Income Fund ("Tax Exempt Fund"), a Massachusetts business trust (each of Short Term Fund, Tax Free Fund, CA Fund, MA Fund, MN Fund, NJ Fund, NY Fund, OH Fund, PA Fund, and Tax Exempt Fund, an "Acquired Fund," and together, the "Acquired Funds"), and Putnam ETF Trust ("ETF Trust"), a Delaware statutory trust, on behalf of its Franklin Short-Term Municipal Income ETF, Franklin Municipal High Yield ETF, Franklin California Municipal Income ETF, Franklin Massachusetts Municipal Income ETF, Franklin Minnesota Municipal Income ETF, Franklin New Jersey Municipal Income ETF, Franklin New York Municipal Income ETF, Franklin Ohio Municipal Income ETF, Franklin Pennsylvania Municipal Income ETF, and Franklin Municipal Income ETF series (each series of ETF Trust an "Acquiring Fund," and together, the "Acquiring Funds"). Each Acquired Fund is entering into this Agreement with its corresponding Acquiring Fund, as shown on Schedule A hereto, and each Acquiring Fund is entering into this Agreement with its corresponding Acquired Fund, as shown on Schedule A hereto,<sup>\*</sup> solely with respect to its Reorganization (as defined below) with that Acquiring Fund or Acquired Fund, separately and not jointly or jointly and severally with any other Acquired Fund or Acquiring Fund. Franklin Advisers, Inc. ("FAV") joins this Agreement with respect to each Reorganization solely for purposes of Section 5(a).

**PLAN OF REORGANIZATION** 

(a) Each Acquired Fund agrees to sell, assign, convey, transfer and deliver to the corresponding 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)) (following the redemption of any Acquired Fund shares pursuant to Section 8(m)). In
consideration therefor, each Acquiring Fund agrees, on the Exchange Date, to assume all of the liabilities of the corresponding Acquired Fund existing at the Valuation Time (following the redemption of any Acquired Fund shares pursuant to
Section 8(m)) and to deliver to the corresponding Acquired Fund a whole number of shares of beneficial interest of the Acquiring Fund (the "Merger Shares") determined as follows. For each share class of the Acquired Fund, the
Acquiring Fund will deliver that whole number of Merger Shares as has an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to the share class of the Acquired Fund (following the redemption of any Acquired
Fund shares pursuant to Section 8(m)) transferred to the Acquiring Fund on the Exchange Date, less the value of the liabilities of the Acquired Fund attributable to the share class of the Acquired Fund (following the redemption of any Acquired
Fund shares pursuant to Section 8(m)) assumed by the Acquiring Fund on that date (together, such transactions each constitute a "Reorganization" and collectively, the "Reorganizations"). For Acquired Fund shareholders that
hold Acquired Fund shares through accounts that are not permitted to hold a corresponding Acquiring Fund's shares,

<sup>\*</sup> Hereinafter, references to an Acquired Fund and a corresponding Acquiring Fund, or vice versa, shall refer to the pairings of Acquired Funds and Acquiring Funds shown on Schedule A hereto.

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such Acquiring Fund shares may be held by a transfer agent of the applicable Acquiring Fund as agent for, and for the account and benefit of, each Acquired Fund shareholder pending delivery of information with respect to accounts that are permitted to hold such Acquiring Fund shares or, if any Acquired Fund shareholder does not deliver information with respect to an account that is permitted to hold such Acquiring Fund shares within nine months (or such other period agreed upon by the Acquiring Fund and such transfer agent) of the Exchange Date, such Acquiring Fund shares will be liquidated and the cash proceeds will be distributed to such Acquired Fund shareholder. Each Reorganization described in this Agreement is intended to be a reorganization within the meaning of Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").

(b) Upon consummation of the transactions described in paragraph (a) of this Agreement, each Acquired Fund
will distribute in complete liquidation to its shareholders of record as of the Exchange Date all Merger Shares on a pro rata basis, with each shareholder receiving that whole number of Merger Shares as has the same aggregate net asset value as the
Acquiring Fund shares held by the shareholder (following the redemption of any Acquired Fund shares pursuant to Section 8(m)) on the Exchange Date.

(c) Each Acquiring Fund is, and will be immediately prior to the Exchange Date, a shell series, without assets
(other than de minimis seed capital, which shall be paid out in redemption of the Initial Shares (as defined in Section 1(o)) prior to the Reorganization) or liabilities, created for the purpose of acquiring the assets and assuming the
liabilities of the corresponding Acquired Fund.

**AGREEMENT** 

Each Acquiring Fund and each Acquired Fund agree as follows:

**1. Representations and warranties of each Acquiring Fund.** 

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

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

(b) ETF 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 Acquiring Fund has not commenced operations as of the date of this Agreement. The Acquiring Fund is, and
will be at the time of the Exchange Date, a new series of ETF Trust created within the last twelve (12) months, without assets (other than de minimis seed capital, which shall be paid out in redemption of the Initial Shares (as defined in
Section 1(o)) prior to the Reorganization) or liabilities, formed for the purpose of acquiring the assets and assuming the liabilities of the corresponding Acquired Fund in connection with the Reorganization and, accordingly, the Acquiring Fund
has not prepared books of account and related records or financial statements or issued any shares except those issued in a private placement to FAV or its affiliate to secure any required initial shareholder approvals.

(d) The Acquiring Fund's prospectus and statement of additional information to be used in connection with the
Reorganization, previously furnished to the corresponding Acquired Fund, and the prospectus and statement of additional information of the Acquiring Fund that will be in effect on

------

the Exchange Date, which will be furnished to the corresponding 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. <br>

(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 corresponding Acquired Fund.

(f) The Acquiring Fund was established in order to effect the Reorganization described in this Agreement and, prior
to the Exchange Date, (i) will have carried on no business activity, (ii) will have had no tax attributes (including those specified in Section 381(c) of the Code), (iii) will not have held any property (other than a de minimis amount
of assets to facilitate its organization) and immediately following the Reorganization, the Acquiring Fund will possess solely assets and liabilities that were possessed by the Acquired Fund immediately prior to the Reorganization.

(g) No consent, approval, authorization or order of any court or governmental authority is required for the
consummation by ETF 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").

(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, 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 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
or the Prospectus made in reliance upon and in conformity with information furnished by the corresponding Acquired Fund for use in the Registration Statement or the Prospectus.

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

(j) The Initial Shares (as defined in Section 1(o)) of the Acquiring Fund have been offered for sale and sold
in conformity with all applicable U.S. federal securities laws.

(k) The Acquiring Fund has not yet filed its first U.S. federal income tax return and thus has not yet elected to
be treated as a "regulated investment company" for U.S. federal income tax purposes; upon filing its first U.S. federal income tax return following the completion of its first taxable year, the Acquiring Fund will elect to be a
"regulated investment company" and, from the beginning of its

------

first taxable year, the Acquiring Fund will take all steps necessary to ensure that it qualifies and will be treated as a "regulated investment company" under Sections 851 and 852 of the Code.

(l) As of the Exchange Date, no U.S. federal, state or other tax returns of the Acquiring Fund will have been
required by law to be filed and no U.S. federal, state or other taxes will be due by the Acquiring Fund; the Acquiring Fund will not have been required to pay any assessments; and the Acquiring Fund will not have any tax liabilities. Consequently,
as of the Exchange Date, the Acquiring Fund will not have any tax deficiency or liability asserted against it or question with respect thereto raised, and the Acquiring Fund will not be under audit by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already paid.

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

(o) There shall be no issued and outstanding shares of the Acquiring Fund prior to the Exchange Date other than a
nominal number of shares (the "Initial Shares") issued to an initial shareholder (which shall be FAV or an affiliate thereof) to vote on the investment advisory contract and other agreements and plans as may be required by the 1940 Act and
to take whatever action it may be required to take as the Acquiring Fund's sole shareholder in connection with the Acquiring Fund's organization. The Initial Shares will be redeemed by the Acquiring Fund prior to the Reorganization for the
price for which they were issued, and any price paid for the Initial Shares shall at all times have been held by the Acquiring Fund in a non-interest-bearing account.

**2. Representations and warranties of each Acquired Fund.** 

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

(a) Each Acquired Fund except Short Term Fund and Tax Free Fund (each, a "Single Series Trust") is, and
Short Term Fund and Tax Free Fund are series of Funds Trust and Tax Free Trust (each, a "Series Trust"), respectively, each of 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. Each Single Series Trust and each Series Trust is not required to qualify as a foreign association in
any jurisdiction. Each Single Series Trust and each Series Trust has all necessary U.S. federal, state and local authorizations to carry on its business as now being conducted and to carry out this Agreement.

(b) Each Single Series Trust and each Series 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) A 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 its most recently completed fiscal year (collectively, the "fiscal year financial statements"), audited by PricewaterhouseCoopers LLP, the Acquired Fund's
independent registered public accounting firm, as well as the unaudited, semi-annual 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 semi-annual period next succeeding the Acquired Fund's most recently completed fiscal year, if any (collectively, the "semi-annual financial statements"), have been furnished to the corresponding Acquiring Fund.
The statements of assets and liabilities and

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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. <br>

(d) The Acquired Fund's current prospectus and statement of additional information, previously furnished to
the corresponding 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
corresponding Acquiring Fund (collectively 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 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 corresponding 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 statement of assets and liabilities as of the end of its most recently completed fiscal year or on its statement of assets and liabilities as of the end of its semi-annual period next succeeding the Acquired
Fund's most recently completed fiscal year, if any, 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
corresponding Acquiring Fund of all material liabilities, contingent or otherwise, incurred by it subsequent to the applicable period referenced above, 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 each Acquired Fund except Short Term Fund and Tax Free Fund, and by Funds Trust and Tax Free Trust, on behalf of Short Term Fund and Tax Free Fund, respectively, 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 and the Prospectus on the effective date of the Registration Statement and insofar
as they do not relate to the corresponding Acquiring 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 Exchange Date, the Prospectus, as amended or supplemented by any amendments or
supplements filed or requested to be filed by the corresponding 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 or the Prospectus, or
omissions to state in any thereof a material fact relating to the Acquired Fund, as such Registration Statement and Prospectus 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.

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(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 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 U.S. 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. The Acquired Fund does not have any earnings or profits accumulated with
respect to any taxable year in which the provisions of Subchapter M of the Code (or the corresponding provisions of prior law) did not apply to Acquired Fund. Acquired Fund does not own any "converted property" (as that term is defined in
Treasury regulation Section 1.337(d)-7(a)(2)) that is subject to the rules of Section 1374 of the Code as a consequence of the application of Section 337(d)(1) of the Code and the Treasury
regulations promulgated thereunder.

(l) The Acquired Fund has timely filed or will timely file (taking into account extensions) all U.S. 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 U.S. 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. The
Acquired Fund does not have any actual liability for any tax obligation of any taxpayer other than itself. The Acquired Fund is not currently, nor has the Acquired Fund been, a member of a group of corporations with which it has filed (or been
required to file) consolidated, combined or unitary tax returns. The Acquired Fund is not a party to any tax allocation, sharing, or indemnification agreement (other than agreements the principal purpose of which do not relate to taxes).

(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 corresponding 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 corresponding 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 the date 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 Acquiring Fund or the corresponding Acquired Fund, except as previously disclosed to the Acquiring Fund by the Acquired Fund.

(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

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pursuant to this Agreement, Acquiring Fund will remain in compliance with its investment restrictions as set forth in the Registration Statement.

**3. Reorganization.** 

(a) Subject to the terms and conditions contained herein, each Acquired Fund agrees to sell, assign, convey,
transfer and deliver to the corresponding Acquiring Fund, and each 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 each Acquired Fund upon the liquidation by each Acquired Fund of any investments listed in the fiscal year financial statements or, if more recent, in the semi-annual financial statements, 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 each Acquiring Fund of all of the liabilities of the corresponding Acquired
Fund, whether accrued or contingent, existing at the Valuation Time (following the redemption of any Acquired Fund shares pursuant to Section 8(m)). Pursuant to this Agreement, each Acquired Fund will, as soon as practicable after the Exchange
Date, distribute all of the Merger Shares received by it to the shareholders of the corresponding Acquired Fund, in complete liquidation of each Acquired Fund. The approval or consummation of each Reorganization is not conditioned on the approval or
consummation of the merger of any other Reorganization.

(b) As soon as practicable, each Acquired Fund will, at its expense, liquidate such of its portfolio securities as
the corresponding Acquiring Fund indicates it does not wish to acquire. These liquidations will be substantially completed before the Exchange Date, unless otherwise agreed by each Acquired Fund and the corresponding Acquiring Fund. For the
avoidance of doubt, notwithstanding this Section 3(b), each Acquired Fund will transfer all of its Investments and all of the cash and other properties and assets existing as of the Valuation Time to the corresponding Acquiring Fund as
described in Section 3(a).

(c) Each Acquired Fund agrees to pay or cause to be paid to the corresponding 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 each 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 each Acquired Fund acquired by the corresponding Acquiring Fund.

**4. Exchange date; valuation time.** 

Subject to the occurrence of the events described in Section 8(m) below, on the Exchange Date, each Acquiring Fund will deliver to the corresponding Acquired Fund, determined in each case as provided hereafter in Section 4, a whole number of Merger Shares having an aggregate net asset value equal to the value of the assets of the Acquired Fund attributable to shares of the Acquired Fund (following the redemption of any Acquired Fund shares pursuant to Section 8(m)) transferred to the Acquiring Fund on that date less the value of the liabilities of the Acquired Fund attributable to shares of the Acquired Fund (following the redemption of any Acquired Fund shares pursuant to Section 8(m)) assumed by the Acquiring Fund on that date, with the whole number of Merger Shares to be delivered determined, for each share class of the Acquired Fund, by dividing the value of the Acquired Fund's net assets attributable to that share class by the net asset value of one Merger Share.

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(a) The net asset value of the Merger Shares to be delivered to each Acquired Fund, the value of the assets
attributable to the shares of each Acquired Fund, and the value of the liabilities attributable to the shares of each Acquired Fund to be assumed by the corresponding Acquiring Fund, will in each case be determined (following the redemption of any
Acquired Fund shares pursuant to Section 8(m)) as of the Valuation Time by the applicable Acquiring Fund, in cooperation with the corresponding Acquired Fund, pursuant to procedures approved by the Acquiring Fund's Board of Trustees to be
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 any Acquired Fund or Acquiring Fund to take into account
differences in realized and unrealized gains and losses.

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

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

(e) Each Acquiring Fund will assume all liabilities of the corresponding 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 [   ], 2025 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) Except as otherwise provided herein, FAV will bear 100% of all direct fees and expenses, including legal and
accounting expenses, portfolio transfer taxes (if any), or other similar expenses incurred in connection with the consummation by each Acquired Fund and the corresponding Acquiring Fund of the transactions contemplated by this Agreement (together
with the costs specified below, "Expenses"), except that the costs of liquidating each Acquired Fund's portfolio securities as the corresponding Acquiring Fund shall indicate it does not wish to acquire before the Exchange Date shall
be allocated to the Acquired Fund; and provided that such Expenses will in any event be paid by the party directly incurring such Expenses if and to the extent that the payment by the other party of such Expenses would result in the disqualification
of any Acquiring Fund or any Acquired Fund, as the case may be, as a "regulated investment company" within the meaning of Section 851 of the Code or would prevent a Reorganization contemplated by this Agreement from qualifying as a
"reorganization" described in Section 368(a)(1) of the Code or otherwise result in the imposition of tax on any Acquired Fund or any Acquiring Fund, as the case may be, or on any of their respective shareholders.

(b) In the event that a Reorganization is not consummated by reason of (i) an 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 corresponding Acquired Fund's obligations referred to in Section 9, the Acquiring Fund will pay directly all reasonable fees and expenses incurred by the corresponding Acquired Fund in connection with such transactions, including,
without limitation, legal, accounting and filing fees.

(c) In the event that a Reorganization is not consummated by reason of (i) an 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

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failure of any condition to the corresponding Acquiring Fund's obligations referred to in Section 8, the Acquired Fund will pay directly all reasonable fees and expenses incurred by the corresponding Acquiring Fund in connection with such transactions, including without limitation legal, accounting and filing fees. <br>

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

(e) Notwithstanding any other provisions of this Agreement, if for any reason a Reorganization 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 each Acquired Fund to be transferred, assumption of the liabilities of the corresponding 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, 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 each Acquiring Fund and the corresponding Acquired Fund, the date and time upon which such delivery is to take place being referred to herein as the "Exchange Date."

**7. Dissolution.** 

(a) Reserved.

(b) Each Acquired Fund agrees that the liquidation and dissolution of the Acquired Fund will be effected in the
manner provided in the Agreement and Declaration of Trust of each Single Series Trust and each Series 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, including: (i) with respect to each Acquired Fund except Short Term Fund and Tax Free Fund, its termination as a Massachusetts business trust and its deregistration as an investment company under
the 1940 Act, and (ii) with respect to each of Short Term Fund and Tax Free Fund, its termination as a series of a Massachusetts business trust.

(c) Each Acquiring Fund will file the Registration Statement with the Commission. Each Acquired Fund and the
corresponding 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.

**8. Conditions to each Acquiring Fund's obligations.** 

The obligations of each Acquiring Fund hereunder, in respect of the Acquiring Fund's acquisition of the corresponding 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); and (ii) at least a
majority of the Trustees of Acquiring Fund (including a majority of those Trustees who are not "interested persons" of Acquiring Fund, as defined in Section 2(a)(19) of the 1940 Act).

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(b) That the Acquired Fund will have furnished to the corresponding 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 since the date of the fiscal year financial statements or the semi-annual financial statements, whichever are more recent, 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 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 Acquiring Fund; and (iii) copies of all relevant tax books and records.

(c) That the Acquired Fund will have furnished to the corresponding Acquiring Fund a statement, dated as of 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 each 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) each Acquired Fund except Short Term Fund and Tax Free Fund is, and Short Term Fund and Tax Free Fund are series of Funds Trust and Tax Free Trust, respectively, each of
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 each Acquired Fund except Short Term Fund and Tax Free Fund and by Funds
Trust and Tax Free Trust, on behalf of Short Term Fund and Tax Free Fund, respectively, and assuming that the Registration Statement and the Prospectus comply with the 1933 Act, the 1934 Act and the 1940 Act and assuming due authorization, execution
and delivery of this Agreement by the above-referenced entities, is a valid and binding obligation 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 corresponding Acquiring Fund, (iv) the
execution and delivery by each Acquired Fund except Short Term Fund and Tax Free Fund and by Funds Trust and Tax Free Trust, on behalf of Short Term Fund and Tax Free Fund, respectively, of this Agreement do not, and the performance of the Acquired
Fund's obligations hereunder will not, violate the Agreement and Declaration of Trust, as amended, or Bylaws, as amended, of each Acquired Fund except Short Term Fund and Tax Free Fund or of each Series Trust, any provision of any agreement
known to such counsel to which the Acquired Fund is a party or by which it is bound, or any investment restrictions contained in the Acquired Fund's then-current prospectus or statement of additional information or the Registration Statement,
it being understood that with respect to investment restrictions as contained in the Agreement and Declaration of Trust, as amended, or Bylaws, as amended, of each Acquired Fund except Short Term Fund and Tax Free Fund or of each Series Trust, the
Acquired Fund's then-current prospectus or statement of additional information or the Registration Statement, such

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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 in connection with the execution and delivery by each Acquired Fund except Short Term Fund and Tax Free Fund and by Funds Trust and Tax Free Trust, on behalf of Short Term Fund and Tax Free Fund, respectively, of this Agreement and the performance of the Acquired Fund's obligations hereunder, except such as have 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. <br>

(f) That each Acquiring Fund will have received an opinion of Ropes & Gray LLP dated as of the Exchange
Date (which opinion would be based upon certain factual representations and customary assumptions and subject to certain qualifications and would note and distinguish certain published precedent), in a form reasonably satisfactory to the
corresponding Acquired Fund and the Acquiring Fund, substantially to the effect that, with respect to each Reorganization, 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 U.S. federal income tax purposes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the acquisition by the Acquiring Fund of all of the assets of the Acquired Fund solely in exchange for Merger Shares and the assumption by such Acquiring Fund of liabilities of the Acquired Fund followed by the distribution by the Acquired Fund to its shareholders of all Merger Shares (and cash in lieu of shares or fractional shares, if any, received by the Acquired Fund prior to the Reorganization) 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 (except with respect to cash received by such Acquired Fund shareholders in redemption of shares or fractional shares prior to the Reorganization);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 such Acquired Fund shares exchanged therefor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 U.S. 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) under Section 362(b) of the Code, the Acquiring Fund's tax basis in the assets of the Acquired Fund transferred to such Acquiring Fund pursuant to this Agreement will be the same as the Acquired Fund's tax basis immediately prior to the transfer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) under Section 1223(2) of the Code, the holding period in the hands of the Acquiring Fund of the Acquired Fund asset transferred to such Acquiring Fund pursuant to this Agreement, will include the period during which such asset was held, or treated for U.S. federal income tax purposes as held by, the Acquired Fund; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 Treasury regulations thereunder.

The opinion will not be a guarantee that the tax consequences of any Reorganization contemplated will be as described above. It is possible that the Internal Revenue Service or a court could disagree with Ropes & Gray LLP's opinion.

(g) That the assets of the Acquired Fund to be acquired by the corresponding Acquiring Fund will include no assets
which 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 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 corresponding Acquiring Fund and Ropes & Gray LLP.

(k) That the Acquired Fund's custodian has delivered to the corresponding Acquiring Fund a certificate
identifying all of the assets of the Acquired Fund held by such custodian as of the Valuation Time (following the redemption of any Acquired Fund shares pursuant to Section 8(m)).

(l) That the Acquired Fund's transfer agent has provided to the corresponding 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 each share class of the Acquired Fund outstanding as
of the Valuation Time (following the redemption of any Acquired Fund shares pursuant to Section 8(m)), and (iii) the name and address of each holder of record of any such shares and the number of shares of each share class held of record
by each such shareholder.

(m) Prior to the Exchange Date, the Acquired Fund shall, for each shareholder of record of the Acquired Fund,
redeem such number and/or fractional number of the shareholder's shares of the Acquired Fund as is necessary so that the shareholder will receive a whole number of Merger Shares in connection with the Reorganization.

(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 corresponding Acquiring Fund or its agents will have
revealed otherwise, either (i) the Acquired

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Fund will have taken all actions that in the opinion of 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 Acquiring Fund in amounts sufficient and upon terms satisfactory, in the opinion of Acquiring Fund or its counsel, to indemnify 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. <br>

(o) That the Acquired Fund will have executed and delivered to the corresponding 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 Acquiring Fund at the Valuation Time (following the redemption of any Acquired Fund shares pursuant
to Section 8(m)) in connection with the transactions contemplated by this Agreement.

**9. Conditions to each Acquired Fund's obligations.** 

The obligations of each Acquired Fund hereunder, in respect of the acquisition of the Acquired Fund by the corresponding 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); and (ii) at least a
majority of the Trustees of Acquiring Fund (including a majority of those Trustees who are not "interested persons" of Acquiring Fund, as defined in Section 2(a)(19) of the 1940 Act).

(b) Reserved.

(c) That the Acquiring Fund will have executed and delivered to the corresponding 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 (following the redemption of any Acquired Fund shares pursuant to
Section 8(m)) in connection with the transactions contemplated by this Agreement.

(d) That the Acquiring Fund will have furnished to the corresponding Acquired Fund a statement, dated as of 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 each Acquired Fund will have received an opinion of Morris, Nichols, Arsht & Tunnell LLP, special
Delaware counsel to ETF Trust, in form satisfactory to the Acquired Fund and dated as of the Exchange Date, to the effect that (i) the Acquiring Fund is a series of ETF Trust, which is a statutory trust with transferable shares duly formed and
validly existing in conformity with the laws of the State of Delaware, (ii) this Agreement has been duly authorized, executed and delivered by ETF Trust, on behalf of the Acquiring Fund, and, assuming that the Prospectus and the Registration
Statement comply with the 1933 Act, the 1934 Act and the 1940 Act and assuming due authorization, execution and delivery of this Agreement by ETF Trust, on behalf of the Acquiring Fund, is a valid and binding obligation of the Acquiring Fund,
(iii) the Merger Shares to be

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delivered to the Acquired Fund as provided for by this Agreement are duly authorized and upon such delivery will be 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 under ETF Trust's Agreement and Declaration of Trust, as amended, Bylaws, as amended, or Delaware law, (iv) the execution and delivery by ETF Trust, on behalf of the Acquiring Fund, of this Agreement do not, and the performance of the Acquiring Fund's obligations hereunder will not, violate ETF Trust's Agreement and Declaration of Trust, as amended, or Bylaws, as amended, and (v) no consent, approval, authorization or order of any governmental authority of the State of Delaware is required in connection with the execution and delivery by ETF Trust, on behalf of the Acquiring Fund, of this Agreement and the performance of the Acquiring Fund's obligations hereunder. <br>

(g) That each Acquired Fund will have received an opinion of Ropes & Gray LLP, in form satisfactory to the
Acquired Fund and dated as of the Exchange Date, to the effect that (i) ETF Trust is a registered investment company classified as a management company of the open-end type with respect to each series of
shares it offers, including each Acquiring Fund, under the 1940 Act, and its registration with the Commission as an investment company under the 1940 Act is in full force and effect, (ii) 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, (iii) to the knowledge of such counsel, Acquiring Fund 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, (iv) no consent,
approval, authorization or order of any court or governmental authority is required in connection with the execution and delivery by ETF Trust, on behalf of the Acquiring Fund, of the transactions contemplated hereby, except such as have 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, (v) the execution and
delivery by ETF Trust, on behalf of the Acquiring Fund, of this Agreement do not, and the performance of the Acquiring Fund's obligations hereunder will not, violate any provision of any agreement known to such counsel to which the Acquiring
Fund is a party or by which it is bound or any investment restrictions contained in the Acquiring Fund's then-current prospectus or statement of additional information or the Registration Statement, it being understood that with respect to
investment restrictions as contained in the Acquiring Fund's 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.

(h) That each Acquired Fund will have received an opinion of Ropes & Gray LLP dated as of the Exchange
Date (which opinion would be based upon certain factual representations and customary assumptions and subject to certain qualifications and would note and distinguish certain published precedent), in a form reasonably satisfactory to the Acquired
Fund and the corresponding Acquiring Fund, substantially to the effect that, with respect to each Reorganization, 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 U.S. federal income tax purposes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the acquisition by the Acquiring Fund of all of the assets of the Acquired Fund solely in exchange for Merger Shares and the assumption by such Acquiring Fund of liabilities of the Acquired Fund followed by the distribution by the Acquired Fund to its shareholders of all Merger Shares (and cash in lieu of shares or fractional shares, if any, received by the Acquired Fund prior to the Reorganization) 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

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Fund and the Acquiring Fund will each be a "party to a reorganization" within the meaning of Section 368(b) of the Code;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 (except with respect to cash received by such Acquired Fund shareholders in redemption of shares or fractional shares prior to the Reorganization);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 such Acquired Fund shares exchanged therefor;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 U.S. 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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) under Section 362(b) of the Code, the Acquiring Fund's tax basis in the assets of the Acquired Fund transferred to such Acquiring Fund pursuant to this Agreement will be the same as the Acquired Fund's tax basis immediately prior to the transfer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) under Section 1223(2) of the Code, the holding period in the hands of the Acquiring Fund of the Acquired Fund asset transferred to such Acquiring Fund pursuant to this Agreement will include the period during which such asset was held, or treated for U.S. federal income tax purposes as held by, the Acquired Fund; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(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 Treasury regulations thereunder.

The opinion will not be a guarantee that the tax consequences of any Reorganization contemplated will be as described above. It is possible that the Internal Revenue Service or a court could disagree with Ropes & Gray LLP's opinion.

(i) 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 corresponding Acquired Fund and Ropes & Gray LLP.

(j) 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.

(k) 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 and any applicable state

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

(l) That the Acquiring Fund's shares shall have been registered under the 1934 Act on Form 8-A.

(m) That the Acquiring Fund's shares shall have been approved for listing with NYSE Arca, Inc.

**10. Indemnification.** 

(a) Each Acquired Fund agrees to indemnify and hold harmless, out of the assets of the Acquired Fund but no other
assets, the corresponding 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, 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 applicable 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). Each 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. Each 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) Each Acquiring Fund agrees to indemnify and hold harmless, out of the assets of the Acquiring Fund but no other
assets, the corresponding 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 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, 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

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applicable 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). Each 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. Each 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. <br>

**11. Cooperation.** 

With respect to each Reorganization contemplated by this Agreement:

(a) The Acquired Fund will deliver to the corresponding Acquiring Fund copies of all relevant tax books and records
and will otherwise reasonably cooperate with the Acquiring Fund in connection with (i) the preparation and filing of tax returns for the Acquired Fund and/or the Acquiring Fund for tax periods or portions thereof ending on or before or that
include the Exchange Date and (ii) the declaration and payment of any dividend or dividends, including pursuant to Section 855 of the Code, for purposes of making distributions of the Acquired Fund's or the Acquiring Fund's, as
applicable, (x) investment company taxable income (if any), net tax-exempt income (if any), and net capital gains (if any) in respect of a taxable year of the Acquired Fund or the Acquiring Fund ending on
or before or that includes the Exchange Date of an amount or amounts sufficient for the Acquired Fund or the Acquiring Fund, as applicable, to qualify for treatment as a regulated investment company under Subchapter M of the Code and to otherwise
avoid the incurrence of any fund-level U.S. federal income taxes for any such taxable year and (y) ordinary income and capital gain net income in an amount or amounts sufficient to avoid the incurrence of any fund-level U.S. federal excise
taxes under Section 4982 of the Code for any calendar year ending on or before December 31, 2025, in each case without any additional consideration therefor; it being understood that such books and records shall remain the property of and
may be retained by the Acquiring Fund following the provision of such copies thereof to the Acquiring Fund.

(b) It is the intention of the parties that the Reorganization will qualify as a "reorganization" within
the meaning of Section 368(a)(l)(F) of the Code. None of the parties to the Reorganization shall take any action or cause any action to be taken (including, without limitation the filing of any tax return) that is inconsistent with such
treatment or is reasonably likely to result in the failure of such Reorganization to qualify as a **"** reorganization **"** within the meaning of Section 368(a)(l)(F) of the Code.

**12. No broker, etc.** 

Each of the Acquired Funds and each of the Acquiring Funds 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.

**13. Termination.** 

Each Acquired Fund and the corresponding Acquiring Fund, may, by mutual consent of their Trustees, terminate this Agreement, and either an Acquired Fund or an 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 [ ], 2025, this Agreement shall automatically terminate on

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that date unless a later date is agreed to by the applicable Acquired Fund and the corresponding Acquiring Fund.

**14. 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.

**15. 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.

**16. Agreement and Declaration of Trust.** 

Copies of the Agreements and Declarations of Trust, as amended, of each Acquired Fund except Short Term Fund and Tax Free Fund and of each Series Trust are on file with the Secretary of State of The Commonwealth of Massachusetts, and the Certificate of Trust of ETF Trust is on file with the Secretary of State of the State of Delaware, and notice is hereby given that this instrument is executed by the Trustees or officers of each trust, respectively, as Trustees or officers and not individually and that the obligations of this instrument are not binding upon any of the Trustees or officers or shareholders of each Acquired Fund or each Acquiring Fund individually but are binding only upon the assets and property of each Acquired Fund and each Acquiring Fund, respectively.

[*Signature page follows.*] 

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

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| |
|:---|
| **PUTNAM FUNDS TRUST, on behalf of Putnam Short-Term Municipal Income Fund** |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |
| **PUTNAM TAX FREE INCOME TRUST, on behalf of Putnam Tax-Free High Yield Fund** |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |
| **PUTNAM CALIFORNIA TAX EXEMPT INCOME FUND** |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |
| **PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND** |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |
| **PUTNAM MINNESOTA TAX EXEMPT INCOME FUND** |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |
| **PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND** |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |

---

------

---

| |
|:---|
| **PUTNAM NEW YORK TAX EXEMPT INCOME FUND** |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |
| **PUTNAM OHIO TAX EXEMPT INCOME FUND** |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |
| **PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND** |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |
| **PUTNAM TAX EXEMPT INCOME FUND** |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |
| **PUTNAM ETF TRUST**, on behalf of its Franklin Short-Term Municipal Income ETF, Franklin Municipal High Yield ETF, Franklin California Municipal Income ETF, Franklin Massachusetts Municipal Income ETF, Franklin Minnesota Municipal Income ETF, Franklin New Jersey Municipal Income ETF, Franklin New York Municipal Income ETF, Franklin Ohio Municipal Income ETF, Franklin Pennsylvania Municipal Income ETF, and Franklin Municipal Income ETF series |
| By: |
| Jonathan S. Horwitz |
| Executive Vice President, Principal Executive Officer and Compliance Liaison |

---

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**Appendix A** 

<u>SCHEDULE A</u> 

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| | | |
|:---|:---|:---|
| **Acquired Fund** |  | **Acquiring Fund** |
| Putnam California Tax Exempt Income Fund |® | Franklin California Municipal Income ETF |
| Putnam Massachusetts Tax Exempt Income Fund |® | Franklin Massachusetts Municipal Income ETF |
| Putnam Minnesota Tax Exempt Income Fund |® | Franklin Minnesota Municipal Income ETF |
| Putnam New Jersey Tax Exempt Income Fund |® | Franklin New Jersey Municipal Income ETF |
| Putnam New York Tax Exempt Income Fund |® | Franklin New York Municipal Income ETF |
| Putnam Ohio Tax Exempt Income Fund |® | Franklin Ohio Municipal Income ETF |
| Putnam Pennsylvania Tax Exempt Income Fund |® | Franklin Pennsylvania Municipal Income ETF |
| Putnam Short-Term Municipal Income Fund |® | Franklin Short-Term Municipal Income ETF |
| Putnam Tax Exempt Income Fund |® | Franklin Municipal Income ETF |
| Putnam Tax-Free High Yield Fund |® | Franklin Municipal High Yield ETF |

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**Appendix B** 

**FUNDAMENTAL AND NON-FUNDAMENTAL INVESTMENT RESTRICTIONS** 

**<u>Putnam California Tax Exempt Income Fund and Franklin California Municipal Income ETF:</u>**

The Fund has adopted the fundamental investment restrictions below for the protection of shareholders. Fundamental investment restrictions may not be changed without a vote of a majority of the outstanding voting securities. The Investment Company Act of 1940, as amended, 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.

**As fundamental investment restrictions, the Fund may not and will not:** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at
the time the borrowing is made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition
of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate, and securities 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Purchase or sell commodities or commodity contracts, except that the Fund may purchase and sell financial
futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Make loans, except by purchase of debt obligations in which the Fund may invest consistent with its
investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) With respect to 75% of its total assets, invest in securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the
U.S. government or its agencies or instrumentalities or to securities issued by other investment companies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of nongovernmental issuers) if, as a result of such purchase, more than 25% of the
Fund's total assets would be invested in any one industry.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8) With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any
issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9) Issue any class of securities which is senior to the Fund's shares of beneficial interest, except for
permitted borrowings.

For purposes of the Fund's fundamental policy on commodities and commodities contracts (#4 above), at the time of the establishment of the policy, swap contracts on financial instruments or rates were not within the understanding of the terms "commodities" or "commodity contracts," and notwithstanding any federal legislation or regulatory action by the Commodity Futures Trading Commission ("CFTC") that

------

subject such swaps to regulation by the CFTC, the Fund will not consider such instruments to be commodities or commodity contracts for purposes of this policy.

For purposes of the Fund's fundamental policy on industry concentration (#7 above), 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.

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.

**<u>Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, and Franklin Pennsylvania Municipal Income ETF</u>** 

The Fund has adopted the fundamental investment restrictions below for the protection of shareholders. Fundamental investment restrictions may not be changed without a vote of a majority of the outstanding voting securities. The Investment Company Act of 1940, as amended, 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.

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

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at the time the borrowing is made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Purchase or sell commodities or commodity contracts, except that the fund may purchase and sell financial futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Make loans, except by purchase of debt obligations in which the fund may invest consistent with its investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.

(6)(a) (New Jersey Fund only). 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.

(6)(b) (Massachusetts, Minnesota, Ohio and Pennsylvania Funds only). With respect to 75% of its total assets, invest in the securities of any issuer if, immediately after such investment, more than

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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. <br>

(7)(a) (New Jersey Fund only). With respect to 50% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer.

(7)(b) (Massachusetts, Minnesota, Ohio and Pennsylvania Funds only). With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of non-governmental issuers) if, as a result of such purchase, more than 25% of the fund's total assets would be invested in any one industry.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9) Issue any class of securities which is senior to the fund's shares of beneficial interest, except for permitted borrowings.

For purposes of the fund's fundamental policy on commodities and commodities contracts (#4 above), at the time of the establishment of the policy, swap contracts on financial instruments or rates were not within the understanding of the terms "commodities" or "commodity contracts," and notwithstanding any federal legislation or regulatory action by the Commodity Futures Trading Commission ("CFTC") that subject such swaps to regulation by the CFTC, the fund will not consider such instruments to be commodities or commodity contracts for purposes of this policy.

For purposes of each fund's fundamental policy on industry concentration (#8 above), Franklin Advisers, LLC ("Franklin Advisers" or the "Investment Manager"), the funds' 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 policies may be changed by the Trustees without shareholder approval.** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) (New Jersey Fund only). With respect to 75% of its total assets, each fund may not and will not 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) (New Jersey Fund only). With respect to 75% of its total assets, each fund may not and will not acquire more
than 10% of the outstanding voting securities of any issuer.

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.

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The New Jersey Fund is currently operating as a diversified fund consistent with non-fundamental restrictions (1) and (2) above. The fund had previously operated as a non-diversified fund and may operate as a non-diversified fund in the future to the extent permitted by applicable law. Under current law, shareholder approval would be required for the fund to resume operating as non-diversified.

**<u>Putnam New York Tax Exempt Income Fund, Franklin New York Municipal Income ETF, Putnam Tax Exempt Income Fund, and Franklin Municipal Income ETF:</u>** 

The Fund has adopted the fundamental investment restrictions below for the protection of shareholders. Fundamental investment restrictions may not be changed without a vote of a majority of the outstanding voting securities. The Investment Company Act of 1940, as amended, 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.

**As fundamental investment restrictions, the Fund may not and will not:** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at
the time the borrowing is made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition
of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate, and securities 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Purchase or sell commodities or commodity contracts, except that the Fund may purchase and sell financial
futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Make loans, except by purchase of debt obligations in which the Fund may invest consistent with its
investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) With respect to 75% of its total assets, invest in securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the
U.S. government or its agencies or instrumentalities or to securities issued by other investment companies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of nongovernmental issuers) if, as a result of such purchase, more than 25% of the
Fund's total assets would be invested in any one industry.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8) With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any
issuer.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9) Issue any class of securities which is senior to the Fund's shares of beneficial interest, except for
permitted borrowings.

For purposes of the Fund's fundamental policy on commodities and commodities contracts (#4 above), at the time of the establishment of the policy, swap contracts on financial instruments or rates were not within the understanding of the terms "commodities" or "commodity contracts," and notwithstanding any federal legislation or regulatory action by the Commodity Futures Trading Commission ("CFTC") that subject such swaps to regulation by the CFTC, the Fund will not consider such instruments to be commodities or commodity contracts for purposes of this policy.

For purposes of the Fund's fundamental policy on industry concentration (#7 above), 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.

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.

**<u>Putnam Short-Term Municipal Income Fund and Franklin Short-Term Municipal Income ETF</u>** 

The Fund has adopted the fundamental investment restrictions below for the protection of shareholders. Fundamental investment restrictions may not be changed without a vote of a majority of the outstanding voting securities. The Investment Company Act of 1940, as amended, 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.

As fundamental investment restrictions, the Fund may not and will not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at
the time the borrowing is made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition
of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate, and securities 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Purchase or sell commodities, except as permitted by applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Make loans, except by purchase of debt obligations in which the Fund may invest consistent with its
investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) With respect to 75% of its total assets, invest in securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the
U.S. government or its agencies or instrumentalities or to securities issued by other investment companies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any
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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of nongovernmental issuers) if, as a result of such purchase, more than 25% of the
Fund's total assets would be invested in any one industry

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9) Issue any class of securities which is senior to the Fund's shares of beneficial interest, except for
permitted borrowings.

For purposes of the Fund's fundamental policy on industry concentration (#8 above), 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.

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.

**<u>Putnam Tax-Free High Yield Fund and Franklin Municipal High Yield ETF</u>** 

The Fund has adopted the fundamental investment restrictions below for the protection of shareholders. Fundamental investment restrictions may not be changed without a vote of a majority of the outstanding voting securities. The Investment Company Act of 1940, as amended, 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.

**As fundamental investment restrictions, the Fund may not and will not:** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at
the time the borrowing is made.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition
of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate, and securities 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.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) Purchase or sell commodities or commodity contracts, except that the fund may purchase and sell financial
futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) Make loans, except by purchase of debt obligations in which the fund may invest consistent with its
investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) With respect to 75% of its total assets, invest in securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the
U.S. government or its agencies or instrumentalities or to securities issued by other investment companies, and that insurers of tax-exempt securities are not considered issuers of securities for this purpose.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) With respect to 75% of the fund's total assets, acquire more than 10% of the voting securities of any
issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(8) Purchase securities (other than securities of the U.S government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of non-governmental issuers) if, as a result
of such purchase, more than 25% of the fund's total assets would be invested in any one industry.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(9) Issue any class of securities which is senior to the fund's shares of beneficial interest, except for
permitted borrowings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(10) Invest less than 80% of a fund's net assets in tax-exempt securities, except when investing for defensive purposes.

For purposes of the fund's fundamental policy on commodities and commodities contracts (#4 above), at the time of the establishment of the policy, swap contracts on financial instruments or rates were not within the understanding of the terms "commodities" or "commodity contracts," and notwithstanding any federal legislation or regulatory action by the Commodity Futures Trading Commission ("CFTC") that subject such swaps to regulation by the CFTC, the fund will not consider such instruments to be commodities or commodity contracts for purposes of this policy.

For purposes of the fund's fundamental policy on industry concentration (#8 above), Franklin Advisers, Inc. ("Franklin Advisers" or the "Investment Manager"), 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.

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.

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**Appendix C** 

**INDEX PROVIDER INFORMATION** 

BLOOMBERG<sup>®</sup> is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively "Bloomberg"). Bloomberg or Bloomberg's licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg's licensors approve or endorse this material or guarantee the accuracy or of any information herein, or make any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.

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**Appendix D** 

**DESCRIPTION OF PRINCIPAL RISKS** 

***Alternative minimum tax risk.*** The fund may invest in municipal securities and private activity bonds that generate interest that is subject to AMT. As a result, taxpayers who are subject to the AMT potentially could earn a lower after-tax return. For more information, including possible state, local and other taxes, contact your tax advisor.

***Authorized participant concentration risk***. Only authorized participants may engage in creation and redemption transactions directly with the fund. The fund may have a limited number of financial institutions that act as authorized participants, none of which are obligated to engage in creation and/or redemption transactions. Decisions by market makers or authorized participants to reduce their role with respect to market making or creation and redemption activities during times of market stress, or a decline in the number of authorized participants due to decisions to exit the business, bankruptcy, or other factors, could inhibit the effectiveness of the arbitrage process in maintaining the relationship between the underlying value of the fund's portfolio securities and the market price of fund shares. To the extent no other authorized participants are able to step forward to create or redeem, shares may trade at a discount (or premium) to NAV and possibly face trading halts and/or delisting.

***Cash transactions risk***. Unlike certain ETFs, the fund may effect creations and redemptions in cash or partially in cash. Therefore, it may be required to sell portfolio securities and subsequently recognize gains on such sales that the fund might not have recognized if it were to distribute portfolio securities in-kind. As such, investments in the fund's shares may be less tax-efficient than an investment in an ETF that distributes portfolio securities entirely in-kind.

***Credit risk***. 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.

***For Putnam California Tax Exempt Income Fund, Franklin California Municipal Income ETF, Putnam Tax Exempt Income Fund, and Franklin Municipal Income ETF only*:** The fund invests mainly in investment-grade debt investments. These are rated at least BBB or its equivalent at the time of purchase by a nationally recognized securities rating agency, or are unrated investments that the Investment Manager believes are of comparable quality. The fund may invest up to 25% of its total assets in below-investment-grade investments (as further described below). However, the fund will not invest in below-investment-grade investments that are rated lower than BB or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The fund will not necessarily sell an investment if its rating is reduced after purchase.

***For Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, Franklin Pennsylvania Municipal Income ETF only:*** The fund invests mostly in investment-grade debt investments. These are rated at least BBB or its equivalent at the time of purchase by a nationally recognized securities rating agency, or are unrated investments that the Investment Manager believes are of comparable quality. The fund may invest up to 25% of its total assets in below-investment-grade investments (as further described below). However, the fund will not invest in below-investment-grade investments that are rated lower than BB or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The fund will not necessarily sell an investment if its rating is reduced after purchase.

***For Putnam New York Tax Exempt Income Fund and Franklin New York Municipal Income ETF only:*** The fund invests in investment-grade debt investments. These are rated at least BBB or its equivalent at the time of purchase by a nationally recognized securities rating agency, or are unrated investments that the Investment Manager believes are of comparable quality. The fund may invest up to 25% of its total assets in below-investment-grade investments((as further described below). However, the fund will not invest in below-investment-grade investments that are rated lower than B or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. Also, the fund may only invest up to 10% of its total assets in below-investment-grade investments that are rated B or its equivalent by each agency rating the investment, or are unrated securities that the Investment Manager believes are of comparable quality. The fund will not necessarily sell an investment if its rating is reduced after purchase.

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***For Putnam Short-Term Municipal Income Fund and Franklin Short-Term Municipal Income ETF only*:** The fund invests mainly in investment-grade debt investments. These are rated at least BBB or its equivalent at the time of purchase by a nationally recognized securities rating agency, or are unrated investments that the Investment Manager believes are of comparable quality. The fund will not necessarily sell an investment if its rating is reduced after purchase.

***For Putnam Tax-Free High Yield Fund and Franklin Municipal High Yield ETF only*:** The fund invests in a combination of higher-rated (or "investment-grade") and lower-rated (or "below-investment-grade") investments. The fund's below-investment-grade investments (as further described below) consist of higher-yielding, higher-risk debt securities that are rated below BBB or its equivalent at the time of purchase by a nationally recognized securities rating agency rating the investment, or are unrated investments that the Investment Manager thinks are of comparable quality. The fund may invest up to 10% of its total assets in debt investments rated, at the time of purchase, below CC or its equivalent by each agency rating such investments, including investments in the lowest rating category of the rating agency, and in unrated investments that the Investment Manager thinks are of comparable quality. The fund will not necessarily sell an investment if its rating is reduced after purchase.

***For Putnam California Tax Exempt Income Fund, Franklin California Municipal Income ETF, Putnam Tax-Free High Yield Fund, and Franklin Municipal High Yield ETF only*:** Investments rated below BBB or its equivalent are below-investment-grade (sometimes referred to as "junk bonds"), which can be more sensitive to changes in markets, credit conditions, and interest rates and may be considered speculative. This rating reflects a greater possibility that the issuers may be unable to make timely payments of interest and principal and thus default.

***For Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, Putnam New York Tax Exempt Income Fund, Franklin New York Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, Franklin Pennsylvania Municipal Income ETF, Putnam Short-Term Municipal Income Fund, and Franklin Short-Term Municipal Income ETF, Putnam Tax Exempt Income Fund, and Franklin Municipal Income ETF only*:** The fund may also invest in investments that are below-investment-grade (sometimes referred to as "junk bonds"), which can be more sensitive to changes in markets, credit conditions, and interest rates and may be considered speculative. These investments are rated below BBB or its equivalent, which reflects a greater possibility that the issuers may be unable to make timely payments of interest and principal and thus default.

***For all Funds*:** If default occurs, or is perceived as likely to occur, the value of the investment will usually be more volatile and is likely to fall. The value of a debt instrument may also be affected by changes in, or perceptions of, the financial condition of the issuer, borrower, counterparty, or other entity, or underlying collateral or assets, or changes in, or perceptions of, specific or general market, economic, industry, political, regulatory, geopolitical, environmental, public health, and other conditions. A default or expected default could also make it difficult for the fund to sell the investment at a price approximating the value the Investment Manager had previously placed on it. Tax-exempt debt, particularly lower-rated tax-exempt debt, usually has a more limited market than taxable debt, which may at times make it difficult for the fund to buy or sell certain debt instruments or to establish their fair value. Credit risk is generally greater for investments that are required to make interest payments only at maturity rather than at intervals during the life of the investment.

***For Putnam Tax-Free High Yield Fund and Franklin Municipal High Yield ETF only*:** Credit ratings are based largely on the issuer's historical financial condition and a rating agency's 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 the Investment Manager considers credit ratings in making investment decisions, the Investment Manager performs its own investment analysis and does not rely only on ratings assigned by the rating agencies. The amount of information about the financial condition of issuers of tax-exempt debt may not be as extensive as that which is made available by companies whose stock or debt is publicly traded. The fund's success in achieving its investment objective may depend more on the Investment Manager's credit analysis when buying lower-quality bonds than when buying higher quality bonds.

The fund may have to participate in legal proceedings or take possession of and manage assets that secure the issuer's obligations. The fund's ability to enforce rights in bankruptcy proceedings may be more limited than would be the case for taxable debt. This could increase the fund's operating expenses and decrease its net asset value. Any income that arises from ownership or operation of assets would be taxable.

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

***For all Funds*:** Bond investments may be more susceptible to downgrades or defaults during economic downturns or other periods of economic stress, which can significantly strain the financial resources of many tax-exempt debt issuers, including the issuers of the bonds in which the fund invests (or has exposure to). This may make it less likely that those issuers can meet their financial obligations when due and may adversely impact the value of their bonds, which could negatively impact the performance of the fund. It is difficult to predict the level of financial stress and duration of such stress issuers may experience.

The fund may buy investments that are insured as to the payment of principal and interest in the event the issuer defaults. Any reduction in an insurer's ability to pay claims may adversely affect the value of insured investments and, consequently, the value of the fund's shares.

***Derivatives***. The fund may engage in a variety of transactions involving derivatives, such as municipal rate locks, futures, and swap contracts (***for Putnam California Tax Exempt Income Fund, Franklin California Municipal Income ETF, Putnam Tax Exempt Income Fund, and Franklin Municipal Income ETF only***), municipal rate locks, tender option bond transactions, futures, and swap contracts (***for Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, Franklin Pennsylvania Municipal Income ETF, Putnam Tax-Free High Yield Fund, and Franklin Municipal High Yield ETF only***), tender option bond transactions, futures, and swap contracts (***for Putnam New York Tax Exempt Income Fund and Franklin New York Municipal Income ETF only***), futures and swap contracts (***for Putnam Short-Term Municipal Income Fund and Franklin Short-Term Municipal Income ETF only***), although they do not represent a primary focus of the fund. 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 or indexes. The fund may make use of "short" derivative positions, the values of which typically move in the opposite direction from the price of the underlying investment, pool of investments, or index. The fund may use derivatives both for hedging and non-hedging purposes, such as to modify the behavior of an investment so that it responds differently than it would otherwise respond to changes in a particular interest rate or to modify the fund's duration. For example, derivatives may increase or decrease an investment's exposure to long- or short-term interest rates or cause the value of an investment to move in the opposite direction from prevailing short-term or long-term interest rates. For example, the fund may use interest rate swaps to hedge or gain exposure to interest rate risk, or to hedge or gain exposure to inflation. The fund may also use derivatives to adjust the fund's positioning on the yield curve (a line that plots interest rates of bonds having equal credit quality but differing maturity dates) or to take tactical positions along the yield curve. However, the fund may also choose not to use derivatives based on the Investment Manager's 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 the fund's ability to manage these sophisticated instruments. Some derivatives are "leveraged," which means they provide the fund with investment exposure greater than the value of the fund's investment in the derivatives. As a result, these derivatives may magnify or otherwise increase investment losses to the fund. The risk of loss from certain short derivative positions is theoretically unlimited. The value of derivatives may move in unexpected ways due to unanticipated market movements, the use of leverage, imperfect correlation between the derivative instrument and the reference asset, or other factors, especially in unusual market conditions, and volatility in the value of derivatives could adversely impact the fund's returns, obligations and exposures.

Other risks arise from the potential inability to terminate or sell derivative positions. Derivatives may be subject to liquidity risk due to the fund's obligation to make payments of margin, collateral, or settlement payments to counterparties. A liquid secondary market may not always exist for the fund's derivative positions. In fact, certain over-the-counter instruments (investments not traded on an exchange) may not be liquid. Over-the-counter instruments also involve the risk that the other party to the derivative transaction may not be willing or able to meet its obligations with respect to the derivative transaction. The risk of a party failing to meet its obligations may increase if the fund has significant exposure to that counterparty. Derivative transactions may also be subject to operational risk, including

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due to documentation and settlement issues, system failures, inadequate controls and human error, and legal risk due to insufficient documentation, insufficient capacity or authority of a counterparty, or issues with respect to the legality or enforceability of the derivative contract. For further information about additional types and risks of derivatives, see Miscellaneous Investments, Investment Practices and Risks in the SAI.

***Fluctuation of NAV and share price risk***. Shares may trade at a larger premium or discount to NAV than shares of other ETFs. The NAV of the fund's shares will generally fluctuate with changes in the market value of the fund's holdings. The fund's shares are listed on an exchange and can be bought and sold in the secondary market at market prices. The market prices of shares will fluctuate in accordance with changes in NAV and supply and demand on the listing exchange. Although the arbitrage process is designed to permit the shares of the fund to trade at market prices that are at or close to NAV, it is possible that the market price and NAV will vary significantly. As a result, you may sustain losses if you pay more than the shares' NAV when you purchase shares or receive less than the shares' NAV when you sell shares, in the secondary market. During periods of disruptions to creations and redemptions, the existence of extreme market volatility, or lack of an active trading market for the fund's shares, the market price of fund shares is more likely to differ significantly from the fund's NAV or the intraday value of the fund's holdings. During such periods, you may be unable to sell your shares or may incur significant losses if you sell your shares. There are various methods by which investors can purchase and sell shares and various orders that may be placed. Investors should consult their financial intermediary before purchasing or selling shares of the fund. Disruptions at market makers, authorized participants or market participants may also result in significant differences between the market price of the fund's shares and the fund's NAV. In addition, in stressed market conditions or periods of market disruption or volatility, the market for shares may become less liquid in response to deteriorating liquidity in the markets for the fund's underlying portfolio holdings.

The market price of shares during the trading day, like the price of any exchange-traded security, includes a "bid/ask" spread charged by the exchange specialist, market makers, or other participants that trade the particular security. In times of severe market disruption or volatility, the bid/ask spread can increase significantly. At those times, shares are most likely to be traded at a discount to NAV, and the discount is likely to be greatest when the price of shares is falling fastest, which may be the time that you most want to sell your shares.

***Focus of investments***.

***For Putnam California Tax Exempt Income Fund, Franklin California Municipal Income ETF, Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, Franklin Pennsylvania Municipal Income ETF, Putnam Short-Term Municipal Income Fund, Franklin Short-Term Municipal Income ETF, Putnam Tax Exempt Income Fund, Franklin Municipal Income ETF, Putnam Tax-Free High Yield Fund, and Franklin Municipal High Yield ETF only*:**The fund may make significant investments in a particular segment of the tax-exempt debt market, such as tobacco settlement bonds or revenue bonds for health care facilities, housing or airports.

***For Putnam New York Tax Exempt Income Fund and Franklin New York Municipal Income ETF only:*** The fund may make significant investments in a particular segment of the tax-exempt debt market, such as the education, transportation, and health care sectors, including revenue bonds for schools, airports, or health care facilities.

***For Putnam Short-Term Municipal Income Fund, Franklin Short-Term Municipal Income ETF, Putnam Tax Exempt Income Fund, Franklin Municipal Income ETF, Putnam Tax-Free High Yield Fund, and Franklin Municipal High Yield ETF only:*** may also make significant investments in the debt of issuers located in the same state.

***For all Funds:*** These investments may cause the value of the fund's shares to fluctuate more than the values of shares of funds that invest in a greater variety of investments. Certain events may adversely affect all investments within a particular market segment. Examples include legislation or court decisions, concerns about pending legislation or court decisions, and lower demand for the services or products provided by a particular market segment.

***For Putnam Short-Term Municipal Income Fund, Franklin Short-Term Municipal Income ETF, Putnam Tax Exempt Income Fund, Franklin Municipal Income ETF, Putnam Tax-Free High Yield Fund, and Franklin Municipal High Yield ETF only:*** Investing in issuers located in the same state may make the fund more vulnerable

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to that state's economy and to factors affecting its tax-exempt issuers, such as their ability to collect revenues to meet payment obligations.

***For Putnam California Tax Exempt Income Fund, Franklin California Municipal Income ETF, Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, , Putnam New York Tax Exempt Income Fund, and Franklin New York Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, and Franklin Pennsylvania Municipal Income ETF only:*** Investing mostly in tax-exempt investments of a single state makes a fund more vulnerable to that state's economy and to factors affecting tax-exempt issuers in that state than would be true for a more geographically diversified fund. These risks include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the inability or perceived inability of a government authority to collect sufficient tax or other revenues to
meet its payment obligations, which could result in a downgrade of a state's credit rating or the ratings of authorities or political sub-divisions of the state;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the introduction of constitutional or statutory limits on a tax-exempt issuer's ability to raise revenues or increase taxes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● economic or demographic factors that may cause a decrease in tax or other revenues for a government authority
or for private operators of publicly financed facilities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●  ***For Putnam California Tax Exempt Income Fund and Franklin California Municipal Income ETF only:*** environmental events such as earthquakes, droughts, mudslides, or fires; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;●  ***For Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, , Putnam New York Tax Exempt Income Fund, and Franklin New York Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, and Franklin Pennsylvania Municipal Income ETF only:*** environmental events such as blizzards, hurricanes, high winds, floods
and other weather events; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● increased expenditures on domestic security or reduced monetary support from the federal government.

These risks are also present in the securities issued by any other state that the fund might invest in.

***For Putnam Massachusetts Tax Exempt Income Fund and Franklin Massachusetts Municipal Income ETF only:*** The fund's investments in Massachusetts municipal securities may be vulnerable to events adversely affecting the Massachusetts economy. These events include tax, legislative, or political changes as well as a deterioration in the state or local budgets. Although Massachusetts's economy is relatively diverse, industries significant to the state's economy, such as the education, technology, biotech, financial services or healthcare, could experience downturns or fail to develop as expected, hurting the local economy, and negatively impacting the fund's performance. Massachusetts generally has a high degree of job stability and an educated work force due to its large concentration

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of colleges and universities, but the high cost of doing business in Massachusetts may serve as an impediment to job creation. Additionally, fluctuations in unemployment levels or in the state or national economy could result in decreased tax revenues, which could also impact the fund's performance. Additionally, events such as epidemics or pandemics, and the significant uncertainty and stress to the financial resources they may cause to the state and its municipalities may impair the ability of the state and its municipalities to repay their obligations and could, amongst other things, exacerbate existing economic, political or other tensions.

***For Putnam Minnesota Tax Exempt Income Fund and Franklin Minnesota Municipal Income ETF only:*** The fund's investments in Minnesota securities may be vulnerable to events adversely affecting the Minnesota economy. While the Minnesota economy is relatively diverse, including the agriculture, forestry, mining, manufacturing, retail, financial services, healthcare, and biomedical industries, a downturn in any of these could hurt Minnesota economic conditions. Minnesota businesses generally face a high cost of doing business, which also may negatively affect economic conditions in the state. Additionally, events affecting the global economy such as the ongoing COVID-19 pandemic may negatively affect Minnesota's economic outlook and stress the state's financial resources, which may impair the state's ability to meet its financial obligations.

***For Putnam New Jersey Tax Exempt Income Fund and Franklin New Jersey Municipal Income ETF only:*** The fund's investment in New Jersey municipal securities may be vulnerable to events adversely affecting the New Jersey economy. New Jersey's diverse economic base, centered on the following core industry clusters: technology, transportation and logistics, health care, financial services, biopharmaceuticals, and advanced manufacturing, and supplemented by commercial agriculture in rural areas, could experience downturns or fail to develop as expected, hurting the local economy. Fluctuations in labor market growth, unemployment levels or in the state or national economy could result in decreased tax revenues. Additionally, events such as epidemics or pandemics and the significant uncertainty and stress to the financial resources it may cause to the state and its municipalities may impair the ability of the state and its municipalities to repay their obligations and could, among other things, exacerbate existing economic, political or other tensions.

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***For Putnam Ohio Tax Exempt Income Fund and Franklin Ohio Municipal Income ETF only:*** The fund's investments in Ohio municipal securities may be vulnerable to events adversely affecting Ohio and its economy as a whole, or industry segments in that economy or geographic areas within the State, including events such as the global pandemic spread of COVID-19. Ohio ranks fourth among the states in manufacturing ($131.0 billion) and fifth in durable goods ($69.2 billion). Manufacturing was responsible for 15.0% of Ohio's preliminary 2023 gross state product (GSP), the goods-producing sectors were responsible for 21.8% of Ohio's preliminary 2023 GSP and the business services sectors, including finance, insurance and real estate were responsible for 33.7% of Ohio's preliminary 2023 GSP. Ohio is the tenth largest exporting state with 2023 merchandise exports totaling $55.7 billion, with machinery (including electrical machinery), motor vehicles (including parts), aircraft/spacecraft and plastics, accounting for more than half of that total. And, with 13.5 million acres (of a total land area of 26.4 million acres) in farmland and an estimated 77,800 individual farms, agriculture combined with related agricultural sectors remains an important segment of the state's economy. Ohio's 2023 decennial census population estimate (as of July 1, 2023) of 11,756,058 ranked it seventh among the states, and was a 0.35% decrease over the 2020 decennial census population of 11,797,517. Ohio's unemployment rate (seasonally adjusted) was 3.7% as of March, 2024.

The continued spread of COVID-19 has had and may continue to have a material impact on Ohio's economy although the full impact of COVID-19 on Ohio's economy is unknown at this time. See "State Specific Information - Ohio General Information" in the funds' SAI for a discussion on COVID-19's impact on Ohio.

***For Putnam Pennsylvania Tax Exempt Income Fund and Franklin Pennsylvania Municipal Income ETF only:*** The fund's investment in Pennsylvania municipal securities may be vulnerable to events adversely affecting the Pennsylvania economy. Pennsylvania is one of the most populous states, ranking fifth behind California, Texas, Florida and New York. Pennsylvania stakes claim to a diverse economy and many thriving industries. At different times throughout its history, the Commonwealth has been the nation's principal producer of ships, iron, chemicals, lumber, oil, textiles, glass, coal and steel. This led Pennsylvania to be identified, historically, as a heavy industrial state. That reputation has changed over the last several decades as the coal, steel and railroad industries declined. Pennsylvania's business environment readjusted with a more diversified economic base. Currently, the major sources of growth in Pennsylvania are in the service sector, including healthcare, leisure-hospitality, transport and storage. As in other industrially developed states, economic activity in Pennsylvania may be more cyclical than in some other states or in the nation as a whole. Other factors that may negatively affect economic conditions in Pennsylvania include adverse changes in employment rates, Federal revenue sharing laws or laws with respect to tax exempt financing.

***For Putnam California Tax Exempt Income Fund, Putnam California Tax Exempt Income ETF, Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, Putnam New York Tax Exempt Income Fund, Franklin New York Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, and Franklin Pennsylvania Municipal Income ETF only:*** In addition, because of the relatively small number of issuers of tax-exempt securities, the fund is more likely to invest a higher percentage of assets in a single issuer. Therefore, the fund may be more exposed to the risk of loss due to investing in relatively fewer issuers than a fund that invests more broadly.

***For all Funds:*** At times, the fund and other accounts that the Investment Manager and its affiliates manage may own all or most of the debt of a particular issuer. This concentration of ownership may make it more difficult to sell, or to determine the fair value of, these investments.

***General obligations***. These are backed by the issuer's authority to levy taxes and are considered an obligation of the issuer. They are payable from the issuer's general unrestricted revenues, although payment may depend upon government appropriation or aid from other governments. These investments may be vulnerable to legal limits on a

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government's power to raise revenue or increase taxes, as well as economic or other developments that can reduce revenues.

***Interest rate risk***. The values of bonds and other debt instruments usually rise and fall in response to changes in interest rates. Interest rates can change in response to the supply and demand for credit, government and/or central bank monetary policy and action, inflation rates, and other factors. Declining interest rates generally result in an increase in the value of existing debt instruments, and rising interest rates generally result in a decrease in 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.

***For Putnam Short-Term Municipal Income Fund and Franklin Short-Term Municipal Income ETF only:*** Under normal circumstances, the fund will maintain a dollar-weighted average portfolio maturity of three years or less. Short-term investments may have lower yields than longer-term investments.

***For all Funds:*** 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, the fund 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.

***Large shareholder transaction risk***.

The fund is subject to the risk that shareholders will purchase or redeem large quantities of shares of the fund (such purchases or redemptions, "large shareholder transactions"). The fund may be an investment option for mutual funds that are managed by the Investment Manager and its affiliates as "funds of funds." Additionally, other investors from time to time may make substantial investments in the fund. Such shareholders may at times be considered to control the fund. In addition, a large number of shareholders collectively may purchase or redeem fund shares in large amounts rapidly or unexpectedly. A number of circumstances may cause the fund to experience large shareholder transactions, such as changes in the eligibility criteria for the fund or share class of the fund; liquidations, reorganizations, repositionings, or other announced fund events; or changes in investment objectives, strategies, policies, risks, or investment personnel. Large redemptions may be more likely during times of market stress or reduced liquidity, exacerbating the potential impact on the fund.

Large shareholder transactions may adversely affect the fund's liquidity and net assets. These transactions could adversely affect the fund's performance if the fund is forced to sell portfolio securities to satisfy redemption requests or purchase securities for the portfolio in connection with the investment of subscription proceeds when the fund would otherwise not do so, and at unfavorable prices, which may increase the fund's brokerage costs and accelerate the realization of taxable income and/or gains to shareholders. The effects of taxable income and/or gains resulting from large shareholder transactions would particularly impact non-redeeming shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged plan. To the extent that such transactions result in short-term capital gains, such gains will generally be taxed at the ordinary income tax rate for shareholders who hold fund shares in a taxable account. In addition, fund returns also may be adversely affected if the fund holds a portion of its assets in liquid, cash-like investments in connection with or in anticipation of shareholder redemptions.

***Liquidity and illiquid investments***. The fund may invest up to 15% of its net 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 the fund's net asset value. Certain other investments may not have an active trading market due to adverse market, economic, industry, political, regulatory, geopolitical, environmental, public health, and other conditions, including investors trying to sell large quantities of a particular investment or type of investment, or lack of market makers or other buyers for a particular investment or type of investment. The fund may not be able to sell illiquid investments when it is desirable to do so, or the fund may be able to sell them only at less than their value.

***Management and operational risk***. The fund is actively managed and its performance will reflect, in part, the Investment Manager's ability to make investment decisions that seek to achieve the fund's investment objective. There is no guarantee that the investment techniques, analyses, or judgments that the Investment Manager applies in making investment decisions for the fund will produce the intended outcome or that the investments selected for the fund will perform as well as other securities that were not selected for the fund. As a result, the fund may underperform its

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benchmark or other funds with a similar investment goal and may realize losses. In addition, the Investment Manager, or the fund's other service providers, may experience disruptions or operating errors that could negatively impact the fund. Although service providers may have operational risk management policies and procedures and take appropriate precautions to avoid and mitigate risks that could lead to disruptions and operating errors, it may not be possible to identify all of the operational risks that may affect the fund or to develop processes and controls to completely eliminate or mitigate their occurrence or effects.

***Market risk***. 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 (including perceptions about monetary policy, interest rates, inflation 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); outbreaks of infectious illnesses or other widespread public health issues (including epidemics and pandemics); and factors related to a specific issuer, asset class, geography, industry, or sector. These and other factors may lead to increased volatility and reduced liquidity in the fund's portfolio holdings. 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 prices. These risks may be exacerbated during economic downturns or other periods of economic stress.

The COVID-19 pandemic and efforts to contain its spread have resulted in, among other effects, significant market volatility, exchange trading suspensions and closures, declines in global financial markets, higher default rates, significant changes in fiscal and monetary policies, and economic downturns and recessions. The effects of the COVID-19 pandemic have negatively affected, and may continue to negatively affect, the global economy, the economies of the United States and other individual countries, the financial performance of individual issuers, sectors, industries, asset classes, and markets, and the value, volatility, and liquidity of particular securities and other assets. The effects of the COVID-19 pandemic also are likely to exacerbate other risks that apply to the fund, including the risks disclosed in this prospectus, which could negatively impact the fund's performance and lead to losses on your investment in the fund. The duration of the COVID-19 pandemic and its effects cannot be determined with certainty.

***Other investments***. In addition to the main investment strategies described above, the fund may make other types of investments, such as investments in securities that may produce taxable income. The fund may also invest in cash or cash equivalents, including money market instruments or short-term instruments such as commercial paper, bank obligations (e.g., certificates of deposit and bankers' acceptances), repurchase agreements, and U.S. Treasury bills or other government obligations. The fund may also from time to time invest all or a portion of its assets, including any cash balances, in money market and/or short-term bond funds advised by the Investment Manager or its affiliates. The percentage of the fund invested in cash and cash equivalents and such money market and short-term bond funds is expected to vary over time and will depend on various factors, including market conditions, purchase and redemption activity by fund shareholders, and our assessment of the cash level that is appropriate to allow the fund to pursue investment opportunities as they arise and to meet shareholder redemption requests. Large cash positions may dampen performance and may prevent the fund from achieving its goal. These practices may be subject to other risks, as described under Miscellaneous Investments, Investment Practices and Risks in the SAI.

***Portfolio turnover rate***. The 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 (including imputed transaction costs), which may detract from performance. The fund's portfolio turnover rate and the amount of brokerage commissions it pays and transaction costs it incurs will vary over time based on market conditions.

***Revenue obligations***. These are payable from revenue earned by a particular project or other revenue source. They include private activity bonds such as industrial development bonds, which are paid only from the revenues of the private owners or operators of the facilities. Investors can look only to the revenue generated by the project or the private company operating the project rather than the credit of the state or local government authority issuing the bonds. Revenue obligations are typically subject to greater credit risk than general obligations because of the relatively limited source of revenue.

***Tax-exempt investments***.

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***For Putnam California Tax Exempt Income Fund and Franklin California Municipal Income ETF only:*** These investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and California income tax.

***For Putnam New York Tax Exempt Income Fund and Franklin New York Municipal Income ETF only:*** These investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and New York State and City personal income tax.

***For Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, Franklin Pennsylvania Municipal Income ETF, Putnam Tax Exempt Income Fund, and Franklin Municipal Income ETF only:*** These investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from both federal and the applicable state's income tax.

***For Putnam Short-Term Municipal Income Fund, Franklin Short-Term Municipal Income ETF, Putnam Tax-Free High Yield Fund, and Franklin Municipal High Yield ETF only:*** These investments are issued by or for states, territories or possessions of the United States or by their political subdivisions, agencies, authorities or other government entities, and the income from these investments is exempt from federal income tax.

***For all Funds:*** These investments are issued to raise money for public purposes, such as loans for the construction of housing, schools or hospitals, or to provide temporary financing in anticipation of the receipt of taxes and other revenue. They also include private activity obligations of public authorities to finance privately owned or operated facilities.

***For Putnam California Tax Exempt Income Fund and Franklin California Municipal Income ETF only:*** Changes in law or adverse determinations by the Internal Revenue Service ("IRS") or the California tax authorities could make the income from some of these obligations taxable. For instance, the IRS could rule that income from certain types of state-issued bonds would no longer be considered tax-exempt. Investments in securities of issuers located outside California may be applied toward meeting a requirement to invest in a tax-exempt investment if the security pays interest that is exempt from federal and California income tax.

***For Putnam New York Tax Exempt Income Fund and Franklin New York Municipal Income ETF only:*** Changes in law or adverse determinations by the Internal Revenue Service ("IRS") or the New York State or City tax authorities could make the income from some of these obligations taxable. For instance, the IRS could rule that income from certain types of state-issued bonds would no longer be considered tax-exempt. Investments in securities of issuers located outside New York may be applied toward meeting a requirement to invest in a tax-exempt investment if the security pays interest that is exempt from federal and New York State and City personal income taxes.

***Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, and Franklin Pennsylvania Municipal Income ETF only:*** Changes in law or adverse determinations by the Internal Revenue Service ("IRS") or a state tax authority could make the income from some of these obligations taxable. For instance, the IRS could rule that income from certain types of state-issued bonds would no longer be considered tax-exempt. Investments in securities of issuers located outside the applicable state may be applied toward meeting a requirement to invest in a tax-exempt investment if the security pays interest that is exempt from federal and the applicable state's income tax.

***For Putnam Short-Term Municipal Income Fund, Franklin Short-Term Municipal Income ETF, Putnam Tax Exempt Income Fund, Franklin Municipal Income ETF, Putnam Tax-Free High Yield Fund, and Franklin Municipal High Yield ETF only:*** Changes in law or adverse determinations by the Internal Revenue Service ("IRS") could make the income from some of these obligations taxable.

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***For Putnam California Tax Exempt Income Fund and Franklin California Municipal Income ETF only:*** Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of fund shareholders, the fund cannot include these investments for the purpose of complying with the 90% investment policy described above. Corporate shareholders will be required to include all exempt interest dividends in determining their federal AMT. For more information, including possible state, local and other taxes, contact your tax advisor.

***Putnam Massachusetts Tax Exempt Income Fund, Franklin Massachusetts Municipal Income ETF, Putnam Minnesota Tax Exempt Income Fund, Franklin Minnesota Municipal Income ETF, Putnam New Jersey Tax Exempt Income Fund, Franklin New Jersey Municipal Income ETF, Putnam Ohio Tax Exempt Income Fund, Franklin Ohio Municipal Income ETF, Putnam Pennsylvania Tax Exempt Income Fund, and Franklin Pennsylvania Municipal Income ETF only:*** Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of fund shareholders, the fund cannot include these investments for the purpose of complying with the 80% investment policy described above. Corporate shareholders will be required to include all exempt interest dividends in determining their federal AMT. For more information, including possible state, local and other taxes, contact your tax advisor.

***For Putnam New York Tax Exempt Income Fund and Franklin New York Municipal Income ETF only:*** Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of fund shareholders, the fund cannot include these investments for the purpose of complying with the 90% investment policy described above. For more information, including possible state, local and other taxes, contact your tax advisor.

***For Putnam Tax Exempt Income Fund, Franklin Municipal Income ETF, Putnam Tax-Free High Yield Fund, and Franklin Municipal High Yield ETF only:*** Interest income from private activity bonds may be subject to federal AMT for individuals. As a policy that cannot be changed without the approval of fund shareholders, the fund cannot include these investments for the purpose of complying with the 80% investment policy described above. For more information, including possible state, local and other taxes, contact your tax advisor.

***Temporary defensive strategies***. In response to adverse market, economic, political or other conditions, the fund may take temporary defensive positions, such as investing some or all of the fund's assets in cash and cash equivalents, that differ from the fund's usual investment strategies. However, the fund may choose not to use these temporary defensive strategies for a variety of reasons, even in very volatile market conditions. If the fund employs these strategies, the fund may miss out on investment opportunities and may not achieve its goal. Additionally, while temporary defensive strategies are mainly designed to limit losses, they may not work as intended.

***Tender option bonds***. The fund may leverage its assets through the use of proceeds received through tender option bond transactions. In a tender option bond transaction, the fund transfers a fixed-rate municipal bond to a special purpose entity trust ("TOB trust") sponsored by a broker. The TOB trust funds the purchase of the fixed-rate bonds by issuing short-term floating-rate bonds to third parties and allowing the fund to retain the residual interest in the TOB trust's assets and cash flows, which are in the form of inverse floating-rate bonds. The inverse floating-rate bonds held by the fund give the fund the right to (1) cause the holders of the floating-rate bonds to tender their notes at par, and (2) to have the fixed-rate bonds held by the TOB trust transferred to the fund, causing the TOB trust to be liquidated. The market prices of tender option bonds may be highly sensitive to changes in market rates and may decrease significantly when market rates increase. Tender option bonds are subject to restrictions on resale and are highly sensitive to changes in interest rates and the value of the underlying bond. The fund will look through to the underlying municipal bond held by a TOB trust for purposes of the fund's 80% policy.

***Trading issues risk***. The fund has a limited public trading history. Although shares are listed on an exchange, there can be no assurance that an active trading market or requirements to remain listed will be met or maintained, or that the market for fund shares will operate as intended. If the market does not operate as intended, it could lead to the fund's shares trading at wider spreads and larger premiums and discounts to NAV than other actively managed ETFs, particularly during periods of market disruption or volatility. As a result, it may cost investors more to trade fund shares than shares of other ETFs.

Only an authorized participant may engage in creation or redemption transactions directly with the fund. There is no guarantee that the fund will be able to attract market makers and authorized participants. There are no obligations of market makers to make a market in the fund's shares or of authorized participants to submit purchase or redemption orders for creation units.

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The market prices of the fund's shares are expected to fluctuate, in some cases materially, in response to changes in the fund's NAV, the intraday value of the fund's holdings and supply and demand for the fund's shares. The investment manager cannot predict whether the fund's shares will trade above, below or at their NAV or the intraday value of the fund's holdings. During such periods, investors may incur significant losses if they sell shares.

The securities held by the fund may be traded in markets that close at a different time than the exchange on which the fund's shares are listed. Liquidity in those securities may be reduced after the applicable closing times. Accordingly, during the time when the exchange is open but after the applicable market closing, fixing or settlement times, bid-ask spreads on the exchange and the corresponding premium or discount to the shares' NAV may widen.

In addition, trading of shares in the secondary market may be halted, for example, due to activation of market-wide "circuit breakers." If trading halts or an unanticipated early closing of the listing exchange occurs, a shareholder may be unable to purchase or sell shares of the fund.

If the fund's shares are delisted from the listing exchange, the investment manager may seek to list the fund shares on another market, merge the fund with another exchange-traded fund or traditional mutual fund, or redeem the fund shares at NAV.

Shares of the fund, similar to shares of other issuers listed on a stock exchange, may be sold short and are therefore subject to the risk of increased volatility and price decreases associated with being sold short.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Fund** | **Symbol** | **Principal U.S. Listing Exchange** |
| &nbsp;&nbsp;&nbsp;Franklin California Municipal Income ETF | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp;Franklin Massachusetts Municipal Income ETF | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp;Franklin Minnesota Municipal Income ETF | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp;Franklin Municipal High Yield ETF | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp;Franklin Municipal Income ETF | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp;Franklin New Jersey Municipal Income ETF | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp;Franklin New York Municipal Income ETF | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp;Franklin Ohio Municipal Income ETF | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp;Franklin Pennsylvania Municipal Income ETF | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp;Franklin Short-Term Municipal Income ETF | [ ] | [NYSE Arca, Inc.] |

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**Each a series of Putnam ETF Trust** 

**FORM N-14** 

**PART B** 

**STATEMENT OF ADDITIONAL INFORMATION** 

**August 6, 2025** 

This Statement of Additional Information ("SAI") contains additional information to that included in the combined prospectus/information statement for each Target Fund (defined below) dated August 6, 2025 (the "Prospectus/Information Statement") relating to the acquisition of the assets and assumption of the liabilities of each Target Fund listed below by the corresponding Acquiring ETF listed below in exchange for shares of such Acquiring ETF (each, a "Merger" and collectively, the "Mergers"). The table below sets forth the Target Fund and corresponding Acquiring ETF for each Merger.

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| | | |
|:---|:---|:---|
| **Target Fund** |  | **Acquiring ETF** |
| Putnam California Tax Exempt Income Fund | → | Franklin California Municipal Income ETF |
| Putnam Massachusetts Tax Exempt Income Fund | → | Franklin Massachusetts Municipal Income ETF |
| Putnam Minnesota Tax Exempt Income Fund | → | Franklin Minnesota Municipal Income ETF |
| Putnam New Jersey Tax Exempt Income Fund | → | Franklin New Jersey Municipal Income ETF |
| Putnam New York Tax Exempt Income Fund | → | Franklin New York Municipal Income ETF |
| Putnam Ohio Tax Exempt Income Fund | → | Franklin Ohio Municipal Income ETF |
| Putnam Pennsylvania Tax Exempt Income Fund | → | Franklin Pennsylvania Municipal Income ETF |
| Putnam Short-Term Municipal Income Fund | → | Franklin Short-Term Municipal Income ETF |
| Putnam Tax Exempt Income Fund | → | Franklin Municipal Income ETF |
| Putnam Tax-Free High Yield Fund | → | Franklin Municipal High Yield ETF |

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This SAI is not a prospectus and is authorized for distribution only when it accompanies or follows delivery of the Prospectus/Information Statement. This SAI should be read in conjunction with the

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Prospectus/Information Statement. Investors may obtain a free copy of the Prospectus/Information Statement by writing Putnam Investor Services by phone at 1-800-225-1581 or by mail at P.O. Box 219697, Kansas City, MO 64121-9697.

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| | |
|:---|:---|
| **Table of Contents** | |
|  **[Additional Information about the Acquiring ETFs](#sai91160_1)** | **4** |
|  **[Financial Statements](#sai91160_2)** | **4** |
|  **[Supplemental Financial Information](#sai91160_3)** | **6** |
|  **[Appendix A-1 — Statement of Additional Information of Franklin California Municipal Income ETF and Franklin Municipal Income ETF](#sai91160_4)** | **A-1** |
|  **[Appendix A-2 — Statement of Additional Information of Franklin Municipal High Yield ETF](#sai91160_5)** | **A-142** |
|  **[Appendix A-3 — Statement of Additional Information of Franklin New York Municipal ETF and Franklin Short-Term Municipal Income ETF](#sai91160_6)** | **A-280** |
|  **[Appendix A-4 — Statement of Additional Information of Franklin Massachusetts Municipal Income ETF, Franklin Minnesota Municipal Income ETF, Franklin New Jersey Municipal Income ETF, Franklin Ohio Municipal Income ETF and Franklin Pennsylvania Municipal Income ETF](#sai91160_7)** | **A-421** |

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**ADDITIONAL INFORMATION ABOUT THE ACQUIRING ETFS** 

Each Acquiring ETF is a newly-formed "shell" that has not yet commenced operations and has not published any annual or semi-annual shareholder reports. Each Acquiring ETF is expected to commence operations upon consummation of the Mergers and continue the operations of the corresponding Target Fund. Each Target Fund shall be the accounting and performance survivor in the Mergers, and each Acquiring ETF, as the corporate survivor in the Mergers, shall adopt the accounting and performance history of the corresponding Target Fund.

Attached hereto as Appendix A is the Preliminary Statement of Additional Information of each Acquiring ETF (each, an "Acquiring ETF SAI").

**FINANCIAL STATEMENTS** 

The Acquiring ETFs have not yet commenced operations as of the date of this SAI and, therefore, financial statements for the Acquiring ETFs are not available.

The following documents relating to the Target Funds have been filed with the Securities and Exchange Commission and are incorporated into this SAI by reference:

- [the statement of additional information of Putnam California Tax Exempt Income Fund, dated January 30, 2025, as supplemented (File Nos. 811-03630 and 002-81011);](http://www.sec.gov/Archives/edgar/data/711402/000092881625000144/a2_put2501027pro.htm)

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam California Tax Exempt Income Fund's Form N-CSR for the fiscal year ended September 30, 2024 (File No. 811-03630)](http://www.sec.gov/Archives/edgar/data/711402/000092881624001969/a2_tsr-20240930.htm); <br>

[the unaudited financial highlights and financial statements included in Putnam California Tax Exempt Income Fund's Form N-CSRS for the six-month period ended March 31, 2025 (File No. 811-03630)](http://www.sec.gov/Archives/edgar/data/711402/000092881625000656/a2_tsr-20250331.htm); <br>

- [the statement of additional information of Putnam Massachusetts Tax Exempt Income Fund, dated September 30, 2024, as supplemented (File Nos. 811-04518 and 33-5416);](http://www.sec.gov/Archives/edgar/data/792288/000092881624001564/a2_put2409teifpro.htm)

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Massachusetts Tax Exempt Income Fund's Form N-CSR for the fiscal year ended May 31, 2025 (File No. 811-04518)](http://www.sec.gov/Archives/edgar/data/../../../ix?doc=/Archives/edgar/data/792288/000113322825007791/pmteif-efp16628_ncsr.htm); <br>

- [the statement of additional information of Putnam Minnesota Tax Exempt Income Fund, dated September 30, 2024, as supplemented (File Nos. 811-04527 and 33-8916);](http://www.sec.gov/Archives/edgar/data/792288/000092881624001564/a2_put2409teifpro.htm)

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Minnesota Tax Exempt Income Fund's Form N-CSR for the fiscal year ended May 31, 2025 (File No. 811-04527)](http://www.sec.gov/Archives/edgar/data/../../../ix?doc=/Archives/edgar/data/794612/000113322825007776/pmteif-efp16631_ncsr.htm); <br>

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- [the statement of additional information of Putnam New Jersey Tax Exempt Income Fund, dated September 30, 2024, as supplemented (File Nos. 811-05977 and 33-32550);](http://www.sec.gov/Archives/edgar/data/792288/000092881624001564/a2_put2409teifpro.htm)

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam New Jersey Tax Exempt Income Fund's Form N-CSR for the fiscal year ended May 31, 2025 (File No. 811-05977)](http://www.sec.gov/Archives/edgar/data/../../../ix?doc=/Archives/edgar/data/0000857463/000113322825007781/pnjteif-efp16634_ncsr.htm); <br>

- [the statement of additional information of Putnam New York Tax Exempt Income Fund, dated March 31, 2025, as supplemented (File Nos. 811-03741 and 002-83909);](http://www.sec.gov/Archives/edgar/data/719712/000092881625000422/a2_put2503030pro.htm)

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam New York Tax Exempt Income Fund's Form N-CSR for the fiscal year ended November 30, 2024 (File No. 811-03741)](http://www.sec.gov/Archives/edgar/data/719712/000092881625000157/tsr-20241130.htm); <br>

[the unaudited financial highlights and financial statements included in Putnam New York Tax Exempt Income Fund's Form N-CSRS for the six-month period ended May 31, 2025 (File No. 811-03741);](http://www.sec.gov/Archives/edgar/data/719712/000113322825007764/pnyteif-efp16652_ncsrs.htm) <br>

- [the statement of additional information of Putnam Ohio Tax Exempt Income Fund, dated September 30, 2024, as supplemented (File Nos. 811-04528 and 33-8924);](http://www.sec.gov/Archives/edgar/data/792288/000092881624001564/a2_put2409teifpro.htm)

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Ohio Tax Exempt Income Fund's Form N-CSR for the fiscal year ended May 31, 2025 (File No. 811-04528)](http://www.sec.gov/Archives/edgar/data/../../../ix?doc=/Archives/edgar/data/0000794616/000113322825007783/poteif-efp16637_ncsr.htm); <br>

- [the statement of additional information of Putnam Pennsylvania Tax Exempt Income Fund, dated September 30, 2024, as supplemented (File Nos. 811-05802 and 33-28321);](http://www.sec.gov/Archives/edgar/data/792288/000092881624001564/a2_put2409teifpro.htm)

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Pennsylvania Tax Exempt Income Fund's Form N-CSR for the fiscal year ended May 31, 2025 (File No. 811-05802)](http://www.sec.gov/Archives/edgar/data/../../../ix?doc=/Archives/edgar/data/794615/000113322825007779/ppteif-efp16640_ncsr.htm); <br>

[the statement of additional information of Putnam Funds Trust on behalf of Putnam Short-Term Municipal Income Fund, dated March 31, 2025, as supplemented (File Nos. 811-07513 and 333-00515);](http://www.sec.gov/Archives/edgar/data/1005942/000092881625000425/0000928816-25-000425-index.html) <br>

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Short-Term Municipal Income Fund's Form N-CSR for the fiscal year ended November 30, 2024 (File No. 811-07513)](http://www.sec.gov/Archives/edgar/data/1005942/000092881625000158/a2_tsr-20241130.htm); <br>

[the unaudited financial highlights and financial statements included in Putnam Short-Term Municipal Income Fund's Form N-CSRS for the six-month period ended May 31, 2025 (File No. 811-07513);](http://www.sec.gov/Archives/edgar/data/1005942/000113322825007768/pstmif-efp16649_ncsrs.htm) <br>

- [the statement of additional information of Putnam Tax Exempt Income Fund, dated January 30, 2025, as supplemented (File Nos. 811-02675 and 002-57165);](http://www.sec.gov/Archives/edgar/data/205802/000092881625000127/a2_put2501011pro.htm)

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Tax Exempt Income Fund's Form N-CSR for the fiscal year ended September 30, 2024 (File No. 811-02675)](http://www.sec.gov/Archives/edgar/data/205802/000092881624001971/tsr-20240930.htm); <br>

- [the unaudited financial highlights and financial statements included in Putnam Tax Exempt Income Fund's Form N-CSRS for the six-month period ended March 31, 2025 (File No. 811-02675)](http://www.sec.gov/Archives/edgar/data/205802/000092881625000658/tsr-20250331.htm);

[the statement of additional information of Putnam Tax Free Income Trust on behalf of Putnam Tax-Free High Yield Fund, dated November 30, 2024, as supplemented (File Nos. 811-04345 and 002-98790);](http://www.sec.gov/Archives/edgar/data/771951/000092881624001993/a2_tfit.htm) <br>

[the Report of Independent Registered Public Accounting Firm and the audited financial highlights and financial statements included in Putnam Tax-Free High Yield Fund's Form N-CSR for the fiscal year ended July 31, 2024 (File No. 811-04345)](http://www.sec.gov/Archives/edgar/data/771951/000092881624001596/tsr-20240731.htm); and <br>

- [the unaudited financial highlights and financial statements included in Putnam Tax-Free High Yield Fund's Form N-CSRS for the six-month period ended January 31, 2025 (File No. 811-04345)](http://www.sec.gov/Archives/edgar/data/771951/000092881625000419/tsr-20250131.htm).

------

PricewaterhouseCoopers LLP, 101 Seaport Boulevard, Boston, Massachusetts 02210, is each Acquiring ETF's and Target 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 audited financial statements for each Target Fund incorporated by reference into the Prospectus/Information Statement and this 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.

**SUPPLEMENTAL FINANCIAL INFORMATION** 

Rule 6-11(d)(2) under Regulation S-X requires that, with respect to any fund acquisition, registered investment companies must provide certain supplemental financial information in lieu of pro forma financial statements required by Regulation S-X. For this reason, pro forma financial statements of the Acquiring ETFs are not included in this SAI.

A table showing the fees and expenses of the each Acquiring ETF and the respective Target Fund and the fees and expenses of each Acquiring ETF on a pro forma basis after giving effect to the proposed Merger is included in the section titled "*How do the management fees and other expenses of the Funds compare, and what are they estimated to be following the Merger*?" of the Prospectus/Information Statement under the discussion of each Merger.

Each Merger is not expected to result in a material change to the Target Funds' investment portfolios due to the investment restrictions of the corresponding Acquiring ETFs. Accordingly, a schedule of investments modified to show the effects of the change is not required and is not included for the Target Funds. Notwithstanding the foregoing, changes may be made to a Target Fund's portfolio in advance of the Mergers and/or each Acquiring ETF's portfolio following the Mergers.

There are no material differences between the accounting, tax, and valuation policies of the Target Funds and the Acquiring ETFs.

------

**APPENDIX A-1** 

**PUTNAM ETF TRUST** 

**STATEMENT OF ADDITIONAL INFORMATION ("SAI") OF FRANKLIN CALIFORNIA MUNICIPAL INCOME ETF AND FRANKLIN MUNICIPAL INCOME ETF** 

------

**The information in this Statement of Additional Information is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.** 

**Subject to completion, May 30, 2025** 

[ ], 2025

Putnam ETF Trust

---

| | | |
|:---|:---|:---|
| **Fund** | **Symbol** | **Principal U.S. Listing Exchange** |
| &nbsp;&nbsp;&nbsp; Franklin California Municipal Income ETF <br> ("California Municipal Income ETF") <br>| [ ]<br>| [NYSE Arca, Inc.]<br>|
| &nbsp;&nbsp;&nbsp; Franklin Municipal Income ETF<br> ("Municipal Income ETF") <br>| [ ]<br>| [NYSE Arca, Inc.]<br>|

---

**STATEMENT OF ADDITIONAL INFORMATION** 

This Statement of Additional Information ("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.

Each Fund has not commenced operations as of the date of this prospectus. Simultaneous with each Fund's commencement of operations, which is anticipated to occur on or about [ ], California Municipal Income ETF and Municipal Income ETF will acquire the assets and assume the liabilities of the Putnam California Tax Exempt Income Fund and Putnam Tax Exempt Income Fund (each, a "Predecessor Fund"), respectively, in a reorganization (the "Reorganization"). As a result of the Reorganization, each Fund will adopt the performance and financial history of the respective Predecessor Fund's class R6 shares. The audited financial statements and report of the respective Predecessor Fund's independent registered public accounting firm in the respective Predecessor Fund's Form N-CSR, for the fiscal year ended [ ], are incorporated by reference into this SAI, which means that they are part of this SAI for legal purposes

Part I of this SAI contains specific information about each Fund listed above (references to the "Fund" mean each Fund listed on this cover page, unless otherwise noted). Part II includes information about the Fund and other Putnam mutual funds and exchange-traded funds (collectively, the "Putnam funds").

For a free copy of the Fund's current prospectus and, when available, shareholder reports, and/or financial statements, call Putnam Investor Services at 1-800-225-1581, write P.O. Box 219697, Kansas City, MO 64121-9697 or visit www.franklintempleton.com.

A-2 [ -SAI] [ ]

------

**Table of Contents** 

---

| | |
|:---|:---|
|  **PART I** |  |
|  **[FUND ORGANIZATION AND CLASSIFICATION](#sai91160_1a)** | **A-4** |
|  **[INVESTMENT RESTRICTIONS](#sai91160_2a)** | **A-4** |
|  **[CHARGES AND EXPENSES](#sai91160_3a)** | **A-5** |
|  **[PORTFOLIO MANAGERS](#sai91160_4a)** | **A-8** |
|  **[STATE SPECIFIC INFORMATION](#sai91160_5a)** | **A-11** |
|  **[FINANCIAL STATEMENTS](#sai91160_6a)** | **A-12** |
|  **PART II** |  |
|  **[TAXES](#sai91160_7a)** | **A-72** |
|  **[MANAGEMENT](#sai91160_8a)** | **A-86** |
|  **[DISCLOSURE OF PORTFOLIO INFORMATION](#sai91160_9a)** | **A-105** |
|  **[INFORMATION SECURITY RISKS](#sai91160_10a)** | **A-106** |
|  **[PROXY VOTING GUIDELINES AND PROCEDURES](#sai91160_11a)** | **A-107** |
|  **[SECURITIES RATINGS](#sai91160_12a)** | **A-107** |
|  **[APPENDIX A - PROXY VOTING GUIDELINES OF THE PUTNAM FUNDS](#sai91160_13a)** | **A-112** |

---

------

**SAI** 

**PART I** 

**FUND ORGANIZATION AND CLASSIFICATION** 

The Fund is a diversified series of Putnam ETF Trust (the "Trust"). The Trust is a Delaware statutory trust organized on December 22, 2020.

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.

Each share has one vote per dollar of net asset value represented by such share.

Shares of all classes vote together as a single class except when otherwise required by law or as determined by the Trustees. The Trustees may take many actions affecting the fund without shareholder approval, including under certain circumstances merging the 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 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.

**Information about the Summary Prospectus, Prospectus, and SAI** 

The Fund has entered into contractual arrangements with an investment adviser, distributor, transfer 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 by a shareholder against or on behalf of the Trust (or its series), including claims against Trustees and Officers, must be brought in courts of the State of Delaware.

**INVESTMENT RESTRICTIONS** 

The Fund has adopted the fundamental investment restrictions below for the protection of shareholders. Fundamental investment restrictions may not be changed without a vote of a majority of the outstanding voting securities. The Investment Company Act of 1940, as amended, 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.

**As fundamental investment restrictions, the Fund may not and will not:** 

(1) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at the time the borrowing is made.

(2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws.

(3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities 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.

------

(4) Purchase or sell commodities or commodity contracts, except that the Fund may purchase and sell financial futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities.

(5) Make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.

(6) With respect to 75% of its total assets, invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the Fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities or to securities issued by other investment companies.

(7) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of nongovernmental issuers) if, as a result of such purchase, more than 25% of the Fund's total assets would be invested in any one industry.

(8) With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer.

(9) Issue any class of securities which is senior to the Fund's shares of beneficial interest, except for permitted borrowings.

For purposes of the Fund's fundamental policy on commodities and commodities contracts (#4 above), at the time of the establishment of the policy, swap contracts on financial instruments or rates were not within the understanding of the terms "commodities" or "commodity contracts," and notwithstanding any federal legislation or regulatory action by the Commodity Futures Trading Commission ("CFTC") that subject such swaps to regulation by the CFTC, the Fund will not consider such instruments to be commodities or commodity contracts for purposes of this policy.

For purposes of the Fund's fundamental policy on industry concentration (#7 above), 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.

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.

**CHARGES AND EXPENSES** 

**Creation/Redemption Transaction Fees** 

The following table shows the standard transaction fees for creations and redemptions.

---

| | |
|:---|:---|
| **Standard Creation/Redemption Transactions Fee (in kind)** | **Standard Creation/Redemption Transactions Fee (in cash)** |
| [ ] | [ ] |

---

**Management fees** 

Franklin Advisers, Inc. (the "Investment Manager") serves as the Fund's investment manager. Under the Fund's management agreement with the Investment Manager (the "Management Contract"), the Fund pays an annual all-inclusive management fee to the Investment Manager as shown below. The management fee is based on the Fund's average daily net assets and is calculated and accrued daily. In consideration of the management fee, the Investment Manager pays all expenses incurred by the Fund, or reimburses the Fund for, all of the Fund's organizational and other operating expenses, excluding only: (i) interest and taxes (including, but not limited to, income, excise, transfer and withholding taxes); (ii) expenses of the Fund incurred with respect to the acquisition and disposition of portfolio securities, commodities or other financial instruments and the execution of portfolio transactions, including brokerage commissions; (iii) expenses incurred in connection with any distribution plan adopted by the Fund in compliance with Rule 12b-1 under the Investment Company Act of 1940, as amended, including distribution fees;

------

(iv) expenses of printing and mailing proxy materials to shareholders of the Fund; (v) all other expenses incidental to holding meetings of the Fund's shareholders, including proxy solicitations therefor; (vi) litigation expenses (including, but not limited to, any indemnification obligation, attorneys' fees, expenses, costs, judgments, amounts paid in settlement, fines, penalties, fees of expert witnesses, document production fees, and all other liabilities whatsoever incurred or paid by the Fund or a person indemnified by the Fund); (vii) the fee payable to the Investment Manager hereunder; (viii) any extraordinary expenses (which, for the avoidance of doubt, do not include expenses related to the organization of any subsidiary for a fund or the ongoing corporate expenses of maintaining such subsidiary) and (ix) acquired fund fees and expenses.

Management Fee:

California Municipal Income ETF: 0.35%

Municipal Income ETF: 0.30%

**Brokerage commissions** 

Because the Fund has yet to commence investment operations as of the date of this SAI, the Fund has not paid any brokerage commissions.

Because the Fund has yet to commence investment operations, the Fund does not hold securities of its regular broker-dealers (or affiliates of such broker-dealers).

**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, the Investment Manager furnishes a continuing investment program for the Fund and makes investment decisions on its behalf. Subject to the control of the Trustees, the Investment Manager also manages the Fund's other affairs and business.

The table below shows the value of each Trustee's holdings in all registered investment companies in the Franklin Templeton family of funds overseen by the Trustee as of December 31, [2024].

---

| | |
|:---|:---|
| <br>**Trustees** | **Aggregate Dollar Range of Equity**<br>**Securities in All Registered Investment**<br>**Companies in the Franklin Templeton**<br>**Fund Complex Overseen by Trustee ($)** |
|  **Independent Trustees** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Liaquat Ahamed | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Barbara M. Baumann | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Katinka Domotorffy | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Catharine Bond Hill | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gregory G. McGreevey |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jennifer Williams Murphy | $10001-$50000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Marie Pillai | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; George Putnam III | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Manoj P. Singh | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mona K. Sutphen | over $100,000 |
|  **Interested Trustees** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jane E. Trust |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Robert L. Reynolds | over $100,000 |

---

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 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 Fund had not yet commenced investment operations as of the date of this SAI.

The following table shows the fees paid to each Trustee by all of the Putnam funds for services rendered during the calendar year ended December 31, [ ]. As the Fund has not yet commenced operations, no fees have been paid by the Fund. Certain Independent Trustees who serve in leadership positions of the Board of Trustees or Board committees receive additional compensation, which is included in the fees shown below.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Trustees** | **Aggregate<br>compensation<br>from the Fund<sup>1</sup>** | **Pension or<br>retirement<br>benefits<br>accrued as<br>part of Fund<br>expenses** | **Estimated<br>annual benefits<br>from Franklin<br>Templeton<br>fund complex<br>upon<br>retirement<sup>2</sup>** | **Total<br>compensation<br>from Franklin<br>Templeton fund<br>complex** |
|  **Independent Trustees** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Liaquat Ahamed | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Barbara M. Baumann | N/A | N/A | N/A | $[464,500] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Katinka Domotorffy | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Catharine Bond Hill | N/A | N/A | N/A | $[368,660] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Kenneth R. Leibler<sup>3</sup>  | N/A | N/A | N/A | $[295,160] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gregory G. McGreevey<sup>4</sup>  | N/A | N/A | N/A | $[189,590] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jennifer Williams Murphy | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Marie Pillai | N/A | N/A | N/A | $[355,320] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; George Putnam III | N/A | N/A | $[130,333] | $[407,000] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Manoj P. Singh | N/A | N/A | N/A | $[407,000] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mona K. Sutphen | N/A | N/A | N/A | $[382,000] |
|  **Interested Trustees** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Robert L. Reynolds<sup>5</sup>  | N/A | N/A | N/A | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jane E. Trust<sup>5</sup>  | N/A | N/A | N/A | N/A |

---

<sup>1</sup> Certain Trustees are also owed compensation deferred pursuant to a Trustee Compensation Deferral Plan.

<sup>2</sup> Estimated benefits for each Trustee are based on Trustee fee rates for calendar years 2003, 2004 and 2005.

<sup>3</sup> Mr. Leibler retired from the Board of Trustees effective June 30, 2024.

<sup>4</sup> Mr. McGreevey was appointed to the Board of Trustees on May 17, 2024.

<sup>5</sup> Mr. Reynolds and Ms. Trust are not compensated by the Fund for their service as Trustees because of their affiliation with the Investment Manager.

Under a retirement plan for Trustees of 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** 

Because the Fund had not commenced operations prior to the date of this SAI, the Fund has not issued any shares.

**PORTFOLIO MANAGERS** 

**Other Accounts Managed by the Portfolio Managers** 

The table below identifies the portfolio managers, the number of accounts (other than the Fund) for which the portfolio managers have day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. For each category, the number of accounts and total assets in the accounts where fees are based on performance are also indicated, as applicable. Unless noted otherwise, all information is provided as of [ ].

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Portfolio Manager** | **Type of Account** | **Number of**<br> **Accounts**<br> **Managed** | **Total Assets<br>Managed<br>(Millions) ($)** | **Number of Accounts<br>Managed for which<br>Advisory Fee is<br>Performance-Based** | **Assets Managed for<br>which Advisory Fee<br>is**<br> **Performance-Based<br>(Millions) ($)** |
|  **California Municipal Income ETF** | **California Municipal Income ETF** | **California Municipal Income ETF** |  |  |  |
|  John Bonelli | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Michael Conn | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Garrett L. Hamilton | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

---

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  Christopher Sperry | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  John Wiley | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  **Municipal Income ETF** |  |  |  |  |  |
|  Benjamin C. Barber | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  James Conn | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Garrett L. Hamilton | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  Francisco Rivera | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Daniel Workman | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

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**Compensation of portfolio managers** 

The Investment Manager seeks to maintain a compensation program that is competitively positioned to attract, retain and motivate top-quality investment professionals. Portfolio managers receive a base salary, a cash incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed annually, and the level of compensation is based on individual performance, the salary range for a portfolio manager's level of responsibility and Franklin Templeton guidelines. Portfolio managers are provided no financial incentive to favor one fund or account over another. Each portfolio manager's compensation consists of the following three elements:

**Base salary** Each portfolio manager is paid a base salary.

**Annual bonus** Annual bonuses are structured to align the interests of the portfolio manager with those of the Fund's shareholders. Each portfolio manager is eligible to receive an annual bonus. Bonuses generally are split between cash (50% to 65%) and restricted shares of Franklin Resources, Inc. ("Resources") stock and mutual fund shares. The deferred equity-based compensation is intended to build a vested interest of the portfolio manager in the financial performance of both Resources and mutual funds advised by the Investment Manager. The bonus plan is intended to provide a competitive level of annual bonus compensation that is tied to the portfolio manager achieving consistently strong investment performance, which aligns the financial incentives of the portfolio manager and Fund shareholders. The Chief Investment Officer of the Investment Manager and/or other officers of the Investment Manager, with responsibility for the Fund, have discretion in the granting of annual bonuses to portfolio managers in accordance with Franklin Templeton guidelines. The following factors are generally used in determining bonuses under the plan:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Investment performance.* Primary consideration is given to the historic investment performance over the 1,
3 and 5 preceding years of all accounts managed by the portfolio manager. The pre-tax performance of each fund managed is measured relative to a relevant peer group and/or applicable benchmark as appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Non-investment performance.* The more qualitative contributions of
the portfolio manager to the Investment Manager's business and the investment management team, including professional knowledge, productivity, responsiveness to client needs and communication, are evaluated in determining the amount of any
bonus award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Responsibilities.* The characteristics and complexity of funds managed by the portfolio manager are
factored in the Investment Manager's appraisal.

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**Additional long-term equity-based compensation** Portfolio managers may also be awarded restricted shares or units of Resources stock or restricted shares or units of one or more mutual funds. Awards of such deferred equity-based compensation typically vest over time, so as to create incentives to retain key talent.

**Benefits** Portfolio managers also participate in benefit plans and programs available generally to all employees of the Investment Manager.

**Portfolio managers' securities ownership** 

Because the Fund has not commended operations prior to the date of this SAI, the portfolio managers did not own any shares of the Fund as of the date of this SAI.

See "Management—Portfolio Transactions—Potential conflicts of interest in managing multiple accounts" in Part II of this SAI for information on how the Investment Manager addresses potential conflicts of interest resulting from an individual's management of more than one account.

**STATE SPECIFIC INFORMATION** 

<u>General information</u>. The fund invests in tax exempt investments that are issued by the State of California ("California") or its political subdivisions, agencies, authorities or other government entities. As such, California's economic conditions and the ability of its issuers to make principal and interest payment on their securities will have a direct impact on the fund's performance.

California has a population of approximately 39.1 million people and is the most populous state in the United States. California has a diverse economy that is comprised of the finance, insurance, real estate, high technology, trade, entertainment, manufacturing, government, tourism, construction, and services sectors. California's economy generally mirrors the composition of the national economy. California's economy has improved and benefitted from broad-based growth since the end of the 2009 recession. After ten years of expansion, the COVID-19 pandemic induced a recession in February 2020 that ended in April 2020. California's economy remained the fifth largest economy in the world in 2023, with a gross domestic product of $3.9 trillion. California's unemployment was 5.4% as of November 2024, which represented an increase of 0.3% from November 2023.

The 2024 Budget Act, enacted on June 26, 2024, as amended June 29, 2024, includes $22.2 billion in reserves, consisting of approximately $17.6 billion in the Budget Stabilization Account, approximately $1.1 billion in the Public School System Stabilization Account, and an estimated $3.5 billion in the Special Fund for Economic Uncertainties ("SFEU"). California's budget remains susceptible to various risks, such as the threat of another recession, inflation, personal and corporation income tax volatility, future tax deadline delays, interest rate volatility, capital gains volatility, global relations and trade, health care costs, the unpredictability of any epidemics or pandemics (including the COVID-19 pandemic), housing constraints, climate change, energy risks, cybersecurity risks, as well as significant unfunded liabilities with respect to state retiree health benefits and its two main retirement systems, the California Public Employees' Retirement System and the California State Teachers' Retirement System.

The beginning General Fund balance for fiscal year 2023-2024 in the 2024 Budget Act was $20.7 billion higher than was previously estimated in the 2023 Budget Act, primarily due to past year adjustments to spending that decreased the estimate of spending by $39.4 billion, a revised estimate of the beginning balance of the prior year that includes an increase of $7.9 billion, and a revised estimate of revenues and transfers in the past year decreasing revenues and transfers by $26.6 billion. The 2024 Budget Act estimate for fiscal year 2023-2024 General Fund revenues and transfers decreased by $19.3 billion as compared to the 2023 Budget Act, primarily due to lower tax revenues. The latest estimate of General Fund expenditures for fiscal year 2023-2024 decreased from the 2023 Budget Act by $2.9 billion. The 2024 Budget Act projects an ending balance in the SFEU of $2.9 billion for fiscal year 2023-2024, $0.9 billion lower than the 2023 Budget Act estimate of $3.8 billion.

As of July 1, 2024, California had approximately $72.3 billion of outstanding general obligation bonds, of which $71.7 billion were payable primarily from California's General Fund and $634.5 million were self-liquidating bonds. As of July 1, 2024, California had approximately $8.6 billion of outstanding lease revenue bonds payable principally from the General Fund or from lease payments paid from operating budgets, which are primarily, but not exclusively, derived from the General Fund.

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California's Constitution limits its ability to increase property taxes in order to raise revenue by requiring tax increases to be approved by two-thirds vote in each house of the Legislature. Proposition 13, adopted in 1978, limits the rate of ad valorem property taxes to 1% of the full cash value of real property and restricts the reassessment of property to 2% per year, except on new construction or change of ownership.

California's general obligation bonds have been assigned the long-term credit rating of AA from Fitch Ratings, Aa1 from Moody's Investors Services, Inc., and AA+ from S&P Global Ratings.

California is subject to natural hazard risks such as earthquakes and forest fires, which can cause localized economic harm. Natural hazards could limit the ability of governments to repay debt, particularly if a leased asset is destroyed. Cycles of drought, flooding, fires and mudslides are also concerns insofar as they affect agricultural production, power generation and drinking water supplies.

Tax information. The prospectus describes generally the tax treatment of distributions by the fund. This section of the SAI and the section entitled "Taxes" in Part II of this SAI include additional information concerning certain state and federal tax consequences of an investment in the fund.

This section of the SAI is based on state laws, judicial decisions and other administrative materials interpreting state law, all of which are subject to changes that may or may not be retroactive. Prospective investors should be aware that an investment in a state tax-exempt fund may not be suitable for persons who do not otherwise receive income subject to income taxes of such state. You should consult your tax advisor to see how investing in the fund will affect your own tax situation.

From time to time legislation may be introduced or litigation may arise that would change the tax treatment of exempt-interest dividends. Such litigation or legislation may have the effect of raising the state or other taxes payable by shareholders on such dividends. Shareholders should consult their tax advisers for the current law on exempt-interest dividends.

Distributions that the fund properly reports to you as "exempt-interest dividends" derived from interest on (i) California qualifying state and local obligations that are tax-exempt pursuant to California law and (ii) qualifying obligations of the United States, the District of Columbia and certain United States possessions will generally be exempt from the California personal income tax (but not California franchise and corporate income tax). Distributions are so treated whether paid in cash or reinvested in additional shares.

Unlike federal law, California law provides that no portion of the exempt-interest dividends will constitute an item of tax preference for California personal alternative minimum tax purposes. Because, unlike federal law, California law does not impose personal income tax on an individual's social security benefits, the receipt of California exempt-interest dividends will have no effect on an individual's California personal income tax.

In order for any portion of the fund's distributions to be exempt from California personal income tax, the fund and its investments must meet certain requirements. The fund or its investments may fail to meet the state's requirements for a variety of reasons, which may increase the amount of taxes payable by shareholders. In addition, the fund's distributions may be subject to other state or local taxes.

Interest on indebtedness incurred or continued by shareholders or related parties to purchase or carry shares of the fund is not deductible for California personal income tax purposes. Any loss realized upon the redemption of shares within six months from the date of purchase of such shares and following receipt of a long-term capital gains distribution on such shares is treated as long-term capital loss to the extent of such long-term capital gains distribution. Finally, any loss realized upon the redemption or other disposition of shares may be disallowed under the "wash sale" rules if within a period beginning 30 days before and ending 30 days after the redemption or other disposition, other shares of the fund or other substantially identical stock or securities are acquired. The fund may at times buy tax-exempt investments at a discount from the price at which they were originally issued, especially during periods of rising interest rates. For federal income tax and California personal income tax purposes, some or all of this market discount will be included in the fund's ordinary income and will be taxable to you as such when it is distributed.

**FINANCIAL STATEMENTS** 

The Fund has not yet commenced operations as of the date of this SAI and, therefore, financial statements for the Fund are not available.

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Each Predecessor Fund's Form N-CSR for the fiscal year ended [ ] ([ ]) contains that Predecessor Fund's audited financial statements, accompanying notes and the report of [ ], an independent registered public accounting firm, all of which are incorporated by reference into this SAI. These audited financial statements are available free of charge upon request by calling 1-800-225-1581.

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Throughout this SAI, references to the fund's investment manager (the "Investment Manager") shall refer to the entity indicated for each fund in the table below:

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Investment** <br> **Manager**  | Franklin Advisers, Inc.<br> ("Franklin Advisers") | Putnam Investment Management, LLC ("Putnam<br>Management") |
| &nbsp;&nbsp;&nbsp; **Funds** | Franklin California Municipal Income ETF | Putnam BDC Income ETF |
|  | Franklin Massachusetts Municipal Income ETF | Putnam BioRevolution<sup>TM</sup> ETF |
|  | Franklin Minnesota Municipal Income ETF | Putnam Emerging Markets Ex-China ETF |
|  | Franklin Municipal High Yield ETF | Putnam Focused Large Cap Growth ETF |
|  | Franklin Municipal Income ETF | Putnam Focused Large Cap Value ETF |
|  | Franklin New Jersey Municipal Income ETF | Putnam PanAgora ESG Emerging Markets Equity |
|  | Franklin New York Municipal Income ETF | ETF |
|  | Franklin Ohio Municipal Income ETF | Putnam PanAgora ESG International Equity ETF |
|  | Franklin Pennsylvania Municipal Income ETF | Putnam Sustainable Future ETF |
|  | Franklin Short-Term Municipal Income ETF | Putnam Sustainable Leaders ETF |
|  | Putnam ESG Core Bond ETF |  |
|  | Putnam ESG High Yield ETF |  |
|  | Putnam ESG Ultra Short ETF |  |

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**THE PUTNAM ETFS** 

**STATEMENT OF ADDITIONAL INFORMATION ("SAI")** 

**PART II** 

**GENERAL DESCRIPTION OF THE FUNDS** 

Each fund is an actively managed exchange-traded fund ("ETF"). Each fund issues and redeems shares on a continuous basis at net asset value per share ("NAV") in aggregations of a specified number of shares called "Creation Units." Creation Units are generally issued in exchange for portfolio securities and/or cash. Shares are listed and traded on an exchange. Shares trade in the secondary market at market prices that may differ from the shares' NAV. Shares are not individually redeemable, but are redeemable only in Creation Unit aggregations, also in exchange for portfolio securities and/or cash. Shareholders who are not Authorized Participants (as defined herein), therefore, will not be able to purchase or redeem shares directly with or from a fund. Instead, most shareholders who are not Authorized Participants will buy and sell shares in the secondary market through a broker.

**BUYING AND SELLING SHARES** 

**Book-Entry Only System** 

The Depository Trust Company ("DTC") acts as securities depository for the shares. Shares of each fund are represented by securities registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. Certificates will not be issued for shares.

DTC, a limited-purpose trust company, was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among DTC participants in such securities through electronic book-entry changes in accounts of the DTC participants, thereby eliminating the need for physical movement of securities certificates. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. Access to the DTC system is also available to others such as banks, brokers,

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dealers, and trust companies that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly.

Beneficial ownership of shares is limited to DTC participants and persons holding interests through DTC participants. Ownership of beneficial interests in shares (owners of beneficial interests are referred to herein as Beneficial Owners) is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC participants) and on the records of DTC participants (with respect to indirect DTC participants and Beneficial Owners that are not DTC participants). Beneficial Owners will receive from or through a DTC participant a written confirmation relating to their purchase of shares.

Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the trust and DTC, DTC is required to make available to the trust upon request and for a fee to be charged to the trust a listing of the shares of each fund held by each DTC participant. The trust shall inquire of each such DTC participant as to the number of Beneficial Owners holding fund shares, directly or indirectly, through such DTC participant. The trust shall provide each such DTC participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC participant may reasonably request, in order that such notice, statement or communication may be transmitted by such DTC participant, directly or indirectly, to such Beneficial Owners. In addition, the trust shall pay to each such DTC participant a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements.

Share distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all shares. DTC or its nominee, upon receipt of any such distributions, shall credit immediately DTC participants' accounts with payments in amounts proportionate to their respective beneficial interests in shares of each fund as shown on the records of DTC or its nominee. Payments by DTC participants to indirect DTC participants and Beneficial Owners of shares held through such DTC participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in a "street name," and will be the responsibility of such DTC participants.

The trust has no responsibility or liability for any aspect of the records relating to or notices to Beneficial Owners, or payments made on account of beneficial ownership interests in such shares, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests, or for any other aspect of the relationship between DTC and the DTC participants or the relationship between such DTC participants and the indirect DTC participants and Beneficial Owners owning through such DTC participants.

DTC may decide to discontinue providing its service with respect to shares at any time by giving reasonable notice to the trust and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the trust shall take action either to find a replacement for DTC to perform its functions at a comparable cost or, if such a replacement is unavailable, to issue and deliver printed certificates representing ownership of shares, unless the trust makes other arrangements with respect thereto satisfactory to the listing exchange.

**Creation Units** 

The trust issues and redeems shares of each fund only in Creation Unit aggregations on a continuous basis through Franklin Distributors, LLC ("Franklin Distributors"), the Fund's distributor, without a sales load, at its NAV next determined after receipt, on any Business Day (as defined herein), of an order in proper form. An Authorized Participant that is not a "qualified institutional buyer," as such term is defined under Rule 144A of the 1933 Act, will not be able to receive, as part of a redemption, restricted securities eligible for resale under Rule 144A.

A "Business Day" with respect to each fund is any day on which the listing exchange or the NYSE is open for business. As of the date of the prospectus, the listing exchange and the NYSE observe the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day (Washington's Birthday) (U.S.), Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day (U.S.), Labor Day (U.S.), Thanksgiving Day (U.S.), and Christmas Day.

To be eligible to place orders to purchase a Creation Unit of each fund, an entity must be an "Authorized Participant" which is a member or participant of a clearing agency registered with the SEC, which has a written agreement with Franklin Distributors, the fund's distributor, that allows the Authorized Participant to place orders for the purchase and redemption of Creation Units ("Participant Agreement"). All shares of each fund, however created, will be entered on the records of DTC in the name of Cede & Co. for the account of a DTC participant.

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Each fund reserves the right to adjust the prices of fund shares and the number of shares in a Creation Unit in the future to maintain convenient trading ranges for investors. Any adjustments would be accomplished through stock splits or reverse stock splits, which would have no effect on the net assets of each fund.

**Portfolio Deposit** 

The consideration for purchase of a Creation Unit generally consists of an in-kind deposit of a portfolio of securities ("Deposit Securities") designated by a fund (or in certain circumstances, cash in lieu of certain Deposit Securities) together with a deposit of a specified cash payment ("Cash Component") computed as described herein. Alternatively, each fund may issue and redeem Creation Units in exchange for a specified all-cash payment ("Cash Deposit"). Together, the Deposit Securities (including any cash in lieu amounts) and the Cash Component or, alternatively, the Cash Deposit, constitute the "Portfolio Deposit," which represents the minimum initial and subsequent investment amount for a Creation Unit. In the event each fund requires Deposit Securities (including any cash in lieu amounts) and a Cash Component in consideration for purchasing a Creation Unit, the function of the Cash Component is to compensate for any differences between the NAV per Creation Unit and the Deposit Amount (as defined below). The Cash Component would be an amount equal to the difference between the NAV of the shares (per Creation Unit) and the "Deposit Amount," which is an amount equal to the market value of the Deposit Securities. If the Cash Component is a positive number (the NAV per Creation Unit exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (the NAV per Creation Unit is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Computation of the Cash Component excludes any stamp duty or other similar fees and expenses payable upon transfer of beneficial ownership of the Deposit Securities, which shall be the sole responsibility of the Authorized Participant.

A fund may determine, upon receiving a purchase order from an Authorized Participant, to accept a basket of securities or cash that differs from Deposit Securities or to permit the substitution of an amount of cash (i.e., a "cash-in-lieu" amount) to be added to the Cash Component to replace any Deposit Security. In cases where a fund purchases portfolio securities with cash, the Authorized Participant will reimburse the fund for, among other things, any difference between the market value at which the securities were purchased by the fund and the cash in lieu amount (which amount, at the Investment Manager's discretion, may be capped), applicable registration fees and taxes. Brokerage commissions incurred in connection with a fund's acquisition of Deposit Securities will be at the expense of the fund and will affect the value of all shares of the fund; but the Investment Manager may adjust the transaction fee to the extent the composition of the Deposit Securities changes or cash in lieu is added to the Cash Component to protect ongoing shareholders.

**Procedures for Creation Unit Purchases** 

All purchase orders must be placed for one or more Creation Units. All orders to purchase Creation Units must be received by Franklin Distributors or its agent no later than the closing time of regular trading hours on the listing exchange or the NYSE (ordinarily 4:00 p.m. Eastern Time) (the Closing Time) or at an earlier time set forth in the Participant Agreement or otherwise provided to all Authorized Participants on the date such order is placed in order for the creation of Creation Units to be effected based on the NAV of shares of each fund as next determined on such date after receipt of the order in proper form. The date on which an order to purchase Creation Units (or an order to redeem Creation Units as discussed below) is placed is referred to as the "Transmittal Date." Orders must be transmitted by an Authorized Participant by telephone or other transmission method acceptable to Franklin Distributors pursuant to procedures set forth in the Participant Agreement. Severe economic or market disruptions or changes, or telephone or other communications failure may impede the ability to reach Franklin Distributors or an Authorized Participant.

All orders to purchase Creation Units shall be placed with an Authorized Participant, as applicable, in the form required by such Authorized Participant. In addition, in the event an Authorized Participant places an order on behalf of an investor, the Authorized Participant may request the investor to make certain representations or enter into agreements with respect to the order, including payments of cash to pay the Cash Component, when required. Investors should be aware that their particular broker may not have executed a Participant Agreement and that, therefore, orders to purchase Creation Units have to be placed by the investor's broker through an Authorized Participant that has executed a Participant Agreement. In such cases there may be additional charges to such investor. At any given time, there may be only a limited number of broker-dealers that have executed a Participant Agreement.

Those placing orders to purchase Creation Units should afford sufficient time to permit proper submission of the order to Franklin Distributors or its agent prior to the applicable deadlines on the Transmittal Date. Authorized participants may ascertain the

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deadlines applicable to DTC and the Federal Reserve Bank wire system by contacting the operations department of the broker or depository institution effecting such transfer of Deposit Securities and Cash Component.

Portfolio Deposits must be delivered through the Federal Reserve System (for cash and government securities) and through DTC (for corporate securities) by an Authorized Participant that has executed a Participant Agreement. The Portfolio Deposit transfer must be ordered by the Authorized Participant on the Transmittal Date in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities through DTC to the account of each fund by no later than 1:00 p.m. Eastern Time of the next Business Day immediately following the Transmittal Date. In certain cases, Authorized Participants will purchase and redeem Creation Units of each fund on the same Transmittal Date. In these instances, each fund reserves the right to settle these transactions on a net basis.

All questions as to the number of Deposit Securities to be delivered, and the validity, form and eligibility (including time of receipt) for the deposit of any tendered securities, will be determined by each fund, whose determination shall be final and binding. For purchase orders composed solely of a Cash Component, the amount of cash equal to the Cash Component must be transferred directly to each fund's custodian through the Federal Reserve Bank wire transfer system in a timely manner so as to be received by each fund's custodian no later than 10:00 a.m. Eastern Time on the next Business Day immediately following such Transmittal Date. An order to purchase Creation Units is deemed received by Franklin Distributors on the Transmittal Date if (i) such order is received by Franklin Distributors or its agent not later than the Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on such Transmittal Date; and (ii) all other procedures set forth in the Participant Agreement are properly followed. However, if each fund's custodian does not receive the required Deposit Securities together with the associated Cash Component by 1:00 p.m. or, with respect to purchase orders composed solely of a Cash Component, the Cash Component by 10:00 a.m. on the next Business Day immediately following the Transmittal Date, such order will be deemed not in proper form and canceled. Upon written notice to Franklin Distributors, such canceled order may be resubmitted the following Business Day using a Portfolio Deposit as newly constituted to reflect the next calculated NAV of each fund. The delivery of Creation Units so purchased will occur not later than the second (2nd) Business Day following the day on which the purchase order is deemed received by Franklin Distributors.

Franklin Distributors or its agent will inform the transfer agent, the Investment Manager and each fund's custodian upon receipt of a purchase order. The custodian will then provide such information to the appropriate sub-custodian. The custodian will cause the sub-custodian to maintain an account into which the Deposit Securities (or the cash value of all or part of such securities, in the case of a cash purchase or "cash in lieu" amount) will be delivered. Deposit Securities must be delivered to an account maintained at the applicable local custodian. The trust must also receive, on or before the contractual settlement date, immediately available or same day funds estimated by the custodian to be sufficient to pay the Cash Component next determined after receipt in proper form of the purchase order, together with the purchase transaction fee described in Part I of this SAI.

Once the Trust has accepted a purchase order, the trust will confirm the issuance of a Creation Unit of a fund against receipt of payment, at such NAV as will have been calculated after receipt in proper form of such order. Franklin Distributors or its agent will then transmit a confirmation of acceptance of such order.

Creation Units will not be issued until the transfer of good title to the trust of the Deposit Securities and the payment of the Cash Component have been completed. When the sub-custodian has confirmed to the custodian that the required Deposit Securities (or the cash value thereof) have been delivered to the account of the relevant sub-custodian, Franklin Distributors and the Investment Manager will be notified of such delivery and the trust will issue and cause the delivery of the Creation Units.

Creation Units may be created in advance of receipt by each fund of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the NAV of the shares on the date the order is placed in proper form since, in addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component (including any transaction fees), plus (ii) 105% of the market value of the undelivered Deposit Securities ("Additional Cash Deposit"). The order shall be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to 3:00 p.m. Eastern Time on such date and federal funds in the appropriate amount are deposited with each fund's custodian by 10:00 a.m. Eastern Time the following Business Day. If the order is not placed in proper form by 3:00 p.m. or federal funds in the appropriate amount are not received by 10:00 a.m. the next Business Day, then the order may be deemed to be rejected and the Authorized Participant shall be liable to each fund for losses, if any, resulting therefrom. An additional amount of cash shall be required to be deposited with each fund, pending delivery of the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with each fund in an

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amount at least equal to 105% of the daily marked to market value of the missing Deposit Securities. In the sole discretion of each fund following the Business Day on which the order was received a fund may use the cash on deposit to purchase the missing Deposit Securities. Authorized Participants will be liable to each fund for the costs incurred by each fund in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities exceeds the market value of such Deposit Securities on the day the purchase order was deemed received by Franklin Distributors plus the brokerage and related transaction costs associated with such purchases and the Authorized Participant shall be liable to the fund for any shortfall between the cost to the fund of purchasing any missing Deposit Securities and the value of the collateral. Each fund will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Securities have been properly received by Franklin Distributors or purchased by each fund and deposited into each fund.

**Acceptance of Purchase Orders** 

Each fund and Franklin Distributors reserve the right to reject or revoke acceptance of a creation order transmitted to it in respect to the fund, if, including but not limited to, the following conditions are present(i) the order is not in proper form; (ii) the investor(s), upon obtaining the shares ordered, would own 80% or more of the currently outstanding shares of each fund; (iii) acceptance of the Deposit Securities would have certain adverse tax consequences to each fund; (iv) acceptance of the Portfolio Deposit would, in the opinion of the fund, be unlawful; or (v) in the event that circumstances outside the control of each fund, make it impossible to process creation orders for all practical purposes. Examples of such circumstances include, without limitation, acts of God; public service or utility problems such as earthquakes, fires, floods, extreme weather conditions, and power outages resulting in telephone, telecopy, and computer failures; wars; civil or military disturbances, including acts of civil or military authority or governmental actions; terrorism; sabotage; epidemics; riots; labor disputes; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting each fund, the Investment Manager, Franklin Distributors, DTC, NSCC, the transfer agent, or any other participant in the purchase process, and similar extraordinary events. Each fund and Franklin Distributors have the right to require information to determine beneficial share ownership for purposes of (ii) above should it so choose or to rely on a certification from a broker-dealer who is a member of the Financial Industry Regulatory Authority, Inc. as to the cost basis of Deposit Securities. Franklin Distributors or the fund shall notify a prospective purchaser of a Creation Unit and/or the Authorized Participant acting on the purchaser's behalf, of its rejection of the purchaser's order. Each fund, the transfer agent, and Franklin Distributors are under no duty, however, to verify or give notification of any defects or irregularities in any written order or in the delivery of a Portfolio Deposit, nor shall any of them incur any liability for the failure to give any such notification.

**Redemption of Creation Units** 

Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by each fund through the transfer agent and only on a Business Day through an Authorized Participant that has entered into a Participant Agreement. Each fund generally will not redeem shares in amounts less than Creation Unit-size aggregations. Beneficial Owners must accumulate enough shares to constitute a Creation Unit in order to have such shares redeemed by each fund. There can be no assurance, however, that there will be sufficient liquidity in the public trading market at any time to permit assembly of a Creation Unit. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of shares to constitute a redeemable Creation Unit.

The redemption proceeds for a Creation Unit may consist of a portfolio of securities (Fund Securities) – as announced by the Investment Manager, or its agent, on the Business Day of the request for redemption received in proper form – plus cash in an amount equal to the difference between the NAV of the shares being redeemed, as next determined after a receipt of the request in proper form, and the value of the Fund Securities ("Cash Redemption Amount"), less a redemption transaction fee and any variable fee as listed in Part I of this SAI. In the event that the Fund Securities have a value greater than the NAV of the shares being redeemed, a compensating cash payment to a fund equal to the differential plus the applicable redemption transaction fee is required to be made by or through an Authorized Participant by the redeeming shareholder. Notwithstanding the foregoing, each fund will substitute a cash-in-lieu amount to replace any Fund Security that is a non-deliverable instrument. The amount of the cash paid out in such cases will be equivalent to the value of the instrument listed as a Fund Security.

The right of redemption may be suspended or the date of payment postponed with respect to each fund (i) for any period during which the NYSE is closed (other than customary weekend and holiday closings); (ii) for any period during which trading on the NYSE is suspended or restricted; (iii) for any period during which an emergency exists as a result of which disposal of the shares or determination of each fund's NAV is not reasonably practicable; or (iv) in such other circumstances as is permitted by the SEC.

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Orders to redeem Creation Units must be delivered through an Authorized Participant. An order to redeem Creation Units is deemed received by each fund on the Transmittal Date if (i) such order is received in proper form by the transfer agent not later than the Closing Time (or one hour prior to the Closing Time (ordinarily 3:00 p.m. Eastern Time) for nonconforming orders) on such Transmittal Date; (ii) such order is accompanied or followed by the requisite number of shares of each fund and the Cash Redemption Amount specified in such order, which delivery must be made through DTC to each fund's custodian no later than 1:00 p.m., for the shares, and 3:00 p.m., for the Cash Redemption Amount, Eastern Time on the next Business Day following such Transmittal Date (the "DTC Cut-Off-Time"); and (iii) all other procedures set forth in the Participant Agreement are properly followed. The requisite Fund Securities and the Cash Redemption Amount will generally be transferred by the second (2nd) Business Day following the date on which such request for redemption is deemed received, which will generally be no more than seven (7) days after such request for redemption but may be up to fifteen days for funds that invest in foreign securities. In certain cases, Authorized Participants will redeem and purchase Creation Units of each fund on the same Transmittal Date. In these instances, each fund reserves the right to settle these transactions on a net basis.

If each fund determines, based on information available to each fund when a redemption request is submitted by an Authorized Participant, that: (i) the short interest of each fund in the marketplace (*i.e.,* the number of shares of the fund that have been sold short but have not yet been covered or closed out) is greater than or equal to 100%; and (ii) the orders in the aggregate from all Authorized Participants redeeming shares on a Business Day represent 25% or more of the outstanding shares of each fund, such Authorized Participant will be required to verify to each fund the accuracy of its representations that are deemed to have been made by submitting a request for redemption. If, after receiving notice of the verification requirement, the Authorized Participant does not verify the accuracy of its representations that are deemed to have been made by submitting a request for redemption in accordance with this requirement, its redemption request will be considered not to have been received in proper form.

To the extent contemplated by an Authorized Participant's agreement, in the event the Authorized Participant has submitted a redemption request in proper form but is unable to transfer all or part of the Creation Units to be redeemed to Franklin Distributors, on behalf of each fund, at or prior to the closing time of regular trading on the listing exchange on the date such redemption request is submitted, Franklin Distributors will nonetheless accept the redemption request in reliance on the undertaking by the Authorized Participant to deliver the missing fund shares as soon as possible, which undertaking shall be secured by the Authorized Participant's delivery and maintenance of collateral consisting of cash having a value (marked to market daily) at least equal to 105% of the value of the missing fund shares. The current procedures for collateralization of missing shares require, among other things, that any cash collateral shall be in the form of U.S. dollars in immediately-available funds and shall be held by each fund and marked to market daily, and that the fees of each fund and any sub-custodians in respect of the delivery, maintenance, and redelivery of the cash collateral shall be payable by the Authorized Participant. The Participant Agreement will permit each fund to purchase the missing fund shares or acquire the Deposit Securities underlying such shares at any time and will subject the Authorized Participant to liability for any shortfall between the cost to each fund of purchasing such shares or Deposit Securities and the value of the collateral.

The calculation of the value of the Fund Securities and the Cash Redemption Amount to be delivered upon redemption will be made by the Investment Manager according to the procedures set forth in the section entitled "Determination of Net Asset Value" computed on the Business Day on which a redemption order is deemed received by the transfer agent. Therefore, if a conforming redemption order in proper form is submitted to the transfer agent by an Authorized Participant not later than Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on the Transmittal Date, and the requisite number of shares of each fund are delivered to each fund's custodian prior to the DTC Cut-Off-Time, then the value of the Fund Securities and the Cash Redemption Amount to be delivered will be determined by State Street Bank and Trust Company on such Transmittal Date. If, however, a conforming redemption order is submitted to the transfer agent by an Authorized Participant not later than the Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on the Transmittal Date but either (i) the requisite number of shares of each fund and the Cash Redemption Amount are not delivered by the DTC Cut-Off-Time as described above on the next Business Day following the Transmittal Date, or (ii) the redemption order is not submitted in proper form, then the redemption order will not be deemed received as of the Transmittal Date. In such case, the value of the Fund Securities and the Cash Redemption Amount to be delivered will be computed as of the Closing Time on the Business Day that such order is deemed received by the transfer agent, i.e., the Business Day on which the shares of each fund are delivered through DTC to Franklin Distributors by the DTC Cut-Off-Time on such Business Day pursuant to a properly submitted redemption order.

A fund may in its discretion exercise its option to redeem shares in cash, and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash that each fund may, in its

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sole discretion, permit. In either case, the investor will receive a cash payment equal to the NAV of its shares based on the NAV of shares of each fund next determined after the redemption request is received in proper from (minus a redemption transaction fee and additional charge for requested cash redemptions specified above, to offset each fund's brokerage and other transaction costs associated with the disposition of Fund Securities). In addition, each fund reserves the right to honor a redemption request by delivering a basket of securities or cash that differs from the Fund Securities.

Redemption of shares for Fund Securities will be subject to compliance with applicable federal and state securities laws and each fund (whether or not it otherwise permits cash redemptions) reserves the right to redeem Creation Units for cash to the extent that each fund could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Fund Securities under such laws. An Authorized Participant or a Beneficial Owner for which it is acting subject to a legal restriction with respect to a particular stock included in the Fund Securities applicable to the redemption of a Creation Unit may be paid an equivalent amount of cash. The Authorized Participant may request the redeeming Beneficial Owner of the shares to complete an order form or to enter into agreements with respect to such matters as compensating cash payment.

In connection with taking delivery of shares for Fund Securities upon redemption of Creation Units, a redeeming shareholder or entity acting on behalf of a redeeming shareholder must maintain appropriate custody arrangements with a qualified broker-dealer, bank or other custody providers in each jurisdiction in which any of the Fund Securities are customarily traded, to which account such Fund Securities will be delivered. If neither the redeeming shareholder nor the entity acting on behalf of a redeeming shareholder has appropriate arrangements to take delivery of the Fund Securities in the applicable foreign jurisdiction and it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Fund Securities in such jurisdictions, the trust may, in its discretion, exercise its option to redeem such shares in cash, and the redeeming shareholder will be required to receive its redemption proceeds in cash.

Deliveries of redemption proceeds generally will be made within two Business Days. Due to the schedule of holidays in certain countries, however, the delivery of redemption proceeds may take longer than two Business Days after the day on which the redemption request is received in proper form. In such cases, the local market settlement procedures will not commence until the end of the local holiday periods.

**Creation/Redemption Transaction Fees** 

The funds generally impose a "Transaction Fee" on investors purchasing or redeeming Creation Units. The Transaction Fee will be limited to amounts that have been determined by the Investment Manager to be appropriate. The purpose of the Transaction Fee is to protect the existing shareholders of the funds from the dilutive costs associated with the purchase and redemption of Creation Units. Where a fund permits cash creations (or redemptions) or cash in lieu of depositing one or more Deposit Securities, the purchaser (or redeemer) may be assessed a higher Transaction Fee to offset the transaction cost to a fund of buying (or selling) those particular Deposit Securities. To the extent a purchase/redemption transaction consists of cash and/or in-kind securities, the standard Transaction Fee applies to in-kind purchases and redemptions of creation units and an additional Transaction Fee may also be imposed. Each fund reserves the right to not impose the additional Transaction Fee or to vary the amount of the additional Transaction Fee, depending on the materiality of the fund's actual transaction costs incurred or where the Adviser believes that not imposing or varying the additional Transaction Fee would be in the fund's interest. Transaction Fees associated with the redemption of Creation Units will not exceed 2% of the value of shares redeemed. To the extent the fund cannot recoup the amount of transaction costs incurred in connection with a redemption from the redeeming shareholder because of the 2% cap or otherwise, those transaction costs will be borne by the fund's remaining shareholders (including, potentially, increased taxable income in respect of the fund, particularly if the redemption consists solely or partially of cash) and negatively affect the fund's performance. Actual transaction costs may vary depending on the time of day an order is received or the nature of the securities. Investors bear the costs of transferring Deposit Securities or Fund Securities to/from each fund to/from their account or on their order. See "Creation/Redemption Transaction Fees" in Part I of this SAI for information on standard Transaction Fees and maximum additional Transaction Fees.

**Additional Intermediary Payments** 

For purposes of this section the term "intermediary" includes any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator and any other institution that offers shares of the funds to its customers.

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The Investment Manager and/or its affiliates pay additional compensation to selected intermediaries under the categories described below. These categories are not mutually exclusive, and a single intermediary may receive payments under all categories. These payments may create an incentive for an intermediary 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 intermediaries 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, if any, and the expenses paid by the fund as shown under the heading "Fees and Expenses" in the prospectus.

**Marketing Support Payments.** The Investment Manager and/or its affiliates make payments to certain intermediaries for marketing support services. These payments are individually negotiated with each intermediary firm, taking into account the marketing support services provided by the intermediary, including business planning assistance, educating intermediary personnel about the Putnam funds and shareholder financial planning needs, placement on the intermediary's preferred or recommended fund company list, access to sales meetings, sales representatives and management representatives of the intermediary, market data, as well as the size of the intermediary's relationship with the Investment Manager.

No intermediaries received marketing support payments from the Investment Manager and its affiliates during the calendar year ended December 31, [2024]. Intermediaries may receive marketing support payments in [2025] and in future years from the Investment Manager and/or its affiliates. You can ask your intermediary about any payments it receives from the Investment Manager and/or its affiliates.

**Program Servicing Payments.** The Investment Manager and/or its affiliates also make payments to certain intermediaries that sell shares of the Putnam funds through intermediary platforms and other investment programs to compensate intermediaries for a variety of services they provide. An intermediary may perform program services itself or may arrange with a third party to perform program services. In addition to shareholder recordkeeping, reporting, or transaction processing, program services may include services rendered in connection with intermediary platform development and maintenance, fund/investment selection and monitoring, or other similar services.

The following intermediaries (and such intermediaries' respective affiliates) received program servicing payments from the Investment Manager and its affiliates during the calendar year ended December 31, [2024]:

Charles Schwab & Co., Inc.

Cetera Financial Group, Inc.

Fidelity Brokerage Services, LLC

National Financial Services LLC, and

UBS Financial Services Inc.

Additional or different intermediaries may also receive program servicing payments in [2025] and in future years from the Investment Manager and/or its affiliates. Any additions, modifications or deletions to the list of intermediaries identified above that have occurred since December 31, [2024] are not reflected. You can ask your intermediary about any payments it receives from the Investment Manager and/or its affiliates.

**Other Payments**. From time to time, the Investment Manager and/or its affiliate, at its expense, may provide additional compensation to intermediaries that 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 compensation provided by the Investment Manager and/or its affiliate may include financial assistance to intermediaries that enables the Investment Manager and/or its affiliate to participate in and/or present at intermediary-sponsored conferences or seminars, sales or training programs for invited registered representatives and other intermediary employees, intermediary entertainment, and other intermediary-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, retention and due diligence trips. The Investment Manager and/or its affiliates make payments for entertainment events it deems appropriate, subject to internal guidelines and applicable law. These payments may vary upon the nature of the event.

**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 series of Putnam ETF Trust that disclose their holdings daily,

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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 Franklin Templeton Investment Management Limited ("FTIML"), Franklin Advisers, Putnam Management, and/or PanAgora Asset Management, Inc. ("PanAgora") serve as sub-adviser (as described in the fund's prospectus), references to the Investment Manager in this section include FTIML, Franklin Advisers, Putnam Management, and/or PanAgora, as appropriate.

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp; Bank Loans, Loan Participations, and Assignments | Market Risk |
| &nbsp;&nbsp;&nbsp; Benchmark Reference Rate Risk | Master Limited Partnerships (MLPs) |
| &nbsp;&nbsp;&nbsp; Borrowing and Other Forms of Leverage | Money Market Instruments |
| &nbsp;&nbsp;&nbsp; Collateralized Debt and Loan Obligations | Mortgage-backed and Asset-backed Securities |
| &nbsp;&nbsp;&nbsp; Commodities and Commodity-Related Investments | Options on Securities |
| &nbsp;&nbsp;&nbsp; Derivatives | Preferred Stocks and Convertible Securities |
| &nbsp;&nbsp;&nbsp; ESG Considerations | Private Placements and Restricted Securities |
| &nbsp;&nbsp;&nbsp; Exchange-Traded Notes | Real Estate Investment Trusts (REITs) |
| &nbsp;&nbsp;&nbsp; Floating Rate and Variable Rate Demand Notes | Redeemable Securities |
| &nbsp;&nbsp;&nbsp; Foreign Currency Transactions | Repurchase Agreements |
| &nbsp;&nbsp;&nbsp; Foreign Investments and Related Risks | Securities of Other Investment Companies |
| &nbsp;&nbsp;&nbsp; Forward Commitments and Dollar Rolls | Short Sales |
| &nbsp;&nbsp;&nbsp; Futures Contracts and Related Options | Short-Term Trading |
| &nbsp;&nbsp;&nbsp; Hybrid Instruments | Special Purpose Acquisition Companies |
| &nbsp;&nbsp;&nbsp; Illiquid Investments | Structured Investments |
| &nbsp;&nbsp;&nbsp; Inflation-Protected Securities | Swap Agreements |
| &nbsp;&nbsp;&nbsp; Initial Public Offerings (IPOs) | Tax-exempt Securities |
| &nbsp;&nbsp;&nbsp; Inverse Floaters | Temporary Defensive Strategies |
| &nbsp;&nbsp;&nbsp; Large Shareholder Risk | Trade Policy |
| &nbsp;&nbsp;&nbsp; Legal and Regulatory Risks Relating to Investment Strategy | Warrants |
| &nbsp;&nbsp;&nbsp; Lower-rated Securities | Zero-coupon and Payment-in-kind Bonds |

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**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 the Investment Manager, 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 some impose restrictive covenants which must be met by the borrower, although these covenants have become less common, and the terms of covenants have eroded, in recent years. 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

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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, the Investment Manager will not rely solely on that credit analysis, but will perform its own investment analysis of the borrowers. The Investment Manager'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. The Investment Manager 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 the Investment Manager'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 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, the Investment Manager 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

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fair market value. The fund may hold investments in loans for a very short period of time when opportunities to resell the investments that the Investment Manager 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, the Investment Manager 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. The Investment Manager's decision not to receive Confidential Information may place the Investment Manager 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, the Investment Manager's ability to assess their significance or desirability may be adversely affected. For these and other reasons, it is possible that the Investment Manager's decision not to receive Confidential Information under normal circumstances could adversely affect the fund's investment performance.

Notwithstanding its intention generally not to receive material, non-public information with respect to its management of investments in loans, the Investment Manager 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 the Investment Manager's efforts to avoid such possession, but in other instances the Investment Manager 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, the Investment Manager'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 the Investment Manager'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 the Investment Manager 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, the Investment Manager may owe conflicting fiduciary duties to the fund and other client accounts. The Investment Manager 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 the Investment Manager'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.

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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.

**Benchmark Reference Rate Risk** 

Many debt securities, derivatives, and other financial instruments utilize benchmark or reference rates for variable interest rate calculations, including the Euro Interbank Offer Rate, Sterling Overnight Index Average Rate, and the Secured Overnight Financing Rate (each a "Reference Rate"). Instruments in which the fund invests may pay interest at floating rates based on such Reference Rates or may be subject to interest caps or floors based on such Reference Rates. The fund and issuers of instruments in which the fund invests may also obtain financing at floating rates based on such Reference Rates. The elimination of a Reference Rate or any other changes to or reforms of the determination or supervision of Reference Rates could have an adverse impact on the market for, or value of, any instruments or payments linked to those Reference Rates.

For example, some Reference Rates, as well as other types of rates and indices, are described as "benchmarks" and have been the subject of ongoing national and international regulatory reform, including under the European Union regulation on indices used as benchmarks in financial instruments and financial contracts (known as the "Benchmarks Regulation"). The Benchmarks Regulation has been enacted into United Kingdom law by virtue of the European Union (Withdrawal) Act 2018 (as amended), subject to amendments made by the Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019 (SI 2019/657) and other statutory instruments. Following the implementation of these reforms, the manner of administration of benchmarks has changed and may further change in the future, with the result that relevant benchmarks may perform differently than in the past, the use of benchmarks that are not compliant with the new standards by certain supervised entities may be restricted, and certain benchmarks may be eliminated entirely. Such changes could cause increased market volatility and disruptions in liquidity for instruments that rely on or are impacted by such benchmarks. Additionally, there could be other consequences which cannot be predicted.

**Borrowing and Other Forms of Leverage** 

The fund may borrow money to the extent permitted by its investment policies and restrictions and by Section 18 of the 1940 Act. 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.

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. 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.

**Collateralized Debt and Loan Obligations** 

The fund may invest in collateralized debt obligations ("CDOs"). CDOs are types of asset-backed securitized instruments and include collateralized loan obligations ("CLOs") and other similarly structured securities. Although certain CDOs may benefit from credit enhancement in the form of a senior-subordinate structure, overcollateralization or bond insurance, such enhancement may not always be present, and may fail to protect a fund against the risk of loss on default of the collateral. CDOs may charge management and administrative fees, which are in addition to those of a fund. CDOs may be less liquid than other types of securities.

The risks of an investment in a CDO largely depend on the type of underlying collateral securities and the tranche in which a fund invests. CDOs are subject to the typical risks associated with debt instruments and fixed income and/or asset-backed securities discussed elsewhere in the prospectus and in this SAI, including interest rate risk (which may be exacerbated if the

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interest rate payable on a structured financing changes based on multiples of changes in interest rates or inversely to changes in interest rates), prepayment risk, credit risk (including adverse credit spread moves), liquidity risk and market risk. CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments and one or more tranches may be subject to up to 100% loss of invested capital; (ii) the possibility that the quality of the collateral may decline in value or default, due to factors such as the availability of any credit enhancement, the level and timing of payments and recoveries on and the characteristics of the underlying receivables, loans, or other assets that are being securitized, remoteness of those assets from the originator or transferor, the adequacy of and ability to realize upon any related collateral, and the capability of the servicer of the securitized assets (particularly where the underlying collateral in a loan portfolio is not individually assessed prior to purchase); (iii) market and illiquidity risks affecting the price of a structured finance investment, if required to be sold, at the time of sale; and (iv) if the particular structured product is invested in a security in which a fund is also invested, this would tend to increase the fund's overall exposure to the credit of the issuer of such securities, at least on an absolute, if not on a relative basis. In addition, due to the complex nature of a CDO, an investment in a CDO may not perform as expected. An investment in a CDO also is subject to the risk that the issuer and the investors may interpret the terms of the instrument differently, giving rise to disputes.

A CLO is an obligation of a trust or other special purpose vehicle typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. CLOs may charge management and other administrative fees. Payments of principal and interest are passed through to investors in a CLO and divided into several tranches of rated debt securities, which vary in risk and yield, and typically at least one tranche of unrated subordinated securities, which may be debt or equity ("CLO Securities"). CLO Securities generally receive some variation of principal and/or interest installments and, with the exception of certain subordinated securities, bear different interest rates. If there are defaults or if a CLO's collateral otherwise underperforms, scheduled payments to senior tranches typically take priority over less senior tranches.

CLO Securities may be privately placed and thus subject to restrictions on transfer to meet securities law and other legal requirements. In the event that any fund does not satisfy certain of the applicable transfer restrictions at any time that it holds

CLO Securities, it may be forced to sell the related CLO Securities and may suffer a loss on sale. CLO Securities may be considered illiquid investments in the event there is no secondary market for the CLO Securities. CLOs are also subject to the same risks associated with CDOs, as described above.

**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, war, and factors affecting a particular industry or commodity, such as drought, floods, or other weather conditions or natural disasters, livestock disease, trade embargoes, economic sanctions, competition from substitute products, transportation bottlenecks or shortages, insufficient storage capacity, 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. Certain commodities (and related derivatives) are also susceptible to price declines due to factors such as supply surpluses caused by global events.

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

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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 result in gains or losses greater than the amount invested in the instrument. See "Derivatives," "Forward Commitments and Dollar Rolls," "Futures Contracts and Related Options," "Hybrid Instruments," "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.

**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 (including credit default swaps and credit default swap indexes) 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 derivative instrument and the reference asset, or other factors, especially in unusual market conditions, and volatility in the value of derivatives could adversely impact the fund's returns, obligations and exposures. 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 will enable the fund to achieve its investment objective or that the Investment Manager 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 Internal Revenue Code of 1986, as amended (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.

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 derivative transactions are required to be centrally cleared and others are available for voluntary clearing. A party to a cleared derivative transaction is subject to the credit and counterparty 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 derivative 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

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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 margin requirements at a time when it may be disadvantageous to do so.

Other risks arise from the potential inability to terminate or sell derivative positions. Derivatives may be subject to liquidity risk due to the fund's obligation to make payments of margin, collateral, or settlement payments to counterparties. A liquid secondary market may not always exist for the fund's derivative positions. In fact, certain 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 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.

The funds are required to comply with the derivatives rule when they engage in derivatives transactions. See "Legal and Regulatory Risks Relating to Investment Strategy" below. Further information about these instruments and the risks involved in their use is included elsewhere in the prospectus and in this SAI.

<u>Combined Positions</u> 

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.

**ESG Considerations** 

A fund may integrate environmental, social, or governance ("ESG") considerations into its research process and/or investment decision-making. The Investment Manager believes that ESG considerations, like other, more traditional subjects of investment analysis such as market position, growth prospects, and business strategy, have the potential to impact risk and returns. The relevance and materiality of ESG considerations in a fund's process will differ from strategy to strategy, from sector to sector, and from portfolio manager to portfolio manager, and, in some cases (such as where the Investment Manager lacks relevant ESG data), ESG considerations may not represent a material component of a fund's investment process. The consideration of ESG factors as part of a fund's investment process does not mean that a fund pursues a specific "ESG" or "sustainable" investment strategy, and, depending on the fund, the Investment Manager may sometimes make investment decisions other than on the basis of relevant ESG considerations.

**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.

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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.

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

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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.

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" (e.g., 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 Chicago 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 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.

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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 otherwise settle 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 market in such contracts; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts.

Positions in foreign currency futures contracts and related options may be closed out only on an exchange or board of trade that provides a market in such contracts or options. Although the fund intends to purchase or sell foreign currency futures contracts and related options only on exchanges or boards of trade where there appears to be an active market, there is no assurance that a 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 or related option 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 or at 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 or at 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 or at 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 or at 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 the Investment Manager 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. The Investment Manager will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the fund. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge.

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, the Investment Manager 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.

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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 and related options) 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 and related options, 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 or related option 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, additional foreign currency transactions may be 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 the Investment Manager'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 the Investment Manager anticipates. There is no assurance that the Investment Manager'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

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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.

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. The Investment Manager 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

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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 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 the Investment Manager and its affiliates 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 non-local 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

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ownership registration being completely lost. The fund would absorb any loss resulting from such registration problems and may have no successful claim for compensation.

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 the Investment Manager 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.

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

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("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 CDCC 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.

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"). 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 the Investment Manager deems it appropriate to do so. The fund may realize short-term profits or losses upon the sale of forward commitments.

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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. 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.

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 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. See also "Legal and Regulatory Risks Relating to Investment Strategy" below.

**Futures Contracts and Related Options** 

Subject to applicable law, the fund may invest 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 sell the type of financial instrument or other asset called for in the contract in a specified month for a stated price. A futures contract purchase creates an obligation by the purchaser to buy the type of financial instrument or other asset called for in the contract in a specified month at a stated price. The specific assets bought or sold, respectively, at settlement date may not be 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 (brokerage firm) which is a member of the relevant contract market. Examples of futures contracts that the fund may use include, without limitation, U.S. Treasury 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 asset. Therefore, purchasing futures contracts will tend to increase the fund's exposure to positive and negative price fluctuations in the underlying asset, much as if it had purchased the underlying asset 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 asset. Selling futures contracts, therefore, will tend to offset both positive and negative market price changes, much as if the underlying asset 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 by the fund's broker 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

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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 by their terms may 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. Many futures contracts, such as 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 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 settlement 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.

With respect to each fund, the Investment Manager has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act ("CEA") pursuant to Rule 4.5 under the CEA (the "exclusion") promulgated by the CFTC. Accordingly, the Investment Manager (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, options on futures and certain swaps. In the event that the Investment Manager believes that a fund's investments in commodity interests exceed the thresholds set forth in the exclusion, the Investment Manager may be required to register as a "commodity pool operator" with the CFTC with respect to that fund. The Investment Manager'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 fund's ability to invest in commodity interests is limited by the Investment Manager's intention to operate the fund in a manner that would permit the Investment Manager 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 the Investment Manager 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, and the commodity pool operators ("CPOs") of any shareholders that are pooled investment vehicles may be unable to rely on certain CPO registration exemptions.

**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. 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

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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 selling 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).

The fund may use options on futures contracts in lieu of purchasing or writing options directly on the underlying assets 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 (or would result in a smaller loss), 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 purchase or 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 the Investment Manager's ability to predict movements in various factors affecting securities markets (or markets for other assets), 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, the Investment Manager'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.

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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 futures contracts and options themselves, and, in the case of hedging transactions, of the securities which are the subject of a hedge. To attempt to compensate for imperfect correlations, the fund may purchase or sell futures contracts in a greater amount than the hedged investments if the volatility of the price of the hedged investments is historically greater than the volatility of the futures contracts. Conversely, the fund may purchase or sell fewer futures contracts if the volatility of the price of the hedged investments is historically less than that of the futures contract. 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 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 the Investment Manager 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 transactions, 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 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, result in the institution by exchanges of special procedures that may interfere with the timely execution of customer orders, for example, by rendering certain market clearing facilities inadequate. 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 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 and 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. In addition, exchanges may cancel trades in limited circumstances, for example, if the exchange believes that allowing such trades to stand as executed could have an adverse impact on the stability or integrity of the market. Any such cancellation may adversely affect the performance of the fund. The fund's futures broker may also limit the fund's ability to invest in certain futures contracts. Such restrictions may adversely affect the fund's performance and its ability to achieve its investment objective.

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 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 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)

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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 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 settled or 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 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. The funds are required to comply with the derivatives rule when they engage in transactions involving futures and options thereon. See "Legal and Regulatory Risks Relating to Investment Strategy" below.

**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.

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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 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 any governmental regulatory authority, including the regulators typically associated with the derivatives and securities markets such as the CFTC and the SEC.

**Illiquid Investments** 

An illiquid investment 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 the Investment Manager 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.

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

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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.

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.

**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.

**Large Shareholder Risk** 

The fund may be an investment option for mutual funds that are managed by the Investment Manager and its affiliates as "funds of funds." Additionally, other investors from time to time may make substantial investments in the fund. Such shareholders may at times be considered to control the fund. Dispositions of a large number of shares by these shareholders may adversely affect the fund's liquidity and net assets to the extent such transactions are executed directly with the fund in the form of redemptions through an authorized participant, rather than executed in the secondary market. In addition, a large number of shareholders

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collectively may purchase or redeem fund shares in large amounts rapidly or unexpectedly (collectively, such transactions are referred to as "large shareholder transactions"). Large shareholder redemptions may also force the fund to sell securities to satisfy redemption requests or purchase securities for the portfolio in connection with the investment of subscription proceeds when the fund would otherwise not do so, and at unfavorable prices, which may increase the fund's brokerage costs and accelerate the realization of taxable income and/or gains to shareholders. The effects of taxable income and/or gains resulting from large shareholder transactions would particularly impact non-redeeming shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged plan. To the extent that such transactions result in short-term capital gains, such gains will generally be taxed at the ordinary income tax rate for shareholders who hold fund shares in a taxable account. In addition, fund returns may be adversely affected if the fund holds a portion of its assets in liquid, cash-like investments in connection with or in anticipation of shareholder redemptions. To the extent these large shareholders transact in shares of the fund on the secondary market, such transactions may account for a large percentage of the trading volume on the exchange and may, therefore, have a material effect (upward or downward) on the market price of the fund's shares. A number of circumstances may cause the fund to experience large redemptions, such as changes in the eligibility criteria for the fund or share class of the fund; liquidations, reorganizations, repositionings, or other announced fund events; or changes in investment objectives, strategies, policies, risks, or investment personnel.

**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. 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 or otherwise execute its investment strategy could have a material adverse impact on the fund's performance.

The regulatory environment for funds is evolving, and changes in regulation 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 derivatives (including 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 event of market emergencies. The regulation of securitization and derivative transactions and funds that engage in such transactions is an evolving area of law and is subject to modification by government, self-regulatory organization and judicial action.

Since 2021, the SEC has proposed and, in some cases, finalized several new rules regarding a wide range of topics related to the fund. For example, the SEC has proposed new rules requiring the reporting and public disclosure of a manager's positions in security-based swaps, including CDS, equity total return swaps and related positions. The SEC has also finalized new rules restricting activities that could be considered to be manipulative in connection with security-based swaps, new rules regarding beneficial ownership and public reporting by managers under Section 13 of the Exchange Act, and new rules requiring the central clearing of certain cash and repurchase transactions involving U.S. Treasuries. These and other proposed new rules, whether assessed on an individual or collective basis, could fundamentally change the current regulatory framework for relevant markets and market participants, including having a material impact on activities of private fund advisers and their funds. While it is currently difficult to predict the full impact of these new rules, these rules could make it more difficult for the fund to execute certain investment strategies and may have a material adverse effect on the fund's ability to generate returns.

In October 2016, the SEC adopted a liquidity risk management rule, Rule 22e-4 under the 1940 Act (the "Liquidity Rule") that requires each fund to establish a liquidity risk management program. The funds have implemented a liquidity risk management program, and the fund's trustees (such trustees, as referenced in the table below under the heading "Management- Trustees," shall hereinafter be referred to as the "Trustees," the "Board," or the "Board of Trustees") has appointed the Investment Manager to administer the program. Under the liquidity risk management program, the liquidity risk of each fund is assessed, managed, and periodically reviewed and each portfolio investment held by each fund is classified as a "highly liquid investment," "moderately liquid investment," "less liquid investment" or "illiquid investment." The Liquidity Rule defines "liquidity risk" as the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of the remaining investors' interest in the fund. The liquidity of a fund's portfolio investments is determined based on relevant market, trading and investment-specific considerations under the fund's liquidity risk management program. The impact the Liquidity Rule will have

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on the funds, and on the open-end mutual 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 regulation of the derivatives market, including clearing, margin, reporting and registration requirements. The CFTC, SEC, and other federal regulators have adopted and continue to develop 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"), the United Kingdom ("UK"), and some other countries have implemented and are in the process of implementing similar requirements that affect the fund when it enters into derivative transactions with a counterparty organized in that country or otherwise subject to that country's derivatives regulations. For example, the U.S. government, the EU, the UK and certain other jurisdictions have adopted mandatory minimum variation (and in some cases initial) margin requirements for bilateral derivatives. Such requirements could increase the amount of margin the fund needs to provide in connection with its derivative transactions and, therefore, make derivative transactions more expensive. The regulation of the derivatives markets may make derivatives more costly, may limit the availability or reduce the liquidity of derivatives, or may otherwise adversely affect the value or performance of derivatives. Because these requirements are evolving, their ultimate impact on the fund and the financial system is not yet known. While the rules and regulations like those imposing requirements for margin and central clearing of some derivative transactions are designed to reduce systemic risk (e.g., the risk that the interdependence of large derivatives dealers could cause them to suffer liquidity, solvency or other challenges simultaneously), there is no assurance that they will achieve that result, and, as noted, the requirements can expose the fund to new kinds of costs and risks.

In addition, in October 2020, the SEC adopted Rule 18f-4 under the 1940 Act (the "Derivatives Rule"), regulating the use by registered investment companies of derivatives and many related instruments (e.g. reverse repurchase agreements). The Derivatives Rule requires, among other things, that certain entities adopt a derivatives risk management program, comply with limitations on leverage-related risk based on a "value-at-risk" test and update reporting and disclosure procedures. Funds that use derivative instruments in a limited amount are not subject to the full requirements of the Derivatives Rule. In connection with the adoption of the Derivatives Rule, funds are no longer required to comply with the asset segregation framework arising from prior SEC guidance for covering certain derivative instruments and related transactions.

Regulatory changes also may affect counterparty risk. For example, regulatory requirements may limit the ability of the fund to protect its interests in the event of an insolvency of a derivatives counterparty. In the event of a counterparty's (or its affiliate's) insolvency, the fund's ability to exercise remedies, such as the termination of transactions, netting of obligations and realization on collateral, could be stayed or eliminated under special resolution regimes adopted in the United States, the EU, the UK, and various other jurisdictions. Such regimes provide government authorities with broad authority to intervene when a financial institution is experiencing financial difficulty. In particular, with respect to counterparties who are subject to such proceedings in the EU and the UK, the liabilities of such counterparties to the fund could be reduced, eliminated, or converted to equity in such counterparties (sometimes referred to as a "bail in").

The CFTC and domestic exchanges have established (and continue to evaluate and revise) speculative position limits, referred to as "position limits," on the maximum speculative positions which any person, or group of persons acting in concert, may hold or control in particular futures and options on futures contracts. In addition, federal position limits apply to swaps on agricultural, energy and metals commodities that are "economically equivalent," as defined by the CFTC, to certain futures contracts. Uncertainty surrounding which swaps qualify as "economically equivalent" may result in compliance challenges. An overly broad application of the definition could result in unnecessary restrictions in position sizes, whereas an overly narrow application could risk position limit overages. All positions owned or controlled by the same person or entity, even if in different accounts, must be aggregated for purposes of determining whether the applicable position limits have been exceeded unless an exemption applies. Thus, even if the fund does not intend to exceed applicable position limits, it is possible that positions of different clients managed by the Investment Manager and its affiliates or by any sub-adviser 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. Position limits may adversely affect the fund's ability to hold positions in certain futures contracts and related options and swaps. A violation of position limits could also lead to regulatory action materially adverse to the fund's investment strategy.

The SEC has adopted new rules that require managers to file monthly confidential reports with the SEC regarding equity short sales and related activity. Under the new rules, the SEC will publicly disclose aggregated short position information on a monthly basis. The SEC also adopted a rule that will require reporting and public disclosure of securities loan transaction information (not including party names); this may include, but is not limited to, information about securities loans entered into in connection with

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short sales. 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 new or increases in short sales of certain securities, including short positions on such securities acquired through swaps, in response to market events. Bans on short selling and such short positions 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.

In October 2020, the SEC adopted certain regulatory changes and took other actions related to the ability of an investment company to invest in another investment company. These changes include, among other things, amendments to Rule 12d1-1, the rescission of Rule 12d1-2, the adoption of Rule 12d1-4, and the rescission of certain exemptive relief issued by the SEC permitting such investments in excess of statutory limits. These regulatory changes may adversely impact each fund's investment strategies and operations.

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

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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 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, the Investment Manager 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 the Investment Manager or its affiliates, holds all or a major portion. Although the Investment Manager 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 the Investment Manager 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 the Investment Manager'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

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the financial markets or other regulation, and changes in fiscal, monetary or tax policies), geopolitical events or changes (including natural disasters, epidemics or pandemics, 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). 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 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. In addition, trade disputes (such as the "trade war" between the United States and China that intensified in 2018 and 2019) may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. Events such as these and their impact on the fund are difficult to predict. For example, Russia's military invasion of Ukraine in February 2022 resulted in the United States, other countries, and certain international organizations levying broad economic sanctions against Russia and Russian individuals. These sanctions and any additional sanctions or other intergovernmental actions that may be undertaken against Russia in the future may result in the devaluation of the ruble, a downgrade in the country's credit rating, and a decline in the value and liquidity of Russian securities. Such actions could result in a freeze of Russian securities, impairing the ability of a fund to buy, sell, receive, or deliver those securities. Retaliatory action by the Russian government could involve the seizure of U.S. and/or European residents' assets, and any such actions are likely to impair the value and liquidity of such assets. Any or all of these potential results could have an adverse/recessionary effect on Russia's economy. All of these factors could have a negative effect on the performance of funds that have significant exposure to Russia.

In addition, the extent and duration of the military action associated with Russia's invasion of Ukraine, resulting sanctions and resulting future market disruptions, including declines in Russian stock markets and the value of the ruble against the U.S. dollar, are impossible to predict, but could be significant. Any disruptions caused by such military action or other actions (including cyberattacks and espionage) or resulting actual and threatened responses to such activity, including purchasing and financing restrictions, boycotts or changes in consumer or purchaser preferences, sanctions, tariffs or cyberattacks on the Russian government, Russian companies, or Russian individuals, including politicians, may negatively impact Russia's economy and Russian issuers of securities in which the fund invests. Actual and threatened responses to such military action may also impact the markets for certain Russian commodities, such as oil and natural gas, as well as other sectors of the Russian economy, and may likely have collateral impacts on such sectors globally. These and any related events could have a significant impact on fund performance and the value of an investment in the fund.

Likewise, natural and environmental disasters, epidemics or pandemics, and systemic market dislocations may be highly disruptive to economies and markets, and may result in significant market volatility, exchange trading suspensions or closures, or a substantial economic downturn or recession. Those events, as well as other changes in foreign and domestic economic and political conditions, also could disrupt the operations of the fund or its service providers or adversely affect individual issuers or related groups of issuers, interest rates, credit ratings, default rates, inflation, supply chains, consumer demand, investor sentiment, and other factors affecting the value or liquidity of the fund's investments.

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An outbreak of respiratory disease caused by a novel coronavirus designated as COVID-19 was first detected in China in December 2019 and subsequently spread internationally. The transmission of COVID-19 and efforts to contain its spread have resulted in, among other things, border closings and other significant travel restrictions and disruptions; significant disruptions to business operations, supply chains and customer activity; lower consumer demand for goods and services; higher levels of unemployment; event cancellations and restrictions; service cancellations, reductions and other changes; significant challenges in healthcare service preparation and delivery; prolonged quarantines; and general concern and uncertainty. These impacts have negatively affected, and may continue to negatively affect, the global economy, the economies of individual countries, and the financial performance of individual issuers, sectors, industries, asset classes, and markets in significant and unforeseen ways. The COVID-19 pandemic also has resulted in significant market volatility, exchange trading suspensions and closures, declines in global financial markets, higher default rates, and economic downturns and recessions, and may continue to have similar effects in the future. In addition, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to the COVID-19 pandemic, including significant fiscal and monetary policies changes, may affect the value, volatility, and liquidity of some securities and other assets. Health crises caused by the COVID-19 pandemic may also exacerbate other pre-existing political, social, economic, market and financial risks. The effects of the outbreak in developing or emerging market countries may be greater due to less established health care systems. The foregoing could impair the fund's ability to maintain operational standards (such as with respect to creations and redemptions of fund shares), disrupt the operations of the fund's service providers, adversely affect the value and liquidity of the fund's investments, and negatively impact the fund's performance and your investment in the fund. Given the significant uncertainty surrounding the magnitude, duration, reach, costs and effects of the COVID-19 pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, it is difficult to predict its potential impacts on a fund's investments.

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. On January 31, 2020, the United Kingdom formally withdrew from the European Union (commonly known as "Brexit"). An agreement between the United Kingdom and the European Union governing their future trade relationship became effective January 1, 2021. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and global markets. Potential negative long-term effects could include, among others, greater market volatility and illiquidity, disruptions to world securities markets, currency fluctuations, deterioration in economic activity, a decrease in business confidence, and an increased likelihood of a recession in the United Kingdom. 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)** 

An 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 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.

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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 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

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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.

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 assets, including any cash balances in money market and/or short-term bond funds advised by the Investment Manager or its affiliates. In connection with such investments, the Investment Manager 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 the Investment Manager in connection with such investments.

**Mortgage-backed and Asset-backed Securities** 

Mortgage-backed securities, including collateralized mortgage obligations ("CMOs"), stripped mortgage-backed securities and securities that reflect an interest in reverse mortgages, represent a participation in, or are secured by, mortgage loans or otherwise are secured by real estate related collateral. Mortgage-backed securities may be issued by agencies or instrumentalities of the U.S. government (and may not be guaranteed or insured by the U.S. government, such as those issued by 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 typically pass through to the holders of the mortgage-backed securities or serve as the source for payments on 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 (and may or may not be guaranteed or insured by the U.S. government), foreign governments (or their agencies or instrumentalities), or non-governmental issuers.

Mortgage-backed securities may 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 or refinancing of the underlying mortgage loans or the foreclosure of collateral securing the underlying mortgage loans. If property owners make unscheduled prepayments on 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 those 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.

The fund may invest in mortgage-backed securities that represent pools of mortgage loans with variable rates of interest (such loans, "ARMs"). Adjustable-rate mortgage-backed securities, like traditional mortgage-backed securities, are interests in pools of

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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, adjustable-rate mortgage-backed securities are collateralized by or represent interests in ARMs. Interest rates for ARMs 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 ARMs 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 adjustable-rate mortgage-backed security may be adversely affected if interest rates increase faster than the rates of interest payable on the ARMs underlying the security. Also, some ARMs 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 ARM. As a result, changes in the interest rate on an ARM may not fully reflect changes in prevailing market interest rates during certain periods.

The fund may also invest in mortgage-backed securities that represent pools of "hybrid" ARMs, underlying mortgages that 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-rate mortgage loans. All hybrid ARMs have a reset date, the date on which 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 a security backed by that 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 greater losses on securities purchased at a premium than securities that are not purchased at a premium.

Mortgage-backed and asset-backed securities are subject to varying degrees of credit risk, depending on whether they are issued, or are guaranteed or insured, by agencies or instrumentalities of 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., 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.

Mortgage-related securities include, among other things, securities that reflect an interest in a pool of reverse mortgages. In a reverse mortgage, a lender makes a loan to a homeowner based on the homeowner's equity in his or her home. A homeowner must be age 62 or older to qualify for a reverse mortgage but is not necessarily required to have any minimum income. Generally, the homeowner is not required to pay interest or repay principal on the loan until the homeowner dies, sells the home, or ceases to use the home as his or her primary residence. There are three general types of reverse mortgages: (1) single-purpose reverse mortgages, which are offered by certain state and local government agencies and nonprofit organizations; (2) federally-insured reverse mortgages (known as home equity conversion mortgages), which are backed by the U. S. Department

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of Housing and Urban Development; and (3) proprietary reverse mortgages, which are privately offered loans. A mortgage-related security may be backed by a single type of reverse mortgage or by a combination of types of reverse mortgages. Reverse mortgage-related securities include agency and privately issued mortgage-related securities. The principal government guarantor of reverse mortgage-related securities is Ginnie Mae.

Reverse mortgage-related securities may be subject to risks different than other types of mortgage-related securities due to the unique nature of the underlying loans. The date of repayment for these loans is uncertain and may occur sooner or later than anticipated. The timing of payments for the corresponding mortgage-related security may also be uncertain. Because reverse mortgages are offered only to persons 62 and older and there may be no income restrictions, the loans may react differently than traditional home loans to market events. As a result, investors (which may include the fund) in notes issued by reverse mortgage trusts ("RMTs") may be deprived of payments to which they are entitled. This could result in losses to the fund. Investors, including the fund, may determine to pursue negotiations or legal claims or otherwise seek compensation from RMT service providers in certain instances. This may involve the fund incurring costs and expenses associated with such actions.

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.

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 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 stripped mortgage-backed security'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.

The value of asset-backed securities may be substantially dependent on the servicing of the underlying assets, and asset-backed securities are therefore subject to risks associated with negligence by, or defalcation of, the servicers of those assets.

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These risks may be heightened in the case of an asset-backed security collateralized by the fees earned by the servicer, as the servicer may have a reduced financial incentive to provide appropriate servicing. 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 (i.e., determination as to the amount of underlying assets or other support needed to produce the cash flows necessary to service interest and make principal payments), the quality of the underlying assets, the level of credit support, if any, provided for the securities, and the credit quality of the credit-support provider, if any. In recent years, a significant number of asset-backed security insurers have defaulted on their obligations.

Consistent with the fund's investment objective and policies, the fund may invest in other types of mortgage- and asset-backed securities offered currently or in the future, including certain yet-to-be-developed types of mortgage- and asset-backed securities which may be created as the market evolves.

***Additional Information Related to Freddie Mac and Fannie Mae****.* The extreme and unprecedented volatility and disruption that impacted the capital and credit markets beginning in 2008 led to market concerns regarding the ability of Freddie Mac and Fannie Mae to withstand future credit losses associated with securities held in their investment portfolios, and on which they provide guarantees, without the direct support of the federal government. On September 7, 2008, Freddie Mac and Fannie Mae were placed under the conservatorship of the Federal Housing Finance Agency (FHFA). Under the plan of conservatorship, the FHFA assumed control of, and generally has the power to direct, the operations of Freddie Mac and Fannie Mae, and is empowered to exercise all powers collectively held by their respective shareholders, directors and officers, including the power to: (1) take over the assets of and operate Freddie Mac and Fannie Mae with all the powers of the shareholders, the directors and the officers of Freddie Mac and Fannie Mae and conduct all business of Freddie Mac and Fannie Mae; (2) collect all obligations and money due to Freddie Mac and Fannie Mae; (3) perform all functions of Freddie Mac and Fannie Mae which are consistent with the conservator's appointment; (4) preserve and conserve the assets and property of Freddie Mac and Fannie Mae; and (5) contract for assistance in fulfilling any function, activity, action or duty of the conservator.

In connection with the actions taken by the FHFA, the Treasury has entered into certain preferred stock purchase agreements (SPAs) with each of Freddie Mac and Fannie Mae which establish the Treasury as the holder of a new class of senior preferred stock in each of Freddie Mac and Fannie Mae. The senior preferred stock was issued in connection with financial contributions from the Treasury to Freddie Mac and Fannie Mae. Although the SPAs are subject to amendment from time to time, currently the Treasury is obligated to provide such financial contributions up to an aggregate maximum amount determined by a formula set forth in the SPAs, and until such aggregate maximum amount is reached, there is not a specific end date to the Treasury's obligations.

The future status and role of Freddie Mac and Fannie Mae could be impacted by (among other things) the actions taken and restrictions placed on Freddie Mac and Fannie Mae by the FHFA in its role as conservator, the restrictions placed on Freddie Mac's and Fannie Mae's operations and activities under the SPAs, market responses to developments at Freddie Mac and Fannie Mae, downgrades or upgrades in the credit ratings assigned to Freddie Mac and Fannie Mae by nationally recognized statistical rating organizations (NRSROs) or ratings services, and future legislative and regulatory action that alters the operations, ownership, structure and/or mission of these institutions, each of which may, in turn, impact the value of, and cash flows on, any securities guaranteed by Freddie Mac and Fannie Mae.

In addition, the future of Freddie Mac and Fannie Mae, and other U.S. government-sponsored enterprises that are not backed by the full faith and credit of the U.S. government (GSEs), remains in question as the U.S. government continues to consider options ranging from structural reform, nationalization, privatization, or consolidation, to outright elimination. The issues that have led to significant U.S. government support for Freddie Mac and Fannie Mae have sparked serious debate regarding the continued role of the U.S. government in providing mortgage loan liquidity.

**Options on Securities** 

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**Writing covered options**. The fund may write (*i.e.*, sell) covered call options and covered put options on optionable securities held in its portfolio or that it has an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by the Investment Manager in accordance with procedures established by the Trustees, in such amount as are set aside on the fund's books), when in the opinion of the Investment Manager such transactions are consistent with the fund's goal(s) and policies. Call options written by the fund give the purchaser the right to buy the underlying securities from the fund at a stated exercise price, regardless of the security's market price; put options written by the fund give the purchaser the right to sell the underlying securities to the fund at a stated exercise price, regardless of the security's market price.

The fund will receive a premium from writing a put or call option, which increases the fund's return on the underlying security in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, if the fund holds the security, the fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. If the fund does not hold the underlying security, the fund bears the risk that, if the market price exceeds the option strike price, the fund will suffer a loss equal to the difference at the time of exercise. By writing a put option, the fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value.

The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. A closing purchase transaction will ordinarily be effected in order to realize a profit on an outstanding option, to prevent an underlying instrument from being called, to permit the sale of the underlying instrument or to permit the writing of a new option containing different terms on such underlying instrument. The fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. Because increases in the market price of a call option generally reflect increases in the market price of the security underlying the option, any loss resulting from a closing purchase transaction may be offset in whole or in part by unrealized appreciation of the underlying security.

If the fund writes a call option but does not own the underlying security, and when it writes a put option, the fund may be required to deposit cash or securities with its broker as "margin," or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations.

**Purchasing put options**. The fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. If such a price decline occurs, the put option will permit the fund to sell the security at the higher exercise price or to close out the option at a profit. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. The fund may also purchase put options for other investment purposes, including to take a short position in the security underlying the put option.

**Purchasing call options**. The fund may purchase call options to hedge against an increase in the price of securities that the fund wants ultimately to buy. Such protection is provided during the life of the call option since the fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. If such a price increase occurs, a call option will permit the fund to purchase the securities at the exercise price or to close out the option at a profit. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. The fund may also purchase call options for other investment purposes.

**Risk factors in options transactions**. The successful use of the fund's options strategies depends on the ability of the Investment Manager to forecast correctly interest rate and market movements. For example, if the fund were to write a call option

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based on the Investment Manager's expectation that the price of the underlying security would fall, but the price were to rise instead, the fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the fund were to write a put option based on the Investment Manager's expectation that the price of the underlying security would rise, but the price were to fall instead, the fund could be required to purchase the security upon exercise at a price higher than the current market price.

When the fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the fund will lose part or all of its investment in the option. This contrasts with an investment by the fund in the underlying security, since the fund will not realize a loss if the security's price does not change.

The effective use of options also depends on the fund's ability to terminate option positions at times when the Investment Manager deems it desirable to do so. There is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events — such as volume in excess of trading or clearing capability — were to interrupt its normal operations. Although the fund may be able to offset to some extent any adverse effects of being unable to terminate an option position, the fund may experience losses in some cases as a result of such inability.

A market may at times find it necessary to impose restrictions on particular types of exchange-traded options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the fund, as option writer, would remain obligated under the option until expiration or exercise.

Disruptions in the markets for the securities underlying options purchased or sold by the fund could result in losses on the options. For example, if a fund is unable to purchase a security underlying a put option it had purchased, the fund may be unable to exercise the put option. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions in respect of exchange-traded options. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options. The fund, as holder of such a put option, could lose its entire investment if it is unable to exercise the put option prior to its expiration.

The fund may use both European-style options, which are only exercisable at a specific expiration time on the expiration date, and American-style options, which are exercisable at any time prior to the expiration date. Since an American-style option allows the holder to exercise its rights any time before the option's expiration, the writer of an American-style option has no control over when it will be required to fulfill its obligations as a writer of the option. (The writer of a European-style option is not subject to this risk because the holder may only exercise the option on its expiration date.)

Options can be traded either through established exchanges ("exchange traded options") or privately negotiated transactions (over-the-counter or "OTC" options). Exchange traded options are standardized with respect to, among other things, the underlying interest, expiration date, contract size and strike price. The terms of OTC options are generally negotiated by the parties to the option contract which allows the parties greater flexibility in customizing the agreement, but OTC options are generally less liquid than exchange traded options. OTC options purchased by the fund and assets held to cover OTC options written by the fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the fund's ability to invest in illiquid securities. All option contracts involve credit risk if the counterparty to the option contract (*e.g.*, the clearing house or OTC counterparty) or the third party effecting the transaction in the case of cleared options (*e.g.*, futures commission merchant or broker/dealer) fails to perform. The credit risk in OTC options that are not cleared is dependent on the

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credit worthiness of the individual counterparty to the contract and may be greater than the credit risk associated with cleared options.

Foreign-traded options are subject to many of the same risks presented by internationally-traded securities. In addition, because of time differences between the United States and other countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States.

There are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. In addition, many options, in particular OTC options, are complex and often valued based on subjective factors. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to the fund.

The market price of an option is affected by many factors, including changes in the market prices or dividend rates of underlying securities (or in the case of indices, the securities in such indices); the time remaining before expiration; changes in interest rates or exchange rates; and changes in the actual or perceived volatility of the relevant stock market and underlying securities. The market price of an option also may be adversely affected if the market for the option becomes less liquid.

In addition to options on securities and futures, the fund may also enter into options on futures, swaps, or other instruments as described elsewhere in this SAI.

**Preferred Stocks and Convertible Securities** 

The fund may invest in preferred stocks or convertible securities. A preferred stock is a class of stock that generally pays dividends at a specified rate and has preference over common stock in the payment of dividends and the liquidation of an issuer's assets but is junior to the debt securities of the issuer in those same respects. Under ordinary circumstances, preferred stock does not carry voting rights. As with all equity securities, the value of preferred stock fluctuates based on changes in a company's financial condition and on overall market and economic conditions. The value of preferred stocks is particularly sensitive to changes in interest rates and is more sensitive to changes in an issuer's creditworthiness than is the value of debt securities. In addition, many preferred stocks may be called or redeemed prior to their maturity by the issuer under certain conditions, which can limit the benefit to investors of a decline in interest rates. Shareholders of preferred stock may suffer a loss of value if dividends are not paid. Additionally, if the issuer of preferred stock experiences economic or financial difficulties, its preferred stock may lose value due to the reduced likelihood that its board of directors will declare a dividend. Certain preferred stocks contain provisions that allow an issuer under certain conditions to skip or defer distributions. If the fund owns a preferred stock that is deferring its distribution, it may be required to report income for tax purposes despite the fact that it is not receiving current income on this position. Preferred stocks often are subject to legal provisions that allow for redemption in the event of certain tax or legal changes or at the issuer's call. In the event of redemption, the fund may not be able to reinvest the proceeds at comparable rates of return. Preferred stocks are subordinated to bonds and other debt securities in an issuer's capital structure in terms of priority for corporate income and liquidation payments, and therefore will be subject to greater credit risk than those debt securities. Preferred stocks may trade less frequently and in a more limited volume and may be subject to more abrupt or erratic price movements than many other securities, such as common stocks, corporate debt securities, and U.S. government securities.

Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into or exchanged for, at a specific price or formula within a particular period of time, a prescribed amount of common stock or other equity securities of the same or a different issuer. The conversion may occur automatically upon the occurrence of a predetermined event or at the option of either the issuer or the security holder. The holder of a convertible security is generally entitled to participate in the capital appreciation resulting from a market price increase in the issuer's common stock and to receive interest paid or accrued on debt or dividends paid or accrued until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics similar to non-convertible debt or preferred securities, as applicable. Convertible securities rank senior to common stock in an issuer's capital structure and, therefore, normally entail less risk than the issuer's common stock. However, convertible securities may also be subordinate to any senior debt obligations of the issuer, and, therefore, an issuer's convertible securities may entail more risk than such senior debt obligations. Convertible securities usually offer lower interest or dividend yields than non-convertible debt securities of similar credit quality because of the potential for capital appreciation. In addition, convertible securities are often lower-rated securities.

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The market value of a convertible security is a function of its "investment value" and its "conversion value." A security's "investment value" represents the value of the security without its conversion feature (*i.e.*, a nonconvertible fixed income security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value may be dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. A security's "conversion value" is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current market price of the underlying security. Because of the conversion feature, the market value of a convertible security will normally fluctuate in some proportion to changes in the market value of the underlying security, and, accordingly, convertible securities are subject to risks relating to the activities of the issuer and/or general market and economic conditions.

A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. If the conversion value of a convertible security is significantly below its investment value, the convertible security generally trades like nonconvertible debt or preferred stock and its market value will not be influenced greatly by fluctuations in the market price of the underlying security. Conversely, if the conversion value of a convertible security is near or above its investment value, the market value of the convertible security is typically more heavily influenced by fluctuations in the market price of the underlying security. Generally, the amount of the premium decreases as the convertible security approaches maturity. Convertible securities generally have less potential for gain than common stocks.

The fund's investments in convertible securities may at times include securities that have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities at a specified date and a specified conversion ratio, or that are convertible at the option of the issuer. Because conversion of the security is not at the option of the holder, the fund may be required to convert the security into the underlying common stock even at times when the value of the underlying common stock or other equity security has declined substantially.

The fund's investments in preferred stocks and convertible securities, particularly securities that are convertible into securities of an issuer other than the issuer of the convertible security, may be illiquid. The fund may not be able to dispose of such securities in a timely fashion or for a fair price, which could result in losses to the fund.

**Private Placements and Restricted Securities** 

The fund may invest in securities that are purchased in private placements and, accordingly, are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell such securities when the Investment Manager believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. There can be no assurance that a liquid market will exist for any such security at any particular time, and a security which when purchased was liquid in the institutional markets may subsequently become illiquid.

Many private placement securities are issued by companies that are not required to file periodic financial reports, leading to challenges in evaluating the company's overall business prospects and gauging how the investment is likely to perform over time. In addition, market quotations for these securities are less readily available. Due to the more limited financial information and lack of publicly available prices, it may be more difficult to determine the fair value of these securities for purposes of computing the fund's net asset value. As a result, the judgment of the Investment Manager may at times play a greater role in valuing these securities than in the case of publicly traded securities, and the fair value prices determined for the fund could differ from those of other market participants.

While such private placements may offer attractive opportunities for investment not otherwise available on the open market, the securities so purchased are often "restricted securities," i.e., securities which cannot be sold to the public without registration under the Securities Act of 1933 (the "Securities Act") or the availability of an exemption from registration (such as Rules 144, 144A or Regulation S), or which are "not readily marketable" because they are subject to other legal or contractual delays in or restrictions on resale. In addition, the issuer typically does not have an obligation to provide liquidity to investors by buying the securities back when the investor wants to sell. Disposing of these securities may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the fund to sell them promptly at an acceptable price. The fund may have to bear the extra expense of registering these securities for resale and the risk of substantial delay in effecting the registration.

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Since the offering is not registered with the SEC, investors in a private placement have less protection under the federal securities laws against improper practices than investors in registered securities.

Generally speaking, restricted securities may be sold only to qualified institutional buyers, or in a privately negotiated transaction to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration, or in a public offering for which a registration statement is in effect under the Securities Act. The fund may be deemed to be an "underwriter" for purposes of the Securities Act when selling restricted securities to the public, and in such event the fund may be liable to purchasers of such securities if the registration statement prepared by the issuer, or the prospectus forming a part of it, is materially inaccurate or misleading. The SEC Staff currently takes the view that any delegation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the funds) must be pursuant to written procedures established by the Trustees and the Trustees have delegated such authority to the Investment Manager.

**Real Estate Investment Trusts (REITs)** 

The fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. REITs may concentrate their investments in specific geographic areas or in specific property types (i.e., hotels, shopping malls, residential complexes and office buildings). Like regulated investment companies such as the fund, REITs are not taxed on income distributed to shareholders provided that they comply with certain requirements under the Code. The fund will indirectly bear its proportionate share of any expenses (such as operating expenses and advisory fees) paid by REITs in which it invests in addition to the fund's own expenses.

Investing in REITs may involve certain unique risks in addition to those risks associated with investing in the real estate industry in general (such as possible declines in the value of real estate, lack of availability of mortgage funds, or extended vacancies of property). The market value of REIT shares and the ability of the REITs to distribute income may be adversely affected by several factors, including rising interest rates, changes in the national, state and local economic climate and real estate conditions, perceptions of prospective tenants of the safety, convenience and attractiveness of the properties, the ability of the owners to provide adequate management, maintenance and insurance, the cost of complying with the Americans with Disabilities Act, increased competition from new properties, the impact of present or future environmental legislation and compliance with environmental laws, failing to maintain their exemptions from registration under the Investment Company Act, changes in real estate taxes and other operating expenses, adverse changes in governmental rules and fiscal policies, adverse changes in zoning laws, and other factors beyond the control of the issuers of the REITs.

REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs ("hybrid REITs"). Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the risk of borrower default, the likelihood of which is increased for mortgage REITs that invest in sub-prime mortgages. REITs, and mortgage REITs in particular, are also subject to interest rate risk. Rising interest rates may cause REIT investors to demand a higher annual yield, which may, in turn, cause a decline in the market price of the equity securities issued by a REIT. Rising interest rates also generally increase the costs of obtaining financing, which could cause the value of the fund's REIT investments to decline. During periods when interest rates are declining, mortgages are often refinanced. Refinancing may reduce the yield on investments in mortgage REITs. In addition, since REITs depend on payment under their mortgage loans and leases to generate cash to make distributions to their shareholders, investments in REITs may be adversely affected by defaults on such mortgage loans or leases. A hybrid REIT combines the characteristics of equity REITs and mortgage REITs, generally by holding both ownership interests and mortgage interests in real estate, and thus may be subject to risks associated with both real estate ownership and investments in mortgage-related securities.

Investing in certain REITs, which often have small market capitalizations, may also involve the same risks as investing in other small capitalization companies. REITs may have limited financial resources and their securities may trade less frequently and in limited volume and may be subject to more abrupt or erratic price movements than larger company securities. Historically, small capitalization stocks, such as REITs, have been more volatile in price than the larger capitalization stocks such as those included in the S&P 500 Index. The management of a REIT may be subject to conflicts of interest with respect to the operation of the business of the REIT and may be involved in real estate activities competitive with the REIT. REITs may own properties through

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joint ventures or in other circumstances in which the REIT may not have control over its investments. REITs may incur significant amounts of leverage.

REITs are dependent upon their operators' management skills, are generally not diversified (except to the extent the Code requires), and are subject to heavy cash flow dependency, borrower default or self-liquidation. REITs are also subject to the possibility of failing to qualify for the tax-advantaged treatment available to REITs under the Code or failing to maintain their exemptions from registration under the 1940 Act. In addition, REITs may be adversely affected by changes in federal tax law, for example, by limiting their permissible businesses or investments. REITs may have limited financial resources, may trade less frequently and in a limited volume, and may be subject to more abrupt or erratic price movements than more widely held securities.

The fund's investment in a REIT may result in the fund making distributions that constitute a return of capital to fund shareholders for federal income tax purposes or may require the fund to accrue and distribute income not yet received. In addition, distributions by a fund from REITs will not qualify for the corporate dividends-received deduction, or, generally, for treatment as qualified dividend income.

**Redeemable Securities** 

Certain securities held by the fund may permit the issuer at its option to "call" or redeem its securities. Issuers of redeemable securities are generally more likely to exercise a "call" option in periods when interest rates are below the rate at which the original security was issued. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. The fund also may fail to recover additional amounts (i.e., premiums) paid for securities with higher interest rates, resulting in an unexpected capital loss.

**Repurchase Agreements** 

A repurchase agreement is a contract under which the fund, the buyer under the contract, acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller (or repurchase agreement counterparty) to repurchase, and the fund to resell, the security at a fixed time and price, which represents the fund's cost plus interest (or, for repurchase agreements under which the fund acquires a security and then sells it short, the fund's cost of "borrowing" the security). A repurchase agreement with a stated maturity of longer than one week is generally considered an illiquid investment. It is the fund's present intention to enter into repurchase agreements only with banks and registered broker-dealers. The fund may enter into repurchase agreements, including with respect to securities it wishes to sell short. See "Short Sales" in this SAI. Certain of the repurchase agreements related to securities sold short may provide that, at the option of the fund, settlement may be made by delivery of cash equal to the difference between (a) the sum of (i) the market value of the securities sold short at the time the repurchase agreement is closed out and (ii) transaction costs associated with the acquisition in the market by the repurchase agreement counterparty of the securities sold short and (b) the repurchase price specified in the repurchase agreement.

The fund may be exposed to the credit risk of the repurchase agreement counterparty (or seller) in the event that the counterparty is unable or unwilling to close out the repurchase agreement in accordance with its terms or the parties disagree as to the meaning or application of those terms. In such an event, the fund may be subject to expenses, delays, and risk of loss, including: (i) possible declines in the value of the underlying security while the fund seeks to enforce its rights under the agreement; (ii) possible reduced levels of income and lack of access to income during this period; and (iii) the inability to enforce its rights and the expenses involved in attempted enforcement. If the seller defaults, the fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate. The fund is also subject to the risk that the repurchase agreement instrument may not perform as expected.

Pursuant to no-action relief granted by the SEC, the fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments.

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The fund may also enter into reverse repurchase agreements. Under a reverse repurchase agreement, the fund sells portfolio assets to another party subject to an agreement by the fund to repurchase the same assets from that party at an agreed upon price and date. During the reverse repurchase agreement period, the fund continues to receive principal and interest payments on the assets and also has the opportunity to earn a return on the collateral furnished by the counterparty to secure its obligation to redeliver the assets. The fund can use the proceeds received from entering into a reverse repurchase agreement to make additional investments, which generally causes the fund's portfolio to behave as if it were leveraged.

When entering into a reverse repurchase agreement, the fund bears the risk of delay and costs involved in recovery of securities if the initial purchaser of the securities fails to return the securities upon repurchase or fails financially. These delays and costs could be greater with respect to foreign securities. Although securities repurchase transactions are generally marked to market daily, the fund also faces the risk that securities subject to a reverse repurchase transaction will decline quickly in value, and the fund will remain obligated to repurchase those securities at a higher price, potentially resulting in a loss. If the buyer in a reverse repurchase agreement files for bankruptcy or becomes insolvent, the fund may be unable to recover the securities it sold and as a result would realize a loss equal to the difference between the value of those securities and the payment it received for them. The size of this loss will depend upon the difference between what the buyer paid for the securities the fund sold to it and the value of those securities (*e.g.*, a buyer may pay $95 for a bond with a market value of $100). In the event of a buyer's bankruptcy or insolvency, the fund's use of proceeds from the sale of its securities may be restricted while the other party or its trustee or receiver determines whether to honor the fund's right to repurchase the securities. The fund's use of reverse repurchase agreements also subjects the fund to interest costs based on the difference between the sale and repurchase price of a security involved in such a transaction. Additionally, reverse repurchase agreements entail the same risks as over-the-counter derivatives. These include the risk that the counterparty to the reverse repurchase agreement may not be able to fulfill its obligations, as discussed above, that the parties may disagree as to the meaning or application of contractual terms, or that the instrument may not perform as expected.

**Securities of Other Investment Companies** 

Securities of other investment companies, including shares of open- and closed-end investment companies and unit investment trusts (which may include ETFs), 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 the Investment Manager believes is advisable, when there is a shortage of direct investments available, or when the Investment Manager believes that investment companies offer attractive values.

Investment companies may be structured to perform in a similar fashion to a broad-based securities index or may focus on a particular strategy or class of assets. Passive ETFs typically seek to track the performance or dividend yield of specific indexes or companies in related industries, though unlike the index, an ETF incurs administrative expenses and transaction costs in trading securities. These indexes may be broad-based, sector-based or international. 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 duplication of expenses while the fund owns another investment company's shares. In addition, investing in investment companies involves the risk that they will not perform in exactly the same fashion, or in response to the same factors, as the underlying instruments or index. To the extent the fund invests in other investment companies that are professionally managed, its performance will also depend on the investment and research abilities of investment managers other than the Investment Manager.

Open-end investment companies typically offer their shares continuously at net asset value plus any applicable sales charge and stand ready to redeem shares upon shareholder request. The shares of certain other types of investment companies, such as ETFs and closed-end investment companies, typically trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. In the case of closed-end investment companies, the number of shares is typically fixed. The securities of closed-end investment companies and ETFs carry the risk that the price the fund pays or receives may be higher or lower than the investment company's net asset value. ETFs also are subject to the risk that the timing and magnitude of cash inflows and outflows from and to investors buying and redeeming shares in the ETF could create cash balances that cause the ETF's performance to deviate from the index (which remains "fully invested" at all times). Performance of an ETF and the index it is designed to track also may diverge because the composition of the index and the securities held by the ETF may occasionally differ. ETFs and closed-end investment companies are also subject to certain additional risks, including the risks of illiquidity and of possible trading halts or interruptions due to policies of the relevant exchange, unusual market conditions or other reasons. There can be no assurance that shares of a closed-end investment company or ETF will continue to be listed on an active

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exchange. The shares of investment companies, particularly closed-end investment companies, may also be leveraged, which would increase the volatility of the fund's net asset value.

**Business development companies ("BDCs").** BDCs are a type of closed-end fund regulated under the 1940 Act, which typically invest in and lend to small-and medium-sized private companies that may lack access to public equity markets for capital raising. Under the 1940 Act, BDCs must invest at least 70% of the value of their total assets in certain asset types, which are typically the securities of private U.S. businesses. Additionally, BDCs must make available significant managerial assistance to the issuers of such securities. BDCs are not taxed on income distributed to shareholders provided they qualify as a regulated investment company under the Code. The funds will indirectly bear their proportionate share of any management and other expenses charged by the BDCs in which they invest.

Because BDCs typically invest in small and medium-sized companies, a BDC's portfolio is subject to the risks inherent in investing in smaller companies, including that portfolio companies may be dependent on a small number of products or services and may be more adversely affected by poor economic or market conditions. Some BDCs invest substantially, or even exclusively, in one sector or industry group and therefore the BDC may be susceptible to adverse conditions and economic or regulatory occurrences affecting the sector or industry group, which tends to increase volatility and result in higher risk. Investments in BDCs are also subject to management risk, including management's ability to meet the BDC's investment objective, and management's ability to manage the BDC's portfolio during periods of market turmoil and as investors' perceptions regarding a BDC or its underlying investments change.

The extent to which the fund can invest in securities of other investment companies, including ETFs, is generally limited by federal securities laws. For more information regarding the tax treatment of ETFs, please see "Taxes" below.

**Short Sales** 

The fund may engage in short sales of securities and/or currencies either as a hedge against potential declines in value of a portfolio security or currency or to realize appreciation when a security or currency that the fund does not own declines in value. Short sales are transactions in which the fund sells a security or currency it does not own to a third party by borrowing the security or currency in anticipation of purchasing the same security or currency at the market price on a later date to close out the short position. The fund may also engage in short sales by entering into a repurchase agreement with respect to the security it wishes to sell short. See "Repurchase Agreements" in this SAI. The fund will incur a gain if the price of the security or currency declines between the date of the short sale and the date on which the fund replaces the borrowed security or currency; and the fund will incur a loss if the price of the security or currency increases between those dates. Such a loss is theoretically unlimited since the potential increase in the market price of the security or currency sold short is not limited. Until the security is replaced, the fund must pay the lender (or repurchase agreement counterparty) any dividends or interest that accrues during the period of the loan (or repurchase agreement). To borrow (or enter into a repurchase agreement with respect to) the security, the fund also may be required to pay a premium, which would increase the cost of the security sold. The fund's successful use of short sales is subject to the Investment Manager's ability to accurately predict movements in the market price of the security or currency sold short. Short selling may involve financial leverage because the fund is exposed both to changes in the market price of the security or currency sold short and to changes in the value of securities or currencies purchased with the proceeds of the short sale, effectively leveraging its assets. Under adverse market conditions, a fund may have difficulty purchasing securities to meet its short sale delivery obligations, and may be required to close out its short position at a time when the fund would not choose to do so, and may therefore have to sell portfolio securities to raise the capital necessary to meet its short sale obligations at a time when fundamental investment considerations may not favor such sales. There is also a risk that a borrowed security will need to be returned to the lender on short notice. If a request for return of borrowed securities occurs at a time when other short sellers of the securities are receiving similar requests, a "short squeeze" can occur, and the fund may be compelled to replace borrowed securities previously sold short with purchases on the open market at the most disadvantageous time, possibly at prices significantly in excess of the proceeds received in originally selling the securities short. In addition, the fund may have difficulty purchasing securities to meet its delivery obligations in the case of less liquid securities sold short by the fund, such as certain emerging market country securities or securities of companies with smaller market capitalizations. In connection with short sale transactions, the fund may be required to pledge certain additional assets for the benefit of the securities lender (or repurchase agreement counterparty) and the fund may, while such assets remain pledged, be limited in its ability to invest those assets in accordance with the fund's investment strategies.

Short selling is a technique that may be considered speculative and involves risks beyond the initial capital necessary to secure each transaction. It should be noted that possible losses from short sales differ from those losses that could arise from a cash

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investment in a security because losses from a short sale may be limitless, while the losses from a cash investment in a security cannot exceed the total amount of the investment in the security.

Certain of the repurchase agreements related to securities sold short may provide that, at the option of the fund, in lieu of delivering the securities sold short, settlement may be made by delivery of cash equal to the difference between (a) the sum of (i) the market value of the securities sold short at the time the repurchase agreement is closed out and (ii) transaction costs associated with the acquisition in the market by the repurchase agreement counterparty of the securities sold short and (b) the repurchase price specified in the repurchase agreement. Because that cash amount represents the fund's maximum loss in the event of the insolvency of the counterparty, the fund will, except where the local market practice for foreign securities to be sold short requires payment prior to delivery of such securities, treat such amount, rather than the full notional amount of the repurchase agreement, as its "investment" in securities of the counterparty for purposes of all applicable investment restrictions, including its fundamental policy with respect to diversification.

See "Legal and Regulatory Risks Relating to Investment Strategy" in this SAI.

**Short-Term Trading** 

In seeking the fund's objective(s), the Investment Manager will buy or sell portfolio securities whenever the Investment Manager believes it appropriate to do so. From time to time the fund will buy securities intending to seek short-term trading profits. A change in the securities held by the fund is known as "portfolio turnover" and generally involves some expense to the fund. This expense may include brokerage commissions or dealer markups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. If sales of portfolio securities cause the fund to realize net short-term capital gains, such gains will be taxable as ordinary income when distributed to taxable individual shareholders. As a result of the fund's investment policies, under certain market conditions the fund's portfolio turnover rate may be higher than that of other ETFs. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly average of the value of portfolio securities — excluding securities whose maturities at acquisition were one year or less. The fund's portfolio turnover rate is not a limiting factor when the Investment Manager considers a change in the fund's portfolio.

**Special Purpose Acquisition Companies** 

The fund may invest in stock, rights, warrants, and other securities of special purpose acquisition companies ("SPACs") or similar special purpose entities. A SPAC is a publicly traded company that raises investment capital in the form of a blind pool via an IPO for the purpose of acquiring an existing company. The shares of a SPAC are typically issued in "units" that include one share of common stock and one right or warrant (or partial right or warrant) conveying the right to purchase additional shares or partial shares. At a specified time following the SPAC's IPO (generally 1-2 months), the rights and warrants may be separated from the common stock at the election of the holder, after which they become freely tradeable. After going public and until an acquisition is completed, a SPAC generally invests the proceeds of its IPO (less a portion retained to cover expenses), which are held in trust, in U.S. government securities, money market securities and cash. To the extent the SPAC is invested in cash or similar securities, this may impact a fund's ability to meet its investment objective. If a SPAC does not complete an acquisition within a specified period of time after going public, the SPAC is dissolved, at which point the invested funds are returned to the SPAC's shareholders (less certain permitted expenses) and any rights or warrants issued by the SPAC expire worthless.

Because SPACs and similar entities are in essence blank check companies without an operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the entity's management to identify and complete a profitable acquisition. Some SPACs may pursue acquisitions only within certain industries or regions, which may increase the volatility of their prices. In addition, the securities issued by a SPAC, which are typically traded in the over-the-counter market, may be considered illiquid and/or be subject to restrictions on resale.

**Structured Investments** 

A structured investment is a security having a return tied to an underlying index or other security or asset class. Structured investments generally are individually negotiated agreements and may be traded over-the-counter. Structured investments are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, or specified instruments (such as commercial bank loans) and the issuance by that entity or one or more classes of securities ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued

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structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class of structured securities that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there currently is no active trading market for structured securities. Investments in government and government-related and restructured debt instruments are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt and requests to extend additional loan amounts.

**Swap Agreements** 

The fund may enter into swap agreements and other types of over-the-counter transactions such as caps, floors and collars with broker-dealers or other financial institutions for hedging or investment purposes. A swap involves the exchange by the fund with another party of their respective commitments to pay or receive cash flows, e.g., an exchange of floating rate payments for fixed-rate payments. The purchase of a cap entitles the purchaser, to the extent that a specified index or other underlying financial measure exceeds a predetermined value on a predetermined date or dates, to receive payments on a notional principal amount from the party selling the cap. The purchase of a floor entitles the purchaser, to the extent that a specified index or other underlying financial measure falls or other underlying measure below a predetermined value on a predetermined date or dates, to receive payments on a notional principal amount from the party selling the floor. A collar combines elements of a cap and a floor.

Swap agreements and similar transactions can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. A swap agreement may be structured with reference to an index of securities that is created and maintained by the swap counterparty. Depending on their structures, swap agreements may increase or decrease the fund's exposure to long-or short-term interest rates (in the United States or abroad), foreign currency values, mortgage securities, mortgage rates, corporate borrowing rates, or other factors such as security prices, inflation rates or the volatility of an index or one or more securities. For example, if the fund agrees to exchange payments in U.S. dollars for payments in a non-U.S. currency, the swap agreement would tend to decrease the fund's exposure to U.S. interest rates and increase its exposure to that non-U.S. currency and interest rates.

The fund may also engage in total return swaps, in which payments made by the fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity or fixed-income security, a combination of such securities, or an index). Total return swap agreements may be used to obtain exposure to a security, commodity, or market without owning or taking physical custody of such security or investing directly in such market. The fund may also enter into swap agreements on futures contracts including, but not limited to, index futures contracts. Swap agreements on futures contracts are generally subject to the same risks involved in the fund's use of futures contracts, in addition to the risks involved in the fund's use of swap agreements. See "Futures Contracts and Related Options." A total return swap, or a swap on a futures contract, may add leverage to a portfolio by providing investment exposure to an underlying asset or market where the fund does not own or take physical custody of such asset or invest directly in such market.

The value of the fund's swap positions would increase or decrease depending on the changes in value of the underlying rates, currency values, volatility or other indices or measures. Caps and floors have an effect similar to buying or writing options. Depending on how they are used, swap agreements may increase or decrease the overall volatility of the fund's investments and its share price. The fund's ability to engage in certain swap transactions may be limited by tax considerations.

The fund's ability to realize a profit from such transactions will depend on the ability of the financial institutions with which it enters into the transactions to meet their obligations to the fund. If a counterparty's creditworthiness declines, the value of the agreement would be likely to decline, potentially resulting in losses. If a default occurs by the other party to such transaction, the fund will have contractual remedies pursuant to the agreements related to the transaction, which may be limited by applicable law in the case of a counterparty's insolvency. If the returns of an index upon which a swap is based are unavailable or cannot be calculated (including where the index is created and maintained by the swap counterparty), the fund may experience difficulty in valuing the swap or in determining the amounts owed to or by the counterparty, regardless of whether the counterparty has defaulted. Under certain circumstances, suitable transactions may not be available to the fund, or the fund may be unable to close out its position under such transactions at the same time, or at the same price, as if it had purchased comparable publicly

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traded securities. Swaps carry counterparty risks that cannot be fully anticipated. Also, because swap transactions typically involve a contract between the two parties, such swap investments can be extremely illiquid, as it is uncertain as to whether another counterparty would wish to take assignment of the rights under the swap contract at a price acceptable to the fund.

The fund's investments in swaps will generate ordinary income and losses for federal income tax purposes and 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. The fund 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.

A credit default swap is an agreement between the fund and a counterparty that enables the fund to buy or sell protection against a credit event related to a particular issuer. One party, acting as a "protection buyer," makes periodic payments to the other party, a "protection seller," in exchange for a promise by the protection seller to make a payment to the protection buyer if a negative credit event (such as a delinquent payment or default) occurs with respect to a referenced bond or group of bonds. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors (for example, the Nth default within a basket, or defaults by a particular combination of issuers within the basket, may trigger a payment obligation). The fund may enter into credit default swap contracts for investment purposes. As a credit protection seller in a credit default swap contract, the fund would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty in the event of a default by a third party, such as a U.S. or non-U.S. corporate issuer, on the debt obligation. In return for its obligation, the fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the fund would keep the stream of payments and would have no payment obligations to the counterparty. As the seller, the fund would be subject to investment exposure on the notional amount of the swap.

The fund may also invest in credit default swap contracts to hedge against the risk of default of the debt of a particular issuer or basket of issuers or to attempt to profit from changes or perceived changes in the creditworthiness of the particular issuer(s) (also known as "buying credit protection"). In these cases, the fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment may expire worthless and would only generate income in the event of an actual default by the issuer(s) of the underlying obligation(s) (or, as applicable, a credit downgrade or other indication of financial instability). It would also involve the risk that the seller may fail to satisfy its payment obligations to the fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce the fund's return.

Credit default swaps involve a number of special risks. A protection seller may have to pay out amounts following a negative credit event greater than the value of the reference obligation delivered to it by its counterparty and the amount of periodic payments previously received by it from the counterparty. When the fund acts as a seller of a credit default swap, it is exposed to, among other things, leverage risk because if an event of default occurs the seller must pay the buyer the full notional value of the reference obligation. Each party to a credit default swap is subject to the credit risk of its counterparty (the risk that its counterparty may be unwilling or unable to perform its obligations on the swap as they come due). The value of the credit default swap to each party will change based on changes in the actual or perceived creditworthiness of the underlying issuer.

A protection buyer may lose its investment and recover nothing should an event of default not occur. The fund may seek to realize gains on its credit default swap positions, or limit losses on its positions, by selling those positions in the secondary market. There can be no assurance that a liquid secondary market will exist at any given time for any particular credit default swap or for credit default swaps generally.

The market for credit default swaps has at times become more volatile as the creditworthiness of certain counterparties has been questioned and/or downgraded. The parties to a credit default swap are generally required to post collateral to each other. If the fund posts initial or periodic collateral to its counterparty, it may not be able to recover that collateral from the counterparty in accordance with the terms of the swap. In addition, if the fund receives collateral from its counterparty, it may be delayed or prevented from realizing on the collateral in the event of the insolvency or bankruptcy of the counterparty. The fund may exit its obligations under a credit default swap by terminating the contract and paying applicable breakage fees, by selling its position in the secondary market, or by entering into an offsetting credit default swap position, which may cause the fund to incur more losses.

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The fund may also enter into options on swap agreements ("swaptions"). A swaption is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. The fund may purchase and write (sell) put and call swaptions to the same extent it may make use of standard options on securities or other instruments. Swaptions are generally subject to the same risks involved in the fund's use of options. See "Options on Securities."

Many over-the-counter derivatives (including many swaps) are complex and their valuation often requires subjective modeling and judgment, which increases the risk of mispricing or incorrect valuation. The pricing models used may not produce valuations that are consistent with the values the fund realizes when it closes or sells an over-the-counter derivative. Valuation risk is more pronounced when the fund enters into over-the-counter derivatives with specialized terms because the market value of those derivatives in some cases is determined in part by reference to similar derivatives with more standardized terms. Incorrect valuations may result in increased cash payment requirements to counterparties, undercollateralization and/or errors in calculation of the fund's NAV.

**Tax-exempt Securities** 

**General description**. As used in this SAI, the term "Tax-exempt Securities" includes debt obligations issued by a state, a territory or possession of the United States, the District of Columbia, Puerto Rico, Guam and their political subdivisions (for example, counties, cities, towns, villages, districts and authorities), agencies, instrumentalities or other governmental units, the interest from which is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) the corresponding state's personal income tax. Such obligations are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which Tax-exempt Securities may be issued include to refund of outstanding obligations, to obtain funds for general operating expenses, or to obtain funds to lend to other public institutions and facilities in anticipation of the receipt of revenue or the issuance of other obligations.

Tax-exempt Securities can be classified into two principal categories, including "general obligation" bonds and other securities and "revenue" bonds and other securities. General obligation bonds are secured by the issuer's full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific revenue source, such as the user of the facility being financed. Tax-exempt Securities may be structured as fixed-, variable- or floating-rate obligations or as zero-coupon, payment-in-kind and step-coupon securities and may be privately placed or publicly offered.

Short-term Tax-exempt Securities are generally issued by state and local governments and public authorities as interim financing in anticipation of tax collections, revenue receipts or bond sales to finance such public purposes.

In addition, certain types of "private activity" bonds may be issued by public authorities to finance projects of privately-owned entities, such as privately - operated housing facilities; certain local facilities for supplying water, gas or electricity; sewage or solid waste disposal facilities; student loans; or public or private institutions for the construction of educational, hospital, housing and other facilities. Such obligations are included within the term Tax-exempt Securities if the interest paid thereon is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) state personal income tax (such interest may, however, be subject to federal alternative minimum tax). Other types of private activity bonds, the proceeds of which are used for the construction, repair or improvement of, or to obtain equipment for, privately operated industrial or commercial facilities, may also constitute Tax-exempt Securities, although the current federal tax laws place substantial limitations on the size of such issues. The credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.

Tax-exempt Securities share many of the structural features and risks of other bonds, as described elsewhere in this SAI. For example, the fund may purchase callable Tax-exempt Securities, zero-coupon Tax-exempt Securities, or "stripped" Tax-exempt Securities, which entail additional risks. The fund may also purchase structured or asset-backed Tax-exempt Securities, such as the securities (including preferred stock) of special purpose entities that hold interests in the Tax-exempt Securities of one or more issuers and issue "tranched" securities that are entitled to receive payments based on the cash flows from those underlying securities. See "Redeemable securities," "-Zero-coupon and Payment-in-kind Bonds," "-Structured investments," and "Mortgage-backed and Asset-backed Securities" in this SAI. Structured Tax-exempt Securities may involve increased risk that the interest received by the fund may not be exempt from federal or state income tax, or that such interest may result in liability for the alternative minimum tax for shareholders of the fund. For example, in certain cases, the issuers of certain securities held by a

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special purpose entity may not have received an unqualified opinion of bond counsel that the interest from the securities will be exempt from federal income tax and (if applicable) the corresponding state's personal income tax.

Even though Tax-exempt Securities are interest-bearing investments that promise a stable flow of income, their prices are generally inversely affected by changes in interest rates and, therefore, are subject to the risk of market price fluctuations. The values of Tax-exempt Securities with longer remaining maturities typically fluctuate more than those of similarly rated Tax-exempt Securities with shorter remaining maturities. The values of Tax-exempt Securities also may be affected by changes in their actual or perceived credit quality. The credit quality of Tax-exempt Securities can be affected by, among other things, the financial condition of the issuer or guarantor, the issuer's future borrowing plans and sources of revenue, the economic feasibility of the revenue bond project or general borrowing purpose, political or economic developments in the state or region where the security is issued, and the liquidity of the security. The amount of information about the financial condition of an issuer of Tax-exempt Securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. As a result, the achievement of the fund's goals is more dependent on the Investment Manager's investment analysis than would be the case if the fund were investing in securities of better-known issuers. In addition, Tax-exempt Securities may be harder to value than securities issued by corporations that are publicly traded.

The secondary market for some Tax-exempt Securities issued within a state (including issues that are privately placed with the fund) is less liquid than that for taxable debt obligations or other more widely traded municipal obligations. No established resale market exists for certain of the Tax-exempt Securities in which the fund may invest. The market for Tax-exempt Securities rated below investment grade is also likely to be less liquid than the market for higher rated obligations. As a result, the fund may be unable to dispose of these municipal obligations at times when it would otherwise wish to do so at the prices at which they are valued.

Tax-exempt Securities Issued by the Commonwealth of Puerto Rico. Tax-exempt Securities issued by the Commonwealth of Puerto Rico or its political subdivisions, agencies, instrumentalities, or public corporations may be affected by economic, market, political, and social conditions in Puerto Rico. Puerto Rico has recently experienced (and may in the future experience) significant fiscal and economic challenges, including substantial debt service obligations, high levels of unemployment, underfunded public retirement systems, and persistent government budget deficits. These challenges may negatively affect the value of the fund's investments in Puerto Rico Tax-Exempt Securities. Major ratings agencies have downgraded the general obligation debt of Puerto Rico to below investment grade and continue to maintain a negative outlook for this debt, which increases the likelihood that the rating will be lowered further. In both August 2015 and January 2016, Puerto Rico defaulted on its debt by failing to make full payment due on its outstanding bonds, and there can be no assurance that Puerto Rico will be able to satisfy its future debt obligations. Further downgrades or defaults may place additional strain on the Puerto Rico economy and may negatively affect the value, liquidity, and volatility of the fund's investments in Puerto Rico Tax-exempt Securities. In 2016, the Puerto Rico Oversight, Management, and Economic Stability Act, known as "PROMESA," was signed into law. Among other things, PROMESA established a federally-appointed Oversight Board to oversee Puerto Rico's financial operations and provides Puerto Rico a path to restructuring its debts, thus increasing the risk that Puerto Rico may never pay off municipal indebtedness, or may pay only a small fraction of the amount owed. Proceedings under PROMESA remain ongoing, and it is unclear at this time how those proceedings will be resolved or what impact they will have on the value of a fund's investments in Puerto Rico municipal securities.

These challenges and uncertainties have been exacerbated by Hurricane Maria and the resulting natural disaster in Puerto Rico. In September 2017, Hurricane Maria struck Puerto Rico, causing major damage across the Commonwealth, including damage to its water, power, and telecommunications infrastructure. The length of time needed to rebuild Puerto Rico's infrastructure is unclear, but could amount to years, during which the Commonwealth is likely to be in an uncertain economic state. The full extent of the natural disaster's impact on Puerto Rico's economy and foreign investment in Puerto Rico is difficult to estimate.

**Escrow-secured or pre-refunded bonds**. These securities are created when an issuer uses the proceeds from a new bond issue to buy high grade, interest-bearing debt securities, generally direct obligations of the U.S. government, in order to redeem (or "pre-refund"), before maturity, an outstanding bond issue that is not immediately callable. These securities are then deposited in an irrevocable escrow account held by a trustee bank to secure all future payments of principal and interest on the pre-refunded bond until that bond's call date. Pre-refunded bonds often receive an 'AAA' or equivalent rating. Because pre-refunded bonds still bear the same interest rate, and have a very high credit quality, their price may increase. However, as the original bond approaches its call date, the bond's price will fall to its call price. The escrow account securities pledged to pay the principal and interest of the pre-refunded municipal bonds held by the fund nonetheless still subject the fund to interest rate risk and market risk. In addition, while a secondary market exists for pre-refunded municipal bonds, if the fund sells pre-refunded

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municipal bonds prior to maturity, the price received may be more or less than the original cost, depending on market conditions at the time of sale. The interest on pre-refunded bonds issued on or before December 31, 2017 is exempt from federal income tax; the interest on such bonds issued after December 31, 2017 is not exempt from federal income tax.

**Low Income Housing Tax Credits.** The fund may invest in loans and other instruments tied to the Low Income Housing Tax Credit ("LIHTC") program, which seeks to increase the supply of affordable housing by offering tax credits to projects that rehabilitate or create new affordable rental properties. LIHTCs offer investors a dollar-for-dollar reduction in their federal tax liability to incentivize the construction and rehabilitation of affordable housing properties. Certain of these investments may be issued, or are guaranteed or insured, by agencies or instrumentalities of the U.S. government, such as Fannie Mae or Freddie Mac, while other such investments may be issued by non-governmental entities and therefore not guaranteed or insured.

The LIHTC program requires ongoing compliance with numerous eligibility requirements. Failure to comply with these requirements, including failures by persons other than the fund or which are outside the fund's control, may result in recapture of some or all of the related tax credits as well as the possibility of the loss of future credits. In addition to a recapture of credits and the potential loss of future credits, failure to comply with such eligibility requirements may trigger a default event on the underlying bonds. The fund's investments in loans or other instruments tied to LIHTCs are subject to many of the risks facing other fixed income investments, including interest rate, credit, and prepayment risk.

**Tobacco Settlement Revenue Bonds**. The fund may invest in tobacco settlement revenue bonds, which are secured by an issuing state's proportionate share of periodic payments by tobacco companies made under the Master Settlement Agreement ("MSA"). The MSA is an agreement that was reached out of court in November 1998 between 46 states and six U.S. jurisdictions and tobacco manufacturers representing an overwhelming majority of U.S. market share in settlement of certain smoking-related litigation. The MSA provides for annual payments by the manufacturers to the states and jurisdictions in perpetuity in exchange for releasing all claims against the manufacturers and a pledge of no further litigation. The MSA established a base payment schedule and a formula for adjusting payments each year. Tobacco manufacturers pay into a master escrow trust based on their market share, and each state receives a fixed percentage of the payment as set forth in the MSA. Within some states, certain localities may in turn be allocated a specific portion of the state's MSA payment pursuant to an arrangement with the state.

A number of state and local governments have securitized the future flow of payments under the MSA by selling bonds pursuant to indentures, some through distinct governmental entities created for such purpose. The bonds are backed by the future revenue flow that is used for principal and interest payments on the bonds. Annual payments on the bonds, and thus risk to the fund, are dependent on the receipt of future settlement payments by the state or its instrumentality. The actual amount of future settlement payments may vary based on, among other things, annual domestic cigarette shipments, inflation, the financial capability of participating tobacco companies, and certain offsets for disputed payments. Payments made by tobacco manufacturers could be reduced if cigarette shipments continue to decline below the base levels used in establishing manufacturers' payment obligations under the MSA. Demand for cigarettes in the U.S. could continue to decline based on many factors, including, without limitation, anti-smoking campaigns, tax increases, price increases implemented to recoup the cost of payments by tobacco companies under the MSA, reduced ability to advertise, enforcement of laws prohibiting sales to minors, elimination of certain sales venues such as vending machines, the spread of local ordinances restricting smoking in public places, and increases in the use of other nicotine delivery devices (such as electronic cigarettes, smoking cessation products, and smokeless tobacco).

Because tobacco settlement bonds are backed by payments from the tobacco manufacturers, and generally not by the credit of the state or local government issuing the bonds, their creditworthiness depends on the ability of tobacco manufacturers to meet

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their obligations. The bankruptcy of an MSA-participating manufacturer could cause delays or reductions in bond payments, which would affect the fund's net asset value. Under the MSA, a market share loss by MSA-participating tobacco manufacturers to non-MSA participating manufacturers would also cause a downward adjustment in the payment amounts under some circumstances.

The MSA and tobacco manufacturers have been and continue to be subject to various legal claims, including, among others, claims that the MSA violates federal antitrust law. In addition, the United States Department of Justice has alleged in a civil lawsuit that the major tobacco companies defrauded and misled the American public about the health risks associated with smoking cigarettes. An adverse outcome to this lawsuit or to any other litigation matters or regulatory actions relating to the MSA or affecting tobacco manufacturers could adversely affect the payment streams associated with the MSA or cause delays or reductions in bond payments by tobacco manufacturers.

In addition to the risks described above, tobacco settlement revenue bonds are subject to other risks described in this SAI, including the risks of asset-backed securities discussed under "Mortgage-backed and Asset-backed Securities."

**Stand-by commitments**. When the fund purchases Tax-exempt Securities, it has the authority to acquire stand-by commitments from banks and broker-dealers with respect to those Tax-exempt Securities. A stand-by commitment is a right acquired by the fund to sell up to the principal amount of such Tax-exempt Securities back to the seller or a third party (typically an institution such as a bank or broker-dealer) at an agreed-upon price or yield within specified periods prior to their maturity dates. A stand-by commitment may be considered a security independent of the Tax-exempt security to which it relates. The amount payable by a bank or dealer during the time a stand-by commitment is exercisable, absent unusual circumstances, would be substantially the same as the market value of the underlying Tax-exempt security to a third party at any time. The fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. The fund does not expect to assign any value to stand-by commitments when determining the fund's net asset value. The fund will be subject to credit risk with respect to an institution providing a stand-by commitment and a decline in the credit quality of the institution could cause losses to the fund.

**Yields**. The yields on Tax-exempt Securities depend on a variety of factors, including general money market conditions, effective marginal tax rates, the financial condition of the issuer, general conditions of the Tax-exempt security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of nationally recognized securities rating agencies represent their opinions as to the credit quality of the Tax-exempt Securities which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, Tax-exempt Securities with the same maturity, interest rate and rating may have different yields while Tax-exempt Securities of the same maturity and interest rate but with different ratings may have the same yield. Yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates and may be due to such factors as changes in the overall demand or supply of various types of Tax-exempt Securities or changes in the investment objectives of investors. Subsequent to purchase by the fund, an issue of Tax-exempt Securities or other investments may cease to be rated, or its rating may be reduced below the minimum rating required for purchase by the fund. The Investment Manager will consider such an event in its determination of whether the fund should continue to hold an investment in its portfolio. Downgrades of Tax-exempt Securities held by a money market fund may require the fund to sell such securities, potentially at a loss.

**"Moral obligation" bonds**. The fund may invest in so-called "moral obligation" bonds, where repayment of the bond is backed by a moral (but not legally binding) commitment of an entity other than the issuer, such as a state legislature, to pay. Such a commitment may be in addition to the legal commitment of the issuer to repay the bond or may represent the only payment obligation with respect to the bond (where, for example, no amount has yet been specifically appropriated to pay the bond. See "-Municipal leases" below.)

**Municipal leases**. The fund may acquire participations in lease obligations or installment purchase contract obligations (collectively, "lease obligations") of municipal authorities or entities. A lease obligation is an obligation in the form of a lease or installment purchase that is issued by a state or local government to acquire equipment and facilities. Income from such obligations generally is exempt from state and local tax in the state of issuance. Lease obligations may be secured or unsecured. Lease obligations do not constitute general obligations of the municipality for which the municipality's taxing power is pledged.

Municipal leases may be subject to greater risks than general obligation or revenue bonds. Although lease obligations do not constitute general obligations of the municipality, a lease obligation ordinarily is backed by the municipality's covenant to budget for, appropriate, and make the payments due under the lease obligation. However, certain of these lease obligations contain

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"non-appropriation" clauses, which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In the case of a "non-appropriation" lease, the fund's ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, and in any event, foreclosure of that property might prove difficult. If a municipality does not fulfill its payment obligation, it may be difficult to sell the lease obligation and the proceeds of a sale may not cover the fund's loss.

In addition to the "non-appropriation" risk, many municipal lease obligations have not yet developed the depth of marketability associated with municipal bonds. Moreover, such leases may be subject to the temporary abatement of payments in the event the issuer is prevented from maintaining occupancy of the leased premises or utilizing the leased equipment or facilities. Although the obligations may be secured by the leased equipment or facilities, the disposition of the property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly, and result in a delay in recovering, or the failure to recover fully, the fund's original investment.

**Additional risks**. Securities in which the fund may invest, including Tax-exempt Securities, are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code (including special provisions related to municipalities and other public entities), and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, such as the recent bankruptcy-type proceedings by the Commonwealth of Puerto Rico the power, ability or willingness of issuers to meet their obligations for the payment of interest and principal on their Tax-exempt Securities may be materially affected or their obligations may be found to be invalid or unenforceable. Such litigation or conditions may from time to time have the effect of introducing uncertainties in the market for municipal bonds or certain segments thereof, or of materially affecting the credit risk with respect to particular bonds. Adverse economic, business, legal or political developments might affect all or a substantial portion of the fund's municipal bonds in the same manner.

From time to time, legislation may be introduced or litigation may arise that may restrict or eliminate the federal income tax exemption for interest on debt obligations issued by states and their political subdivisions. Federal tax laws limit the types and amounts of tax-exempt bonds issuable for certain purposes, especially industrial development bonds and private activity bonds. Such limits may affect the future supply and yields of these types of Tax-exempt Securities. Further proposals limiting the issuance of Tax-exempt Securities may well be introduced in the future. Shareholders should consult their tax advisors for the current law on tax-exempt bonds and securities.

**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 the Investment Manager 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.

**Trade Policy** 

In 2025, the U.S. government indicated its intent to alter its approach to international trade policy and, in some cases, to renegotiate or potentially terminate certain existing bilateral or multilateral trade agreements and treaties with foreign countries and has made proposals and taken actions related thereto. In addition, the U.S. government has recently imposed tariffs on certain foreign goods and has indicated a willingness to impose tariffs on imports of other products. Some foreign governments, including China, have instituted retaliatory tariffs on certain U.S. goods and have indicated a willingness to impose additional tariffs on U.S. products. Other countries, including Mexico, have threatened retaliatory tariffs on certain U.S. products.

Global trade disruption, significant introductions of trade barriers, and bilateral trade frictions, together with any future downturns in the global economy resulting therefrom, could adversely affect the financial performance of the fund and its investments.

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Trade policy may be an ongoing source of instability, potentially resulting in significant currency fluctuations and/or having other adverse effects on international markets, international trade agreements, and/or other existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory, or otherwise). To the extent trade disputes escalate globally, there could be additional significant impacts on the sectors or industries in which the fund invests and other adverse impacts on the fund's overall performance.

**Warrants** 

The fund may invest in or acquire warrants, which are instruments that give the fund the right (but not the obligation) to purchase certain securities from an issuer at a specific price (the "strike price") until a stated expiration date. The purchase of warrants involves the risk that the effective price paid for the warrant added to the strike price of the underlying security may exceed the value of the security's market price, such as when there is no movement in the level of the underlying security. Also, the strike price of warrants typically is much lower than the current market price of the underlying securities, yet they are subject to similar price fluctuations. As a result, warrants may be more volatile investments than the underlying securities and may offer greater potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to dividends or voting rights with respect to the underlying securities and do not represent any rights in the assets of the issuing company. Also, the value of the warrant does not necessarily change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to the expiration date. These factors can make warrants more speculative than other types of investments.

In addition to warrants on securities, the fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If the fund were not to exercise an index warrant prior to its expiration, then the fund would lose the amount of the purchase price paid by it for the warrant.

The fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the fund's ability to exercise the warrants at such time, or in such quantities, as the fund would otherwise wish to do.

**Zero-coupon and Payment-in-kind Bonds** 

The fund may invest without limit in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in-kind bonds do not pay current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. The fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders even though such bonds do not pay current interest in cash. Thus, it may be necessary at times for the fund to liquidate investments, including when it is not advantageous to do so, in order to satisfy its distribution requirements under the Code. The market for zero-coupon and payment-in-kind bonds may be limited, making it difficult for the fund to value them or dispose of its holdings quickly at an acceptable price.

**EXCHANGE TRADED FUND RISKS** 

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**Continuous Offering** 

The method by which Creation Units of shares are created and traded may raise certain issues under applicable securities laws. Because new Creation Units of shares are issued and sold by a fund on an ongoing basis, at any point a "distribution," as such term is used in the 1933 Act, may occur. Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus delivery and liability provisions of the 1933 Act.

For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with Franklin Distributors, each fund's distributor, breaks them down into constituent shares, and sells such shares directly to customers, or if it chooses to couple the creation of a supply of new shares with an active selling effort involving solicitation of secondary market demand for shares. A determination of whether one is an underwriter for purposes of the 1933 Act must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that 12 could lead to a categorization as an underwriter.

Broker-dealer firms should also note that dealers who are not "underwriters," but are effecting transactions in shares of a fund, whether or not participating in the distribution of shares, are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(a)(3) of the 1933 Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that dealers who are not underwriters but are participating in a distribution (as opposed to engaging in ordinary secondary market transactions) and thus dealing with the shares that are part of an overallotment within the meaning of Section 4(a)(3)(A) of the 1933 Act would be unable to take advantage of the prospectus delivery exemption provided by Section 4(a)(3) of the 1933 Act. Firms that incur a prospectus-delivery obligation with respect to shares of each fund are reminded that, under Rule 153 under the 1933 Act, a prospectus-delivery obligation under Section 5(b)(2) of the 1933 Act owed to an exchange member in connection with a sale on an exchange is satisfied by the fact that the prospectus is available from the exchange upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to transactions on an exchange.

**Listing and Trading** 

Shares of each fund have been approved for listing and trading on an exchange. Each fund's shares trade on an exchange at prices that may differ to some degree from their NAV. The listing exchange may remove a fund's shares from listing if, among other things (i) following the initial 12-month period beginning upon the commencement of trading of the fund, there are fewer than 50 beneficial owners of the fund's shares ; (ii) the listing exchange becomes aware that the fund is no longer eligible to operate in reliance on Rule 6c-11 under the 1940 Act; (iii) the fund no longer complies with certain listing exchange rules; or (iv) such other event shall occur or condition exists that, in the opinion of the listing exchange, makes further dealings on the exchange inadvisable.

The listing exchange will remove a fund's shares from listing and trading upon termination of the trust. There can be no assurance that the requirements of the listing exchange necessary to maintain the listing of the fund's shares will continue to be met. As in the case of other publicly-traded securities, brokers' commissions on transactions will be based on negotiated commission rates at customary levels. The existence of a liquid trading market for certain securities may depend on whether dealers will make a market in such securities. There can be no assurance that such a market will be made or maintained or that any such market will be or remain liquid. The price at which securities may be sold and the value of the fund's shares will be adversely affected if trading markets for the fund's portfolio securities are limited or absent, or if bid/ask spreads are wide.

**TAXES** 

The following discussion of U.S. federal income tax consequences is based on the Code, existing U.S. Treasury regulations, and other applicable authority, as of the date of this SAI. These authorities are subject to change by legislative or administrative action, possibly with retroactive effect. The following discussion is only a summary of some of the important U.S. federal income tax considerations generally applicable to investments in the fund. There may be other tax considerations applicable to particular shareholders. Shareholders should consult their own tax advisors regarding their particular situation and the possible application of foreign, state and local tax laws.

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**Taxation of the fund.** The fund has elected and intends to qualify each year as a regulated investment company under Subchapter M of the Code. In order to qualify for the special tax treatment accorded regulated investment companies and their shareholders, the fund must, among other things:

(a) derive at least 90% of its gross income for each taxable year from (i) dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and (ii) net income from interests in "qualified publicly traded partnerships" (as defined below);

(b) diversify its holdings so that, at the end of each quarter of the fund's taxable year, (i) at least 50% of the market value of the fund's total assets is represented by cash and cash items (including receivables), U.S. government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the fund's total assets and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the fund's total assets is invested, including through corporations in which the fund owns a 20% or more voting stock interest, (x) in the securities (other than those of the U.S. government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related trades or businesses, or (y) in the securities of one or more qualified publicly traded partnerships (as defined below); and

(c) distribute with respect to each taxable year at least 90% of the sum of its investment company taxable income (as that term is defined in the Code without regard to the deduction for dividends paid—generally, taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses) and net tax-exempt interest income, for such year.

In general, for purposes of the 90% gross income requirement described in paragraph (a) above, income derived from a partnership will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership which would be qualifying income if realized by the regulated investment company. However, 100% of the net income of a regulated investment company derived from an interest in a "qualified publicly traded partnership" (defined as a partnership (i) interests in which are traded on an established securities market or readily tradable on a secondary market or the substantial equivalent thereof, and (ii) that derives less than 90% of its income from the qualifying income described in paragraph (a)(i) above) will be treated as qualifying income. In general, such entities will be treated as partnerships for federal income tax purposes because they meet the passive income requirement under Code section 7704(c)(2). In addition, although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated investment company with respect to items attributable to an interest in a qualified publicly traded partnership.

For purposes of the diversification test in paragraph (b) above, identification of the issuer (or, in some cases, issuers) of a particular fund investment will depend on the terms and conditions of that investment. In some cases, identification of the issuer (or issuers) is uncertain under current law, and an adverse determination or future guidance by the IRS with respect to issuer identification for a particular type of investment may adversely affect the fund's ability to meet the diversification test in (b) above. Also, for the purposes of the diversification test in paragraph (b) above, the term "outstanding voting securities of such issuer" will include the equity securities of a qualified publicly traded partnership.

If the fund qualifies as a regulated investment company that is accorded special tax treatment, the fund will not be subject to U. S. federal income tax on income or gains distributed in a timely manner to its shareholders in the form of dividends (including Capital Gain Dividends, as defined below).

If the fund were to fail to meet the income, diversification or distribution test described above, the fund could in some cases cure such failure, including by paying a fund-level tax, paying interest, making additional distributions, or disposing of certain assets. If the fund were ineligible to or otherwise did not cure such failure for any year, or were otherwise to fail to qualify as a regulated investment company accorded special tax treatment in any taxable year, the fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. Some portions of such distributions may be eligible for the dividends received deduction in the case of corporate shareholders, and may be eligible to be treated as "qualified dividend income" in the case of shareholders taxed as individuals, provided, in both cases, that the shareholder meets certain holding period and other requirements in respect of the fund's shares (as described below). In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment.

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The fund intends to distribute at least annually to its shareholders all or substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction) and its net tax-exempt income (if any). The fund may distribute its net capital gain (that is, the excess of net long-term capital gain over net short-term capital loss, in each case determined with reference to any loss carryforwards). Investment company taxable income (which is retained by the fund) will be subject to tax at regular corporate rates. The fund may also retain for investment its net capital gain. If the fund retains any net capital gain, it will be subject to tax at regular corporate rates on the amount retained, but may designate the retained amount as undistributed capital gains in a notice to its shareholders who will be (i) required to include in income for U.S. federal income tax purposes, as long-term capital gain, their shares of such undistributed amount, and (ii) entitled to credit their proportionate shares of the tax paid by the fund on such undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds on a properly-filed U.S. tax return to the extent the credit exceeds such liabilities. If the fund makes this designation, for U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the fund will be increased by an amount equal to the difference between the amount of undistributed capital gains included in the shareholder's gross income under clause (i) of the preceding sentence and the tax deemed paid by the shareholder under clause (ii) of the preceding sentence. The fund is not required to, and there can be no assurance the fund will, make this designation if it retains all or a portion of its net capital gain in a taxable year.

In determining its net capital gain, including in connection with determining the amount available to support a Capital Gain Dividend (as defined below), its taxable income and its earnings and profits, a regulated investment company generally may also elect to treat part or all of any post-October capital loss (defined as any net capital loss attributable to the portion, if any, of the taxable year after October 31 or, if there is no such loss, the net long-term capital loss or net short-term capital loss attributable to any such portion of the taxable year) or late-year ordinary loss (generally, the sum of its (i) net ordinary loss, if any, from the sale, exchange or other taxable disposition of property, attributable to the portion, if any, of the taxable year after October 31, and its (ii) other net ordinary loss, if any, attributable to the portion, if any, of the taxable year after December 31) as if incurred in the succeeding taxable year.

If the fund fails to distribute in a calendar year at least an amount equal to the sum of 98% of its ordinary income for such year and 98.2% of its capital gain net income for the one-year period ending October 31 of such year, plus any retained amount from the prior year, the fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. For these purposes, ordinary gains and losses from the sale, exchange, or other taxable disposition of property that would otherwise be properly taken into account after October 31 are treated as arising on January 1 of the following calendar year. For purposes of the excise tax, the fund will be treated as having distributed any amount on which it has been subject to corporate income tax in the taxable year ending within the calendar year. A dividend paid to shareholders in January of a year generally is deemed to have been paid by the fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax, although there can be no assurance that it will be able to do so.

The fund distributes its net investment income and capital gains to shareholders as dividends at least annually to the extent required to qualify as a regulated investment company under the Code and generally to avoid U.S. federal income or excise tax. Provided it is not treated as a "personal holding company" for U.S. federal income tax purposes, the fund is permitted to treat the portion of redemption proceeds paid to redeeming shareholders that represents the redeeming shareholders' portion of the fund's accumulated earnings and profits as a dividend on the fund's tax return. This practice, which involves the use of tax equalization, will have the effect of reducing the amount of income and gains that the fund is required to distribute as dividends to shareholders in order for the fund to avoid U. S. federal income tax and excise tax. This practice may also reduce the amount of distributions required to be made to non-redeeming shareholders and the amount of any undistributed income will be reflected in the value of the shares of the fund; the total return on a shareholder's investment will not be reduced as a result of this distribution policy.

**Fund distributions.** Distributions from the fund (other than exempt-interest dividends, as discussed below) generally are taxable to shareholders as ordinary income to the extent derived from the fund's investment income and net short-term capital gains. Distributions are taxable whether shareholders receive them in cash or reinvest them in additional shares of the fund or other Putnam funds.

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 how long a shareholder has owned his or her shares. In general, the fund will recognize long-term capital gain or loss on investments it has owned for more than one year, and short-term capital gain or loss on investments it has owned for one year or less. Tax rules can alter the fund's holding period in investments and thereby affect

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the tax treatment of gain or loss on such investments. Distributions of net capital gain that are properly reported by the fund as capital gain dividends ("Capital Gain Dividends") will be treated as long-term capital gains includible in net capital gain and taxed to individuals at reduced rates. The IRS and the Department of the Treasury have issued regulations that impose special rules in respect of Capital Gain Dividends received through partnership interests constituting "applicable partnership interests" under Section 1061 of the Code. Distributions from capital gains generally are made after applying any available capital loss carryforwards. Distributions of net short-term capital gain (as reduced by any net long-term capital loss for the taxable year) will be taxable to shareholders as ordinary income.

The Code generally imposes a 3.8% Medicare contribution tax on the net investment income of certain individuals, trusts and estates to the extent their income exceeds certain threshold amounts. For these purposes, "net investment income" generally includes, among other things, (i) distributions paid by the fund of net investment income and capital gains (other than exempt-interest dividends) as described herein, and (ii) any net gain from the sale, redemption, exchange or other taxable disposition of fund shares. Shareholders are advised to consult their tax advisers regarding the possible implications of this additional tax on their investment in the fund.

Distributions of investment income reported by the fund as "qualified dividend income" received by an individual will be taxed at the reduced rates applicable to net capital gain. In order for some portion of the dividends received by a fund shareholder to be qualified dividend income, the fund must meet holding period and other requirements with respect to some portion of the dividend-paying stocks in its portfolio and the shareholder must meet holding period and other requirements with respect to the fund's shares. In general, a dividend will not be treated as qualified dividend income (at either the fund or shareholder level) (1) if the dividend is received with respect to any share of stock held for fewer than 61 days during the 121-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividend (or, in the case of certain preferred stock, 91 days during the 181-day period beginning 90 days before such date), (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, (3) if the recipient elects to have the dividend income treated as investment interest, or (4) if the dividend is received from a foreign corporation that is (a) not eligible for the benefits of a comprehensive income tax treaty with the United States (with the exception of dividends paid on stock of such a foreign corporation readily tradable on an established securities market in the United States) or (b) treated as a passive foreign investment company. Each fund, other than fixed-income and money market funds, generally expects to report eligible dividends as qualified dividend income.

In general, distributions of investment income reported by the fund as derived from qualified dividend income will be treated as qualified dividend income by a shareholder taxed as an individual provided the shareholder meets the holding period and other requirements described above with respect to such fund's shares. In any event, if the aggregate qualified dividends received by the fund during any taxable year are 95% or more of its gross income (excluding net long-term capital gain over net short-term capital loss), then 100% of the fund's dividends (other than dividends properly reported as Capital Gain Dividends) will be eligible to be treated as qualified dividend income.

Individuals (and certain other non-corporate entities) are generally eligible with respect to tax years beginning after December 31, 2017 and ending on or before December 31, 2025 for a 20% deduction with respect to taxable ordinary dividends from REITs and certain taxable income from publicly traded partnerships. Currently, regulated investment companies may pass through the 20% deduction to shareholders for REIT dividends, but not for income from publicly traded partnerships. Distributions by the fund to its shareholders that the fund properly reports as "section 199A dividends," as defined and subject to certain conditions described below, are treated as qualified REIT dividends in the hands of non-corporate shareholders.

Subject to future regulatory guidance to the contrary, distributions attributable to qualified publicly traded partnership income from a fund's investments in MLPs will ostensibly not qualify for the deduction available to non-corporate taxpayers in respect of such amounts received directly from an MLP.

In general, fixed-income and money market funds receive interest, rather than dividends, from their portfolio securities. As a result, it is not currently expected that any significant portion of such funds' distributions to shareholders will be derived from qualified dividend income. For information regarding qualified dividend income received from underlying funds, see "Funds of funds" below.

Certain distributions reported by a Fund as section 163(j) interest dividends may be treated as interest income by shareholders for purposes of the tax rules applicable to interest expense limitations under Code section 163(j). Such treatment by the

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shareholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that a Fund is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of the Fund's business interest income over the sum of the Fund's (i) business interest expense and (ii) other deductions properly allocable to the Fund's business interest income.

In general, dividends of net investment income received by corporate shareholders of the fund will qualify for the dividends-received deduction generally available to corporations only to the extent of the amount of eligible dividends received by the fund from domestic corporations for the taxable year. A dividend received by the fund will not be treated as a dividend eligible for the dividends-received deduction (1) if it has been received with respect to any share of stock that the fund has held for less than 46 days (91 days in the case of certain preferred stock) during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend (during the 181-day period beginning 90 days before such date in the case of certain preferred stock) or (2) to the extent that the fund is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Moreover, the dividends received deduction may otherwise be disallowed or reduced (1) if the corporate shareholder fails to satisfy the foregoing requirements with respect to its shares of the fund or (2) by application of various provisions of the Code (for instance, the dividends-received deduction is reduced in the case of a dividend received on debt-financed portfolio stock (generally, stock acquired with borrowed funds)). For information regarding eligibility for the dividends-received deduction of dividend income derived from an underlying fund, see "Funds of funds" below.

**Exempt-interest dividends.** A fund will be qualified to pay exempt-interest dividends to its shareholders if, at the close of each quarter of the fund's taxable year, at least 50% of the total value of the fund's assets consists of obligations the interest on which is exempt from federal income tax under Section 103(a) of the Code. In some cases, the fund may also pass through to its shareholders the tax-exempt character of any exempt-interest dividends it receives from underlying funds in which it invests (see "Funds of funds," below). Distributions that the fund reports as exempt-interest dividends are treated as interest excludable from shareholders' gross income for federal income tax purposes but may be taxable for federal alternative minimum tax ("AMT") purposes and for state and local purposes. If the fund intends to qualify to pay exempt-interest dividends, the fund may be limited in its ability to enter into taxable transactions involving forward commitments, repurchase agreements, financial futures and options contracts on financial futures, tax-exempt bond indices and other assets.

Part or all of the interest on indebtedness, if any, incurred or continued by a shareholder to purchase or carry shares of the fund paying exempt-interest dividends is not deductible. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness, multiplied by the percentage of the fund's total distributions (not including distributions from net long-term capital gains) paid to the shareholder that are exempt-interest dividends. Under rules used by the IRS to determine when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares.

In general, exempt-interest dividends, if any, attributable to interest received on certain private activity obligations and certain industrial development bonds will not be tax-exempt to any shareholders who are "substantial users" of the facilities financed by such obligations or bonds or who are "related persons" of such substantial users.

A fund that is qualified to pay exempt-interest dividends will notify its shareholders in a written statement of the portion of distributions for the taxable year that constitutes exempt-interest dividends.

Exempt-interest dividends may be taxable for purposes of the federal AMT. For individual shareholders, exempt-interest dividends that are derived from interest on private activity bonds that are issued after August 7, 1986 (other than a "qualified 501(c)(3) bond," as such term is defined in the Code) generally must be included in an individual's tax base for purposes of calculating the shareholder's liability for U.S. federal AMT. For taxable years beginning after December 31, 2017, corporations are no longer subject to the federal AMT.

**Funds of funds.** If the fund invests in shares of underlying funds, a portion of its distributable income and gains will consist of distributions from the underlying funds and gains and losses on the disposition of shares of the underlying funds. To the extent that an underlying fund realizes net losses on its investments for a given taxable year, the fund will not be able to recognize its share of those losses (so as to offset distributions of net income or capital gains from other underlying funds) until and only to the extent that it disposes of shares of the underlying fund in a transaction qualifying for sale or exchange treatment or those losses

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reduce distributions required to be made by the underlying fund. Moreover, even when the fund does make such a disposition, a portion of its loss may be recognized as a long-term capital loss, which will not be treated as favorably for U.S. federal income tax purposes as a short-term capital loss or an ordinary deduction. In particular, the fund will not be able to offset any capital losses from its dispositions of underlying fund shares against its ordinary income (including distributions of any net short-term capital gains realized by an underlying fund).

In addition, in certain circumstances, the "wash sale" rules under Section 1091 of the Code may apply to the fund's sales of underlying fund shares that have generated losses. A wash sale occurs if shares of an underlying fund are sold by the fund at a loss and the fund acquires additional shares of that same underlying fund 30 days before or after the date of the sale. The wash-sale rules could defer losses in the fund's hands on sales of underlying fund shares (to the extent such sales are wash sales) for extended (and, in certain cases, potentially indefinite) periods of time.

As a result of the foregoing rules, and certain other special rules, the amounts of net investment income and net capital gains that the fund will be required to distribute to shareholders may be greater than such amounts would have been had the fund invested directly in the securities held by the underlying funds, rather than investing in shares of the underlying funds. For similar reasons, the amount or timing of distributions from the fund qualifying for treatment as being of a particular character (e.g., as long-term capital gain, exempt interest, eligible for dividends-received deduction, etc.) will not necessarily be the same as it would have been had the fund invested directly in the securities held by the underlying funds.

If the fund receives dividends from an underlying fund that qualifies as a regulated investment company, and the underlying fund reports such dividends as "qualified dividend income," then the fund may, in turn, report a portion of its distributions as "qualified dividend income" as well, provided the fund meets the holding period and other requirements with respect to shares of the underlying fund.

If the fund receives dividends from an underlying fund and the underlying fund reports such dividends as eligible for the dividends-received deduction, then the fund is permitted, in turn, to designate a portion of its distributions as eligible for the dividends-received deduction, provided the fund meets the holding period and other requirements with respect to shares of the underlying fund.

If the fund were to own 20% or more of the voting interests of an underlying fund, subject to a safe harbor in respect of certain fund of funds arrangements, the fund would be required to "look through" the underlying fund to its holdings and combine the appropriate percentage (as determined pursuant to the applicable Treasury Regulations) of the underlying fund's assets with the fund's assets for purposes of satisfying the 25% diversification test described above.

If, at the close of each quarter of the fund's taxable year, at least 50% of its total assets consists of interests in other regulated investment companies (such fund, a "qualified fund of funds"), the fund will be permitted to distribute exempt-interest dividends and thereby pass through to its shareholders the tax-exempt character of any exempt-interest dividends it receives from underlying funds in which it invests, or interest on any tax-exempt obligations in which it directly invests, if any. For further information regarding exempt-interest dividends, see "Exempt-interest dividends," above.

If the fund is a qualified fund of funds, the fund will be entitled to elect to pass through to its shareholders a credit or deduction for foreign taxes (if any) borne in respect of foreign securities income earned by the fund, or by any underlying funds and passed through to the fund. If the fund so elects, shareholders will include in gross income from foreign sources their pro rata shares of such taxes, if any, treated as paid by the fund. Even if the fund is eligible to make such an election for a given year, it may determine not to do so. If the fund elects to pass through to its shareholders foreign tax credits or deductions, tax-exempt shareholders and those who invest in the fund through tax-advantaged accounts such as IRAs will not benefit from any such tax credit or deduction. See "Foreign taxes" below for more information.

**Derivatives, hedging and related transactions; certain exposure to commodities.** In general, option premiums received by the fund are not immediately included in the income of the fund. Instead, the premiums are recognized when the option contract expires, the option is exercised by the holder, or the fund transfers or otherwise terminates the option (*e.g.*, through a closing transaction). If a call option written by the fund is exercised and the fund sells or delivers the underlying stock, the fund generally will recognize capital gain or loss equal to (a) the sum of the strike price and the option premium received by the fund minus (b) the fund's basis in the stock. Such gain or loss generally will be short-term or long-term depending upon the holding period of the underlying stock. If securities are purchased by the fund pursuant to the exercise of a put option written by it, the fund generally will subtract the premium received for purposes of computing its cost basis in the securities purchased. Gain or loss arising in

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respect of a termination of the fund's obligation under an option other than through the exercise of the option will be short-term gain or loss depending on whether the premium income received by the fund is greater or less than the amount paid by the fund (if any) in terminating the transaction. Thus, for example, if an option written by the fund expires unexercised, the fund generally will recognize short-term gain equal to the premium received.

Certain covered call writing activities of the fund may trigger the U.S. federal income tax straddle rules contained primarily in Section 1092 of the Code. Very generally, where applicable, Section 1092 requires (i) that losses be deferred on positions deemed to be offsetting positions with respect to "substantially similar or related property," to the extent of unrealized gain in the latter, and (ii) that the holding period of such a straddle position that has not already been held for the long-term holding period be terminated and begin anew once the position is no longer part of a straddle. Options on single stocks that are not "deep in the money" may constitute qualified covered calls, which generally are not subject to the straddle rules; the holding period on stock underlying qualified covered calls that are "in the money" although not "deep in the money" will be suspended during the period that such calls are outstanding. Thus, the straddle rules and the rules governing qualified covered calls could cause gains that would otherwise constitute long-term capital gains to be treated as short-term capital gains, and distributions that would otherwise constitute "qualified dividend income" or qualify for the dividends-received deduction to fail to satisfy the holding period requirements and therefore to be taxed as ordinary income or to fail to qualify for the dividends-received deduction, as the case may be.

In general, 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the Commodities Futures Trading Commission is treated as short-term gain or loss, and 60% is treated as long-term gain or loss, although certain foreign currency gains and losses from such contracts may be treated as ordinary in character. Also, such contracts held by the fund at the end of each taxable year (and, for purposes of the 4% excise tax, on certain other dates as prescribed under the Code) are "marked to market" with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as ordinary or 60/40 gain or loss, as applicable.

The fund's investment in swaps, if any, will generate ordinary income and losses for federal income tax purposes. The fund's investments in futures and swaps 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. The fund 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.

In addition to the special rules described above in respect of options, futures transactions and swaps, the fund's derivative transactions, including transactions in options, futures contracts, straddles, securities loan and other similar transactions, including for hedging purposes, will be subject to special tax rules (including constructive sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund's securities, convert long-term capital gains into short-term capital gains, short-term capital losses into long-term capital losses, or capital gains into ordinary income. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund may make any applicable elections pertaining to such transactions consistent with the interests of the fund.

Because these and other tax rules applicable to these types of transactions are in some cases uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which determination or guidance could be retroactive) may affect whether the fund has made sufficient distributions, and otherwise satisfied the relevant requirements, to maintain its qualification as a regulated investment company and avoid a fund-level tax.

A fund's use of commodity-linked derivatives can be limited by the fund's intention to qualify as a regulated investment company and can bear on its ability to so qualify. Income and gains from certain commodity-linked derivatives do not constitute qualifying income to a regulated investment company for purposes of the 90% gross income test described above. The tax treatment of certain other commodity-linked derivative instruments in which the fund might invest is not certain, in particular with respect to whether income or gains from such instruments constitute qualifying income to a regulated investment company. If the fund were to treat income or gain from a particular instrument as qualifying income and the income or gain were later determined not to constitute qualifying income and, together with any other nonqualifying income, caused the fund's nonqualifying income to exceed 10% of its gross income in any taxable year, the fund would fail to qualify as a regulated investment company unless it is eligible to and does pay a tax at the fund level.

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The tax rules are uncertain with respect to the treatment of income or gains arising in respect of commodity-linked exchange-traded notes ("ETNs") and certain commodity-linked structured notes; also, the timing and character of income or gains arising from ETNs can be uncertain. An adverse determination or future guidance by the IRS (which determination or guidance could be retroactive) may affect the fund's ability to qualify for treatment as a regulated investment company and to avoid a fund-level tax.

To the extent that, in order to achieve exposure to commodities, the fund invests in entities that are treated as pass-through vehicles for U.S. federal income tax purposes, including, for instance, certain ETFs (e.g., ETFs investing in gold bullion) and partnerships other than qualified publicly traded partnerships (as defined earlier), all or a portion of any income and gains from such entities could constitute non-qualifying income to the fund for purposes of the 90% gross income requirement described above. In such a case, the fund's investments in such entities could be limited by its intention to qualify as a regulated investment company and could bear on its ability to so qualify. Certain commodities-related ETFs may qualify as qualified publicly traded partnerships. In such cases, the net income derived from such investments will constitute qualifying income for purposes of the 90% gross income requirement. If, however, such a vehicle were to fail to qualify as a qualified publicly traded partnership in a particular year, a portion of the gross income derived from it in such year could constitute non-qualifying income to the fund for purposes of the 90% gross income requirement and thus could adversely affect the fund's ability to qualify as a regulated investment company for a particular year. In addition, the diversification requirement described above for regulated investment company qualification will limit the fund's investments in one or more vehicles that are qualified publicly traded partnerships to 25% of the fund's total assets as of the close of each quarter of the fund's taxable year.

Certain of the fund's investments in derivative instruments and foreign currency-denominated instruments, and any of the fund's transactions in foreign currencies and hedging activities, are likely to produce a difference between its book income and its taxable income. If such a difference arises, and the fund's book income is less than its taxable income (or, for tax-exempt funds, the sum of its net tax-exempt and taxable income), the fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment and to eliminate fund-level income tax. In the alternative, if the fund's book income exceeds the sum of its taxable income and tax-exempt income, the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the fund's remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter as a return of capital to the extent of the recipient's basis in the shares, and (iii) thereafter as gain from the sale or exchange of a capital asset.

**Investments in REITs.** The fund's investment in REIT equity securities may result in the fund's receipt of cash in excess of the REIT's earnings. If the fund distributes such amounts, such distribution could constitute a return of capital to the fund shareholders for U.S. federal income tax purposes. Dividends received by the fund from a REIT generally will not constitute qualified dividend income and will not qualify for the corporate dividends-received deduction.

Distributions by the fund to its shareholders that the fund properly reports as "section 199A dividends," as defined and subject to certain conditions described below, are treated as qualified REIT dividends in the hands of non-corporate shareholders. Non-corporate shareholders are permitted a federal income tax deduction equal to 20% of qualified REIT dividends received by them, subject to certain limitations. Currently, eligible non-corporate shareholders can claim the deduction for tax years beginning after December 31, 2017 and ending on or before December 31, 2025. Very generally, a "section 199A dividend" is any dividend or portion thereof that is attributable to certain dividends received by a regulated investment company from REITs, to the extent such dividends are properly reported as such by the regulated investment company in a written notice to its shareholders. A section 199A dividend is treated as a qualified REIT dividend only if the shareholder receiving such dividend holds the dividend-paying regulated investment company shares for at least 46 days of the 91-day period beginning 45 days before the shares become ex-dividend, and is not under an obligation to make related payments with respect to a position in substantially similar or related property. A fund is permitted to report such part of its dividends as section 199A dividends as are eligible, but is not required to do so.

**Mortgage-related securities.** The fund may invest in REITs, including REITs that hold residual interests in real estate mortgage investment conduits ("REMICs") (including by investing in residual interests in collateralized mortgage obligations ("CMOs") with respect to which an election to be treated as a REMIC is in effect), REITs that are themselves taxable mortgage pools ("TMPs") or REITs that invest in TMPs. Under a notice issued by the IRS in October 2006 and Treasury regulations that have not yet been issued, but apply retroactively, a portion of the fund's income from a REIT that is attributable to the REIT's residual interest in a REMIC or TMP (referred to in the Code as an "excess inclusion") will be subject to U.S. federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a regulated investment company, such as the fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC or TMP residual

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interest directly. As a result, a fund investing in such interests may not be a suitable investment for charitable remainder trusts, as noted below.

In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income ("UBTI") to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a non-U.S. shareholder, will not qualify for any reduction in U.S. federal withholding tax. A shareholder will be subject to U.S. federal income tax on such inclusions notwithstanding any exemption from such income tax otherwise available under the Code. Any investment in residual interests of CMO that has elected to be treated as a REMIC can create complex tax problems, especially if the fund has state or local governments or other tax-exempt organizations as shareholders.

Income of a fund that would be UBTI if earned directly by a tax-exempt entity generally will not constitute UBTI when distributed to a tax-exempt shareholder of the fund. Notwithstanding the foregoing, a tax-exempt shareholder will recognize UBTI by virtue of its investment in the fund if shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code Section 514(b). Furthermore, a tax-exempt shareholder may recognize UBTI if the fund recognizes excess inclusion income derived from direct or indirect investments in REMIC residual interests or TMPs if the amount of such income recognized by the fund exceeds the fund's investment company taxable income (after taking into account deductions for dividends paid by the fund).

Under legislation enacted in December 2006, a charitable remainder trust ("CRT"), as defined in Section 664 of the Code, that realizes UBTI for a taxable year must pay an excise tax annually of an amount equal to such UBTI. Under IRS guidance issued in October 2006, a CRT will not recognize UBTI solely as a result of investing in a fund that recognizes excess inclusion income. Rather, if at any time during any taxable year a CRT (or one of certain other tax-exempt shareholders, such as the United States, a state or political subdivision, or an agency or instrumentality thereof, and certain energy cooperatives) is a record holder of a share in a fund that recognizes excess inclusion income, then the fund will be subject to a tax on that portion of its excess inclusion income for the taxable year that is allocable to such shareholders at the highest federal corporate income tax rate. The extent to which this IRS guidance remains applicable in light of the December 2006 legislation is unclear. To the extent permitted under the 1940 Act, the fund may elect to specially allocate any such tax to the applicable CRT, or other shareholder, and thus reduce such shareholder's distributions for the year by the amount of the tax that relates to such shareholder's interest in the fund. CRTs and other tax-exempt investors are urged to consult their tax advisors concerning the consequences of investing in the fund.

**Return of capital distributions**. If the fund makes a distribution in and with respect to any taxable year to a shareholder in excess of the fund's current and accumulated earnings and profits, the excess distribution will be treated as a return of capital to the extent of such shareholder's tax basis in its shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces a shareholder's tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares. Dividends and distributions on the fund's shares generally are subject to federal income tax as described herein to the extent they do not exceed the fund's realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder's investment. Such distributions are likely to occur in respect of shares purchased at a time when the fund's net asset value reflects gains that are either unrealized, or realized but not distributed. Such realized income and gains may be required to be distributed even when the fund's net asset value also reflects unrealized losses. Distributions are taxable to a shareholder even if they are paid from income or gains earned by the fund prior to the shareholder's investment (and thus included in the price paid by the shareholder).

**Securities issued or purchased at a discount.** Some debt obligations with a fixed maturity date of more than one year from the date of issuance (and zero-coupon debt obligations with a fixed maturity date of more than one year from the date of issuance) that are acquired by the fund will be treated as debt obligations that are issued originally at a discount. Generally, the amount of the original issue discount ("OID") is treated as interest income and is included in the fund's income (and required to be distributed by the fund) over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. In addition, payment-in-kind securities will give rise to income which is required to be distributed and is taxable even though the fund holding the security receives no interest payment in cash on the security during the year.

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Some debt obligations with a fixed maturity date of more than one year from the date of issuance that are acquired by the fund in the secondary market may be treated as having "market discount." Very generally, market discount is the excess of the stated redemption price of a debt obligation (or in the case of an obligation issued with OID, its "revised issue price") over the purchase price of such obligation. Generally any gain recognized on the disposition of, and any partial payment of principal on, a debt security having market discount is treated as ordinary income to the extent the gain, or principal payment, does not exceed the "accrued market discount" on such debt security. Alternatively, the fund may elect to accrue market discount currently, in which case the fund will be required to include the accrued market discount in the fund's income (as ordinary income) and thus distribute it over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. The rate at which the market discount accrues, and thus is included in the fund's income, will depend upon which of the permitted accrual methods the fund elects.

Some debt obligations with a fixed maturity date of one year or less from the date of issuance that are acquired by the fund may be treated as having "acquisition discount" (very generally, the excess of the stated redemption price over the purchase price) or OID. The fund will be required to include the acquisition discount or OID in income over the term of the debt security, even though payment of that amount is not received until a later time, usually when the debt security matures. The fund may make one or more of the elections applicable to debt obligations having acquisition discount or OID, which could affect the character and timing of recognition of income.

If the fund holds the foregoing kinds of obligations, or other obligations subject to special rules under the Code, it may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest the fund actually received. Such distributions may be made from the cash assets of the fund or, if necessary, by disposition of portfolio securities including at a time when it may not be advantageous to do so. These dispositions may cause the fund to realize higher amounts of short-term capital gains (generally taxed to shareholders at ordinary income tax rates) and, in the event the fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution than if the fund had not held such obligations.

**Securities purchased at a premium.** Very generally, where the fund purchases a bond at a price that exceeds the redemption price at maturity (*i*.*e*., a premium), the premium is amortizable over the remaining term of the bond. In the case of a taxable bond, if the fund makes an election applicable to all such bonds it purchases, which election is irrevocable without consent of the IRS, the fund reduces the current taxable income from the bond by the amortized premium and reduces its tax basis in the bond by the amount of such offset; upon the disposition or maturity of such bonds acquired on or after January 4, 2013, the fund is permitted to deduct any remaining premium allocable to a prior period. In the case of a tax-exempt bond, tax rules require the fund to reduce its tax basis by the amount of amortized premium.

**Higher-Risk obligations.** Investments in debt obligations that are at risk of or in default present special tax issues for the fund. Tax rules are not entirely clear about issues such as whether the fund should recognize market discount on a debt obligation and, if so, the amount of market discount the fund should recognize; when the fund may cease to accrue interest, OID or market discount, when and to what extent deductions may be taken for bad debts or worthless securities and how payments received on obligations in default should be allocated between principal and income. These and other related issues will be addressed by the fund when, as and if it invests in such obligations, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.

**Capital loss carryforward.** Distributions from capital gains generally are made after applying any available capital loss carryforwards. Capital loss carryforwards are reduced to the extent they offset current-year net realized capital gains, whether the fund retains or distributes such gains. If a fund incurs or has incurred capital losses in excess of capital gains ("net capital losses"), those losses will be carried forward to one or more subsequent taxable years; any such carryforward losses will retain their character as short-term or long-term.

**Foreign taxes.** If more than 50% of the fund's assets at taxable year end consists of the securities of foreign corporations, the fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries in respect of foreign securities the fund has held for at least the minimum period specified in the Code. A qualified fund of funds also may elect to pass through to its shareholders foreign taxes it has paid or foreign taxes passed through to it by any underlying fund that itself elected to pass through such taxes to shareholders (see "Funds of funds" above). In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholder's ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the

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amount of such taxes. In particular, shareholders must hold their fund shares (without protection from risk of loss) on the ex-dividend date and for at least 15 additional days during the 30-day period surrounding the ex-dividend date to be eligible to claim a foreign tax credit with respect to a given dividend. Shareholders who do not itemize on their U.S. federal income tax returns may claim a credit (but no deduction) for such foreign taxes. Even if the fund is eligible to make such an election for a given year, it may determine not to do so. However, even if the fund elects to pass through to its shareholders foreign tax credits or deductions, tax-exempt shareholders and those who invest in the fund through tax-advantaged accounts such as IRAs will not benefit from any such tax credit or deduction.

**Passive foreign investment companies.** Investments treated as equity for federal income tax purposes in certain "passive foreign investment companies" ("PFICs", as defined below) could subject the fund to a U.S. federal income tax (including interest charges) on distributions received from the company or on the proceeds from the disposition of its investment in such a company. This tax cannot be eliminated by making distributions to fund shareholders; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a "qualified electing fund." The QEF and mark-to-market elections may have the effect of accelerating the recognition of income (without the receipt of cash) and increasing the amount required to be distributed by the fund to avoid taxation. Making either of these elections therefore may require the fund to liquidate other investments to meet its distribution requirement, which may also accelerate the recognition of gain and affect the fund's total return. Dividends paid by PFICs will not be eligible to be treated as "qualified dividend income." If the fund indirectly invests in PFICs by virtue of the fund's investments in other funds, it may not make such PFIC elections; rather, the underlying funds directly investing in the PFICs would decide whether to make such elections.

Because it is not always possible to identify a foreign corporation as a PFIC, the fund may incur the tax and interest charges described above in some instances.

A PFIC is any foreign corporation: (i) 75 percent or more of the income of which for the taxable year is passive income, or (ii) the average percentage of the assets of which (generally by value, but by adjusted tax basis in certain cases) that produce or are held for the production of passive income is at least 50 percent. Generally, passive income for this purpose means dividends, interest (including income equivalent to interest), royalties, rents, annuities, the excess of gains over losses from certain property transactions and commodities transactions, and foreign currency gains. Passive income for this purpose does not include rents and royalties received by the foreign corporation from active business and certain income received from related persons.

**Foreign currency-denominated transactions and related hedging transactions.** The fund's transactions in foreign currencies, foreign currency-denominated debt obligations and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. Any such net gains could require a larger dividend toward the end of the calendar year. Any such net losses generally will reduce and potentially require the recharacterization of prior ordinary income distributions. Such ordinary income treatment may accelerate fund distributions to shareholders and increase the distributions taxed to shareholders as ordinary income. Any net ordinary losses so created cannot be carried forward by the fund to offset income or gains earned in subsequent taxable years.

**Sale or exchange of shares.** The sale or exchange of fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise the gain or loss on the sale or exchange of fund shares will be treated as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss generally will be disallowed for federal income tax purposes to the extent of any exempt-interest dividends received on such shares. This loss disallowance, however, does not apply with respect to dispositions of fund shares held for six months or less with respect to a regular exempt-interest dividend paid by the fund if such fund declares substantially all of its net tax-exempt income as exempt-interest dividends on a daily basis, and pays such dividends at least on a monthly basis. In addition, any loss (not already disallowed as provided in the preceding sentences) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any Capital Gain Dividends received (or deemed received) by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of fund shares will be disallowed if other shares of the same fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

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**Taxes on purchase and redemption of creation units**. Authorized Participants that are "dealers in securities" for U.S. federal income tax purposes are subject to different rules with respect to holding, acquiring and disposing of securities, including Creation Units. Authorized Participants should consult their own tax advisor with respect to transactions with a fund.

An Authorized Participant who exchanges securities for Creation Units generally will recognize a gain or a loss equal to the difference between the market value of the Creation Units at the time of the exchange and the sum of the exchanger's aggregate basis in the securities surrendered plus any Cash Component it pays. An Authorized Participant who exchanges Creation Units for securities will generally recognize a gain or loss equal to the difference between the exchanger's basis in the Creation Units and the sum of the aggregate market value of the securities received plus any cash equal to the difference between the NAV of the shares being redeemed and the value of the securities. The IRS, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing "wash sales" (for a person who does not mark-to-market its portfolio) or on the basis that there has been no significant change in economic position. Persons exchanging securities should consult their own tax advisor with respect to whether wash sale rules apply and when a loss might be deductible.

Any capital gain or loss realized upon the creation of Creation Units will generally be treated as long-term capital gain or loss if the securities exchanged for such Creation Units have been held for more than one year. Any capital gain or loss realized upon redemption of Creation Units is generally treated as long-term capital gain or loss if the shares have been held for more than one year and as short-term capital gain or loss if the shares have been held for one year or less. Any loss upon a redemption of Creation Units held for six months or less will be treated as a long-term capital loss to the extent of any amounts treated as distributions to the applicable Authorized Participant of long-term capital gain with respect to the Creation Units (including any amounts credited to the Authorized Participant as undistributed capital gains). In addition, any loss realized upon a redemption of fund shares held by an Authorized Participant for six months or less generally will be disallowed, to the extent of any exempt-interest dividends received by the Authorized Participant with respect to the shares.

The fund has the right to reject an order for a purchase of shares of the fund if the purchaser (or group of purchasers) would, upon obtaining the shares so ordered, own 80% or more of the outstanding shares of the fund and if, pursuant to Section 351 of the Code, the fund would have a basis in the securities contributed by such purchaser different from the market value of such securities on the date of deposit. The fund also has the right to require information necessary to determine beneficial share ownership for purposes of the 80% determination.

**Cost basis reporting.** Upon the redemption or exchange of a shareholder's shares in the fund, the fund, or, if such shareholder's shares are then held through a financial intermediary, the financial intermediary, will be required to provide the shareholder and the IRS with cost basis and certain other related tax information about the fund shares the shareholder redeemed or exchanged. This cost basis reporting requirement is effective for shares purchased, including through dividend reinvestment, on or after January 1, 2012. Shareholders should consult their financial representatives for more information regarding available methods for cost basis reporting and how to select a particular method. Shareholders should consult their tax advisors to determine which available cost basis method is best for them.

**Shares purchased through tax-qualified plans.** Special tax rules apply to investments through employer-sponsored retirement plans and other tax-qualified plans or tax-advantaged arrangements. Shareholders should consult their tax advisors to determine the suitability of shares of the fund as an investment through such plans and arrangements and the precise effect of an investment on their particular tax situation.

**Backup withholding.** The fund generally is required to withhold and remit to the U.S. Treasury a percentage of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the fund with a correct taxpayer identification number (TIN), who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is not subject to such withholding. The backup withholding rules may also apply to distributions that are properly reported as exempt-interest dividends. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder's U.S. federal income tax liability, provided the appropriate information is furnished to the IRS.

In order for a foreign investor to qualify for exemption from the backup withholding tax rates and for reduced withholding tax rates under income tax treaties, the foreign investor must comply with special certification and filing requirements. Foreign investors in a fund should consult their tax advisors in this regard.

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**Tax shelter reporting regulations.** Under U.S. Treasury regulations, if a shareholder recognizes a loss on disposition of fund shares of at least $2 million in any single taxable year or $4 million in any combination of taxable years for an individual shareholder or $10 million in any single taxable year or $20 million in any combination of taxable years for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.

**Non-U.S. shareholders.** Distributions by the fund to shareholders that are not "U.S. persons" within the meaning of the Code ("foreign shareholders") properly reported by the fund as (1) Capital Gain Dividends, (2) interest-related dividends, (3) short-term capital gain dividends, each as defined below and subject to certain conditions described below, and (4) exempt-interest dividends generally are not subject to withholding of U.S. federal income tax.

In general, the Code defines (1) "short-term capital gain dividends" as distributions of net short-term capital gains in excess of net long-term capital losses and (2) "interest-related dividends" as distributions from U.S. source interest income of types similar to those not subject to U.S. federal income tax if earned directly by an individual foreign shareholder, in each case to the extent such distributions are properly reported as such by the fund in a written notice to shareholders. The exceptions to withholding for Capital Gain Dividends and short-term capital gain dividends do not apply to (A) distributions to an individual foreign shareholder who is present in the United States for a period or periods aggregating 183 days or more during the year of the distribution and (B) distributions attributable to gain that is treated as effectively connected with the conduct by the foreign shareholder of a trade or business within the United States under special rules regarding the disposition of U.S. real property interests as described below. The exception to withholding for interest-related dividends does not apply to distributions to a foreign shareholder (A) that has not provided a satisfactory statement that the beneficial owner is not a U.S. person, (B) to the extent that the dividend is attributable to certain interest on an obligation if the foreign shareholder is the issuer or is a 10% shareholder of the issuer, (C) that is within certain foreign countries that have inadequate information exchange with the United States, or (D) to the extent the dividend is attributable to interest paid by a person that is a related person of the foreign shareholder and the foreign shareholder is a controlled foreign corporation. If the fund invests in other regulated investment companies that pay Capital Gain Dividends, short-term capital gain dividends or interest-related dividends to the fund, such distributions retain their character as not subject to withholding if properly reported when paid by the fund to foreign shareholders. The fund is permitted to report such part of its dividends as interest-related and/or short-term capital gain dividends as are eligible, but is not required to do so. In the case of shares held through an intermediary, the intermediary may withhold even if the fund reports all or a portion of a payment as an interest-related or short-term capital gain dividend to shareholders.

The fact that a fund achieves its goals by investing in underlying funds generally does not adversely affect the fund's ability to pass on to foreign shareholders the full benefit of the interest-related dividends and short-term capital gain dividends that it receives from its investments in underlying funds, except possibly to the extent that (1) interest-related dividends received by the fund are offset by deductions allocable to the fund's qualified interest income or (2) short-term capital gain dividends received by the fund are offset by the fund's net short- or long-term capital losses, in which case the amount of a distribution from the fund to a foreign shareholder that is properly reported as either an interest-related dividend or a short-term capital gain dividend, respectively, may be less than the amount that such shareholder would have received had they invested directly in the underlying funds.

Distributions by the fund to foreign shareholders other than Capital Gain Dividends, interest-related dividends, and short-term capital gain dividends and exempt-interest dividends (*e.g.*, dividends attributable to dividend and foreign-source interest income or to short-term capital gains or U.S.-source interest income to which the exception from withholding described above does not apply) are generally subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate).

Under U.S. federal tax law, a beneficial holder of shares who is a foreign shareholder is not, in general, subject to U.S. federal income tax on gains (and is not allowed a deduction for losses) realized on the sale of shares of the fund, unless (i) such gain is effectively connected with the conduct of a trade or business carried on by such holder within the United States; (ii) in the case of an individual holder, the holder is present in the United States for a period or periods aggregating 183 days or more during the year of the sale and certain other conditions are met; or (iii) the special rules relating to gain attributable to the sale or exchange of "U.S. real property interests" ("USRPIs") apply to the foreign shareholder's sale of shares of the fund (as described below).

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If a beneficial holder who is a foreign shareholder has a trade or business in the United States, and the dividends are effectively connected with the conduct by the beneficial holder of a trade or business in the United States, the dividend will be subject to U.S. federal net income taxation at regular income tax rates and, in the case of a foreign corporation, may also be subject to a branch profits tax. If a foreign shareholder is eligible for the benefits of a tax treaty, any effectively connected income or gain will generally be subject to U.S. federal income tax on a net basis only if it is also attributable to a permanent establishment maintained by the shareholder in the United States. More generally, foreign shareholders who are residents in a country with an income tax treaty with the United States may obtain different tax results than those described herein, and are urged to consult their tax advisors.

Special rules would apply if the fund were a qualified investment entity ("QIE") because it is either a "U.S. real property holding corporation" ("USRPHC") or would be a USRPHC but for the operation of certain exceptions to the definition of USRPIs described below. Very generally, a USRPHC is a domestic corporation that holds USRPIs the fair market value of which equals or exceeds 50% of the sum of the fair market values of the corporation's USRPIs, interests in real property located outside the United States, and other trade or business assets. USRPIs generally are defined as any interest in U.S. real property and any interest (other than solely as a creditor) in a USRPHC or, very generally, an entity that has been a USRPHC in the last five years. A fund that holds, directly or indirectly, significant interests in REITs may be a USRPHC. Interests in domestically controlled QIEs, including regulated investment companies and REITs that are QIEs, not-greater-than-10% interests in publicly traded classes of stock in REITs and not-greater-than-5% interests in publicly traded classes of stock in regulated investment companies generally are not USRPIs, but these exceptions do not apply for purposes of determining whether a fund is a QIE.

If an interest in the fund were a USRPI, the fund would be required to withhold U.S. tax on the proceeds of a share redemption by a greater-than-5% foreign shareholder, in which case such foreign shareholder generally would also be required to file U.S. tax returns and pay any additional taxes due in connection with the redemption.

If the fund were a QIE under a special "look-through" rule, any distributions by the fund to a foreign shareholder (including, in certain cases, distributions made by the fund in redemption of its shares) attributable directly or indirectly to (i) distributions received by the fund from a lower-tier regulated investment company or REIT that the fund is required to treat as USRPI gain in its hands and (ii) gains realized on the disposition of USRPIs by the fund would retain their character as gains realized from USRPIs in the hands of the fund's foreign shareholders and would be subject to U.S. tax withholding. In addition, such distributions could result in the foreign shareholder being required to file a U.S. tax return and pay tax on the distributions at regular U.S. federal income tax rates. The consequences to a foreign shareholder, including the rate of such withholding and character of such distributions (*e.g.*, as ordinary income or USRPI gain), would vary depending upon the extent of the foreign shareholder's current and past ownership of the fund.

Foreign shareholders of the fund also may be subject to "wash sale" rules to prevent the avoidance of the tax-filing and -payment obligations discussed above through the sale and repurchase of fund shares.

Foreign shareholders should consult their tax advisers and, if holding shares through intermediaries, their intermediaries, concerning the application of these rules to their investment in the fund.

**Other reporting and withholding requirements**. Sections 1471-1474 of the Code and the U.S. Treasury and IRS guidance issued thereunder (collectively, "FATCA") generally require a fund to obtain information sufficient to identify the status of each of its shareholders under FATCA or under an applicable intergovernmental agreement (an "IGA") between the United States and a foreign government. If a shareholder fails to provide the requested information or otherwise fails to comply with FATCA or an IGA, the fund may be required to withhold under FATCA at a rate of 30% with respect to that shareholder on ordinary dividends it pays. The IRS and the Department of Treasury have issued proposed regulations providing that these withholding rules will not be applicable to the gross proceeds of share redemptions or Capital Gain Dividends the fund pays. If a payment by the fund is subject to FATCA withholding, the fund is required to withhold even if such payment would otherwise be exempt from withholding under the rules applicable to foreign shareholders described above (*e.g.*, short-term capital gain dividends and interest-related dividends).

Each prospective investor is urged to consult its tax advisor regarding the applicability of FATCA and any other reporting requirements with respect to the prospective investor's own situation, including investments through an intermediary.

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**General Considerations.** The U.S. federal income tax discussion set forth above is for general information only. Prospective investors should consult their tax advisers regarding the specific federal tax consequences of purchasing, holding, and disposing of shares of the fund, as well as the effects of state, local and foreign tax law and any proposed tax law changes.

**MANAGEMENT** 

**Trustees** 

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Name, Address<sup>1</sup>, Year of<br>Birth, Position(s) Held<br>with Fund and Length of<br>Service as a Fund<br>Trustee<sup>2</sup>** | **Principal Occupation(s) During<br>Past 5 Years** | **Number of Funds<br>in the Franklin<br>Templeton Funds<br>Complex Overseen<br>by Trustee<sup>3</sup>** | **Other Directorships Held by Trustee** |
| &nbsp;&nbsp;&nbsp;**Liaquat Ahamed** (Born 1952), Trustee since 2012 | Author; won Pulitzer Prize for *Lords of Finance: The Bankers Who Broke the World*. | 101 | Chair of the Sun Valley Writers Conference, a literary not-for-profit organization; and a Trustee of the Journal of Philosophy. |
| &nbsp;&nbsp;&nbsp;**Barbara M. Baumann** (Born 1955), Trustee since 2010, Vice Chair from 2022 to 2024, Chair since 2024 | President of Cross Creek Energy Corporation, a strategic consultant to domestic energy firms and direct investor in energy projects. | 101 | Director of Devon Energy Corporation, a publicly traded independent natural gas and oil exploration and production company; Director of National Fuel Gas Company, a publicly traded energy company that engages in the production, gathering, transportation, distribution and marketing of natural gas; Senior Advisor to the energy private equity firm First Reserve; member of the Finance Committee of the Children's Hospital of Colorado; member of the Investment Committee of the Board of The Denver Foundation; and previously a Director of publicly traded companies Buckeye Partners LP, UNS Energy Corporation, CVR Energy Company, and SM Energy Corporation. |
| &nbsp;&nbsp;&nbsp;**Katinka Domotorffy** (Born 1975), Trustee since 2012 | Voting member of the Investment Committees of the Anne Ray Foundation and Margaret A. Cargill Foundation, part of the Margaret A. Cargill Philanthropies. | 101 | Director of the Great Lakes Science Center and of College Now Greater Cleveland. |
| &nbsp;&nbsp;&nbsp;**Catharine Bond Hill** (Born 1954), Trustee since 2017 | Managing Director of Ithaka S+R, a not-for-profit service that helps the academic community navigate economic and technological change. From 2006 to 2016, Dr. Hill served as the 10th president of Vassar College. | 101 | Director of Yale-NUS College; and Trustee of Yale University. |
| &nbsp;&nbsp;&nbsp;**Gregory G. McGreevey** (Born 1962), Trustee | Until 2023, Senior Managing Director, Investments, Invesco | 101 | Previously, a Director of Invesco Mortgage Capital, Inc., a publicly traded |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Name, Address<sup>1</sup>, Year of<br>Birth, Position(s) Held<br>with Fund and Length of<br>Service as a Fund<br>Trustee<sup>2</sup>** | **Principal Occupation(s) During<br>Past 5 Years** | **Number of Funds<br>in the Franklin<br>Templeton Funds<br>Complex Overseen<br>by Trustee<sup>3</sup>** | **Other Directorships Held by Trustee** |
| &nbsp;&nbsp;&nbsp;since 2024 | Ltd., a global investment firm. |  | real estate investment trust. |
| &nbsp;&nbsp;&nbsp;**\*Jennifer Williams Murphy** (Born 1964), Trustee since 2022 | Chief Executive Officer and Founder of Runa Digital Assets, LLC, an institutional investment advisory firm specializing in active management of digital assets. Until 2021, Chief Operating Officer of Western Asset Management, LLC, a global investment adviser, and Chief Executive Officer and President of Western Asset Mortgage Capital Corporation, a mortgage finance real estate investment trust. | 101 | Previously, a Director of Western Asset Mortgage Capital Corporation. |
| &nbsp;&nbsp;&nbsp;**Marie Pillai** (Born 1954), Trustee since 2022 | Senior Advisor, Hunter Street Partners, LP, an asset-oriented private investment firm; Director of Choice Bank, a private, community bank based in North Dakota. Until 2019, Vice President, Chief Investment Officer and Treasurer of General Mills, Inc., a global food company. | 101 | Member of the Investment Committee of the Bush Foundation, a nonprofit organization supporting community problem-solving in Minnesota, North Dakota and South Dakota; Member of the Finance Council and Corporate Board of the Archdiocese of Saint Paul and Minneapolis; Member of the Curriculum Committee of the Center for Board Certified Fiduciaries, a public benefit corporation providing coursework for developing fiduciaries; previously a Board Member of Catholic Charities of St. Paul and Minneapolis; former Director of the Catholic Community Foundation of Minnesota; and former Investment Advisory Board Member of the University of Minnesota. |
| &nbsp;&nbsp;&nbsp;**George Putnam III** (Born 1951), Trustee since 1984 | Chair of New Generation Research, Inc., a publisher of financial advisory and other research services, and President of New Generation Advisors, LLC, a registered investment adviser to private funds. | 101 | Director of The Boston Family Office, LLC, a registered investment adviser; a Director of the Gloucester Marine Genomics Institute; a Trustee of the Lowell Observatory Foundation; and previously a Trustee of the Marine Biological Laboratory. |
| &nbsp;&nbsp;&nbsp;**Manoj P. Singh** (Born 1952), Trustee since 2017 | Until 2015, Chief Operating Officer and Global Managing Director at Deloitte Touche Tohmatsu, Ltd., a global professional services organization, serving on the Deloitte U.S. Board of Directors and the boards of Deloitte member | 101 | Director of ReNew Energy Global Plc, a publicly traded renewable energy company; Director of Abt Associates, a global research firm working in the fields of health, social and environmental policy, and international development; Trustee of Carnegie Mellon University; |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Name, Address<sup>1</sup>, Year of<br>Birth, Position(s) Held<br>with Fund and Length of<br>Service as a Fund<br>Trustee<sup>2</sup>** | **Principal Occupation(s) During<br>Past 5 Years** | **Number of Funds<br>in the Franklin<br>Templeton Funds<br>Complex Overseen<br>by Trustee<sup>3</sup>** | **Other Directorships Held by Trustee** |
|  | firms in China, Mexico and Southeast Asia. |  | Director of Pratham USA, an organization dedicated to children's education in India; member of the advisory board of Altimetrik, a business transformation and technology solutions firm; and Director of DXC Technology, a global IT services and consulting company. |
| &nbsp;&nbsp;&nbsp;**Mona K. Sutphen** (Born 1967), Trustee since 2020 | Partner, Investment Strategies at The Vistria Group, a private investment firm focused on middle-market companies in the healthcare, education, and financial services industries. From 2014 to 2018, Partner at Macro Advisory Partners, a global consulting firm. | 101 | Director of Spotify Technology S.A., a publicly traded audio content streaming service; Director of Unitek Learning, a private nursing and medical services education provider in the United States; Board Member, International Rescue Committee; Co-Chair of the Board of Human Rights First; Trustee of Mount Holyoke College; member of the Advisory Board for the Center on Global Energy Policy at Columbia University's School of International and Public Affairs; previously Director of Pattern Energy and Pioneer Natural Resources, publicly traded energy companies; and previously Managing Director of UBS AG. |
| &nbsp;&nbsp;&nbsp;**Interested Trustees** |  |  |  |
| &nbsp;&nbsp;&nbsp;**\*\*Robert L. Reynolds** (Born 1952), Trustee since 2008 | Chair of Great-West Lifeco U.S. LLC. Prior to 2019, also President and Chief Executive Officer of Great-West Financial, a financial services company that provides retirement savings plans, life insurance, and annuity and executive benefits products, and of Great-West Lifeco U.S. LLC, a holding company that owns Putnam Investments, LLC and Great-West Financial, and a member of Great-West Financial's Board of Directors. Until 2023, President and Chief Executive Officer of Putnam Investments, LLC, President and Chief Executive Officer of Putnam Management, and member of Putnam Investments' Board of Directors. | 101 | Director of the Concord Museum; Director of Dana-Farber Cancer Institute; Director of the U.S. Ski & Snowboard Foundation; Chair of the Boston Advisory Board of the American Ireland Fund; Council Co-Chair of the American Enterprise Institute; Member of U.S. Chamber of Commerce, Center for Capital Markets Competitiveness; Chair of Massachusetts High Technology Council; Member of the Chief Executives Club of Boston; Member of the Massachusetts General Hospital President's Council; Chairman of the Board of Directors of the Ron Burton Training Village; Director and former Chair of the Massachusetts Competitive Partnership; former Chair of the West Virginia University Foundation; and former Executive Committee Member of the Greater Boston Chamber of |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Name, Address<sup>1</sup>, Year of<br>Birth, Position(s) Held<br>with Fund and Length of<br>Service as a Fund<br>Trustee<sup>2</sup>** | **Principal Occupation(s) During<br>Past 5 Years** | **Number of Funds<br>in the Franklin<br>Templeton Funds<br>Complex Overseen<br>by Trustee<sup>3</sup>** | **Other Directorships Held by Trustee** |
|  |  |  | Commerce. |
| &nbsp;&nbsp;&nbsp;**\*\*\* Jane E. Trust** (Born 1962), Trustee since 2024 | Since 2020, Senior Vice President, Fund Board Management, Franklin Templeton. Since 2015, Officer and/or Trustee/Director of 123 funds associated with Franklin Templeton Fund Advisor, LLC ("FTFA") or its affiliates, and President and Chief Executive Officer of FTFA. From 2018 to 2020, Senior Managing Director of Legg Mason & Co., LLC ("Legg Mason & Co."). From 2016 to 2018, Managing Director of Legg Mason & Co. In 2015, Senior Vice President of FTFA. | 224 | None. |

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<sup>1</sup> The address of each Trustee is 100 Federal Street, Boston, MA 02110.

<sup>2</sup> Each Trustee serves for an indefinite term, until his or her resignation, retirement during the year he or she reaches age 75, death or removal.

<sup>3</sup> The Franklin Templeton funds complex is composed of the registered investment companies advised by the Investment Manager or by its affiliates.

\* Ms. Murphy is the founder, controlling member, and Chief Executive Officer of Runa Digital Assets, LLC ("RDA"), the investment manager of Runa Digital Partners, LP ("RDP"), a private investment fund. Ms. Murphy also holds a controlling interest in RDP's general partner and is a limited partner in RDP. A subsidiary of Franklin Resources, Inc. ("Franklin Templeton") and certain individuals employed by Franklin Templeton or its affiliates have made passive investments as limited partners in RDP (one of whom serves on the advisory board for RDA, which has no governance or oversight authority over RDA), representing in the aggregate approximately 33% of RDP as of October 31, 2024. In addition, if certain conditions are met, Franklin Templeton will be entitled to receive a portion of any incentive compensation allocable to RDP's general partner. For so long as Franklin Templeton maintains its investment in RDP, Ms. Murphy also has agreed upon request to advise and consult with Franklin Templeton and its affiliates on the market for digital assets. Ms. Murphy provides similar service to other limited partners in RDP that request her advice. Ms. Murphy also is entitled to receive deferred cash compensation in connection with her prior employment by an affiliate of Franklin Templeton, which employment ended at the end of 2021. With regard to Ms. Murphy, the relationships described above may give rise to a potential conflict of interest with respect to the funds.

\*\* Trustee who is an "interested person" (as defined in the 1940 Act) of the fund and the Investment Manager. Mr. Reynolds is deemed an "interested person" by virtue of his position as an officer of the fund and his direct beneficial interest in shares of Franklin Templeton, of which the Investment Manager is an indirect wholly-owned subsidiary. Mr. Reynolds is the President of your fund and each of the other Putnam funds, and prior to January 1, 2024, Mr. Reynolds was President and Chief Executive Officer of Putnam Management and Putnam Investments, LLC ("Putnam Investments"), the previous parent company to Putnam Management.

\*\*\* Trustee who is an "interested person" (as defined in the 1940 Act) of the fund and the Investment Manager. Ms. Trust is deemed an "interested person" by virtue of her positions with certain affiliates of the Investment Manager.

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**Trustee Qualifications** 

Each of the fund's Trustees, with the exception of Ms. Trust and Mr. McGreevey, was most recently elected by shareholders of the fund during 2022, although most of the Trustees have served on the Board for many years. The Board Policy and Nominating Committee is responsible for recommending proposed nominees for election to the full Board of Trustees for its approval. As part of its deliberative process, the Committee considers the experience, qualifications, skills and attributes, including diversity of background, experience, and views, that it determines would most benefit the funds overseen by the Board of Trustees at the time.

In recommending the election of the board members as Trustees, the Committee generally considered the educational, business and professional experience of each Trustee in determining his or her qualifications to serve as a Trustee of the fund, including the Trustee's record of service as a director or trustee of public and private organizations. (This included, but was not limited to, consideration of the specific experience noted in the preceding table.) In the case of most members of the Board, the Committee considered his or her previous service as a member of the Board of Trustees, which demonstrated a high level of diligence and commitment to the interests of fund shareholders and an ability to work effectively and collegially with other members of the Board.

The Committee also considered, among other factors, the particular attributes described below with respect to the various individual Trustees and considered the attributes as indicative of the person's ability to deal effectively with the types of financial, regulatory, and/or investment matters that typically arise in the course of a Trustee's work:

<u>Independent Trustees</u> 

Liaquat Ahamed – Mr. Ahamed's experience as Chief Executive Officer of a major investment management organization and as head of the investment division at the World Bank, as well as his experience as an author of economic literature.

Barbara M. Baumann – Ms. Baumann's experience in the energy industry as a consultant, an investor, and in both financial and operational management positions at a global energy company, and her service as a director of multiple NYSE companies.

Katinka Domotorffy – Ms. Domotorffy's experience as Chief Investment Officer and Global Head of Quantitative Investment Strategies at a major asset management organization.

Catharine Bond Hill – Dr. Hill's education and experience as an economist and as president and provost of colleges in the United States.

Gregory G. McGreevey – Mr. McGreevey's experience as a Senior Managing Director of a global investment firm and as a director of a publicly traded real estate investment trust.

Jennifer Williams Murphy – Ms. Murphy's experience as Chief Operating Officer of a major global investment management organization and as Chief Executive Officer of an investment advisory firm specializing in digital assets.

Marie Pillai – Ms. Pillai's experience as Vice President, Chief Investment Officer, and Treasurer of a global food company, her experience in similar positions at a global engineering company, and her experience in corporate and operational finance roles at a global consumer products company.

George Putnam III – Mr. Putnam's training and experience as an attorney, his experience as the founder and Chief Executive Officer of an investment management firm and his experience as an author of various publications on the subject of investments.

Manoj P. Singh – Mr. Singh's experience as chief operating officer and global managing director of a global professional services organization that provided accounting, consulting, tax, risk management, and financial advisory services.

Mona K. Sutphen – Ms. Sutphen's extensive experience advising corporate, philanthropic and institutional investors on the intersection of geopolitics, policy and markets, as well as her prior service as White House Deputy Chief of Staff for Policy and as a US Foreign Service Officer, her work advising financial services companies on macro risks, and her service as director of public companies.

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<u>Interested Trustees</u> 

Robert L. Reynolds – Mr. Reynolds's extensive experience as a senior executive of a major mutual fund organization in the United States and his previous role as President and Chief Executive Officer of Putnam Management and Putnam Investments, LLC, the previous parent company to Putnam Management and PAC.

Jane E. Trust – Ms. Trust's investment management and risk oversight experience as an executive and portfolio manager and leadership roles within Franklin Templeton and affiliated entities.

**Officers** 

The other officers of the fund, in addition to Robert L. Reynolds, the fund's President, are shown below. All of the officers of your fund listed below are employees of the Investment Manager or its affiliates or are members of the Trustees' independent administrative staff.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year of Birth, Position(s)**<br> **Held with Fund** | **Length of Service**<br> **with the Putnam**<br> **Funds<sup>2</sup>**  | **Principal Occupation(s) During Past 5 Years and<br>Position(s) with Fund's Investment Adviser and**<br> **Distributor<sup>3</sup>**  |
| &nbsp;&nbsp;&nbsp; **Jonathan S. Horwitz<sup>4</sup>** (Born 1955)<br> Executive Vice President, Principal Executive Officer, and Compliance Liaison | Since 2004 | Executive Vice President, Principal Executive Officer, and Compliance Liaison, The Putnam Funds. |
| &nbsp;&nbsp;&nbsp; **Stephen J. Tate** (Born 1974)<br> Vice President and Chief Legal Officer | Since 2021 | Deputy General Counsel, Franklin Templeton, and Secretary, Putnam U.S. Holdings I, LLC ("Putnam Holdings") and Putnam Management (2024 – Present). General Counsel and related positions, Putnam Investments, Putnam Management and Putnam Retail Management (2004-2023). |
| &nbsp;&nbsp;&nbsp; **James F. Clark<sup>3</sup>** (Born 1974)<br> Vice President and Chief Compliance Officer | Since 2016 | Chief Compliance Officer, Putnam Holdings and Putnam Management (2016 – Present). Associate General Counsel, Putnam Investments, Putnam Management and Putnam Retail Management (2003- 2015). |
| &nbsp;&nbsp;&nbsp; **Michael J. Higgins<sup>4</sup>** (Born 1976)<br> Vice President, Treasurer, and Clerk | Since 2010 | Vice President, Treasurer, and Clerk, The Putnam Funds. |
| &nbsp;&nbsp;&nbsp; **Kevin R. Blatchford** (Born 1967)<br> Vice President and Assistant Treasurer | Since 2024 | Director, Financial Reporting, Putnam Holdings. |
| &nbsp;&nbsp;&nbsp; **Graham Cole** (Born 1984)<br> Vice President and Assistant Treasurer | Since 2024 | Director, Global Fund Tax, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Lindsey Hicks** (Born 1979)<br> Vice President and Assistant Treasurer | Since 2024 | Controller, Fund Administration and Oversight, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Monica Krogh** (Born 1981)<br> Vice President and Assistant Treasurer | Since 2024 | Assistant Treasurer, Fund Administration and Oversight, Franklin Templeton. |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year of Birth, Position(s)**<br> **Held with Fund** | **Length of Service**<br> **with the Putnam**<br> **Funds<sup>2</sup>**  | **Principal Occupation(s) During Past 5 Years and<br>Position(s) with Fund's Investment Adviser and**<br> **Distributor<sup>3</sup>**  |
| &nbsp;&nbsp;&nbsp; **Kelley Hunt** (Born 1984)<br> AML Compliance Officer | Since 2024 | Manager, U.S. Financial Crime Compliance, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Jeffrey White** (Born 1971)<br> Vice President, Principal Financial Officer, Principal Accounting Officer, and Assistant Treasurer | Since 2024 | Vice President, Fund Administration and Reporting, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Denere P. Poulack<sup>4</sup>** (Born 1968)<br> Assistant Vice President, Assistant Clerk, and Assistant Treasurer | Since 2004 | Assistant Vice President, Assistant Clerk, and Assistant Treasurer, The Putnam Funds. |

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<sup>1</sup> The address of each Officer, other than as noted below, is 100 Federal Street, Boston, MA 02110. Mr. Cole's address is 5000 Yonge St, Toronto, ON, Canada M2N0A7. Ms. Hicks address is 3355 Data Drive, Rancho Cordova, CA 95670. Ms. Krogh and Mr. Wheeler's address is 300 S.E. 2nd Street, Ft. Lauderdale, FL 33301. Ms. Hunt's address is 100 Fountain Parkway, St. Petersburg, FL 33716. Mr. White's address is One Franklin Parkway, San Mateo, CA 94403.

<sup>2</sup> Each officer serves for an indefinite term, until his or her resignation, retirement, death or removal.

<sup>3</sup> Prior positions and/or officer appointments with the fund or the fund's investment adviser and distributor have been omitted.

<sup>4</sup> Officers of the fund indicated are members of the Trustees' independent administrative staff. Compensation for these individuals is fixed by the Trustees and reimbursed to the Investment Manager by the funds, except in certain cases where a fund has a unitary fee and/or expense limitation arrangement whereby the Investment Manager is responsible for all or a portion of these individuals' compensation.

Except as stated above, the principal occupations of the officers and Trustees for the last five years have been with the employers as shown above, although in some cases they have held different positions with such employers.

**Leadership Structure and Standing Committees of the Board of Trustees** 

**For details regarding the number of times the standing committees of the Board of Trustees met during a fund's last fiscal year, see "Trustee responsibilities and fees" in Part I of this SAI.** 

**Board Leadership Structure.** Currently, 10 of the 12 Trustees of your fund are Independent Trustees, meaning that they are not considered "interested persons" of your fund or the Investment Manager. These Independent Trustees must vote separately to approve all financial arrangements and other agreements with the Investment Manager and other affiliated parties. The role of independent trustees has been characterized as that of a "watchdog" charged with oversight to protect shareholders' interests against overreaching and abuse by those who are in a position to control or influence a fund. Your fund's Independent Trustees meet regularly as a group in executive session (*i.e*., without representatives of the Investment Manager or its affiliates present). An Independent Trustee currently serves as chair of the Board.

Taking into account the number, the diversity and the complexity of the funds overseen by the Board and the aggregate amount of assets under management, your fund's Trustees have determined that the efficient conduct of the Board's affairs makes it desirable to delegate responsibility for certain specific matters to committees of the Board. The Executive Committee, Audit, Compliance and Risk Committee, and Board Policy and Nominating Committee are authorized to take action on certain matters as specified in their charters or in policies and procedures relating to the governance of the funds; with respect to other matters, these committees review and evaluate and make recommendations to the Trustees as they deem appropriate. The other committees also review and evaluate matters specified in their charters and make recommendations to the Trustees as they deem appropriate. Each committee may utilize the resources of your fund's independent staff, counsel and independent

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registered public accountants as well as other experts. The committees meet as often as appropriate, either in conjunction with regular meetings of the Trustees or otherwise. The membership and chair of each committee are appointed by the Trustees upon recommendation of the Board Policy and Nominating Committee. Each committee is chaired by an Independent Trustee and, except as noted below, the membership and chairs of each committee consist exclusively of Independent Trustees.

The Trustees have determined that this committee structure also allows the Board to focus more effectively on the oversight of risk as part of its broader oversight of the fund's affairs. While risk management is the primary responsibility of the Investment Manager, the Trustees receive reports regarding investment risks, compliance risks and other risks. The Board and certain committees also meet periodically with the funds' Chief Compliance Officer to receive compliance reports. In addition, the Board and its Investment Oversight Committees meet periodically with the portfolio managers of the funds to receive reports regarding the management of the funds. The Board's committee structure allows separate committees to focus on different aspects of these risks and their potential impact on some or all of the funds and to discuss with the Investment Manager how it monitors and controls risks.

The Board recognizes that the reports it receives concerning risk management matters are, by their nature, typically summaries of the relevant information. Moreover, the Board recognizes that not all risks that may affect your fund can be identified in advance; that it may not be practical or cost effective to eliminate or to mitigate certain risks; that it may be necessary to bear certain risks (such as investment-related risks) in seeking to achieve your fund's investment objectives; and that the processes, procedures and controls employed to address certain risks may be limited in their effectiveness. As a result of the foregoing and for other reasons, the Board's risk management oversight is subject to substantial limitations.

**Audit, Compliance and Risk Committee.** The Audit, Compliance and Risk Committee provides oversight on matters relating to the integrity of the funds' financial statements, compliance with legal and regulatory requirements, the performance of each fund's internal audit function, Codes of Ethics issues, and certain aspects of overseeing the Investment Manager's risk assessment and risk management. This oversight is discharged by regularly meeting with management and the funds' independent registered public accountants and remaining current with respect to industry developments. Duties of this Committee also include the review and evaluation of all matters and relationships pertaining to the funds' independent registered public accountants, including their independence, and the review of the Investment Manager's oversight of the funds' significant other service providers (unless another committee, or the Board, has this responsibility). The Committee also oversees all dividends and distributions by the funds by making recommendations to the Trustees regarding the amount and timing of dividends and distributions paid by the funds, and determining such matters when the Trustees are not in session. The Committee also oversees the policies and procedures pursuant to which the Investment Manager prepares recommendations for dividends and distributions, and meets regularly with representatives of the Investment Manager to review the implementation of these policies and procedures. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The members of the Committee include only Independent Trustees. Each member of the Committee also is "independent," as that term is interpreted for purposes of Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the listing standards of the NYSE. The Board has adopted a written charter for the Committee. The current members are Messrs. Singh (Chair) and McGreevey and Mses. Pillai and Sutphen.

**Board Policy and Nominating Committee.** The Board Policy and Nominating Committee reviews matters pertaining to the operations of the Board of Trustees and its Committees, the compensation of the Trustees and their staff, and the conduct of legal affairs for the funds. The Committee evaluates and recommends all candidates for election as Trustees and recommends the appointment of members and chairs of each board committee. The Committee will consider nominees for Trustee recommended by shareholders of a fund provided that such recommendations are submitted by the date disclosed in the fund's proxy statement and otherwise comply with applicable securities laws, including Rule 14a-8 under the Exchange Act. The Committee also reviews policy matters affecting the operation of the Board and its independent staff. In addition, the Committee oversees the voting of proxies associated with portfolio investments of the funds with the goal of ensuring that these proxies are voted in the best interest of the funds' shareholders. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee generally believes that the Board benefits from diversity of background, experience and views among its members, and considers this as a factor in evaluating the composition of the Board, but has not adopted any specific policy in this regard. The Committee is composed entirely of Independent Trustees. The current members are Dr. Hill (Chair), Mses. Baumann and Sutphen, and Mr. Putnam.

**Brokerage Committee.** The Brokerage Committee reviews the funds' policies regarding the execution of portfolio trades and the Investment Manager's (and its affiliates') practices and procedures relating to the implementation of those policies. The Committee reviews periodic reports on the cost and quality of execution of portfolio transactions and the extent to which

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brokerage commissions have been used (i) by the Investment Manager (or its affiliates) to obtain brokerage and research services generally useful to it (or its affiliates) in managing the portfolios of the funds and of its other clients, and (ii) by the funds to pay for certain fund expenses. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee is composed entirely of Independent Trustees. The current members are Messrs. Ahamed (Chair) and Putnam, Mses. Baumann and Domotorffy, and Dr. Hill.

**Contract Committee.** The Contract Committee reviews and evaluates at least annually arrangements pertaining to (i) the engagement of the Investment Manager and its affiliates to provide services to the funds, (ii) the expenditure of the funds' assets for distribution purposes pursuant to Distribution Plans of the funds, and (iii) the engagement of other persons to provide material services to the funds, including in particular those instances where the cost of services is shared between the funds and the Investment Manager and its affiliates or where the Investment Manager or its affiliates have a material interest. The Committee also reviews the proposed organization of new fund products and proposed structural changes to existing funds. In addition, the Committee also reviews communications with, and the quality of services provided to, shareholders and oversees the marketing and sale of fund shares by Franklin Distributors. The Committee reports and makes recommendations to the Trustees regarding these matters. The Committee is composed entirely of Independent Trustees. The current members are Messrs. Putnam (Chair) and Ahamed, Mses. Baumann and Domotorffy, and Dr. Hill.

**Exchange-Traded Fund Committee.** The Exchange-Traded Fund Committee is responsible for assisting the Trustees in their oversight of the funds that are ETFs. The Committee reviews matters arising from time to time relating to the ETFs that are not otherwise within the general subject matter purview of another committee, including, but not limited to: (i) service provider relationships that are specific to the ETFs, (ii) business, industry, legal, and regulatory matters that are specific to the ETFs, (iii) proposals relating to new ETFs, and (iii) transactions involving ETFs. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The current members are Messrs. Ahamed (Chair), McGreevey, and Reynolds, Dr. Hill, and Mses. Domotorffy, Murphy, Sutphen and Trust.

**Executive Committee.** The functions of the Executive Committee are twofold. The first is to ensure that the funds' business may be conducted at times when it is not feasible to convene a meeting of the Trustees or for the Trustees to act by written consent. The Committee may exercise any or all of the power and authority of the Trustees when the Trustees are not in session. The second is to review annual and ongoing goals, objectives and priorities for the Board and to facilitate coordination of all efforts between the Trustees and the Investment Manager on behalf of the shareholders of the funds. The Committee currently consists of Ms. Baumann (Chair) and Messrs. Putnam and Singh.

**Investment Oversight Committees.** The Investment Oversight Committees regularly meet with investment personnel of the Investment Manager and its affiliates to review the investment performance and strategies of the funds in light of their stated goals and policies. The Committees seek to identify any compliance issues that are unique to the applicable categories of funds and work with the appropriate board committees to ensure that any such issues are properly addressed. The Committees review the proposed investment objectives, policies and restrictions of new fund products and proposed changes to investment objectives, policies and restrictions of existing funds. The current members of Investment Oversight Committee A are Mses. Domotorffy (Chair), Murphy and Sutphen, and Messrs. Ahamed, Reynolds, and Singh, and the current members of Investment Oversight Committee B are Mses. Pillai (Chair), Baumann, and Trust, Dr. Hill, and Messrs. McGreevey and Putnam.

**Pricing Committee.** The Pricing Committee oversees the valuation of assets of the funds overseen by the Board of Trustees and reviews the funds' policies and procedures for achieving accurate and timely pricing of fund shares. The Committee oversees implementation of these policies, including fair value determinations of individual securities made by the Investment Manager or other designated agents of the funds. The Committee also reviews (i) compliance by money market funds with Rule 2a-7 under the 1940 Act, (ii) in-kind redemptions by the fund affiliates, (iii) the correction of occasional pricing errors, and (iv) the Investment Manager's oversight of pricing vendors. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The current members are Messrs. Singh (Chair), McGreevey, and Reynolds and Mses. Murphy, Pillai, Sutphen, and Trust.

**Indemnification** 

Subject to certain exceptions specified therein, the Trust's Amended and Restated Agreement and Declaration of Trust provides that the Trust and each fund will indemnify its Trustees and officers to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him or her in connection with any claim, action, suit or proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a trustee or officer of the Trust

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and against amounts paid or incurred by him or her in the settlement thereof. Each fund, at its expense, provides liability insurance for the benefit of its Trustees and officers.

**For details of Trustees' fees paid by the fund and information concerning retirement guidelines for the Trustees, see "Charges and expenses" in Part I of this SAI.** 

**The Investment Manager and its Affiliates** 

*Putnam Investment Management, LLC* 

If so disclosed in the fund's prospectus, Putnam Management serves as Investment Manager to the fund. Putnam Management is one of America's oldest money management firms. Putnam Management has been managing mutual funds since 1937.

*Franklin Advisers, Inc.* 

If so disclosed in the fund's prospectus, Franklin Advisers serves as Investment Manager to the fund. Franklin Advisers, Inc., a global investment organization, is a California corporation formed on October 31, 1985.

**Additional information about Putnam Management and Franklin Advisers** 

Putnam Management and Franklin Advisers are indirect, wholly-owned subsidiaries of Franklin Templeton, a Delaware corporation. Franklin Templeton, whose principal executive offices are at One Franklin Parkway, San Mateo, California 94403, is a global investment management organization.

Trustees and officers of the fund who are also officers of Putnam Management, Franklin Advisers or their affiliates or who are stockholders of Franklin Templeton or its affiliates will benefit from the advisory fees, sales commissions, distribution fees and transfer agency fees paid or allowed by the fund.

**The Management Contract** 

Under a management contract between the fund and the Investment Manager (the "Management Contract"), subject to such policies as the Trustees may determine, the Investment Manager, at its expense, furnishes continuously an investment program for the fund and makes investment decisions on behalf of the fund. Subject to the control of the Trustees, the Investment Manager also manages, supervises and conducts the other affairs and business of the fund, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully, furnishes office space and equipment, provides bookkeeping and clerical services (including determination of the fund's net asset value, but excluding shareholder accounting services) and typically places orders for the purchase and sale of the fund's portfolio securities (in some cases, Putnam Management and Franklin Advisers, in their capacities as sub-advisers to a fund, may place orders for the purchase and sale of the fund's portfolio securities, and references elsewhere in this SAI to the Investment Manager placing orders for the purchase and sale of portfolio securities shall be deemed to include Putnam Management and Franklin Advisers in their capacities as sub-advisers, as appropriate in the context). The Investment Manager may place fund portfolio transactions with broker-dealers that furnish the Investment Manager, without cost to it, certain research services of value to the Investment Manager and its affiliates in advising the fund and other clients. In so doing, the Investment Manager may cause the fund to pay greater brokerage commissions than it might otherwise pay.

Franklin Templeton Services, LLC ("FT Services") has entered into an agreement with the Investment Manager to provide certain administrative services and facilities for the fund. FT Services is an indirect, wholly-owned subsidiary of Franklin Templeton and is an affiliate of the Investment Manager, the fund's investment manager. The administrative services FT Services provides include preparing and maintaining books, records, and tax and financial reports, and monitoring compliance with regulatory requirements. The Investment Manager pays FT Services a monthly fee equal to 105% of the internal costs incurred by FTS for providing administrative services to the Putnam ETFs. The Investment Manager will also reimburse FT Services for fees paid by FT Services to any third-party service provider for sub-administration and other services for the fund.

**For details of the Investment Manager's compensation under the Management Contract, see "Charges and expenses" in Part I of this SAI.** 

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The Management Contract provides that the Investment Manager shall not be subject to any liability to the fund or to any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of the Investment Manager.

The Management Contract may be terminated without penalty by vote of the Trustees or the shareholders of the fund, or by the Investment Manager, on not less than 60 days' written notice. Subject to certain exceptions, it may be amended only by a vote of the shareholders of the fund. The Management Contract also terminates without payment of any penalty in the event of its assignment. The Management Contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

**The Sub-Advisers** 

*<u>Putnam Investment Management, LLC</u>*

If so disclosed in the fund's prospectus, Putnam Management, an affiliate of Franklin Advisers, has been retained as a sub-adviser by Franklin Advisers, at Franklin Advisers' own expense, to make investment decisions for such fund assets as may be designated from time to time for its management by Franklin Advisers and to provide certain other advisory and related services pursuant to a subadvisory agreement between Franklin Advisers and Putnam Management. The other advisory and related services may include the facilitation of derivative transactions, sharing of investment research if so requested by Franklin Advisers, and proxy voting, and these services are subject to change over time.

The subadvisory agreement provides that Putnam Management shall not be subject to any liability to Franklin Advisers, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of Putnam Management.

The subadvisory agreement may be terminated with respect to the fund without penalty by vote of the Trustees or shareholders of the fund, or by Franklin Advisers or Putnam Management upon 60 days' written notice. The subadvisory agreement also terminates without payment of any penalty in the event of its assignment or upon any termination of the management contract between Franklin Advisers and the fund. The subadvisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not parties to the subadvisory agreement or "interested persons" thereof. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

For additional information about Putnam Management, see "Putnam Investment Management, LLC" under "The Investment Manager and its Affiliates" above.

*<u>Franklin Advisers, Inc.</u>*

If so disclosed in the fund's prospectus, Franklin Advisers, an affiliate of Putnam Management, has been retained as a sub-adviser to provide by Putnam Management, at Putnam Management's own expense, to make investment decisions for such fund assets as may be designated from time to time for its management by Putnam Management and to provide certain other advisory and related services pursuant to a subadvisory agreement between Putnam Management and Franklin Advisers. The other advisory and related services may include the facilitation of foreign exchange transactions, sharing of investment research if so requested by Putnam Management, and managing the fund's investments in cash or cash equivalents, and these services are subject to change over time.

The subadvisory agreement provides that Franklin Advisers shall not be subject to any liability to Putnam Management, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of Franklin Advisers.

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The subadvisory agreement may be terminated with respect to the fund without penalty by vote of the Trustees or shareholders of the fund, or by Putnam Management or Franklin Advisers or upon 60 days' written notice. The subadvisory agreement also terminates without payment of any penalty in the event of its assignment or upon any termination of the management contract between Putnam Management and the fund. The subadvisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not parties to the subadvisory agreement or "interested persons" thereof. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

For additional information about Franklin Advisers, see "Franklin Advisers, Inc." under "The Investment Manager and its Affiliates" above.

*<u>Franklin Templeton Investment Management Limited</u>*

If so disclosed in the fund's prospectus, FTIML, an affiliate of the Investment Manager, has been retained as a sub-adviser for a portion of the assets of the fund, as determined from time to time by the Investment Manager pursuant to a sub-advisory agreement between the Investment Manager and FTIML. Under the terms of the sub-advisory agreement, FTIML, at its own expense, manages the investment and reinvestment of that portion of each such fund's portfolio that is allocated to FTIML from time to time by the Investment Manager, with FTIML determining what securities and other property will be purchased, retained or sold with respect to such portion, and placing all purchase and sale orders with respect to such portion, subject to the supervision of the Investment Manager. The Investment Manager may also, at its discretion, request FTIML to provide assistance with purchasing and selling securities for the fund, including placement of orders with certain broker-dealers, and to perform research and obtain and evaluate data relevant to the fund's investment strategies and policies.

Pursuant to the terms of the sub-advisory agreement, FTIML will pay all expenses incurred by it in connection with its activities under this agreement other than the cost of securities (including brokerage commissions, if any) purchased for the fund. The sub-advisory agreement provides that, in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of FTIML, neither FTIML, nor any of its directors, officers, employees or affiliates, shall be subject to liability to the Investment Manager, the fund or any shareholder of the fund for any error of judgment or mistake of law or any other act or omission in the course of, or connected with, rendering services to the fund or for any losses that may be sustained in the purchase, holding or sale of any security by the fund.

The sub-advisory agreement may be terminated at any time with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund upon not more than sixty days' written notice to the Investment Manager and FTIML, and by FTIML or the Investment Manager on not more than 60 days' written notice to the other party. The sub-advisory agreement also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. The sub-advisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

*<u>PanAgora Asset Management, Inc.</u>*

If so disclosed in the fund's prospectus, PanAgora, an affiliate of Putnam Management, has been retained as the sub-adviser for a portion of the assets of the fund, as determined from time to time by Putnam Management, by Putnam Management pursuant to a sub-advisory agreement between Putnam Management and PanAgora.

PanAgora, a Delaware corporation organized in 1985 and incorporated in 1989, is located at One International Place, 24th Floor, Boston, Massachusetts 02110. In addition, certain PanAgora employees own non-voting interests in PanAgora. Assuming all employee stock and options are issued and exercised, up to 20% of the economic interest in PanAgora would be owned by PanAgora employees.

Under certain terms of the sub-advisory agreement, PanAgora, at its own expense, furnishes continuously an investment program for that portion of each such fund that is allocated to PanAgora from time to time by Putnam Management, and makes

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investment decisions on behalf of such portion of the fund, subject to the supervision of the Board of Trustees and Putnam Management.

PanAgora, at its expense, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties. The sub-advisory agreement provides that PanAgora shall not be subject to any liability to Putnam Management, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of PanAgora.

The sub-advisory agreement may be terminated with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund, or by PanAgora or Putnam Management, on not more than 60 days' nor less than 30 days' written notice. The sub-advisory agreement also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. The sub-advisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

**Portfolio Transactions** 

**Potential conflicts of interest in managing multiple accounts.** 

*Investment Manager* 

Like other investment professionals with multiple clients, the fund's Portfolio Manager(s) may face certain potential conflicts of interest in connection with managing both the fund and the other accounts listed under **"PORTFOLIO MANAGER(S)" "Other accounts managed"** at the same time. The paragraphs below describe some of these potential conflicts, which the Investment Manager believes are faced by investment professionals at most major financial firms. As described below, the Investment Manager and the Trustees have adopted compliance policies and procedures that attempt to address certain of these potential conflicts.

The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance ("performance fee accounts"), may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The most attractive investments could be allocated to higher-fee accounts or performance fee accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The trading of higher-fee accounts could be favored as to timing and/or execution price. For example, higher-fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The trading of other accounts could be used to benefit higher-fee accounts (front-running).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation.

The Investment Manager attempts to address these potential conflicts of interest relating to higher-fee accounts through various compliance policies that are generally intended to place all accounts, regardless of fee structure, on the same footing for investment management purposes. For example, under the Investment Manager's policies:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Performance fee accounts must be included in all standard trading and allocation procedures with all other accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• All accounts must be allocated to a specific category of account and trade in parallel with allocations of similar

accounts based on the procedures generally applicable to all accounts in those groups (e.g., based on relative risk budgets of accounts).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• All trading must be effected through Putnam's trading desks and normal queues and procedures must be followed (i.e., no special treatment is permitted for performance fee accounts or higher-fee accounts based on account fee structure).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Front running is strictly prohibited.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Except as provided in Part I of this SAI, the fund's Portfolio Manager(s) may not be guaranteed or specifically allocated any portion of a performance fee.

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As part of these policies, the Investment Manager has also implemented trade oversight and review procedures in order to monitor whether particular accounts (including higher-fee accounts or performance fee accounts) are being favored over time.

Potential conflicts of interest may also arise when the Portfolio Manager(s) have personal investments in other accounts that may create an incentive to favor those accounts. As a general matter and subject to limited exceptions, the Investment Manager's investment professionals do not have the opportunity to invest in client accounts, other than Putnam funds. However, in the ordinary course of business, the Investment Manager or related persons may from time to time establish "pilot" or "incubator" accounts for the purpose of testing proposed investment strategies and products before offering them to clients. These pilot accounts may be in the form of registered investment companies, private funds such as partnerships or separate accounts established by the Investment Manager or an affiliate. The Investment Manager or an affiliate supplies the funding for these accounts. Putnam employees, including the fund's Portfolio Manager(s), may also invest in certain pilot accounts. The Investment Manager, and to the extent applicable, the Portfolio Manager(s) will benefit from the favorable investment performance of pilot accounts. Pilot funds and accounts may, and frequently do, invest in the same securities as the client accounts. The Investment Manager's policy is to treat pilot accounts in the same manner as client accounts for purposes of trading allocation – neither favoring nor disfavoring them except as is legally required. For example, pilot accounts are normally included in the Investment Manager's daily block trades to the same extent as client accounts (except that pilot accounts do not participate in initial public offerings).

A potential conflict of interest may arise when the fund and other accounts purchase or sell the same securities. On occasions when the Portfolio Manager(s) consider the purchase or sale of a security to be in the best interests of the fund as well as other accounts, the Investment Manager's trading desk may, to the extent permitted by applicable laws and regulations and where practicable, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to the fund or another account if one account is favored over another in allocating the securities purchased or sold – for example, by allocating a disproportionate amount of a security that is likely to increase in value to a favored account. The Investment Manager's trade allocation policies generally provide that each day's transactions in securities that are purchased or sold by multiple accounts are, insofar as possible, averaged as to price and allocated between such accounts (including the fund) in a manner which in the Investment Manager's opinion is equitable to each account and in accordance with the amount being purchased or sold by each account. However, accounts advised or sub-advised by FTIML will only place trades at an execution-only commission rate, whereas other Putnam accounts may pay an additional amount for research and other products and services (a "bundled" or "full service" rate). The Investment Manager may aggregate trades in FTIML accounts with other Putnam accounts that pay a bundled rate as long as all participating accounts pay the same execution rate. To the extent that non- FTIML accounts pay a bundled rate, the FTIML and other the Investment Manager accounts would not be paying the same total commission rate. Certain other exceptions exist for specialty, regional or sector accounts. Trade allocations are reviewed on a periodic basis as part of the Investment Manager's trade oversight procedures in an attempt to ensure fairness over time across accounts.

"Cross trades," in which one Putnam account sells a particular security to another account (potentially saving transaction costs for both accounts), may also pose a potential conflict of interest. Cross trades may be seen to involve a potential conflict of interest if, for example, one account is permitted to sell a security to another account at a higher price than an independent third party would pay, or if such trades result in more attractive investments being allocated to higher-fee accounts. The Investment Manager and the fund's Trustees have adopted compliance procedures that provide that any transactions between the fund and another Putnam-advised account are to be made at an independent current market price, as required by law.

Another potential conflict of interest may arise based on the different goals and strategies of the fund and other accounts. For example, another account may have a shorter-term investment horizon or different goals, policies or restrictions than the fund. Depending on goals or other factors, the Portfolio Manager(s) may give advice and make decisions for another account that may differ from advice given, or the timing or nature of decisions made, with respect to the fund. In addition, investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a particular security may be bought or sold for certain accounts even though it could have been bought or sold for other accounts at the same time. More rarely, a particular security may be bought for one or more accounts managed by the Portfolio Manager(s) when one or more other accounts are selling the security (including short sales). There may be circumstances when purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts. As noted above, the Investment Manager has implemented trade oversight and review procedures to monitor whether any account is systematically favored over time.

Under federal securities laws, a short sale of a security by another client of the Investment Manager or its affiliates (other than another registered investment company) within five business days prior to a public offering of the same securities (the timing of

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which is generally not known to Putnam in advance) may prohibit the fund from participating in the public offering, which could cause the fund to miss an otherwise favorable investment opportunity or to pay a higher price for the securities in the secondary markets.

The fund's Portfolio Manager(s) may also face other potential conflicts of interest in managing the fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the fund and other accounts. For information on restrictions imposed on personal securities transactions of the fund's Portfolio Manager(s), please see "Personal Investments by Employees of the Investment Manager and Franklin Distributors and Officers and Trustees of the Fund."

*PanAgora* 

The portfolio managers' management of other accounts may give rise to potential conflicts of interest in connection with their management of the fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts include retirement plans and separately managed accounts ("SMA's"), as well as incubated accounts. The other accounts might have similar investment objectives as the fund, or hold, purchase or sell securities that are eligible to be held, purchased or sold by the fund. While the portfolio managers' management of other accounts may give rise to the following potential conflicts of interest, PanAgora does not believe that the conflicts, if any, are material or, to the extent any such conflicts are material, PanAgora believes that it has designed policies and procedures to manage those conflicts in an appropriate way.

A potential conflict of interest may arise as a result of the portfolio managers' day-to-day management of the fund. Because of their positions with the fund, the portfolio managers know the size, timing and possible market impact of the fund's trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of the fund. However, PanAgora has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.

A potential conflict of interest may arise as a result of the portfolio managers' management of the fund, and other accounts, which, in theory, may allow them to allocate investment opportunities in a way that favors other accounts over the fund. This conflict of interest may be exacerbated to the extent that PanAgora or the portfolio managers receive, or expect to receive, greater compensation from their management of the other accounts than the fund. Notwithstanding this theoretical conflict of interest, it is PanAgora's policy to manage each account based on its investment objectives and related restrictions and, as discussed above, PanAgora has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and in a manner consistent with each account's investment objectives and related restrictions. For example, while the portfolio managers may buy for other accounts securities that differ in identity or quantity from securities bought for the fund, such securities might not be suitable for the fund given its investment objective and related restrictions.

For information about other funds and accounts managed by the fund's Portfolio Manager(s), please refer to "Who oversees and manages the fund(s)?" in the prospectus and **"PORTFOLIO MANAGER(S)" "Other accounts managed"** in Part I of the SAI.

**Brokerage and research services.** 

Transactions on stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by the fund of negotiated brokerage commissions. Such commissions may vary among different brokers. A particular broker may charge different commissions according to such factors as execution venue and exchange. Although the fund does not typically pay commissions for principal transactions in the over-the-counter markets, such as the markets for most fixed income securities and certain derivatives, an undisclosed amount of profit or "mark-up" is included in the price the fund pays. In underwritten offerings, the price paid by the fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer. **See "Charges and expenses" in Part I of this SAI for information concerning commissions paid by the fund**.

It has for many years been a common practice in the investment advisory business for broker-dealers that execute portfolio transactions for the clients of advisers of investment companies and other institutional investors to provide those advisers with brokerage and research services, as defined in Section 28(e) of the Exchange Act. Consistent with this practice, the Investment Manager receives brokerage and research services from broker-dealers with which the Investment Manager places the fund's portfolio transactions. The products and services that broker-dealers may provide to the Investment Manager's managers and analysts include, among others, trading systems and other brokerage services, economic and political analysis, fundamental and macro investment research, industry and company reviews, statistical information, market data, evaluations of investments,

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strategies, markets and trading venues, recommendations as to the purchase and sale of investments, performance measurement services and meetings with management of current or prospective portfolio companies or with industry experts. Some of these services are of value to the Investment Manager and its affiliates in advising various of their clients (including the fund), although not all of these services are necessarily useful and of value in managing the fund. Research services provided by broker-dealers are supplemental to the Investment Manager's own research efforts and relieve the Investment Manager of expenses it might otherwise have borne in generating such research. The management fee paid by the fund is not reduced because the Investment Manager and its affiliates receive brokerage and research services even though the Investment Manager might otherwise be required to purchase some of these services for cash. The Investment Manager may also use portfolio transactions to generate "soft dollar" credits to pay for "mixed-use" services (i.e., products or services that may be used both for investment/brokerage- and non-investment/brokerage-related purposes), but in such instances the Investment Manager uses its own resources to pay for that portion of the mixed-use product or service that in its good-faith judgment does not relate to investment or brokerage purposes. The Investment Manager may also allocate trades to generate soft dollar credits for third-party investment research reports and related fundamental research.

The Investment Manager places all orders for the purchase and sale of portfolio investments for the funds, and buys and sells investments for the funds, through a substantial number of brokers and dealers. In selecting broker-dealers to execute the funds' portfolio transactions, the Investment Manager uses its best efforts to obtain for each fund the most favorable price and execution reasonably available under the circumstances, except to the extent it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution and in considering the overall reasonableness of the brokerage commissions paid, the Investment Manager, having in mind the fund's best interests, considers all factors it deems relevant, including, in no particular order of importance, and by way of illustration, the price, size and type of the transaction, the nature of the market for the security or other investment, the amount of the commission, research and brokerage services provided by a broker-dealer, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved, the benefit of any capital committed by a broker-dealer to facilitate the efficient execution of the transaction and the quality of service rendered by the broker-dealer in other transactions.

The Investment Manager may cause the fund to pay a broker-dealer that provides "brokerage and research services" (as defined in the Exchange Act and as described above) to the Investment Manager an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the fund on an agency basis in excess of the commission another broker-dealer would have charged for effecting that transaction. The Investment Manager may also instruct an executing broker to "step out" a portion of the trades placed with a broker to other brokers that provide brokerage and research services to the Investment Manager. The Investment Manager's authority to cause the fund to pay any such greater commissions or to instruct a broker to "step out" a portion of a trade is subject to the requirements of applicable law and such policies as the Trustees may adopt from time to time. It is the position of the staff of the SEC that Section 28(e) of the Exchange Act does not apply to the payment of such greater commissions in "principal" transactions. Accordingly, the Investment Manager will use its best effort to obtain the most favorable price and execution available with respect to such transactions, as described above.

The Management Contract provides that commissions, fees, brokerage or similar payments received by the Investment Manager or an affiliate in connection with the purchase and sale of portfolio investments of the fund, less any direct expenses approved by the Trustees, shall be recaptured by the fund through a reduction of the fee payable by the fund under the Management Contract. The Investment Manager seeks to recapture for the fund soliciting dealer fees on the tender of the fund's portfolio securities in tender or exchange offers. Any such fees which may be recaptured are likely to be minor in amount.

For those funds sub-advised by FTIML and where FTIML places trades on behalf of those funds, the rules of the United Kingdom's Financial Conduct Authority (the "FCA Rules") apply with respect to the receipt of investment research. Under the FCA Rules, FTIML may not obtain research using brokerage commissions paid by funds sub-advised by FTIML. FTIML will use only "hard dollars" (i.e., from its own resources) to acquire external research used by London-based personnel, including fixed income personnel, except with respect to Minor Non-Monetary Benefits.

Minor Non-Monetary Benefits include, among other categories:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research from independent research providers who are not engaged in execution services and are not part of a financial services group that offers execution or brokerage services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research on listed and unlisted small and medium-sized enterprises with a market capitalization below £200 million;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research focusing on fixed income, currency, and commodity investment strategies; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Written research that is openly available to other firms or to the general public.

FTIML may use soft dollar commissions generated by trades of the Investment Manager and other Putnam affiliates other than FTIML to obtain research received by employees of FTIML that qualify as a Minor Non-Monetary Benefit.

**Principal Underwriter** 

Franklin Distributors, located at One Franklin Parkway, San Mateo, CA 94403-1906, is the principal underwriter of shares of the fund and the other continuously offered Putnam Funds. Franklin Distributors is a registered broker-dealer, a member of the Financial Industry Regulatory Authority, and an indirect, wholly-owned subsidiary of Franklin Templeton. See "Charges and expenses" in Part I of this SAI for information on payments received by Franklin Distributors or Foreside Fund Services, LLC, the principal underwriter for the certain of the funds prior to August 2, 2024.

**Personal Investments by Employees of Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and Officers and Trustees of the Fund** 

Employees of Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and officers and Trustees of the fund are subject to significant restrictions on engaging in personal securities transactions. These restrictions are set forth in the Codes of Ethics adopted by Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and by the fund (the "Code of Ethics"). The Code of Ethics, in accordance with Rule 17j-1 under the 1940 Act, contains provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the fund.

The Code of Ethics does not prohibit personnel from investing in securities that may be purchased or held by the fund. However, the Code of Ethics, consistent with standards recommended by the Investment Company Institute's Advisory Group on Personal Investing and requirements established by Rule 17j-1 and rules adopted under the Investment Advisers Act of 1940, among other things, prohibits personal securities investments without pre-clearance, imposes time periods during which personal transactions may not be made in certain securities by employees with access to investment information, and requires the timely submission of broker confirmations and quarterly reporting of personal securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process.

The Code of Ethics does not prohibit unaffiliated officers and Trustees from investing in securities that may be held by the fund; however, the Putnam Funds Code of Ethics regulates the personal securities transactions of unaffiliated Trustees of the fund, including limiting the time periods during which they may personally buy and sell certain securities and requiring them to submit reports of personal securities transactions under certain circumstances.

The fund's Trustees, in compliance with Rule 17j-1, approved the Code of Ethics and are required to approve any material changes to the Code of Ethics. The Trustees also provide continued oversight of personal investment policies and annually evaluate the implementation and effectiveness of the Code of Ethics.

**Transfer Agent** 

State Street Bank and Trust Company, located at One Congress Street, Suite 1, Boston, Massachusetts 02114-2016, is the fund's transfer agent. The Investment Manager, and not the fund, bears the cost of these services under the terms of its management contract with the fund.

**Custodian** 

[State Street Bank and Trust Company, located at One Congress Street, Suite 1, Boston, Massachusetts 02114-2016, is the fund's custodian. State Street is responsible for safeguarding and controlling the fund's cash and securities, handling the receipt and delivery of securities, collecting interest and dividends on the fund's investments, serving as the fund's foreign custody manager, providing reports on foreign securities depositaries, making payments covering the expenses of the fund and performing other administrative duties. State Street does not determine the investment policies of the fund or decide which securities the fund will buy or sell. State Street has a lien on the fund's assets to secure charges and advances made by it. The fund may from time to time enter into brokerage arrangements that reduce or recapture fund expenses, including custody

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expenses. The fund also has an offset arrangement that may reduce the fund's custody fee based on the amount of cash maintained by its custodian.]

**Auditor** 

[ ], 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.

**Counsel to the Fund** 

Ropes & Gray LLP serves as counsel to the fund, and is located at Prudential Tower, 800 Boylston Street, Boston, Massachusetts 02199.

**DETERMINATION OF NET ASSET VALUE** 

The fund determines the net asset value per share once each day the NYSE is open. Currently, the NYSE is closed Saturdays, Sundays and the following holidays: New Year's Day, Rev. Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth, the Fourth of July, Labor Day, Thanksgiving Day and Christmas Day. The fund determines net asset value as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern Time. The net asset value per share equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares.

Securities and other assets ("Securities") for which market quotations are readily available, as defined by Rule 2a-5 under the 1940 Act, are valued at prices which, in the opinion of the Investment Manager, most nearly represent the market values of such Securities. Currently, prices for these Securities are determined using the last reported sale price (or official closing price for Securities listed on certain markets) or, if no sales are reported (as in the case of some Securities traded over-the-counter), the mean between the last reported bid and ask prices, the "mid price" (prior to July 22, 2024, the last reported bid price was used). All other Securities are valued by the Investment Manager or other parties at their fair value following procedures approved by the Trustees.

Reliable market quotations are not considered to be readily available for, among other Securities, long-term corporate bonds and notes, certain preferred stocks, tax-exempt securities, and certain foreign securities. These investments are valued at fair value, generally on the basis of valuations furnished by approved pricing services, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities that are generally recognized by institutional traders. Other Securities, such as various types of options, are valued at fair value on the basis of valuations furnished by broker-dealers or other market intermediaries.

The Investment Manager values all other Securities at fair value using its internal resources. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the Securities (including any registration expenses that might be borne by the fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted Securities of the same class, the size of the holding, the prices of any recent transactions or offers with respect to such Securities and any available analysts' reports regarding the issuer. In the case of Securities that are restricted as to resale, the Investment Manager determines fair value based on the inherent worth of the Security without regard to the restrictive feature, adjusted for any diminution in value resulting from the restrictive feature.

Generally, trading in certain Securities (such as foreign securities) is substantially completed each day at various times before the close of the NYSE. The closing prices for these Securities in markets or on exchanges outside the U.S. that close before the close of the NYSE may not fully reflect events that occur after such close but before the close of 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 fair value prices will be used will vary, it is possible that fair value prices will be used by the fund to a significant extent. In addition, Securities held by some of the funds may be traded in foreign markets that are open for business on days that the fund is not, and the trading of such Securities on those days may have an impact on the value of a shareholder's investment at a time when the shareholder cannot buy and sell shares of the fund.

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Currency exchange rates used in valuing Securities are normally determined as of 4:00 p.m. Eastern Time.

Occasionally, events affecting such exchange rates may occur between the time of the determination of exchange rates and the close of the NYSE, which, in the absence of fair valuation, would not be reflected in the computation of the fund's net asset value. If events materially affecting the currency exchange rates occur during such period, then the exchange rates used in valuing affected Securities will be valued by the Investment Manager at their fair value following procedures approved by the Trustees.

In addition, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain Securities (such as convertible bonds, U.S. government securities and tax-exempt securities) are determined based on market quotations collected before the close of the NYSE. Occasionally, events affecting the value of such Securities may occur between the time of the determination of value and the close of the NYSE, which, in the absence of fair value prices, would not be reflected in the computation of the fund's net asset value. If events materially affecting the value of such Securities occur during such period, then these Securities will be valued by the Investment Manager at their fair value following procedures approved by the Trustees. It is expected that any such instance would be very rare.

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 at a given point in time and does not reflect an actual market price.

The fund may also value its Securities at fair value under other circumstances pursuant to procedures approved by the Trustees.

**Money Market Funds** 

"Retail money market funds" and "government money market funds" each as defined by Rule 2a-7 under the 1940 Act generally value their portfolio securities at amortized cost according to Rule 2a-7 under the 1940 Act.

Since the net income of a money market fund is declared as a dividend each time it is determined, the net asset value per share of a retail money market fund and government money market fund typically remains at $1.00 per share immediately after such determination and dividend declaration. Any increase in the value of a shareholder's investment in a money market fund representing the reinvestment of dividend income is reflected by an increase in the number of shares of that fund in the shareholder's account on the last business day of each month. It is expected that a money market fund's net income will normally be positive each time it is determined. However, if because of realized losses on sales of portfolio investments, a sudden rise in interest rates, or for any other reason the net income of a fund determined at any time is a negative amount, a money market fund may offset such amount allocable to each then shareholder's account from dividends accrued during the month with respect to such account. If, at the time of payment of a dividend, such negative amount exceeds a shareholder's accrued dividends, a money market fund may reduce the number of outstanding shares by treating the shareholder as having contributed to the capital of the fund that number of full and fractional shares which represent the amount of the excess. Each shareholder is deemed to have agreed to such contribution in these circumstances by his or her investment in a money market fund.

**SHAREHOLDER LIABILITY** 

The Trust is a statutory trust organized under Delaware law. Delaware law provides that, except to the extent otherwise provided in the Amended and Restated Agreement and Declaration of Trust, shareholders shall be entitled to the same limitations of personal liability extended to stockholders of private corporations for profit organized under the general corporation law of Delaware. The courts of some states, however, may decline to apply Delaware law on this point. The Amended and Restated Agreement and Declaration of Trust contains an express disclaimer of shareholder liability for the debts, liabilities, obligations, and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or the funds.

The Amended and Restated Agreement and Declaration of Trust provides that the Trust shall not have any claim against shareholders except for the payment of the purchase price of shares and requires that each agreement, obligation, or instrument entered into or executed by the Trust or the Trustees relating to the Trust or to a fund shall include a provision limiting the obligations created thereby to the Trust or to one or more funds and its or their assets. The Amended and Restated Agreement and Declaration of Trust further provides that shareholders of a fund shall not have a claim on or right to any assets belonging to any other fund.

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**DISCLOSURE OF PORTFOLIO INFORMATION** 

The Trustees of the Putnam funds have adopted policies with respect to the disclosure of the fund's portfolio holdings by the fund, the Investment Manager, or their affiliates. These policies provide that information about the fund's portfolio generally may not be released to any party prior to (i) the day after the posting of such information on franklintempleton.com, (ii) the filing of the information with the SEC in a required filing, or (iii) the dissemination of such information to all shareholders simultaneously. Certain limited exceptions pursuant to the fund's policies are described below. In addition, these policies do not apply to the sharing of fund portfolio holdings information with investment personnel involved in the management of other funds that invest in such fund and that are managed by the Investment Manager or its affiliates. The Trustees will periodically receive reports from the fund's Chief Compliance Officer regarding the operation of these policies and procedures, including any arrangements to make non-public disclosures of the fund's portfolio information to third parties. The Investment Manager and its affiliates are not permitted to receive compensation or other consideration in connection with disclosing information about the fund's portfolio holdings to third parties.

**Public Disclosures** 

On each Business Day, before commencement of trading in shares on the listing exchange, each fund will disclose its complete portfolio holdings on its website. The fund will disclose its top 10 holdings and related portfolio information monthly beginning on or after 5 business days after the end of each month on franklintempleton.com. The find will also disclose on its website its complete holdings as of the end of the prior month on a monthly basis beginning on or before the 15th calendar day after the end of each month..

The fund will also file its portfolio holdings with the SEC twice each year on Form N-CSR (with respect to each annual period and semi-annual period). In addition, the fund will file reports of portfolio holdings on Form N-PORT 60 days after each fiscal quarter (for the respective fiscal quarter), with the schedule of portfolio holdings filed on Form N-PORT for the third month of the first and third fiscal quarter made publicly available. Shareholders may obtain the Form N-CSR filings and the publicly available portions of Form N-PORT filings on the SEC's website at http://www.sec.gov. Form N-CSR filings are available upon filing and information reported on Form N-PORT filings for the third month of a fiscal quarter is available 60 days after the end of the fiscal quarter. You may call the SEC at 1-800-SEC-0330 for information about the SEC's website.

The Investment Manager or its affiliates may include fund portfolio information that has already been made public through a Web posting or SEC filing in marketing literature and other communications to shareholders, advisors or other parties, provided that, in the case of information made public through the Web, the information is disclosed no earlier than the day after the date of posting to the website.

**Other Disclosures** 

In order to address potential conflicts between the interest of fund shareholders, on the one hand, and those of the Investment Manager, Franklin Distributors or any affiliated person of those entities or of the fund, on the other hand, the fund's policies require that non-public disclosures of information regarding the fund's portfolio may be made only if there is a legitimate business purpose consistent with fiduciary duties to all shareholders of the fund. In addition, the party receiving the non-public information must sign a non-disclosure agreement unless otherwise approved by the Chief Compliance Officer of the fund. Arrangements to make non-public disclosures of the fund's portfolio information must be approved by the Chief Compliance Officer of the fund. The Chief Compliance Officer will report on an ongoing basis to a committee of the fund's Board of Trustees consisting only of Trustees who are not "interested persons" of the fund or the Investment Manager regarding any such arrangement that the fund may enter into with third parties other than service providers to the fund.

Daily portfolio composition files ("PCFs") that identify a basket of specified securities that may overlap with the actual or expected portfolio holdings of a fund will be provided as frequently as daily to each fund's service providers to facilitate the provision of services to each fund and to certain other entities in connection with the dissemination of information necessary for transactions in Creation Units. Each business day prior to the opening of the listing exchange, a PCF containing a list of the names and the required number of shares of each Deposit Security for each fund will be provided for dissemination through the facilities of the NSCC; through other fee-based services to NSCC members; subscribers to the fee-based services, including Authorized Participants; and to entities that publish and/or analyze such information in connection with the process of purchasing or

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redeeming Creation Units or trading fund shares in the secondary market. In addition to making PCFs available to the NSCC, each fund will disclose the PCF or portions thereof as frequently as daily on franklintempleton.com.

The fund may also periodically provide non-public information about its portfolio holdings to rating and ranking organizations and other providers of industry data, such as Lipper Inc., Morningstar Inc., Bloomberg and Thomson Reuters, in connection with those firms' research on and classification of the fund and in order to gather information about how the fund's attributes (such as volatility, turnover, and expenses) compare with those of peer funds. The fund may also periodically provide non-public information about its portfolio holdings to consultants that provide portfolio analysis services or other investment research or trading analytics. Such recipients of portfolio holdings include Barclays, FactSet, ITG, Trade Informatics, ConsenSys, ENSO Financial Analytics, Bloomberg and Credit Suisse. Any such rating, ranking, or consulting or other firm would be required to keep the fund's portfolio information confidential and would be prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the fund. Such firms may receive portfolio holdings information only from certain funds and such information may be provided in greater or lesser detail depending on the nature of the services provided by the relevant firm.

In addition, the Investment Manager offers model separately managed account portfolios to sponsoring broker-dealers ("Program Sponsors") that in turn offer those portfolios to their customers. The Investment Manager also provides investment advisory services to retail separately managed account clients through managed account programs sponsored by broker-dealers and other financial intermediaries (together, "SMAs"). The model SMA portfolios may follow investment programs that are similar or identical in material respects to those of specific Putnam funds or other client accounts and, as a result, there may be substantial overlap between the securities holdings and transactions of an model SMA portfolio and those of any similarly managed funds or accounts. If such model portfolios are substantially similar to those of a U.S. registered fund, such model portfolios may be provided to Program Sponsors so long as: (1) the recipient Program Sponsors has executed a non-disclosure agreement or other agreement containing or incorporating confidentiality provisions that restrict the use and dissemination of confidential portfolio holdings information received by the Program Sponsor as described in the following sentence, or other provisions that impose similar restrictions on such use and dissemination and*,* (2) the model SMA portfolio has been deemed sufficiently liquid by the Investment Manager's liquidity committee or the Investment Manager, as determined in their reasonable judgment. Such agreement must provide that the Program Sponsor agrees that: (1) it is subject to a duty of confidentiality; (2) it will use confidential model portfolio information only to the extent necessary to perform its obligations under the agreement; and (3) it will not disclose confidential model portfolio information except to personnel or parties who have a need to know such confidential information in connection with, or in order to fulfill the purposes contemplated by, the agreement.

**INFORMATION SECURITY RISKS** 

*Cyber security risk.* With the increased use of interconnected technologies such as the Internet and the dependence on computer systems to perform necessary business functions, investment companies such as the fund and its service providers may be prone to operational, information security and related risks resulting from third-party cyber-attacks and/or other technological malfunctions. Cyber-attacks may include stealing or corrupting data maintained online or digitally, preventing legitimate users from accessing information or services on a website, releasing confidential information without authorization, and causing operational disruption. Successful cyber-attacks against, or security or technology breakdowns of, the fund or its adviser, custodian, transfer agent, or other affiliated or third-party service providers may adversely affect the fund and its shareholders. For example, cyber-attacks may interfere with the processing of shareholder transactions, impact the fund's ability to calculate its net asset value, cause the release of private shareholder information or confidential fund information, impede trading, cause reputational damage, and subject the fund or others to regulatory fines, penalties or financial losses, reimbursement or other compensation costs, and additional compliance costs. Similar types of cyber security risks also are present for issuers of securities in which the fund invests, which could result in material adverse consequences for such issuers, and may cause the fund's investment in such securities to lose value. The fund and the Investment Manager or sub-advisor (as applicable) may have limited ability to prevent or mitigate cyber-attacks or security or technology breakdowns affecting the fund's third-party service providers. While the Investment Manager and sub-advisor (as applicable) have established business continuity plans and systems designed to prevent or reduce the impact of cyber-attacks, such plans and systems are subject to inherent limitations.

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**PROXY VOTING GUIDELINES AND PROCEDURES** 

The Board of Trustees have delegated proxy voting authority for the securities held in the funds' portfolios to Putnam Management and have approved Putnam Management's current proxy voting guidelines and procedures. Putnam Management retained an independent proxy voting service to assist in vote analysis, implementation, recordkeeping and reporting services. The proxy voting guidelines summarize Putnam Management's positions on various issues of concern to investors and provide direction to the proxy voting service as to how fund portfolio securities should be voted on proposals dealing with particular issues. The proxy voting procedures explain the role of Putnam Management personnel and the proxy voting service in the proxy voting process, describe the procedures for referring matters involving investment considerations to the investment personnel of Putnam Management, and describe the procedures for handling potential conflicts of interest. Putnam Management's proxy voting guidelines and procedures are included in this SAI as Appendix A. The Trustees will review the funds' proxy voting from time to time and will review annually Putnam Management's proxy voting guidelines and procedures. Information regarding how the funds' proxies relating to portfolio securities were voted during the 12-month period ended June 30, 2024 is available on www.franklintempleton.com, and on the SEC's website at www.sec.gov. If you have questions about finding forms on the SEC's website, you may call the SEC at 1-800-SEC-0330. You may also obtain Putnam Management's proxy voting guidelines and procedures by calling Putnam's Shareholder Services at 1-800-225-1581.

**SECURITIES RATINGS** 

The ratings of securities in which the fund may invest will be measured at the time of purchase and, to the extent a security is assigned a different rating by one or more of the various rating agencies, the Investment Manager may use the highest rating assigned by any agency. The Investment Manager will not necessarily sell an investment if its rating is reduced. Below are descriptions of ratings, as provided by the rating agencies, which represent opinions as to the quality of various debt instruments.

**<u>Moody's Investors Service, Inc.</u>**

**Global Long-Term Rating Scale** (original maturity of 1 year or more)

**Aaa –** Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

**Aa –** Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

**A –** Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

**Baa –** Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

**Ba –** Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

**B –** Obligations rated B are considered speculative and are subject to high credit risk.

**Caa –** Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

**Ca –** Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

**C –** Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a "(hyb)" indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.

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By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.

**Global Short-Term Rating Scale** (original maturity of 13 months or less)

**P-1 –** Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

**P-2 –** Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

**P-3 –** Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.

**NP –** Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

US Municipal Short-Term Obligation Ratings

**MIG 1 –** This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

**MIG 2 –** This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

**MIG 3 –** This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

**SG –** This designation denotes speculative grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

**US Municipal Demand Obligation Ratings** 

**VMIG 1 –** This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**VMIG 2 –** This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**VMIG 3 –** This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**SG –** This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.

**<u>Standard & Poor's</u>**

**Long-Term Issue Credit Ratings** (original maturity of one year or more)

**AAA –** An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.

**AA –** An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.

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**A –** An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.

**BBB –** An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

**BB; B; CCC; CC** and **C –** Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the lowest degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

**BB –** An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

**B –** An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

**CCC –** An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

**CC –** An obligation rated 'CC' is currently highly vulnerable to nonpayment. The 'CC' rating is used when a default has not yet occurred, but Standard & Poor's expects default to be a virtual certainty, regardless of the anticipated time to default.

**C –** An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.

**D –** An obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless Standard & Poor's believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer.

**NR –** This indicates that no rating has been requested, or that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.

Note: The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

**Short-Term Issue Credit Ratings** (original maturity of 365 days or less)

**A-1 –** A short-term obligation rated'A-1' is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.

**A-2 –** A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.

**A-3 –** A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

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**B –** A short-term obligation rated 'B' is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitments.

**C –** A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.

**D –** A short-term obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the due date, unless Standard & Poor's believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer.

**Municipal Short-Term Note Ratings** (original maturity of 3 years or less)

**SP-1 –** Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

**SP-2 –** Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

**SP-3 –** Speculative capacity to pay principal and interest.

**<u>Fitch Ratings</u>**

**Long-Term Rating Scales** 

**AAA –** Highest credit quality. 'AAA' ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

**AA –** Very high credit quality. 'AA' ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

**A –** High credit quality. 'A' ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.

**BBB –** Good credit quality. 'BBB' ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

**BB –** Speculative. 'BB' ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.

**B –** Highly speculative. 'B' ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.

**CCC –** Substantial credit risk. Default is a real possibility.

**CC –** Very high levels of credit risk. Default of some kind appears probable.

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**C –** Exceptionally high levels of credit risk. Default is imminent or inevitable, or the issuer is in standstill. Conditions that are indicative of a 'C' category rating for an issuer include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the issuer has entered into a grace or cure period following non-payment of a material financial obligation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default
on a material financial obligation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Fitch Ratings otherwise believes a condition of 'RD' or 'D' to be imminent or inevitable,
including through the formal announcement of a distressed debt exchange.

**RD –** Restricted default. 'RD' ratings indicate an issuer that in Fitch Ratings' opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased operating. This would include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the selective payment default on a specific class or currency of debt;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the uncured expiry of any applicable grace period, cure period or default forbearance period following a
payment default on a bank loan, capital markets security or other material financial obligation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. the extension of multiple waivers or forbearance periods upon a payment default on one or more material
financial obligations, either in series or in parallel; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. execution of a distressed debt exchange on one or more material financial obligations.

**D –** Default. 'D' ratings indicate an issuer that in Fitch Ratings' opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business.

Default ratings are not assigned prospectively to entities or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a distressed debt exchange.

"Imminent" default typically refers to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has formally announced a distressed debt exchange, but the date of the exchange still lies several days or weeks in the immediate future.

In all cases, the assignment of a default rating reflects the agency's opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the definition of default under the terms of an issuer's financial obligations or local commercial practice.

Note: The modifiers "+" or "-" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the 'AAA' Long-Term Issuer Default Rating (IDR) category, or to Long-Term IDR categories below 'B'.

**Short-Term Ratings** 

**F1 –** Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature.

**F2 –** Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments.

**F3 –** Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.

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**B –** Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.

**C –** High short-term default risk. Default is a real possibility.

**RD** – Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations, typically applicable to entity ratings only.

**D** – Default. Indicates a broad-based default event for an entity, or the default of a short-term obligation.

**Appendix A** 

**Putnam Investments** 

<u>Proxy Voting Procedures</u> 

*<u>Introduction and Summary</u>*

Many of Putnam's investment management clients have delegated to Putnam the authority to vote proxies for shares in the client accounts Putnam manages. Putnam believes that the voting of proxies can be an important tool for institutional investors to promote best practices in corporate governance and votes all proxies in the best interests of its clients as investors. In Putnam's view, strong corporate governance policies, most notably oversight by an independent board of qualified directors, best serve investors' interests. Putnam will vote proxies and maintain records of voting of shares for which Putnam has proxy voting authority in accordance with its fiduciary obligations and applicable law.

Putnam's voting policies are rooted in our views that (1) strong, independent corporate governance is important to long-term company financial performance, and (2) long-term investors' active engagement with company management, including through the proxy voting process, strengthens issuer accountability and overall market discipline, potentially reducing risk and improving returns over time. Our voting program is offered as a part of our investment management services, at no incremental fee to Putnam, and, while there can be no guarantees, it is intended to offer potential investment benefits over a long-term horizon. Our voting policies are designed with investment considerations in mind, not as a means to pursue particular political, social, or other goals. As a result, we may not support certain proposals whose costs to the issuer (including implementation costs, practicability, and other factors), in Putnam's view, outweigh their investment merits.

This memorandum sets forth Putnam's policies for voting proxies. It covers all accounts for which Putnam has proxy voting authority. These accounts include the Putnam Mutual Funds<sup>1</sup> and Putnam Exchange-Traded Funds, US and international institutional accounts and funds managed or sub-advised by The Putnam Advisory Company, LLC and Putnam Fiduciary Trust Company, LLC. In addition, the policies include US mutual funds and other accounts sub-advised by Putnam Investment Management, LLC.<sup>2</sup>

*<u>Proxy Committee</u>*

<sup>1</sup> Effective January 27, 2023, the Board of Trustees of the Putnam Mutual Funds delegated proxy voting authority to Putnam Investment Management, LLC, the investment manager to the Putnam Mutual Funds.

<sup>2</sup> The Putnam Proxy Voting Procedures and Guidelines will apply also to certain funds and institutional and other accounts managed by Franklin Advisers, Inc. ("FAV") but formerly managed or sub-advised by one of the Putnam adviser entities identified above, pursuant to sub-advisory agreements in effect from time to time between FAV and the relevant Putnam entity(ies).

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Putnam has a Proxy Committee composed of senior professionals, including from the Putnam Equity investment team and the Putnam Equity Sustainability Strategy group. The Chief Investment Officer of Putnam Equity appoints the members of the Proxy Committee. The Proxy Committee is responsible for setting general policy as to proxies. Specifically, the Committee:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Reviews these procedures and the Proxy Voting Guidelines annually and approves any amendments considered to be
advisable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Considers special proxy issues as they may from time to time arise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Must approve all vote overrides recommended by investment professionals.

*<u>Proxy Voting Administration</u>*

The Putnam Sustainability Strategy group administers Putnam's proxy voting through a Proxy Voting Team. The Proxy Voting Team has the following duties:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Annually prepares the Proxy Voting Guidelines and distributes them to the Proxy Committee for review.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Coordinates the Proxy Committee's review of any new or unusual proxy issues and serves as Secretary
thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Manages the process of referring issues to portfolio managers for voting instructions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Oversees the work of any third-party vendor hired to process proxy votes (as of the date of these procedures
Putnam has engaged Institutional Shareholder Services (ISS) to process proxy votes) and the process of setting up the voting process with ISS and custodial banks for new clients.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Coordinates responses to investment professionals' questions on proxy issues and proxy policies, including
forwarding specialized proxy research from ISS and other vendors and forwards information to investment professionals prepared by other areas at Putnam.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Implements the exception process with respect to referred items on securities held solely in accounts managed
by the Global Asset Allocation ("GAA") team within Franklin Templeton Investment Solutions described in more detail in the Proxy Referral section below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Maintains required records of proxy votes on behalf of the appropriate Putnam client accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Prepares and distributes reports required by Putnam clients.

*<u>Proxy Voting Guidelines</u>*

Putnam maintains written voting guidelines ("Guidelines") setting forth voting positions determined by the Proxy Committee on those issues believed most likely to arise day to day. The Guidelines may call for votes to be cast normally in favor of or opposed to a matter or may deem the matter an item to be referred to investment professionals on a case-by-case basis. A copy of the Guidelines is attached to this memorandum as Exhibit A.

In light of our views on the importance of issuer governance and investor engagement, which we believe are applicable across our various strategies and clients, regardless of a specific portfolio's investment objective, Putnam will vote all proxies in accordance with the Guidelines, subject to two exceptions as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If the portfolio managers of client accounts holding the stock of a company with a proxy vote believe that
following the Guidelines in any specific case would not be in the clients' best interests, they may request the Proxy Voting Team not to follow the guidelines in such case. The request must be in writing and include an explanation of the
rationale for doing so. The Proxy Voting Team will review any such request with the Proxy Committee (or, in cases with limited time, with the Chair of the Proxy Committee acting on the Proxy Committee's behalf) prior to implementing the
request.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Putnam may accept instructions to vote proxies under client specific guidelines subject to review and
acceptance by the Investment Division and the Legal and Compliance Department.

*<u>Other</u>*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Putnam may elect not to vote when the security is no longer held.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Putnam will  **<u>abstain</u>** on items that require case-by-case review when a vote recommendation from the appropriate investment professional(s) cannot be obtained due to restrictive voting deadlines or other prohibitive operational or administrative
requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Where securities held in Putnam client accounts, including the Putnam mutual funds, have been loaned to third
parties in connection with a securities lending program administered by Putnam (through securities lending agents overseen by Putnam), Putnam has instructed lending agents to recall U.S. securities on loan to vote proxies, in accordance with
Putnam's securities lending procedures. Due to differences in non-U.S. markets, Putnam does not currently seek to recall non-U.S. securities on loan. In addition,
where Putnam does not administer a client's securities lending program, this recall policy does not apply, since Putnam generally does not have information on loan details or authority to effect recalls in those cases. It is possible that, for
impracticability or other reasons, a recalled security may not be returned to the relevant custodian in time to allow Putnam to vote the relevant proxy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Putnam will make its reasonable best efforts to vote all proxies except when impeded by circumstances that are
reasonably beyond its control and responsibility, such as custodial proxy voting services, in part or whole, not available or not established by a client, or custodial error.

*<u>Proxy Voting Referrals</u>*

Under the Guidelines, certain proxy matters will be referred to Portfolio Managers. The Portfolio Manager receiving the referral request may delegate the vote decision to an appropriate Analyst from among a list of eligible analysts (such list to be approved by the Chief Investment Officer of the Putnam Equity group and the Director of Equity Research for the Putnam Equity group). The Analyst will be required to make the affirmation and disclosures identified in (3) below. Normally specific referral items will be referred to the portfolio team leader (or another member of the portfolio team he or she designates) whose accounts hold the greatest number of shares of the issuer of the proxies through the Proxy Referral Administration Database. The referral request contains (1) a field that will be used by the portfolio team leader or member for recommending a vote on each referral item, (2) a field for describing any contacts relating to the proxy referral item the portfolio team may have had with any Franklin Templeton employee outside Putnam Equity or with any person other than a proxy solicitor acting in the normal course of proxy solicitation, and (3) a field for portfolio managers to affirm that they are making vote recommendations in the best interest of client accounts and have disclosed to Compliance any potential conflicts of interest relevant to their vote recommendation.

Putnam may vote any referred items on securities held solely in accounts managed by the GAA team within Franklin Templeton Investment Solutions (and not held by any other investment product team) in accordance with the recommendation of Putnam's third-party proxy voting service provider. The Proxy Voting Team will first give the relevant portfolio manager(s) on the GAA team the opportunity to review the referred items and vote on them. If the portfolio manager(s) on the GAA team do not decide to make any active voting decision on any of the referred items, the items will be voted in accordance with the service provider's recommendation. If the security is also held by other investment teams at Putnam Equity, the items will be referred to the largest holder who is not a member of the GAA team.

The portfolio team leader or members who have been requested to provide a recommendation on a proxy referral item will complete the referral request. Upon receiving each completed referral request from the applicable Portfolio Manager or Analyst, the Proxy Voting Team will review the completed request for accuracy and completeness, and will follow up with investment personnel as appropriate.

*<u>Conflicts of Interest</u>*

A potential conflict of interest may arise when voting proxies of an issuer which has a significant business relationship with Putnam. For example, Putnam could manage a defined benefit or defined contribution pension plan for the issuer. Putnam's

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policy is to vote proxies based solely on the investment merits of the proposal. In order to guard against conflicts, the following procedures have been adopted:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Proxy Committee is composed of senior professionals, including Portfolio Managers in Putnam Equity and the
Putnam Equity Sustainability Strategy group. None of these individuals or groups reports to Franklin Templeton's marketing businesses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. No Franklin Templeton employee outside Putnam Equity may contact any portfolio manager about any proxy vote
without first contacting the Proxy Voting Team or a senior lawyer in the Legal and Compliance Department. There is no prohibition on employees seeking to communicate investment-related information to investment professionals except for Putnam's
restrictions on dissemination of material, non-public information. However, the Proxy Voting Team will coordinate the delivery of such information to investment professionals to avoid appearances of conflict.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Investment professionals responding to referral requests must disclose any contacts with third parties other
than normal contact with proxy solicitation firms and must affirm that they are making vote recommendations in the best interest of client accounts and have disclosed to the Proxy Voting Team any potential conflicts of interest relevant to their
vote recommendation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Proxy Voting Team will review the name of the issuer of each proxy that contains a referral item against
various sources of Putnam business relationships maintained by the Legal and Compliance Department or Client Service for potential material business relationships (i.e., conflicts of interest). For referrals, the Proxy Voting Team will complete the
Proxy Voting Conflict of Interest Disclosure Form (attached as Exhibit B and C) via the Proxy Referral Administration Database and will prepare a quarterly report for the Putnam Chief Compliance Officer identifying all completed Conflict of Interest
Disclosure forms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Putnam's Proxy Voting Guidelines may only be overridden with the written recommendation from a member of
the Investment Division and concurrence of the Proxy Committee (or, in cases with limited time, with the Chair of the Proxy Committee on the Proxy Committee's behalf).

*<u>Recordkeeping</u>*

The Putnam Equity Sustainability Strategy Group will retain copies of the following books and records:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A copy of the Proxy Voting Procedures and Guidelines as are from time to time in effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. A copy of each proxy statement received with respect to securities in client accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Records of each vote cast for each client;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Internal documents generated in connection with a proxy referral, such as emails, memoranda, etc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Written reports to clients on proxy voting and all client requests for information and Putnam's response.

All records will be maintained for seven years. A proxy vendor may on Putnam's behalf maintain the records noted in 2 and 3 above if it commits to providing copies promptly upon request.

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<u>Exhibit A to Proxy Procedures</u> 

**Putnam Investments Proxy Voting Guidelines** 

The proxy voting guidelines below summarize Putnam's positions on various issues of concern to investors and indicate how client portfolio securities will be voted on proposals dealing with a particular issue. The proxy voting service is instructed to vote all proxies relating to client portfolio securities in accordance with these guidelines, except as otherwise instructed by the Proxy Voting Team.

Putnam's voting policies are rooted in our views that (1) strong, independent corporate governance is important to long-term company financial performance, and (2) long-term investors' active engagement with company management, including through the proxy voting process, strengthens issuer accountability and overall market discipline, potentially reducing risk and improving returns over time. Our voting program is offered as a part of our investment management services, at no incremental fee to Putnam, and, while there can be no guarantees, it is intended to offer potential investment benefits over a long-term horizon. Our voting policies are designed with investment considerations in mind, not as a means to pursue particular political, social, or other goals. As a result, we may not support certain proposals whose costs to the issuer (including implementation costs, practicability, and other factors), in Putnam's view, outweigh their investment merits.

These proxy voting policies are intended to be decision-making guidelines. The guidelines are not exhaustive and do not include all potential voting issues. In addition, as contemplated by and subject to Putnam's Proxy Voting Procedures, because proxy issues and the circumstances of individual companies are so varied, portfolio teams may recommend votes that may vary from the general policy choices set forth in the guidelines.

The following guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals which have been approved and recommended by a company's board of directors. Part II deals with proposals submitted by shareholders for inclusion in proxy statements. Part III addresses unique considerations pertaining to non-US issuers.

**I. Board-Approved Proposals** 

Proxies will be voted **<u>for</u>** board-approved proposals, except as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.  **<u>Matters Relating to the Board of Directors</u>** 

***Uncontested Election of Directors***

The board of directors has the important role of overseeing management and its performance on behalf of shareholders. When evaluating a company's board, Putnam may consider the diversity of professional backgrounds and personal characteristics. Putnam believes that companies generally benefit from diversity on the board, including diversity with respect to gender, ethnicity, race, skills, perspectives and experience.

Proxies will be voted **<u>for</u>** the election of the company's nominees for directors (and/or subsidiary directors) and **<u>for</u>** board-approved proposals on other matters relating to the board of directors (provided that such nominees and other matters have been approved by an independent nominating committee), except as follows:

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have a majority of independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have nominating, audit and compensation committees composed solely of independent directors,
or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has more than <u>15</u> members or fewer than <u>five</u> members, absent special circumstances.

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|:---|:---|
| ⮚ | Putnam may refrain from withholding votes from the board due to insufficient key committee independence due to director resignation, change in board structure, or other specific circumstances, provided that the company has stated (for example in an 8-K), or it can otherwise be determined, that the board will address committee composition to ensure compliance with the applicable corporate governance code in a timely manner after the shareholder meeting and the company has a history of appropriate board independence.  |

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Unless otherwise indicated, for the purposes of determining whether a board has a majority of independent directors and independent nominating, audit, and compensation committees, an independent director is a director who (1) meets all requirements to serve as an independent director of a company under the final NYSE Corporate Governance Rules (e.g., no material business relationships with the company and no present or recent employment relationship with the company (including employment of an immediate family member as an executive officer)), and (2) has not accepted directly or indirectly any consulting, advisory, or other compensatory fee (excluding immaterial fees for transactional services as defined by the NYSE Corporate Governance rules) from the company other than in his or her capacity as a member of the board of directors or any board committee. Putnam believes that the receipt of such compensation for services other than service as a director raises significant independence issues.

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director who is considered an independent director by the company and who has received compensation within the last three years from the company for the provision of professional services (e.g., investment banking, consulting, legal or financial advisory fees).  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director who attends fewer than 75% of board and committee meetings. Putnam may refrain from withholding votes on a **<u>case-by-case</u>** basis if a valid reason for the absence exists, such as illness, personal emergency, potential conflict of interest, etc.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any incumbent nominee for director who served on a board that has not acted to implement a policy requested in a shareholder proposal that received the support of a majority of the votes actually cast on the matter at its previous two annual meetings, or  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any incumbent nominee for director who served on a board that adopted, renewed, or made a material adverse modification to a shareholder rights plan (commonly referred to as a "poison pill") without shareholder approval during the current or prior calendar year. (This is applicable to any type of poison pill, for example, advance-warning type pill, EGM pill, and Trust Defense Plans in Japan.)  |

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Putnam will refrain from opposing the board members who served at the time of the adoption of the poison pill if the duration is one year or less, if the plan contains other suitable restrictions; or if the company publicly discloses convincing rationale for its adoption and seeks shareholder approval of future renewals of the poison pill. (Suitable restrictions could include but are not limited to, a higher threshold for passive investors. Convincing rationale could include circumstances such as, but not limited to, extreme market disruption or conditions, stock volatility, substantial merger, active investor interest, or takeover attempts.)

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|:---|:---|
| ⮚ | Putnam will vote on a **case-by-case** basis and may consider voting against the Nominating Committee Chair if there is a lack of evidence of board diversity.  |

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Putnam is concerned about over-committed directors. In some cases, directors may serve on too many boards to make a meaningful contribution. This may be particularly true for senior executives of public companies (or other directors with substantially full-time employment) who serve on more than a few outside boards.

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** any non-executive nominee for director who serves on more than four (4) public company boards, except where Putnam would otherwise be withholding votes for the entire board of directors. For the purpose of this guideline, boards of affiliated registered investment companies and other similar entities such as UCITS will count as one board. Generally, Putnam will withhold support from directors serving on more than four unaffiliated public company boards, although an exception may be made in the case of a director who represents an investing firm with the sole purpose of managing a portfolio of investments that includes the company.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold</u>** votes from any nominee for director who serves as an executive officer of any public company ("home company") while serving on more than two (2) public company board**s** other than the home company board. (Putnam will withhold votes from the nominee at each company where Putnam client portfolios own shares.) In addition, if Putnam client portfolios are shareholders of the executive's home company, Putnam will withhold votes from members of the company's governance committee. For the purpose of this guideline, boards of affiliated registered investment companies and other similar entities such as UCITS will count as one board.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director of a public company (Company A) who is employed as a senior executive of another public company (Company B) if a director of Company B serves as a senior executive of Company A (commonly referred to as an "interlocking directorate").  |

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Board independence depends not only on its members' individual relationships, but also the board's overall attitude toward management. Independent boards are committed to good corporate governance practices and, by providing objective independent judgment, enhancing shareholder value. Putnam may withhold votes on a case-by-case basis from some or all directors that, through their lack of independence, have failed to observe good corporate governance practices or, through specific corporate action, have demonstrated a disregard for the interest of shareholders.

Note: Designation of executive director is based on company disclosure.

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that provide that a director may be removed only for cause. Putnam will generally vote **<u>for</u>** proposals that permit the removal of directors with or without cause.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals authorizing a board to fill a director vacancy without shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on subsidiary director nominees if Putnam will be voting against the nominees of the parent company's board.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis for director nominees, including nominees for positions on Supervisory Boards or Supervisory Committees, or similar board entities (depending on board structure), for (re)election when cumulative voting applies.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to approve annual directors' fees, except that Putnam will vote on a <u>**case-by-case**</u> basis if Putnam's independent proxy voting service has recommended a vote against such proposal. Additionally, Putnam will vote **<u>for</u>** proposals to approve the grant of equity awards to directors, except that Putnam will consider these proposals on a **<u>case-by-case</u>** basis if Putnam's proxy service provider is recommending a vote against the proposal.  |

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***Classified Boards***

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to classify a board, absent special circumstances indicating that shareholder interests would be better served by this structure.  |

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***Ratification of Auditors***

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to ratify the selection of independent auditors if there is evidence that the audit firm's independence or the integrity of an audit is compromised. (Otherwise, Putnam will vote **<u>for</u>**.)  |

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***Contested Elections of Directors***

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis in contested elections of directors.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. <u>Executive Compensation</u>** 

Putnam will vote on a **<u>case-by-case</u>** basis on board-approved proposals relating to executive compensation, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** stock option and restricted stock plans that will result in an average annual dilution of 1.67% or less (based on the disclosed term of the plan and including all equity-based plans), except where Putnam would otherwise be withholding votes for the entire board of directors in which case Putnam will evaluate the plans on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option and restricted stock plans that will result in an average annual dilution of greater than 1.67% (based on the disclosed term of the plan and including all equity plans).  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** any stock option or restricted stock plan where the company's actual grants of stock options and restricted stock under all equity-based compensation plans during the prior three (3) fiscal years have resulted in an average annual dilution of greater than 1.67%.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Additionally, if the annualized dilution cannot be calculated, Putnam will vote  **<u>for</u>** plans where the
Total Potential Dilution is 5% or less. If the annualized dilution cannot be calculated and the Total Potential Dilution exceeds 5%, then Putnam will vote  **<u>against</u>** . Note: Such plans must first pass all of Putnam's other screens.

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|:---|:---|
| ⮚ | Putnam will vote proposals to issue equity grants to executives on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans that permit replacing or repricing of underwater options (and **<u>against</u>** any proposal to authorize such replacement or repricing of underwater options).  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans that permit issuance of options with an exercise price below the stock's current market price.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans/ restricted stock plans with evergreen features providing for automatic share replenishment.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** bonus plans under which payments are treated as performance-based compensation that is deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended, except as follows:  |

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Vote on a **<u>case-by-case</u>** basis on such proposals if any of the following circumstances exist:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the amount per employee under the plan is unlimited, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the maximum award pool is undisclosed, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the incentive bonus plan's performance criteria are undisclosed, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the independent proxy voting service recommends a vote against.

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|:---|:---|
| ⮚ | Putnam will vote in favor of the annual presentation of advisory votes on executive compensation (Say-on-Pay).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** advisory votes on executive compensation (Say-on-Pay). However, Putnam will vote **<u>against</u>** an advisory vote if the company fails to effectively link executive compensation to company performance according to benchmarking performed by the independent proxy voting service.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will review the proposal on a  **<u>case-by-case</u>** basis if there is no recommendation of the independent proxy voting service.

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on severance agreements (e.g., golden and tin parachutes)  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold</u>** votes from members of a Board of Directors which has approved compensation arrangements Putnam's investment personnel have determined are grossly unreasonable at the next election at which such director is up for re-election.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** employee stock purchase plans that have the following features: (1) the shares purchased under the plan are acquired for no less than 85% of their market value, (2) the offering period under the plan is 27 months or less, and (3) dilution is 10% or less.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** Non-qualified Employee Stock Purchase Plans with all the following features:  |

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1) Broad-based participation (i.e., all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company). 

2) Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary. 

3) Company matching contribution up to 25 percent of employee's contribution, which is effectively a discount of 20 percent from market value. 

4) No discount on the stock price on the date of purchase since there is a company matching contribution.

Putnam will vote **<u>against</u>** Non-qualified Employee Stock Purchase Plans when any of the plan features do not meet the above criteria.

Putnam may vote against executive compensation proposals on a **<u>case-by-case</u>** basis where compensation is excessive by reasonable corporate standards, or where a company fails to provide transparent disclosure of executive compensation. In voting on proposals relating to executive compensation, Putnam will consider whether the proposal has been approved by an independent compensation committee of the board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C. <u>Capitalization</u>** 

Putnam will vote on a case-by-case basis on board-approved proposals involving changes to a company's capitalization, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals relating to the authorization of additional common stock, except that Putnam will evaluate such proposals on a **<u>case-by-case</u>** basis if (i) they relate to a specific transaction or to common stock with special voting rights, (ii) the company has a non-shareholder approved poison pill in place, or (iii) the company has had sizeable stock placements to insiders within the past three years at prices substantially below market value without shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to effect stock splits (excluding reverse stock splits.)  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals authorizing share repurchase programs, except that Putnam will vote on a **<u>case-by-case</u>** basis if there are concerns that there may be abusive practices related to the share repurchase programs.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D. <u>Acquisitions, Mergers, Reorganizations and</u>** 

**<u>Other Transactions</u>** 

Putnam will vote on a **<u>case-by-case</u>** basis on business transactions such as acquisitions, mergers, reorganizations involving business combinations, liquidations and sale of all or substantially all of a company's assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E. <u>Anti-Takeover Measures</u>** 

Putnam will vote **<u>against</u>** board-approved proposals to adopt anti-takeover measures such as supermajority voting provisions, issuance of blank check preferred stock, the creation of a separate class of stock with disparate voting rights, control share acquisition provisions, targeted share placements, and ability to make greenmail payments, except as follows:

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| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to ratify or approve shareholder rights plans;  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to adopt fair price provisions.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to issue blank check preferred stock in the case of REITs (only).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals that enable or expand shareholders' ability to take action by written consent.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to <u>increase</u> shares of an existing class of stock with disparate voting rights from another share class.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on **shareholder or board-approved** proposals to eliminate supermajority voting provisions at controlled companies (companies in which an individual or a group voting collectively holds a majority of the voting interest).  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u> basis** on **board-approved** proposals to adopt supermajority voting provisions at controlled companies (companies in which an individual or a group voting collectively holds a majority of the voting interest).  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to issue blank check preferred stock if appropriate "*de-clawed"* language is present. Specifically, appropriate *de-clawed* language will include cases where the Company states (i.e., through 8-K, proxy statement or other public disclosure) it will not use the preferred stock for anti-takeover purposes, or in order to implement a shareholder rights plan, or discloses a commitment to submit any future issuances of preferred stock to be used in a shareholder rights plan/anti-takeover purpose to a shareholder vote prior to its adoption.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F. <u>Other Business Matters</u>** 

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved proposals approving routine business matters such as changing the company's name and procedural matters relating to the shareholder meeting, except as follows:  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to amend a company's charter or bylaws (except for charter amendments necessary or to effect stock splits, to change a company's name, to authorize additional shares of common stock or other matters which are considered routine (for example, director age or term limits), technical in nature, fall within Putnam's guidelines (for example, regarding board size or virtual meetings), are required pursuant to regulatory and/or listing rules, have little or no economic impact or will not negatively impact shareholder rights).  |

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|:---|:---|
| ⮚ | Additionally, Putnam believes the bundling of items, whether the items are related or unrelated, is generally not in shareholders' best interest. We may vote **<u>against</u>** the entire bundled proposal if we would normally vote against any of the items if presented individually. In these cases, we will review the bundled proposal on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam generally supports quorum requirements if the level is set high enough to ensure a broad range of shareholders is represented in person or by proxy but low enough so that the Company can transact necessary business. Putnam will vote on a **<u>case-by-case</u>** basis on proposals seeking to change quorum requirements; however, Putnam will normally support proposals that seek to comply with market or exchange requirements.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals seeking to change a company's state of incorporation. However, Putnam will vote **<u>for</u>** mergers and reorganizations involving business combinations designed solely to reincorporate a company in Delaware.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** authorization to transact other unidentified, substantive business at the meeting.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals where there is a lack of information to make an informed voting decision.  |

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|:---|:---|
| ⮚ | Putnam will vote as follows on proposals to adjourn shareholder meetings:  |

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If Putnam is withholding support for the board of the company at the meeting, any proposal to adjourn should be referred for **<u>case-by-case</u>** analysis.

If Putnam is not withholding support for the board, Putnam will vote in favor of adjourning, unless the vote concerns an issue that is being referred back to Putnam for case-by-case review. Under such circumstances, the proposal to adjourn should also be referred to Putnam for **<u>case-by-case</u>** analysis.

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** management proposals to adopt a specific state's courts, or a specific U.S. district court as the exclusive forum for certain disputes, except that Putnam will vote **<u>for</u>** proposals adopting the State of Delaware, or the Delaware Chancery Court, as the exclusive forum, for corporate law matters for issuers incorporated in Delaware. Requiring shareholders to bring actions solely in one state may discourage the pursuit of derivative claims by increasing their difficulty and cost. However, Putnam's guideline recognizes the expertise of the Delaware state court system in handling disputes involving Delaware corporations. In addition, Putnam will **<u>withhold votes</u>** from the chair of the Nominating/Governance committee if a company amends its Bylaws, or takes other actions, to adopt a specific state's courts (other than Delaware courts, for issuers incorporated in Delaware) or a specific U.S. district court as the exclusive forum for certain disputes <u>without</u> shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote on a case-by-case basis on management proposals seeking to adopt a bylaw amendment allowing the company to shift legal fees and costs to unsuccessful plaintiffs in intra-corporate litigation (fee-shifting bylaw). Additionally, Putnam will vote against the Chair of the Nominating/Governance committee if a company adopts a fee-shifting bylaw amendment without shareholder approval.  |

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⮚ Putnam will support management/shareholder proxy access proposals as long as the proposals align with the following principles for a shareholder (or up to 20 shareholders together as a group) to receive proxy access:

1) The required minimum aggregate ownership of the Company's outstanding common stock is no greater than 3%; 

2) The required minimum holding period for the shareholder proponent(s) is no greater than two years; and

3) The shareholder(s) are permitted to nominate at least 20% of director candidates for election to the board. 

Proposals requesting shares be held for 3 years will be reviewed on a **<u>case-by-case</u>** basis. Putnam will vote **<u>agains</u>t** proposals requesting shares be held for more than three years. Proposals that meet Putnam's stated criteria and include other requirements relating to issues such as, but not limited to, shares on loan or compensation agreements with nominees, will be reviewed on a **<u>case-by-case</u>** basis.

Additionally, shareholder proposals seeking an amendment to a company's proxy access policy which include any one of the supported criteria under Putnam's guidelines, for example, a 2-year holding period for shareholders, will be reviewed on a **<u>case-by-case</u>** basis.

Putnam supports management / shareholder proposals giving shareholders the right to call a special meeting as long as the ownership requirement in such proposals is at least **15%** of the company's outstanding common stock and not more than **25%**.

In general, Putnam will vote **<u>for</u>** management or shareholder proposals to reduce the ownership requirement below a company's existing threshold, as long as the new threshold is at least **15%** and not greater than **25%** of the company's outstanding common stock.

Putnam will vote **<u>against</u>** any proposal with an ownership requirement exceeding **25%** of the company's common stock or an ownership requirement that is less than **15%** of the company's outstanding common stock.

In cases where there are competing management and shareholder proposals giving shareholders the right to call a special meeting, Putnam will generally vote **<u>for</u>** the proposal which has the lower minimum shareholder ownership threshold, as long as that threshold is within Putnam's recommended minimum/maximum thresholds. If only one of the competing proposals has a threshold that falls within Putnam's threshold range, Putnam will normally support that proposal as long as

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it represents an improvement (reduction) from the previous requisite ownership level. Putnam will normally vote **<u>against</u>** both proposals if neither proposal has a requisite ownership level between **15%** and **25%** of the company's outstanding common stock**.**

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** management or shareholder proposals to allow a company to hold virtual-only or hybrid shareholder meetings or to amend its articles/charter/by-laws to allow for virtual-only or hybrid shareholder meetings, provided the proposal does not preclude in-person meetings (at any given time), and does not otherwise limit or impair shareholder participation; and if the company has provided clear disclosure to ensure that shareholders can effectively participate in virtual-only shareholder meetings and meaningfully communicate with company management and directors. Additionally, Putnam may consider the rationale of the proposal and whether there have been concerns about the company's previous meeting practices.  |

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Disclosure should address the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the ability of shareholders to ask questions during the meeting

<sup>○</sup> including time guidelines for shareholder questions

<sup>○</sup> rules around what types of questions are allowed

<sup>○</sup> and rules for how questions and comments will be recognized and disclosed to meeting participants

<sup>○</sup> the manner in which appropriate questions received during the meeting will be addressed by the board

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● procedures, if any, for posting appropriate questions received during the meeting and the company's answers
on the investor page of their website as soon as is practical after the meeting

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● technical and logistical issues related to accessing the virtual meeting platform; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● procedures for accessing technical support to assist in the event of any difficulties accessing the virtual
meeting

Putnam may vote against proposals that do not meet these criteria.

Additionally, Putnam may vote **<u>against</u>** the Chair of the Governance Committee when the board is planning to hold a virtual-only shareholder meeting and the company has not provided sufficient disclosure (as noted above) or shareholder access to the meeting.

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to approve a company's board-approved climate transition action plan ("say on climate" proposals in which the company's board proposes that shareholders indicate their support for the company's plan), unless the proxy voting service has recommended a vote against the proposal, in which case Putnam will vote on a **<u>case-by-case</u>** basis on the proposal.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on board-approved proposals that conflict with shareholder proposals.  |

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**II. Shareholder Proposals** 

Shareholder proposals are non-binding votes that are often opposed by management. Some proposals relate to matters that are financially immaterial to the company's business, while others may be impracticable or costly for a company to implement. At the same time, well-crafted shareholder proposals may serve the purpose of raising issues that are material to a company's business for management's consideration and response. Putnam seeks to weigh the costs of different types of proposals against their expected financial benefits. More specifically:

Putnam will vote **<u>in accordance with the recommendation of the company's board of directors</u>** on all shareholder proposals, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals that are consistent with Putnam's proxy voting guidelines for board-approved proposals.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals to declassify a board, absent special circumstances which would indicate that shareholder interests are better served by a classified board structure.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals to require shareholder approval of shareholder rights plans.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals asking that director nominees receive support from holders of a majority of votes cast or a majority of shares outstanding of the company in order to be (re) elected.  |

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|:---|:---|
| ⮚ | Putnam will review on a **<u>case-by-case</u>** basis, shareholder proposals requesting that the board adopt a policy whereby, in the event of a significant restatement of financial results or significant extraordinary write-off, the board will recoup, to the fullest extent practicable, for the benefit of the company, all performance-based bonuses or awards that were made to senior executives based on having met or exceeded specific performance targets to the extent that the specified performance targets were not met.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to seek shareholder approval of any future supplemental executive retirement plan ("SERP"), or individual retirement arrangement, for senior executives that provides credit for additional years of service not actually worked, preferential benefit formulas not provided under the company's tax-qualified retirement plans, accelerated vesting of retirement benefits or retirement perquisites and fringe benefits that are not generally offered to other company employees. (Implementation of this policy shall not breach any existing employment agreement or vested benefit.)  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to report on their executive retirement benefits. (Deferred compensation, split-dollar life insurance, SERPs and pension benefits)  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requesting that a company establish a pay-for-superior-performance standard whereby the company discloses defined financial and/or stock price performance criteria (along with the detailed list of comparative peer group) to allow shareholders to sufficiently determine the pay and performance correlation established in the company's performance-based equity program. In addition, no <u>multi-year</u> award should be paid out unless the company's performance exceeds, <u>during the current CEO's tenure (three or more years)</u>, its peer median or mean performance on selected financial and stock price performance criteria.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to disclose in a separate report to shareholders, the Company's relationships with its executive compensation consultants or firms. Specifically, the report should identify the entity that retained each consultant (the company, the board or the compensation committee) and the types of services provided by the consultant in the past five years (non-compensation-related services to the company or to senior management and a list of all public company clients where the Company's executives serve as a director.)  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to accelerate vesting of equity awards under management severance agreements only if both of the following conditions are met:  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the company undergoes a change in control, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the change in control results in the termination of employment for the person receiving the severance payment.

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring that the chair's position be filled by an independent director (separate chair/CEO). However, Putnam will vote on a **<u>case-by-case</u>** basis on such proposals when the company's board has a lead-independent director (or already has an independent or separate chair) <u>and</u> Putnam is supporting the nominees for the board of directors.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals seeking the submission of golden coffins to a shareholder vote or the elimination of the practice altogether.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals seeking a policy that forbids any director who receives more than 25% withhold votes cast (based on for and withhold votes) from serving on any key board committee for two years and asking the board to find replacement directors for the committees if need be.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to seek shareholder approval of severance agreements (e.g., golden and tin parachutes).  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● However, Putnam will vote  **<u>against</u>** such proposals when the company has a policy that minimally
requires shareholder approval of severance agreements for executives that provides for cash severance benefits exceeding 2.99 times the sum of the executive's base salary plus target annual non-equity incentive plan bonus opportunity.

Putnam will vote on a **<u>case-by-case</u>** basis on approving such compensation arrangements.

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to make cash payments under management severance agreements only if both of the following conditions are met: the company undergoes a change in control, and the change in control results in the termination of employment for the person receiving the severance payment.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on shareholder proposals to limit a company's ability to make excise tax gross-up payments under management severance agreements as well as proposals to limit income or other tax gross-up payments.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>in accordance with the recommendation of the company's board of directors</u>** on shareholder proposals regarding corporate political spending, unless Putnam is voting against the directors, in which case the proposal would be reviewed on a **<u>case-by-case</u>** basis.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on shareholder proposals that conflict with board-approved proposals.  |

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**Environmental and Social** 

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| | |
|:---|:---|
| ⮚ | Putnam believes that sustainable environmental practices and sustainable social policies are important components of long-term value creation. Companies should evaluate the potential risks to their business operations that are directly related to environmental and social factors (among others). In evaluating shareholder proposals relating to environmental and social initiatives, Putnam takes into account (1) the relevance and materiality of the proposal to the company's business, (2) whether the proposal is well crafted (e.g., whether it references science-based targets, or standard global protocols), and (3) the practicality or reasonableness of implementing the proposal.  |

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Putnam may support well-crafted and well-targeted proposals that request additional reporting or disclosure on a company's plans to mitigate risk to the company related to the following issues and/or their strategies related to these issues: Environmental issues, including but not limited to, climate change, greenhouse gas emissions, renewable energy, and broader sustainability issues; and Social issues, including but not limited to, fair pay, employee diversity and development, safety, labor rights, supply chain management*,* privacy and data security.

In addition, Putnam will consider proposals related to Artificial Intelligence ("AI") on a case-by-case basis.

Putnam will consider factors such as (i) the industry in which the company operates, (ii) the company's current level of disclosure, (iii) the company's level of oversight, (iv) the company's management of risk arising out of these matters, (v) whether the company has suffered a material financial impact. Other factors may also be considered.

Putnam will consider the recommendation of its third-party proxy service provider and may consider other factors such as third-party evaluations of ESG performance.

Additionally, Putnam may vote on a **<u>case-by-case</u>** basis on proposals which ask a company to take action beyond reporting where our third-party proxy service provider has identified one or more reasons to warrant a vote FOR.

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**III. Voting Shares of Non-US Issuers** 

Many non-US jurisdictions impose material burdens on voting proxies. There are three primary types of limits as follows:

1) Share blocking. Shares must be frozen for certain periods of time to vote via proxy. 

2) Share re-registration. Shares must be re-registered out of the name of the local custodian or nominee into the name of the client for the meeting and, in many cases, then re-registered back. Shares are normally blocked in this period.

3) Powers of Attorney. Detailed documentation from a client must be given to the local sub-custodian. In many cases Putnam is not authorized to deliver this information or sign the relevant documents.

Putnam's policy is to weigh the benefits to clients from voting in these jurisdictions against the detriments of not doing so. For example, in a share blocking jurisdiction, it will normally not be in a client's interest to freeze shares simply to participate in a non-contested routine meeting. More specifically, Putnam will normally not vote shares in non-US jurisdictions imposing burdensome proxy voting requirements except in significant votes (such as contested elections and major corporate transactions) where directed by portfolio managers.

Putnam recognizes that the laws governing non**-**US issuers will vary significantly from US law and from jurisdiction to jurisdiction. Accordingly, it may not be possible or even advisable to apply these guidelines mechanically to non-US issuers. However, Putnam believes that shareholders of all companies are protected by the existence of a sound corporate governance and disclosure framework. Accordingly, Putnam will vote proxies of non**-**US issuers **<u>in accordance with the foregoing guidelines where applicable</u>**, except as follows:

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals calling for a majority of the directors to be independent of management.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals relating to (1) the issuance of common stock in excess of 20% of a company's outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of a company's outstanding common stock where shareholders have preemptive rights.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to authorize share repurchase programs that are recommended for approval by Putnam's proxy voting service provider, otherwise Putnam will vote **<u>against</u>** such proposals; except that Putnam will vote on a **<u>case-by-case basis</u>** if there are concerns that there may be abusive practices related to the share repurchase programs.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** authorizations to repurchase shares or issue shares or convertible debt instruments with or without preemptive rights when such authorization can be used as a takeover defense without shareholder approval. Putnam will not apply this policy to a company with a shareholder who controls more than 50% of its voting rights.  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **for** proposals that include debt issuances, however substantive/non-routine proposals, and proposals that fall outside of normal market practice or reasonable standards, will be reviewed on a **<u>case-by-case</u>** basis.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved routine, market-practice proposals. These proposals are limited to (1) those issues that will have little or no economic impact, such as technical, editorial, or mandatory regulatory compliance items, (2) those issues that will not adversely affect and/or which clearly improve shareholder rights/values, and which do not violate Putnam's proxy voting guidelines, or (3) those issues that do not seek to deviate from existing laws or regulations. Examples include but are not limited to, related party transactions (non-strategic), profit-and-loss transfer agreements (Germany), authority to increase paid-in capital (Taiwan). Should any unusual circumstances be identified concerning a normally routine issue, such proposals will be referred back to Putnam for internal review.  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals regarding amendments seeking to expand business lines or to amend the corporate purpose, provided the proposal would not include a significant or material departure from the company's current business, and/or will provide the company with greater flexibility in the performance of its activities.  |

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|:---|:---|
| ⮚ | Putnam will normally vote **<u>for</u>** management proposals concerning allocation of income and the distribution of dividends. However, Putnam portfolio teams will override this guideline when they conclude that the proposals are outside the market norms (i.e., those seen as consistently and unusually small or large compared to market practices).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals seeking to adjust the par value of common stock. However, non-routine, substantive proposals will be reviewed on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that would authorize the company to reduce the notice period for calling special or extraordinary general meetings to less than 21-Days.  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals relating to transfer of reserves/increase of reserves (i.e., France, Japan). However, Putnam will vote on a **<u>case-by-case</u>** basis if the proposal falls outside of normal market practice.  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to increase the maximum variable pay ratio. However, Putnam will vote on a **<u>case-by-case</u>** basis if we are voting against a company's remuneration report or if the proposal seeks an increase in excess of 200%.  |

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|:---|:---|
| ⮚ | Putnam will review stock option plans on a **<u>case-by-case</u>** basis which allow for the options exercise price to be reduced by dividend payments (if the plan would normally pass Putnam's Guidelines).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** requests to provide loan guarantees however, Putnam will vote on a **<u>case-by-case</u>** basis if the total amount of guarantees is in excess of 100% of the company's audited net assets.  |

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|:---|:---|
| ⮚ | Putnam will generally support remuneration report/policy proposals (i.e., advisory/binding) where a company's executive compensation is linked directly with the performance of the business and executive. Putnam will generally support compensation proposals which incorporate a mix of reasonable salary and performance based short- and long-term incentives. Companies should demonstrate that their remuneration policies are designed and managed to incentivize and retain executives while growing the company's long-term shareholder value.  |

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Generally, Putnam will vote **<u>against</u>** remuneration report/policy proposals (i.e., advisory/binding) in the following cases:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Disconnect between pay and performance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● No performance metrics disclosed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● No relative performance metrics utilized;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Single performance metric was used and it was an absolute measure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Performance goals were lowered when management failed or was unlikely to meet original goals;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Long Term Incentive Plan is subject to retesting (e.g., Australia);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Service contracts longer than 12 months (e.g., United Kingdom);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Allows vesting below median for relative performance metrics;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Ex-gratia / non-contractual payments have been made (e.g., United Kingdom and Australia);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Contains provisions to automatically vest upon change-of-control; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Other poor compensation practices or structures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Pension provisions for new executives is not at the same level as the majority of the wider workforce; pension
provisions for incumbent executives are not set to decrease over time (United Kingdom)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Proposed CEO salary increases are not justifiably appropriate in comparison to wider workforce or rationale for
exception increases is not fully disclosed (United Kingdom)

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case basis</u>** on bonus payments to executive directors or senior management; however, Putnam will vote **<u>against</u>** payments that include outsiders or independent statutory auditors.  |

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**<u>Matters Relating to Board of Directors</u>**

**<u>Uncontested Board Elections</u>**

***Asia: China, Hong Kong, India, Indonesia, Philippines, Taiwan and Thailand***

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|:---|:---|
| ⮚ | Putnam will **vote <u>against</u>** the entire board of directors if  |

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<sup>○</sup> fewer than one-third of the directors are independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;∎ the board has not established <u>audit</u>, <u>compensation</u> and <u>nominating</u> committees each composed of
a majority of independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;∎ the chair of the audit, compensation or nominating committee is not an independent director.

Commentary: Companies listed in China (or dual-listed in China and Hong Kong) often have a separate supervisory committee in addition to a standard board of directors containing audit, compensation, and nominating committees. The supervisory committee provides oversight of the financial affairs of the company and supervises members of the board and management, while the board of directors makes decisions related to the company's business and investment strategies. The supervisory committee normally comprises employee representatives and shareholder representatives. Shareholder representatives are elected by shareholders of the company while employee representatives are elected by the company's staff. Shareholder representatives may be independent or may be affiliated with the company or its substantial shareholders. Current laws and regulations neither provide a basis for evaluation of supervisor independence nor do they require a supervisor to be independent.

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|:---|:---|
| ⮚ | Putnam will generally vote in favor of nominees to the Supervisory Committee  |

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***Australia***

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire board of directors if  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● fewer than a majority of the directors are independent, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed solely of non-executive directors, a majority of whom, including the chair of the committee (who should not be the board chair), should be independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established nominating and compensation committees each composed of a majority of independent, non-executive directors, with an independent chair.

***Brazil***

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|:---|:---|
| ⮚ | Putnam will vote <u>against</u> proposals requesting cumulative voting unless there are more candidates than number of seats available, in which case vote for.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals for the proportional allocation of cumulative votes if Putnam is supporting the entire slate of nominees. Putnam will vote **<u>against</u>** such proposals if Putnam is not supporting the entire slate.  |

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|:---|:---|
| ⮚ | Putnam will **<u>abstain</u>** on individual director allocation proposals if Putnam is voting for the proportional allocation of cumulative votes. Putnam will vote on a **<u>case-by-case</u>** basis on individual director allocation proposals if Putnam is voting against the proportional allocation of votes.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to cumulate votes of common and preferred shareholders if the nominees are known and Putnam is supporting the applicable nominees; Putnam will vote **<u>against</u>** such proposals if Putnam is not supporting the known nominees, or if the nominees are unknown.  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>against</u>** proposals seeking the recasting of votes for amended slate (as new candidates could be included in the amended slate without prior disclosure to shareholders).  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals regarding instructions if meeting is held on second call if election of directors is part of the recasting as the slate can be amended without (prior) disclosure to shareholders.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals regarding the casting of minority votes to the candidate with largest number of votes.  |

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***Canada***

Canadian corporate governance requirements mirror corporate governance reforms that have been adopted by the NYSE and other U.S. national securities exchanges and stock markets. As a result, Putnam will vote on matters relating to the board of directors of Canadian issuers **<u>in accordance with the guidelines applicable to U.S. issuers.</u>**

<u>Commentary</u>: Like the UK's Combined Code on Corporate Governance, the policies on corporate governance issued by Canadian securities regulators embody the "comply and explain" approach to corporate governance. Because Putnam believes that the board independence standards contained in the proxy voting guidelines are integral to the protection of investors in Canadian companies, these standards will be applied in a prescriptive manner.

***Continental Europe (ex-Germany)***

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire board of directors if  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● fewer than a majority of the directors are independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established <u>audit, nominating</u> and <u>compensation</u> committees each composed of a
majority of independent directors.

<u>Commentary</u>: An "independent director" under the European Commission's guidelines is one who is free of any business, family or other relationship, with the company, its controlling shareholder or the management of either, that creates a conflict of interest such as to impair his judgment. A "non-executive director" is one who is not engaged in the daily management of the company.

In France, Employee Representatives are employed by the company and represent rank and file employees. These representatives are elected by company employees. The law also provides for the appointment of employee shareholder representatives, if the employee shareholdings exceed 3% of the share capital. Employee shareholder representatives are elected by the company's shareholders (via general meeting).

***Germany***

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| | |
|:---|:---|
| ⮚ | For companies subject to "co-determination," Putnam will vote <u>for</u> the election of nominees to the supervisory board, except:  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the Supervisory Board if  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee comprising an Independent chair.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the audit committee chair serves as board chair.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board contains more than two former management board members.

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| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the election of a former member of the company's managerial board to chair of the supervisory board.  |

---

<u>Commentary</u>: German corporate governance is characterized by a two-tier board system - a managerial board composed of the company's executive officers, and a supervisory board. The supervisory board appoints the members of the managerial board. Shareholders elect members of the supervisory board, except that in the case of companies with a large number of employees, company employees are allowed to elect some of the supervisory board members (one-half of supervisory board members are elected by company employees at companies with more than 2,000 employees; one-third of the supervisory board members are elected by company employees at companies with more than 500 employees but fewer than 2,000). This practice is known as co-determination.

***Israel***

**<u>Non-Controlled Banks:</u>** Director elections at Non-Controlled banks are overseen by the Supervisor of the Banks and nominees for election as "other" (non-external) directors and external directors (under Companies Law and Directive 301) are put forward by an external and independent committee. As such,

⮚ Putnam's guidelines regarding board Nominating Committees will not apply

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** on nominees when there are more nominees than seats available.  |

---

***Italy***

Election of directors and statutory auditors:

---

| | |
|:---|:---|
| ⮚ | Putnam will apply the director guidelines to the majority shareholder supported list and vote accordingly (**<u>for</u>** or **<u>against</u>**) if multiple lists of director candidates are presented. If there is no majority shareholder supported slate of nominees, Putnam will support the shareholder slate of nominees that is recommended for approval by Putnam's service provider.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire list of director nominees if the list is bundled as one proposal and if Putnam would otherwise be voting against any one director nominee.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** the majority shareholder supported list of statutory auditor nominees.  |

---

Note: Pursuant to Italian law, directors and statutory auditors are elected through a slate voting system whereby candidates are presented in lists submitted by shareholders representing a minimum percentage of share capital.

---

| | |
|:---|:---|
| ⮚ | Putnam will withhold votes from any director not identified in the proxy materials. (Example: Co-opted director nominees.)  |

---

***Japan***

---

| | |
|:---|:---|
| ⮚ | For companies that have established a U.S.-style corporate governance structure, Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have a majority of outside directors,

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established nominating and compensation committees composed of a majority of outside directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of a majority of independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder.

⮚ For companies that have established a statutory auditor board structure:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will  **<u>withhold votes</u>** from the appointment of members of a company's board of statutory
auditors if a majority of the members of the board of statutory auditors is not independent.

---

| | |
|:---|:---|
| ⮚ | For companies that have established a statutory auditor board structure, Putnam will **withhold votes** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two outside directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will vote  **<u>against</u>** any statutory auditor nominee who attends fewer than 75% of board and
committee meeting without valid reasons for the absences (i.e., illness, personal emergency, etc.) (Note that Corporate Law requires disclosure of outsiders' attendance but not that of insiders, who are presumed to have no more important time
commitments.)

---

| | |
|:---|:---|
| ⮚ | For companies that have established an audit committee board structure (one-tier / one committee), Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two outside directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of a majority of independent directors

**Election of Executive Director and Election of Supervisory Director - REIT** 

REITs have a unique two-tier board structure with generally one or more executive directors and two or more supervisory directors. The number of supervisory directors must be greater than, not equal to, the number of executive directors. Shareholders are asked to vote on both types of directors. Putnam will vote as follows, provided each board of executive / supervisory directors meets legal requirements.

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote <u>for</u> the election of Executive Director  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote <u>for</u> the election of Supervisory Directors  |

---

<u>Commentary</u>:

**Definition of outside director and independent director:** 

The Japanese Companies Act focuses on two director classifications: Insider or Outsider. An outside director is a director who is not a director, executive, executive director, or employee of the company or its parent company, subsidiaries or affiliates. Further, a director, executive, executive director or employee, who have executive responsibilities, of the company or subsidiaries can regain eligibility ten years after his or her resignation, provided certain other requirements are met. An outside director is designated as an "independent" director based on the Tokyo Stock Exchange listing rules. An outside director is "independent" if that person can make decisions completely independent from the managers of the company, its parent, subsidiaries, or affiliates

------

and does not have a material relationship with the company (i.e., major client, trading partner, or other business relationship; familial relationship with current director or executive; etc.).

The guidelines have incorporated these definitions in applying the board independence standards above.

***Korea***

Putnam will **<u>withhold votes</u>** from the entire board of directors if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● For large companies (i.e., those with assets of at least KRW 2 trillion); the board does not have at least three
independent directors or less than a majority of directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● For small companies (i.e., those with assets of less than KRW 2 trillion), fewer than one-fourth of the directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has not established a nominating committee with at least half of the members being outside directors,
or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of at least three members and in which at least two-thirds of its members are independent directors.

<u>Commentary</u>: For purposes of these guidelines, an "outside director" is a director who is independent from the management or controlling shareholders of the company and holds no interests that might impair performing his or her duties impartially from the company, management or controlling shareholder. In determining whether a director is an outside director, Putnam will also apply the standards included in Article 382 of the Korean Commercial Act*,* i.e., no employment relationship with the company for a period of two years before serving on the committee, no director or employment relationship with the company's largest shareholder, etc.) and may consider other business relationships that would affect the independence of an outside director.

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to amend the Executive Officer Retirement Allowance Policy unless the recipients of the grants include non-executives; the proposal would have a negative impact on shareholders, or the proposal appear to be outside of normal market practice, in which case Putnam will vote **<u>against</u>**.  |

---

**Malaysia** 

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● less than 50% of the directors are independent directors, or less than a majority of the directors are
independent directors for large companies,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee with all members being independent directors, including the
committee chair,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a nominating committee with all members being non-executive directors, a majority of whom are independent, including the committee chair; the board chair should not serve as a member of the nomination committee, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a compensation committee with all members being non-executive directors, a majority of whom are independent; the board chair should not serve as a member of the remuneration committee.

***Nordic Markets – Finland, Norway, Sweden***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the entire board of directors if:  |

---

**<u>Board Independence:</u>**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have a majority of directors independent from the company and management. (Sweden, Finland,
Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have at least two directors independent from the company and its major shareholders holding
> 10% of the Company's share capital. (Sweden, Finland, Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive director is a member of the board. (Norway)

**<u>Audit Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee does not consist of a majority of directors independent from the company and management.
(Sweden, Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee does not have at least one director independent from the company and its major shareholders
holding > 10% of the Company's share capital. (Sweden, Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee is not majority independent. (Norway)

**<u>Remuneration Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not fully independent of the company, excluding the chair. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not majority independent of the company. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee does not consist fully of non-executive directors. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not fully independent of management (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not majority independent from the company and its major shareholders holding >
50% of the Company's share capital. (Sweden, Finland, Norway)

**<u>Board Nomination Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The nomination committee does not consist of a majority of directors independent from the company. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive is a member of the nomination committee. (Finland)

**<u>External Nomination Committee:</u>** Vote against the establishment of the nomination committee and its guidelines when:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee is not majority independent of the company and management. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee does not have at least one director not affiliated to largest shareholder on the
committee. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee does not meet best practice based on ISS analysis. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee is not majority independent of the board and management. (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee has more than one member of the board of the directors sitting on the committee. (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● There is insufficient disclosure provided for new nominees (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive is a member of the committee. (Norway)

------

***Russia***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a <u>case-by-case basis</u> for the election of nominees to the board of directors.  |

---

<u>Commentary</u>: In Russia, director elections are handled through a cumulative voting process. Cumulative voting allows shareholders to cast all of their votes for a single nominee for the board of directors, or to allocate their votes among nominees in any other way. In contrast, in "regular" voting, shareholders may not give more than one vote per share to any single nominee. Cumulative voting can help to strengthen the ability of minority shareholders to elect a director.

***Singapore***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** from the entire board of directors if  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● in the case of a board with an independent director serving as chair, fewer than one-third of the directors are independent directors; or, in the case of a board not chaired by an independent director, fewer than half of the directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established <u>audit</u> and <u>compensation</u> committees, each with an independent director
serving as chair, with at least a majority of the members being independent directors, and with all of the directors being non-executive directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a <u>nominating</u> committee, with an independent director serving as chair, and
with at least a majority of the members being independent directors.

***United Kingdom, Ireland***

<u>Commentary</u>:

**Application of guidelines**: Although the Combined Code has adopted the "comply and explain" approach to corporate governance, Putnam believes that the guidelines discussed above with respect to board independence standards are integral to the protection of investors in UK companies. As a result, these guidelines will be applied in a prescriptive manner.

**Definition of independence**: For the purposes of these guidelines, a non-executive director shall be considered independent if the director meets the independence standards in section A.3.1 of the Combined Code (i.e., no material business or employment relationships with the company, no remuneration from the company for non-board services, no close family ties with senior employees or directors of the company, etc.), except that Putnam does not view service on the board for more than nine years as affecting a director's independence.

**Smaller companies**: A smaller company is one that is below the FTSE 350 throughout the year immediately prior to the reporting year.

---

| | |
|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board, excluding the Non-Executive Chair, is not comprised of at
least half independent non-executive directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a Nomination committee composed of a majority of independent non-executive directors, excluding the Non-Executive Chair, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a Compensation committee composed of (1) at least three directors (in the case
of smaller companies, as defined by the Combined Code, two directors) and (2) solely of independent non-executive directors. The company chair may be a member of, but not chair, the Committee provided he
or she was considered independent on appointment as chair, or

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has not established an Audit Committee composed of, (1) at least three directors (in the case of
smaller companies as defined by the Combined Code, two directors) and (2) solely of independent non-executive directors. The board chair may not serve on the audit committee of large or small
companies.

***All other jurisdictions***

---

| | |
|:---|:---|
| ⮚ | In the absence of jurisdiction specific guidelines, Putnam will vote as follows for boards/supervisory boards:  |

---

---

| | |
|:---|:---|
| <sup>○</sup> | Putnam will vote **<u>against</u>** the entire board of directors if  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;∎ fewer than a majority of the directors are independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;∎ the board has not established audit, nominating and compensation committees each composed of a majority of
independent directors.

**Additional Commentary regarding all Non-US jurisdictions:** 

Whether a director is considered "independent" or not will be determined by reference to local corporate law or listing standards.

Some jurisdictions may legally require or allow companies to have a certain number of employee representatives, employee shareholder representatives (e.g., France) and/or shareholder representatives on their board. Putnam generally does not consider these representatives independent. The presence of employee representatives or employee shareholder representatives on the board and key committees is generally legally mandated. In most markets, shareholders do not have the ability to vote on the election of employee representatives or employee shareholder representatives. In some markets, significant shareholders have a legal right to nominate shareholder representatives. Shareholders are required to approve the election of shareholder representatives to the board. Unlike employee representatives, there are no legal requirements regarding the presence of shareholder representatives on the board or its committees.

---

| | |
|:---|:---|
| ⮚ | Putnam will **not include** employee or employee shareholder representatives in the independence calculation of the board or key committees, nor in the calculation of the size of the board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will **include** shareholder representatives in the independence calculation of the board and key committees, and in the calculation of the size of the board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally support shareholder or employee representatives if included in the agenda Putnam will vote on a **<u>case-by-case</u>** basis when there are more candidates than seats. Additionally, Putnam will vote **<u>against</u>** such nominees when there is insufficient information disclosed.  |

---

⮚ Putnam Investments' policies regarding the provision of professional services and transactional relationship with regard to directors will apply.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **for** independent nominees for alternate director, unless such nominees do not meet Putnam's individual director standards.  |

---

**Shareholder nominated directors/self-nominated directors** 

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> shareholder nominees if Putnam supports the board of directors.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a <u>case-by case</u> basis if Putnam will be voting against the current board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a case-by-case basis if the proposal regarding a self-nominated/shareholder nominated director nominee would add an additional seat to the board if the nominee is approved.  |

---

**<u>Other Business Matters</u>**

------

***Japan***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>A. Article Amendments</u>**

---

| | |
|:---|:---|
| ⮚ | The Japanese Companies Act gives companies the option to adopt a U.S.-Style corporate structure (i.e., a board of directors and audit, nominating, and compensation committees). Putnam will vote **<u>for</u>** proposals to amend a company's articles of incorporation to adopt the U.S.-Style "Board with Committees" structure. However, the independence of the outside directors is critical to effective corporate governance under this new system. Putnam will, therefore, scrutinize the backgrounds of the outside director nominees at such companies, and will vote **<u>against</u>** the amendment where Putnam believes the board lacks the necessary level of independence from the company or a substantial shareholder.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on granting the board the authority to repurchase shares at its discretion.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** amendments to delete a requirement directing the company to reduce authorized capital by the number of treasury shares cancelled. If issued share capital decreases while authorized capital remains unchanged, then the company will have greater leeway to issue new shares (for example as a private placement or a takeover defense).  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to authorize appointment of special directors. Under the new Corporate Law, companies are allowed to appoint, from among their directors, "special directors" who will be authorized to make decisions regarding the purchase or sale of important assets and major borrowing or lending, on condition that the board has at least six directors, including at least one non-executive director. At least three special directors must participate in the decision-making process and decisions shall be made by a majority vote of the special directors. However, the law does not require any of the special directors to be non-executives, so in effect companies may use this mechanism to bypass outsiders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to create new class of shares or to conduct a share consolidation of outstanding shares to squeeze out minority shareholders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals seeking to enable companies to establish specific rules governing the exercise of shareholder rights. (Note: Such as, shareholders' right to submit shareholder proposals or call special meetings.)  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>B. Compensation Related Matters</u>**

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** option plans which allow the grant of options to suppliers, customers, and other outsiders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option grants to independent internal statutory auditors. The granting of stock options to internal auditors, at the discretion of the directors, can compromise the independence of the auditors and provide incentives to ignore accounting problems, which could affect the stock price over the long term.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the payment of retirement bonuses to directors and statutory auditors when one or more of the individuals to whom the grants are being proposed has not served in an executive capacity for the company. Putnam will also vote **<u>against</u>** payment of retirement bonuses to any directors or statutory auditors who have been designated by the company as independent. Retirement bonus proposals are all-or-nothing, meaning that split votes against individual payments cannot be made. If any one individual does not meet Putnam's criteria, Putnam will vote **<u>against</u>** the entire bundled item.  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>C. Other Business Matters</u>**

---

| | |
|:---|:---|
| ⮚ | Putnam votes **<u>for</u>** mergers by absorptions of wholly-owned subsidiaries by their parent companies. These deals do not require the issuance of shares, and do not result in any dilution or new obligations for shareholders of the parent company. These transactions are routine.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** the acquisition if it is between parent and wholly-owned subsidiary.  |

---

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---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** the formation of a holding company, if routine. Holding companies are once again legal in Japan and a number of companies, large and small, have sought approval to adopt a holding company structure. Most of the proposals are intended to help clarify operational authority for the different business areas in which the company is engaged and promote effective allocation of corporate resources. As most of the reorganization proposals do not entail any share issuances or any change in shareholders' ultimate ownership interest in the operating units, Putnam will treat most such proposals as routine.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that authorize the board to vary the AGM record date.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to abolish the retirement bonus system  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved director/officer indemnification proposals  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on private placements (Third-party share issuances). Where Putnam views the share issuance necessary to avoid bankruptcy or to put the company back on solid financial footing, Putnam will generally vote **<u>for</u>**. When a private placement allows a particular shareholder to obtain a controlling stake in the company at a discount to market prices, or where the private placement otherwise disadvantages ordinary shareholders, Putnam will vote **<u>against</u>**.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>against</u>** shareholder rights plans (poison pills). However, if all of the following criteria are met, Putnam will evaluate such poison pills on a **<u>case-by-case</u>** basis:  |

---

1) The poison pill must have a duration of no more than three years.

2) The trigger threshold must be no less than 20 percent of issued capital. 

3) The company must have no other types of takeover defenses in place.

4) The company must establish a committee to evaluate any takeover offers, and the members of that committee must all meet Putnam's' definition of independence.

5) At least 20 percent, and no fewer than two, of the directors must meet Putnam's definition of independence. These independent directors must also meet Putnam's guidelines on board meeting attendance. 

6) The directors must stand for reelection on an annual basis.

7) The company must release its proxy materials no less than three weeks before the meeting date.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to allow the board to decide on income allocation without shareholder vote.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to limit the liability of External Audit Firms ("Accounting Auditors")  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals seeking a reduction in board size that eliminates all vacant seats.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam may generally vote **<u>against</u>** proposals seeking an increase in authorized capital that leaves the company with as little as 25 percent of the authorized capital outstanding (general request). However, such proposals will be evaluated on a company specific basis, taking into consideration such factors as current authorization outstanding, existence (or lack thereof) of preemptive rights and rationale for the increase.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** corporate split agreement and transfer of sales operations to newly created wholly-owned subsidiaries where the transaction is a purely internal one which does not affect shareholders' ownership interests in the various operations. All other proposals will be referred back to Putnam for **<u>case-by-case</u>** review. These reorganizations usually accompany the switch to a holding company structure, but may be used in other contexts.  |

---

***United Kingdom***

------

---

| | |
|:---|:---|
| ⮚ | Putnam will not apply the U.S. standard 15% discount cap for employee share purchase schemes at U.K. companies. As such, Putnam will generally vote **<u>for</u>** 'Save-As-You-Earn' schemes in the U.K which allow for no more than a 20% purchase discount, and which otherwise comply with U.K. law and Putnam standards.  |

---

***France***

---

| | |
|:---|:---|
| ⮚ | Putnam will not apply the U.S. standard 15% discount cap for employee share purchase schemes at French companies. As such, Putnam will generally vote **<u>for</u>** employee share purchase schemes in France that allow for no greater than a 30% purchase discount, or 40% purchase discount if the vesting period is equal to or greater than ten years, and which otherwise comply with French law and Putnam standards.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** the Remuneration Report (established based on SRD II), however Putnam will vote on a **<u>case-by-case</u>** basis when Putnam is voting against both the ex-Post Remuneration Report (CEO) and ex-Ante Remuneration Policy (CEO, or proposal including CEO remuneration package) in the current year, and Putnam's third party service provider(s) is recommending a vote against.  |

---

***Canada***

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** Advance Notice provisions for submitting director nominations not less than 30 days prior to the date of the annual meeting. For Advance Notice provisions where the minimum number of days to submit a shareholder nominee is less than 30 days prior to the meeting date, Putnam will vote on a **<u>case-by-case</u>** basis. Putnam will also vote on a **<u>case-by-case</u>** basis if the company's policy expressly prohibits the commencement of a new notice period in the event the originally scheduled meeting is adjourned or postponed**.**  |

---

***Hong Kong***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>for</u> proposals to approve a general mandate permitting the company to engage in non-pro rata share issuances of up to 20% of total equity in a year if the company's board meets Putnam's independence standards; if the company's board does not meet Putnam's independence standards, then Putnam will vote against these proposals.  |

---

---

| | |
|:---|:---|
| ⮚ | Additionally, Putnam will vote <u>for</u> proposals to approve the reissuance of shares acquired by the company under a share repurchase program, provided that: (1) Putnam supported (or would have supported, in accordance with these guidelines) the share repurchase program, (2) the reissued shares represent no more than 10% of the company's outstanding shares (measured immediately before the reissuance), and (3) the reissued shares are sold for no less than 85% of current market value.  |

---

This policy supplements policies regarding share issuances as stated above under section

III. Voting Shares of Non-US Issuers.

***Taiwan***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to release the board of directors from the non-compete restrictions specified in Taiwanese Company Law. However, Putnam will vote **<u>for</u>** such proposals if the directors are engaged in activities with a wholly- owned subsidiary of the company.  |

---

***Australia***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to carve out, from the general cap on non-pro rata share issues of 15% of total equity in a rolling 12-month period, a particular proposed issue of shares or a particular issue of shares made previously within the 12-month period, if the company's board meets Putnam's independence standards; if the company's board does <u>not</u> meet Putnam's independence standards, then Putnam will vote **<u>against</u>** these proposals.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals renewing partial takeover provisions.  |

---

------

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on Board-Spill proposals.  |

---

***Turkey***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals involving related party transactions. However, Putnam will vote **<u>against</u>** when such proposals do not provide information on the specific transaction(s) to be entered into with the board members or executives.  |

---

------

**<u>Exhibit B to Proxy Procedures</u>**

<u>PUTNAM INVESTMENTS</u> 

<u>PROXY VOTING CONFLICT</u> 

OF INTEREST DISCLOSURE FORM

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. *Company name*:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. *Date of Meeting:* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. *Referral Item(s):* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. *Description of Putnam's Business Relationship with Issuer of Proxy which may give rise to a conflict of interest:* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. *Describe procedures used to address any conflict of interest:* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. *Describe any contacts from parties outside Putnam Management (other than routine communications from proxy* solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

CERTIFICATION

The undersigned officer of Putnam Investments certifies that, to the best of his or her knowledge, any recommendation of an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

---

| |
|:---|
| Name: |
| Proxy Voting Team |

---

------

**<u>Exhibit C to Proxy Procedures</u>**

<u>PUTNAM INVESTMENTS</u> 

<u>PROXY VOTING CONFLICT</u> 

OF INTEREST DISCLOSURE FORM

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. *Company name*:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. *Date of Meeting*:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. *Referral Item(s)*:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. *Description of Putnam's Business Relationship with Issuer of Proxy which may give rise to a conflict of interest:* <br> <u>None</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. *Describe procedures used to address any conflict of interest*: N/A

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. *Describe any contacts from parties outside Putnam Management (other than routine communications from proxy solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation*:

None

CERTIFICATION

The undersigned officer of Putnam Investments certifies that, to the best of his or her knowledge, any recommendation of an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

---

| |
|:---|
| Name: |
| Proxy Voting Team |

---

------

**APPENDIX A-2** 

**PUTNAM ETF TRUST** 

**STATEMENT OF ADDITIONAL INFORMATION ("SAI") OF FRANKLIN MUNICIPAL HIGH YIELD ETF** 

------

**The information in this Statement of Additional Information is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.** 

**Subject to completion, May 30, 2025** 

[ ], 2025

Putnam ETF Trust

---

| | | |
|:---|:---|:---|
| **Fund** | **Symbol** | **Principal U.S. Listing Exchange** |
| Franklin Municipal High Yield ETF <br>| [ ] | [NYSE Arca, Inc.]<br>|

---

**STATEMENT OF ADDITIONAL INFORMATION** 

This Statement of Additional Information ("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.

The Fund has not commenced operations as of the date of this prospectus. Simultaneous with the Fund's commencement of operations, which is anticipated to occur on or about [ ], the Fund will acquire the assets and assume the liabilities of the Putnam Tax-Free High Yield Fund ("Predecessor Fund") in a reorganization (the "Reorganization"). As a result of the Reorganization, the Fund will adopt the performance and financial history of the Predecessor Fund's class R6 shares. The audited financial statements and report of the Predecessor Fund's independent registered public accounting firm in the Predecessor Fund's Form N-CSR, for the fiscal year ended [ ], are incorporated by reference into this SAI, which means that they are part of this SAI for legal purposes

Part I of this SAI contains specific information about the Fund. Part II includes information about the Fund and other Putnam mutual funds and exchange-traded funds (collectively, the "Putnam funds").

For a free copy of the Fund's current prospectus and, when available, shareholder reports, and/or financial statements, call Putnam Investor Services at 1-800-225-1581, write P.O. Box 219697, Kansas City, MO 64121-9697 or visit www.franklintempleton.com.

A-143 [ -SAI] [ ]

------

**Table of Contents** 

---

| | |
|:---|:---|
|  **[PART I](#sai12516_1_1)** |  |
|  **[FUND ORGANIZATION AND CLASSIFICATION](#sai12516_1_2)** | **A-145** |
|  **[INVESTMENT RESTRICTIONS](#sai12516_1_3)** | **A-145** |
|  **[CHARGES AND EXPENSES](#sai12516_1_4)** | **A-146** |
|  **[PORTFOLIO MANAGERS](#sai12516_1_5)** | **A-149** |
|  **[FINANCIAL STATEMENTS](#sai12516_1_6)** | **A-151** |
|  **[PART II](#sai12516_1_7)** |  |
|  **[TAXES](#sai12516_1_8)** | **A-210** |
|  **[MANAGEMENT](#sai12516_1_9)** | **A-224** |
|  **[DISCLOSURE OF PORTFOLIO INFORMATION](#sai12516_1_10)** | **A-243** |
|  **[INFORMATION SECURITY RISKS](#sai12516_1_11)** | **A-244** |
|  **[PROXY VOTING GUIDELINES AND PROCEDURES](#sai12516_1_12)** | **A-245** |
|  **[SECURITIES RATINGS](#sai12516_1_13)** | **A-245** |
|  **[APPENDIX A - PROXY VOTING GUIDELINES OF THE PUTNAM FUNDS](#sai12516_1_14)** | **A-250** |

---

------

**SAI** 

**PART I** 

**FUND ORGANIZATION AND CLASSIFICATION** 

The Fund is a diversified series of Putnam ETF Trust (the "Trust"). The Trust is a Delaware statutory trust organized on December 22, 2020.

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.

Each share has one vote per dollar of net asset value represented by such share.

Shares of all classes vote together as a single class except when otherwise required by law or as determined by the Trustees. The Trustees may take many actions affecting the fund without shareholder approval, including under certain circumstances merging the 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 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.

**Information about the Summary Prospectus, Prospectus, and SAI** 

The Fund has entered into contractual arrangements with an investment adviser, distributor, transfer 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 by a shareholder against or on behalf of the Trust (or its series), including claims against Trustees and Officers, must be brought in courts of the State of Delaware .

**INVESTMENT RESTRICTIONS** 

The Fund has adopted the fundamental investment restrictions below for the protection of shareholders. Fundamental investment restrictions may not be changed without a vote of a majority of the outstanding voting securities. The Investment Company Act of 1940, as amended, 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.

**As fundamental investment restrictions, the Fund may not and will not:** 

(1) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at the time the borrowing is made.

(2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws.

(3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities 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.

------

(4) Purchase or sell commodities or commodity contracts, except that the Fund may purchase and sell financial futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities.

(5) Make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.

(6) With respect to 75% of its total assets, invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the Fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities or to securities issued by other investment companies, and that insurers of tax-exempt securities are not considered issuers of securities for this purpose.

(7) With respect to 75% of the fund's total assets, acquire more than 10% of the voting securities of any issuer.

(8) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of nongovernmental issuers) 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.

(10) Invest less than 80% of a fund's net assets in tax-exempt securities, except when investing for defensive purposes.

For purposes of the Fund's fundamental policy on commodities and commodities contracts (#4 above), at the time of the establishment of the policy, swap contracts on financial instruments or rates were not within the understanding of the terms "commodities" or "commodity contracts," and notwithstanding any federal legislation or regulatory action by the Commodity Futures Trading Commission ("CFTC") that subject such swaps to regulation by the CFTC, the Fund will not consider such instruments to be commodities or commodity contracts for purposes of this policy.

For purposes of the Fund's fundamental policy on industry concentration (#8 above), 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.

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.

**CHARGES AND EXPENSES** 

**Creation/Redemption Transaction Fees** 

The following table shows the standard transaction fees for creations and redemptions.

---

| | |
|:---|:---|
| **Standard Creation/Redemption Transactions Fee (in kind)** | **Standard Creation/Redemption Transactions Fee (in cash)** |
| [ ] | [ ] |

---

**Management fees** 

Franklin Advisers, Inc. (the "Investment Manager") serves as the Fund's investment manager. Under the Fund's management agreement with the Investment Manager (the "Management Contract"), the Fund pays an annual all-inclusive management fee to the Investment Manager as shown below. The management fee is based on the Fund's average daily net assets and is calculated and accrued daily. In consideration of the management fee, the Investment Manager pays all expenses incurred by the Fund, or reimburses the Fund for, all of the Fund's organizational and other operating expenses, excluding only: (i) interest and taxes (including, but not limited to, income, excise, transfer and withholding taxes); (ii) expenses of the Fund incurred with

------

respect to the acquisition and disposition of portfolio securities, commodities or other financial instruments and the execution of portfolio transactions, including brokerage commissions; (iii) expenses incurred in connection with any distribution plan adopted by the Fund in compliance with Rule 12b-1 under the Investment Company Act of 1940, as amended, including distribution fees; (iv) expenses of printing and mailing proxy materials to shareholders of the Fund; (v) all other expenses incidental to holding meetings of the Fund's shareholders, including proxy solicitations therefor; (vi) litigation expenses (including, but not limited to, any indemnification obligation, attorneys' fees, expenses, costs, judgments, amounts paid in settlement, fines, penalties, fees of expert witnesses, document production fees, and all other liabilities whatsoever incurred or paid by the Fund or a person indemnified by the Fund); (vii) the fee payable to the Investment Manager hereunder; (viii) any extraordinary expenses (which, for the avoidance of doubt, do not include expenses related to the organization of any subsidiary for a fund or the ongoing corporate expenses of maintaining such subsidiary) and (ix) acquired fund fees and expenses.

Management Fee: 0.35%

**Brokerage commissions** 

Because the Fund has yet to commence investment operations as of the date of this SAI, the Fund has not paid any brokerage commissions.

Because the Fund has yet to commence investment operations, the Fund does not hold securities of its regular broker-dealers (or affiliates of such broker-dealers).

**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, the Investment Manager furnishes a continuing investment program for the Fund and makes investment decisions on its behalf. Subject to the control of the Trustees, the Investment Manager also manages the Fund's other affairs and business.

The table below shows the value of each Trustee's holdings in all registered investment companies in the Franklin Templeton family of funds overseen by the Trustee as of December 31, [2024].

---

| | |
|:---|:---|
| <br>**Trustees** | **Aggregate Dollar Range of Equity**<br>**Securities in All Registered Investment**<br>**Companies in the Franklin Templeton**<br>**Fund Complex Overseen by Trustee ($)** |
|  **Independent Trustees** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Liaquat Ahamed | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Barbara M. Baumann | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Katinka Domotorffy | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Catharine Bond Hill | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gregory G. McGreevey |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jennifer Williams Murphy | $10001-$50000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Marie Pillai | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; George Putnam III | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Manoj P. Singh | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mona K. Sutphen | over $100,000 |
|  **Interested Trustees** |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jane E. Trust |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Robert L. Reynolds | over $100,000 |

---

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 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 Fund had not yet commenced investment operations as of the date of this SAI.

The following table shows the fees paid to each Trustee by all of the Putnam funds for services rendered during the calendar year ended December 31, [ ]. As the Fund has not yet commenced operations, no fees have been paid by the Fund. Certain Independent Trustees who serve in leadership positions of the Board of Trustees or Board committees receive additional compensation, which is included in the fees shown below.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Trustees** | **Aggregate<br>compensation<br>from the Fund<sup>1</sup>** | **Pension or<br>retirement<br>benefits<br>accrued as<br>part of Fund<br>expenses** | **Estimated<br>annual benefits<br>from Franklin<br>Templeton<br>fund complex<br>upon<br>retirement<sup>2</sup>** | **Total<br>compensation<br>from Franklin<br>Templeton fund<br>complex** |
|  **Independent Trustees** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Liaquat Ahamed | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Barbara M. Baumann | N/A | N/A | N/A | $[464,500] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Katinka Domotorffy | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Catharine Bond Hill | N/A | N/A | N/A | $[368,660] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Kenneth R. Leibler<sup>3</sup>  | N/A | N/A | N/A | $[295,160] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Gregory G. McGreevey<sup>4</sup>  | N/A | N/A | N/A | $[189,590] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jennifer Williams Murphy | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Marie Pillai | N/A | N/A | N/A | $[355,320] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; George Putnam III | N/A | N/A | $[130,333] | $[407,000] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Manoj P. Singh | N/A | N/A | N/A | $[407,000] |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Mona K. Sutphen | N/A | N/A | N/A | $[382,000] |
|  **Interested Trustees** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Robert L. Reynolds<sup>5</sup>  | N/A | N/A | N/A | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jane E. Trust<sup>5</sup>  | N/A | N/A | N/A | N/A |

---

<sup>1</sup> Certain Trustees are also owed compensation deferred pursuant to a Trustee Compensation Deferral Plan. <sup></sup>

<sup>2</sup> Estimated benefits for each Trustee are based on Trustee fee rates for calendar years 2003, 2004 and 2005. <sup></sup>

<sup>3</sup> Mr. Leibler retired from the Board of Trustees effective June 30, 2024.

<sup>4</sup> Mr. McGreevey was appointed to the Board of Trustees on May 17, 2024.

<sup>5</sup> Mr. Reynolds and Ms. Trust are not compensated by the Fund for their service as Trustees because of their affiliation with the Investment Manager.

Under a retirement plan for Trustees of 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** 

Because the Fund had not commenced operations prior to the date of this SAI, the Fund has not issued any shares.

**PORTFOLIO MANAGERS** 

**Other Accounts Managed by the Portfolio Managers** 

The table below identifies the portfolio managers, the number of accounts (other than the Fund) for which the portfolio managers have day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. For each category, the number of accounts and total assets in the accounts where fees are based on performance are also indicated, as applicable. Unless noted otherwise, all information is provided as of [ ].

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Portfolio Manager** | **Type of Account** | **Number of<br>Accounts<br>Managed** | **Total Assets<br>Managed<br>(Millions) ($)** | **Number of Accounts<br>Managed for which<br>Advisory Fee is<br>Performance-Based** | **Assets Managed for<br>which Advisory Fee**<br> **is**<br> **Performance-Based<br>(Millions) ($)** |
|  Benjamin C. Barber | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  James Conn | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Garrett L. Hamilton | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

---

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  Francisco Rivera | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Daniel Workman | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

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**Compensation of portfolio managers** 

The Investment Manager seeks to maintain a compensation program that is competitively positioned to attract, retain and motivate top-quality investment professionals. Portfolio managers receive a base salary, a cash incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed annually, and the level of compensation is based on individual performance, the salary range for a portfolio manager's level of responsibility and Franklin Templeton guidelines. Portfolio managers are provided no financial incentive to favor one fund or account over another. Each portfolio manager's compensation consists of the following three elements:

**Base salary** Each portfolio manager is paid a base salary.

**Annual bonus** Annual bonuses are structured to align the interests of the portfolio manager with those of the Fund's shareholders. Each portfolio manager is eligible to receive an annual bonus. Bonuses generally are split between cash (50% to 65%) and restricted shares of Franklin Resources, Inc. ("Resources") stock and mutual fund shares. The deferred equity-based compensation is intended to build a vested interest of the portfolio manager in the financial performance of both Resources and mutual funds advised by the Investment Manager. The bonus plan is intended to provide a competitive level of annual bonus compensation that is tied to the portfolio manager achieving consistently strong investment performance, which aligns the financial incentives of the portfolio manager and Fund shareholders. The Chief Investment Officer of the Investment Manager and/or other officers of the Investment Manager, with responsibility for the Fund, have discretion in the granting of annual bonuses to portfolio managers in accordance with Franklin Templeton guidelines. The following factors are generally used in determining bonuses under the plan:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Investment performance.* Primary consideration is given to the historic investment performance over the 1,
3 and 5 **  preceding years of all accounts managed by the portfolio manager. The pre-tax performance of each fund managed is measured relative to a relevant peer group and/or applicable benchmark as
appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Non-investment performance.* The more qualitative contributions of
the portfolio manager to the Investment Manager's **  business and the investment management team, including professional knowledge, productivity, responsiveness to client needs and communication, are evaluated in determining the amount of
any bonus award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Responsibilities.* The characteristics and complexity of funds managed by the portfolio manager are
factored in the **  Investment Manager's appraisal.

**Additional long-term equity-based compensation** Portfolio managers may also be awarded restricted shares or units of Resources stock or restricted shares or units of one or more mutual funds. Awards of such deferred equity-based compensation typically vest over time, so as to create incentives to retain key talent.

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**Benefits** Portfolio managers also participate in benefit plans and programs available generally to all employees of the Investment Manager.

**Portfolio managers' securities ownership** 

Because the Fund has not commended operations prior to the date of this SAI, the portfolio managers did not own any shares of the Fund as of the date of this SAI.

See "Management—Portfolio Transactions—Potential conflicts of interest in managing multiple accounts" in Part II of this SAI for information on how the Investment Manager addresses potential conflicts of interest resulting from an individual's management of more than one account.

**FINANCIAL STATEMENTS** 

The Fund has not yet commenced operations as of the date of this SAI and, therefore, financial statements for the Fund are not available.

A Predecessor Fund's Form N-CSR for the fiscal year ended [ ] ([ ]) contains the Predecessor Fund's audited financial statements, accompanying notes and the report of [ ], an independent registered public accounting firm, all of which are incorporated by reference into this SAI. These audited financial statements are available free of charge upon request by calling 1-800-225-1581.

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Throughout this SAI, references to the fund's investment manager (the "Investment Manager") shall refer to the entity indicated for each fund in the table below:

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Investment** <br> **Manager** | Franklin Advisers, Inc.<br> ("Franklin Advisers") | Putnam Investment Management, LLC ("Putnam<br>Management") |
| &nbsp;&nbsp;&nbsp; **Funds** | Franklin California Municipal Income ETF | Putnam BDC Income ETF |
|  | Franklin Massachusetts Municipal Income ETF | Putnam BioRevolution<sup>TM</sup> ETF |
|  | Franklin Minnesota Municipal Income ETF | Putnam Emerging Markets Ex-China ETF |
|  | Franklin Municipal High Yield ETF | Putnam Focused Large Cap Growth ETF |
|  | Franklin Municipal Income ETF | Putnam Focused Large Cap Value ETF |
|  | Franklin New Jersey Municipal Income ETF | Putnam PanAgora ESG Emerging Markets Equity ETF |
|  | Franklin New York Municipal Income ETF | Putnam PanAgora ESG International Equity ETF |
|  | Franklin Ohio Municipal Income ETF | Putnam Sustainable Future ETF |
|  | Franklin Pennsylvania Municipal Income ETF | Putnam Sustainable Leaders ETF |
|  | Franklin Short-Term Municipal Income ETF |  |
|  | Putnam ESG Core Bond ETF |  |
|  | Putnam ESG High Yield ETF |  |
|  | Putnam ESG Ultra Short ETF |  |

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**THE PUTNAM ETFS** 

**STATEMENT OF ADDITIONAL INFORMATION ("SAI")** 

**PART II** 

**GENERAL DESCRIPTION OF THE FUNDS** 

Each fund is an actively managed exchange-traded fund ("ETF"). Each fund issues and redeems shares on a continuous basis at net asset value per share ("NAV") in aggregations of a specified number of shares called "Creation Units." Creation Units are generally issued in exchange for portfolio securities and/or cash. Shares are listed and traded on an exchange. Shares trade in the secondary market at market prices that may differ from the shares' NAV. Shares are not individually redeemable, but are redeemable only in Creation Unit aggregations, also in exchange for portfolio securities and/or cash. Shareholders who are not Authorized Participants (as defined herein), therefore, will not be able to purchase or redeem shares directly with or from a fund. Instead, most shareholders who are not Authorized Participants will buy and sell shares in the secondary market through a broker.

**BUYING AND SELLING SHARES** 

**Book-Entry Only System** 

The Depository Trust Company ("DTC") acts as securities depository for the shares. Shares of each fund are represented by securities registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. Certificates will not be issued for shares.

DTC, a limited-purpose trust company, was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among DTC participants in such securities through electronic book-entry changes in accounts of the DTC participants, thereby eliminating the need for physical movement of securities certificates. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. Access to the DTC system is also available to others such as banks, brokers,

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dealers, and trust companies that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly.

Beneficial ownership of shares is limited to DTC participants and persons holding interests through DTC participants. Ownership of beneficial interests in shares (owners of beneficial interests are referred to herein as Beneficial Owners) is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC participants) and on the records of DTC participants (with respect to indirect DTC participants and Beneficial Owners that are not DTC participants). Beneficial Owners will receive from or through a DTC participant a written confirmation relating to their purchase of shares.

Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the trust and DTC, DTC is required to make available to the trust upon request and for a fee to be charged to the trust a listing of the shares of each fund held by each DTC participant. The trust shall inquire of each such DTC participant as to the number of Beneficial Owners holding fund shares, directly or indirectly, through such DTC participant. The trust shall provide each such DTC participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC participant may reasonably request, in order that such notice, statement or communication may be transmitted by such DTC participant, directly or indirectly, to such Beneficial Owners. In addition, the trust shall pay to each such DTC participant a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements.

Share distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all shares. DTC or its nominee, upon receipt of any such distributions, shall credit immediately DTC participants' accounts with payments in amounts proportionate to their respective beneficial interests in shares of each fund as shown on the records of DTC or its nominee. Payments by DTC participants to indirect DTC participants and Beneficial Owners of shares held through such DTC participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in a "street name," and will be the responsibility of such DTC participants.

The trust has no responsibility or liability for any aspect of the records relating to or notices to Beneficial Owners, or payments made on account of beneficial ownership interests in such shares, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests, or for any other aspect of the relationship between DTC and the DTC participants or the relationship between such DTC participants and the indirect DTC participants and Beneficial Owners owning through such DTC participants.

DTC may decide to discontinue providing its service with respect to shares at any time by giving reasonable notice to the trust and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the trust shall take action either to find a replacement for DTC to perform its functions at a comparable cost or, if such a replacement is unavailable, to issue and deliver printed certificates representing ownership of shares, unless the trust makes other arrangements with respect thereto satisfactory to the listing exchange.

**Creation Units** 

The trust issues and redeems shares of each fund only in Creation Unit aggregations on a continuous basis through Franklin Distributors, LLC ("Franklin Distributors"), the Fund's distributor, without a sales load, at its NAV next determined after receipt, on any Business Day (as defined herein), of an order in proper form. An Authorized Participant that is not a "qualified institutional buyer," as such term is defined under Rule 144A of the 1933 Act, will not be able to receive, as part of a redemption, restricted securities eligible for resale under Rule 144A.

A "Business Day" with respect to each fund is any day on which the listing exchange or the NYSE is open for business. As of the date of the prospectus, the listing exchange and the NYSE observe the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day (Washington's Birthday) (U.S.), Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day (U.S.), Labor Day (U.S.), Thanksgiving Day (U.S.), and Christmas Day.

To be eligible to place orders to purchase a Creation Unit of each fund, an entity must be an "Authorized Participant" which is a member or participant of a clearing agency registered with the SEC, which has a written agreement with Franklin Distributors, the fund's distributor, that allows the Authorized Participant to place orders for the purchase and redemption of Creation Units ("Participant Agreement"). All shares of each fund, however created, will be entered on the records of DTC in the name of Cede & Co. for the account of a DTC participant.

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Each fund reserves the right to adjust the prices of fund shares and the number of shares in a Creation Unit in the future to maintain convenient trading ranges for investors. Any adjustments would be accomplished through stock splits or reverse stock splits, which would have no effect on the net assets of each fund.

**Portfolio Deposit** 

The consideration for purchase of a Creation Unit generally consists of an in-kind deposit of a portfolio of securities ("Deposit Securities") designated by a fund (or in certain circumstances, cash in lieu of certain Deposit Securities) together with a deposit of a specified cash payment ("Cash Component") computed as described herein. Alternatively, each fund may issue and redeem Creation Units in exchange for a specified all-cash payment ("Cash Deposit"). Together, the Deposit Securities (including any cash in lieu amounts) and the Cash Component or, alternatively, the Cash Deposit, constitute the "Portfolio Deposit," which represents the minimum initial and subsequent investment amount for a Creation Unit. In the event each fund requires Deposit Securities (including any cash in lieu amounts) and a Cash Component in consideration for purchasing a Creation Unit, the function of the Cash Component is to compensate for any differences between the NAV per Creation Unit and the Deposit Amount (as defined below). The Cash Component would be an amount equal to the difference between the NAV of the shares (per Creation Unit) and the "Deposit Amount," which is an amount equal to the market value of the Deposit Securities. If the Cash Component is a positive number (the NAV per Creation Unit exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (the NAV per Creation Unit is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Computation of the Cash Component excludes any stamp duty or other similar fees and expenses payable upon transfer of beneficial ownership of the Deposit Securities, which shall be the sole responsibility of the Authorized Participant.

A fund may determine, upon receiving a purchase order from an Authorized Participant, to accept a basket of securities or cash that differs from Deposit Securities or to permit the substitution of an amount of cash (i.e., a "cash-in-lieu" amount) to be added to the Cash Component to replace any Deposit Security. In cases where a fund purchases portfolio securities with cash, the Authorized Participant will reimburse the fund for, among other things, any difference between the market value at which the securities were purchased by the fund and the cash in lieu amount (which amount, at the Investment Manager's discretion, may be capped), applicable registration fees and taxes. Brokerage commissions incurred in connection with a fund's acquisition of Deposit Securities will be at the expense of the fund and will affect the value of all shares of the fund; but the Investment Manager may adjust the transaction fee to the extent the composition of the Deposit Securities changes or cash in lieu is added to the Cash Component to protect ongoing shareholders.

**Procedures for Creation Unit Purchases** 

All purchase orders must be placed for one or more Creation Units. All orders to purchase Creation Units must be received by Franklin Distributors or its agent no later than the closing time of regular trading hours on the listing exchange or the NYSE (ordinarily 4:00 p.m. Eastern Time) (the Closing Time) or at an earlier time set forth in the Participant Agreement or otherwise provided to all Authorized Participants on the date such order is placed in order for the creation of Creation Units to be effected based on the NAV of shares of each fund as next determined on such date after receipt of the order in proper form. The date on which an order to purchase Creation Units (or an order to redeem Creation Units as discussed below) is placed is referred to as the "Transmittal Date." Orders must be transmitted by an Authorized Participant by telephone or other transmission method acceptable to Franklin Distributors pursuant to procedures set forth in the Participant Agreement. Severe economic or market disruptions or changes, or telephone or other communications failure may impede the ability to reach Franklin Distributors or an Authorized Participant.

All orders to purchase Creation Units shall be placed with an Authorized Participant, as applicable, in the form required by such Authorized Participant. In addition, in the event an Authorized Participant places an order on behalf of an investor, the Authorized Participant may request the investor to make certain representations or enter into agreements with respect to the order, including payments of cash to pay the Cash Component, when required. Investors should be aware that their particular broker may not have executed a Participant Agreement and that, therefore, orders to purchase Creation Units have to be placed by the investor's broker through an Authorized Participant that has executed a Participant Agreement. In such cases there may be additional charges to such investor. At any given time, there may be only a limited number of broker-dealers that have executed a Participant Agreement.

Those placing orders to purchase Creation Units should afford sufficient time to permit proper submission of the order to Franklin Distributors or its agent prior to the applicable deadlines on the Transmittal Date. Authorized participants may ascertain the

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deadlines applicable to DTC and the Federal Reserve Bank wire system by contacting the operations department of the broker or depository institution effecting such transfer of Deposit Securities and Cash Component.

Portfolio Deposits must be delivered through the Federal Reserve System (for cash and government securities) and through DTC (for corporate securities) by an Authorized Participant that has executed a Participant Agreement. The Portfolio Deposit transfer must be ordered by the Authorized Participant on the Transmittal Date in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities through DTC to the account of each fund by no later than 1:00 p.m. Eastern Time of the next Business Day immediately following the Transmittal Date. In certain cases, Authorized Participants will purchase and redeem Creation Units of each fund on the same Transmittal Date. In these instances, each fund reserves the right to settle these transactions on a net basis.

All questions as to the number of Deposit Securities to be delivered, and the validity, form and eligibility (including time of receipt) for the deposit of any tendered securities, will be determined by each fund, whose determination shall be final and binding. For purchase orders composed solely of a Cash Component, the amount of cash equal to the Cash Component must be transferred directly to each fund's custodian through the Federal Reserve Bank wire transfer system in a timely manner so as to be received by each fund's custodian no later than 10:00 a.m. Eastern Time on the next Business Day immediately following such Transmittal Date. An order to purchase Creation Units is deemed received by Franklin Distributors on the Transmittal Date if (i) such order is received by Franklin Distributors or its agent not later than the Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on such Transmittal Date; and (ii) all other procedures set forth in the Participant Agreement are properly followed. However, if each fund's custodian does not receive the required Deposit Securities together with the associated Cash Component by 1:00 p.m. or, with respect to purchase orders composed solely of a Cash Component, the Cash Component by 10:00 a.m. on the next Business Day immediately following the Transmittal Date, such order will be deemed not in proper form and canceled. Upon written notice to Franklin Distributors, such canceled order may be resubmitted the following Business Day using a Portfolio Deposit as newly constituted to reflect the next calculated NAV of each fund. The delivery of Creation Units so purchased will occur not later than the second (2nd) Business Day following the day on which the purchase order is deemed received by Franklin Distributors.

Franklin Distributors or its agent will inform the transfer agent, the Investment Manager and each fund's custodian upon receipt of a purchase order. The custodian will then provide such information to the appropriate sub-custodian. The custodian will cause the sub-custodian to maintain an account into which the Deposit Securities (or the cash value of all or part of such securities, in the case of a cash purchase or "cash in lieu" amount) will be delivered. Deposit Securities must be delivered to an account maintained at the applicable local custodian. The trust must also receive, on or before the contractual settlement date, immediately available or same day funds estimated by the custodian to be sufficient to pay the Cash Component next determined after receipt in proper form of the purchase order, together with the purchase transaction fee described in Part I of this SAI.

Once the Trust has accepted a purchase order, the trust will confirm the issuance of a Creation Unit of a fund against receipt of payment, at such NAV as will have been calculated after receipt in proper form of such order. Franklin Distributors or its agent will then transmit a confirmation of acceptance of such order.

Creation Units will not be issued until the transfer of good title to the trust of the Deposit Securities and the payment of the Cash Component have been completed. When the sub-custodian has confirmed to the custodian that the required Deposit Securities (or the cash value thereof) have been delivered to the account of the relevant sub-custodian, Franklin Distributors and the Investment Manager will be notified of such delivery and the trust will issue and cause the delivery of the Creation Units.

Creation Units may be created in advance of receipt by each fund of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the NAV of the shares on the date the order is placed in proper form since, in addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component (including any transaction fees), plus (ii) 105% of the market value of the undelivered Deposit Securities ("Additional Cash Deposit"). The order shall be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to 3:00 p.m. Eastern Time on such date and federal funds in the appropriate amount are deposited with each fund's custodian by 10:00 a.m. Eastern Time the following Business Day. If the order is not placed in proper form by 3:00 p.m. or federal funds in the appropriate amount are not received by 10:00 a.m. the next Business Day, then the order may be deemed to be rejected and the Authorized Participant shall be liable to each fund for losses, if any, resulting therefrom. An additional amount of cash shall be required to be deposited with each fund, pending delivery of the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with each fund in an

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amount at least equal to 105% of the daily marked to market value of the missing Deposit Securities. In the sole discretion of each fund following the Business Day on which the order was received a fund may use the cash on deposit to purchase the missing Deposit Securities. Authorized Participants will be liable to each fund for the costs incurred by each fund in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities exceeds the market value of such Deposit Securities on the day the purchase order was deemed received by Franklin Distributors plus the brokerage and related transaction costs associated with such purchases and the Authorized Participant shall be liable to the fund for any shortfall between the cost to the fund of purchasing any missing Deposit Securities and the value of the collateral. Each fund will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Securities have been properly received by Franklin Distributors or purchased by each fund and deposited into each fund.

**Acceptance of Purchase Orders** 

Each fund and Franklin Distributors reserve the right to reject or revoke acceptance of a creation order transmitted to it in respect to the fund, if, including but not limited to, the following conditions are present(i) the order is not in proper form; (ii) the investor(s), upon obtaining the shares ordered, would own 80% or more of the currently outstanding shares of each fund; (iii) acceptance of the Deposit Securities would have certain adverse tax consequences to each fund; (iv) acceptance of the Portfolio Deposit would, in the opinion of the fund, be unlawful; or (v) in the event that circumstances outside the control of each fund, make it impossible to process creation orders for all practical purposes. Examples of such circumstances include, without limitation, acts of God; public service or utility problems such as earthquakes, fires, floods, extreme weather conditions, and power outages resulting in telephone, telecopy, and computer failures; wars; civil or military disturbances, including acts of civil or military authority or governmental actions; terrorism; sabotage; epidemics; riots; labor disputes; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting each fund, the Investment Manager, Franklin Distributors, DTC, NSCC, the transfer agent, or any other participant in the purchase process, and similar extraordinary events. Each fund and Franklin Distributors have the right to require information to determine beneficial share ownership for purposes of (ii) above should it so choose or to rely on a certification from a broker-dealer who is a member of the Financial Industry Regulatory Authority, Inc. as to the cost basis of Deposit Securities. Franklin Distributors or the fund shall notify a prospective purchaser of a Creation Unit and/or the Authorized Participant acting on the purchaser's behalf, of its rejection of the purchaser's order. Each fund, the transfer agent, and Franklin Distributors are under no duty, however, to verify or give notification of any defects or irregularities in any written order or in the delivery of a Portfolio Deposit, nor shall any of them incur any liability for the failure to give any such notification.

**Redemption of Creation Units** 

Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by each fund through the transfer agent and only on a Business Day through an Authorized Participant that has entered into a Participant Agreement. Each fund generally will not redeem shares in amounts less than Creation Unit-size aggregations. Beneficial Owners must accumulate enough shares to constitute a Creation Unit in order to have such shares redeemed by each fund. There can be no assurance, however, that there will be sufficient liquidity in the public trading market at any time to permit assembly of a Creation Unit. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of shares to constitute a redeemable Creation Unit.

The redemption proceeds for a Creation Unit may consist of a portfolio of securities (Fund Securities) – as announced by the Investment Manager, or its agent, on the Business Day of the request for redemption received in proper form – plus cash in an amount equal to the difference between the NAV of the shares being redeemed, as next determined after a receipt of the request in proper form, and the value of the Fund Securities ("Cash Redemption Amount"), less a redemption transaction fee and any variable fee as listed in Part I of this SAI. In the event that the Fund Securities have a value greater than the NAV of the shares being redeemed, a compensating cash payment to a fund equal to the differential plus the applicable redemption transaction fee is required to be made by or through an Authorized Participant by the redeeming shareholder. Notwithstanding the foregoing, each fund will substitute a cash-in-lieu amount to replace any Fund Security that is a non-deliverable instrument. The amount of the cash paid out in such cases will be equivalent to the value of the instrument listed as a Fund Security.

The right of redemption may be suspended or the date of payment postponed with respect to each fund (i) for any period during which the NYSE is closed (other than customary weekend and holiday closings); (ii) for any period during which trading on the NYSE is suspended or restricted; (iii) for any period during which an emergency exists as a result of which disposal of the shares or determination of each fund's NAV is not reasonably practicable; or (iv) in such other circumstances as is permitted by the SEC.

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Orders to redeem Creation Units must be delivered through an Authorized Participant. An order to redeem Creation Units is deemed received by each fund on the Transmittal Date if (i) such order is received in proper form by the transfer agent not later than the Closing Time (or one hour prior to the Closing Time (ordinarily 3:00 p.m. Eastern Time) for nonconforming orders) on such Transmittal Date; (ii) such order is accompanied or followed by the requisite number of shares of each fund and the Cash Redemption Amount specified in such order, which delivery must be made through DTC to each fund's custodian no later than 1:00 p.m., for the shares, and 3:00 p.m., for the Cash Redemption Amount, Eastern Time on the next Business Day following such Transmittal Date (the "DTC Cut-Off-Time"); and (iii) all other procedures set forth in the Participant Agreement are properly followed. The requisite Fund Securities and the Cash Redemption Amount will generally be transferred by the second (2nd) Business Day following the date on which such request for redemption is deemed received, which will generally be no more than seven (7) days after such request for redemption but may be up to fifteen days for funds that invest in foreign securities. In certain cases, Authorized Participants will redeem and purchase Creation Units of each fund on the same Transmittal Date. In these instances, each fund reserves the right to settle these transactions on a net basis.

If each fund determines, based on information available to each fund when a redemption request is submitted by an Authorized Participant, that: (i) the short interest of each fund in the marketplace (*i.e.,* the number of shares of the fund that have been sold short but have not yet been covered or closed out) is greater than or equal to 100%; and (ii) the orders in the aggregate from all Authorized Participants redeeming shares on a Business Day represent 25% or more of the outstanding shares of each fund, such Authorized Participant will be required to verify to each fund the accuracy of its representations that are deemed to have been made by submitting a request for redemption. If, after receiving notice of the verification requirement, the Authorized Participant does not verify the accuracy of its representations that are deemed to have been made by submitting a request for redemption in accordance with this requirement, its redemption request will be considered not to have been received in proper form.

To the extent contemplated by an Authorized Participant's agreement, in the event the Authorized Participant has submitted a redemption request in proper form but is unable to transfer all or part of the Creation Units to be redeemed to Franklin Distributors, on behalf of each fund, at or prior to the closing time of regular trading on the listing exchange on the date such redemption request is submitted, Franklin Distributors will nonetheless accept the redemption request in reliance on the undertaking by the Authorized Participant to deliver the missing fund shares as soon as possible, which undertaking shall be secured by the Authorized Participant's delivery and maintenance of collateral consisting of cash having a value (marked to market daily) at least equal to 105% of the value of the missing fund shares. The current procedures for collateralization of missing shares require, among other things, that any cash collateral shall be in the form of U.S. dollars in immediately-available funds and shall be held by each fund and marked to market daily, and that the fees of each fund and any sub-custodians in respect of the delivery, maintenance, and redelivery of the cash collateral shall be payable by the Authorized Participant. The Participant Agreement will permit each fund to purchase the missing fund shares or acquire the Deposit Securities underlying such shares at any time and will subject the Authorized Participant to liability for any shortfall between the cost to each fund of purchasing such shares or Deposit Securities and the value of the collateral.

The calculation of the value of the Fund Securities and the Cash Redemption Amount to be delivered upon redemption will be made by the Investment Manager according to the procedures set forth in the section entitled "Determination of Net Asset Value" computed on the Business Day on which a redemption order is deemed received by the transfer agent. Therefore, if a conforming redemption order in proper form is submitted to the transfer agent by an Authorized Participant not later than Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on the Transmittal Date, and the requisite number of shares of each fund are delivered to each fund's custodian prior to the DTC Cut-Off-Time, then the value of the Fund Securities and the Cash Redemption Amount to be delivered will be determined by State Street Bank and Trust Company on such Transmittal Date. If, however, a conforming redemption order is submitted to the transfer agent by an Authorized Participant not later than the Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on the Transmittal Date but either (i) the requisite number of shares of each fund and the Cash Redemption Amount are not delivered by the DTC Cut-Off-Time as described above on the next Business Day following the Transmittal Date, or (ii) the redemption order is not submitted in proper form, then the redemption order will not be deemed received as of the Transmittal Date. In such case, the value of the Fund Securities and the Cash Redemption Amount to be delivered will be computed as of the Closing Time on the Business Day that such order is deemed received by the transfer agent, i.e., the Business Day on which the shares of each fund are delivered through DTC to Franklin Distributors by the DTC Cut-Off-Time on such Business Day pursuant to a properly submitted redemption order.

A fund may in its discretion exercise its option to redeem shares in cash, and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash that each fund may, in its

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sole discretion, permit. In either case, the investor will receive a cash payment equal to the NAV of its shares based on the NAV of shares of each fund next determined after the redemption request is received in proper from (minus a redemption transaction fee and additional charge for requested cash redemptions specified above, to offset each fund's brokerage and other transaction costs associated with the disposition of Fund Securities). In addition, each fund reserves the right to honor a redemption request by delivering a basket of securities or cash that differs from the Fund Securities.

Redemption of shares for Fund Securities will be subject to compliance with applicable federal and state securities laws and each fund (whether or not it otherwise permits cash redemptions) reserves the right to redeem Creation Units for cash to the extent that each fund could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Fund Securities under such laws. An Authorized Participant or a Beneficial Owner for which it is acting subject to a legal restriction with respect to a particular stock included in the Fund Securities applicable to the redemption of a Creation Unit may be paid an equivalent amount of cash. The Authorized Participant may request the redeeming Beneficial Owner of the shares to complete an order form or to enter into agreements with respect to such matters as compensating cash payment.

In connection with taking delivery of shares for Fund Securities upon redemption of Creation Units, a redeeming shareholder or entity acting on behalf of a redeeming shareholder must maintain appropriate custody arrangements with a qualified broker-dealer, bank or other custody providers in each jurisdiction in which any of the Fund Securities are customarily traded, to which account such Fund Securities will be delivered. If neither the redeeming shareholder nor the entity acting on behalf of a redeeming shareholder has appropriate arrangements to take delivery of the Fund Securities in the applicable foreign jurisdiction and it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Fund Securities in such jurisdictions, the trust may, in its discretion, exercise its option to redeem such shares in cash, and the redeeming shareholder will be required to receive its redemption proceeds in cash.

Deliveries of redemption proceeds generally will be made within two Business Days. Due to the schedule of holidays in certain countries, however, the delivery of redemption proceeds may take longer than two Business Days after the day on which the redemption request is received in proper form. In such cases, the local market settlement procedures will not commence until the end of the local holiday periods.

**Creation/Redemption Transaction Fees** 

The funds generally impose a "Transaction Fee" on investors purchasing or redeeming Creation Units. The Transaction Fee will be limited to amounts that have been determined by the Investment Manager to be appropriate. The purpose of the Transaction Fee is to protect the existing shareholders of the funds from the dilutive costs associated with the purchase and redemption of Creation Units. Where a fund permits cash creations (or redemptions) or cash in lieu of depositing one or more Deposit Securities, the purchaser (or redeemer) may be assessed a higher Transaction Fee to offset the transaction cost to a fund of buying (or selling) those particular Deposit Securities. To the extent a purchase/redemption transaction consists of cash and/or in-kind securities, the standard Transaction Fee applies to in-kind purchases and redemptions of creation units and an additional Transaction Fee may also be imposed. Each fund reserves the right to not impose the additional Transaction Fee or to vary the amount of the additional Transaction Fee, depending on the materiality of the fund's actual transaction costs incurred or where the Adviser believes that not imposing or varying the additional Transaction Fee would be in the fund's interest. Transaction Fees associated with the redemption of Creation Units will not exceed 2% of the value of shares redeemed. To the extent the fund cannot recoup the amount of transaction costs incurred in connection with a redemption from the redeeming shareholder because of the 2% cap or otherwise, those transaction costs will be borne by the fund's remaining shareholders (including, potentially, increased taxable income in respect of the fund, particularly if the redemption consists solely or partially of cash) and negatively affect the fund's performance. Actual transaction costs may vary depending on the time of day an order is received or the nature of the securities. Investors bear the costs of transferring Deposit Securities or Fund Securities to/from each fund to/from their account or on their order. See "Creation/Redemption Transaction Fees" in Part I of this SAI for information on standard Transaction Fees and maximum additional Transaction Fees.

**Additional Intermediary Payments** 

For purposes of this section the term "intermediary" includes any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator and any other institution that offers shares of the funds to its customers.

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The Investment Manager and/or its affiliates pay additional compensation to selected intermediaries under the categories described below. These categories are not mutually exclusive, and a single intermediary may receive payments under all categories. These payments may create an incentive for an intermediary 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 intermediaries 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, if any, and the expenses paid by the fund as shown under the heading "Fees and Expenses" in the prospectus.

**Marketing Support Payments.** The Investment Manager and/or its affiliates make payments to certain intermediaries for marketing support services. These payments are individually negotiated with each intermediary firm, taking into account the marketing support services provided by the intermediary, including business planning assistance, educating intermediary personnel about the Putnam funds and shareholder financial planning needs, placement on the intermediary's preferred or recommended fund company list, access to sales meetings, sales representatives and management representatives of the intermediary, market data, as well as the size of the intermediary's relationship with the Investment Manager.

No intermediaries received marketing support payments from the Investment Manager and its affiliates during the calendar year ended December 31, [2024]. Intermediaries may receive marketing support payments in [2025] and in future years from the Investment Manager and/or its affiliates. You can ask your intermediary about any payments it receives from the Investment Manager and/or its affiliates.

**Program Servicing Payments.** The Investment Manager and/or its affiliates also make payments to certain intermediaries that sell shares of the Putnam funds through intermediary platforms and other investment programs to compensate intermediaries for a variety of services they provide. An intermediary may perform program services itself or may arrange with a third party to perform program services. In addition to shareholder recordkeeping, reporting, or transaction processing, program services may include services rendered in connection with intermediary platform development and maintenance, fund/investment selection and monitoring, or other similar services.

The following intermediaries (and such intermediaries' respective affiliates) received program servicing payments from the Investment Manager and its affiliates during the calendar year ended December 31, [2024]:

Charles Schwab & Co., Inc.

Cetera Financial Group, Inc.

Fidelity Brokerage Services, LLC

National Financial Services LLC, and

UBS Financial Services Inc.

Additional or different intermediaries may also receive program servicing payments in [2025] and in future years from the Investment Manager and/or its affiliates. Any additions, modifications or deletions to the list of intermediaries identified above that have occurred since December 31, [2024] are not reflected. You can ask your intermediary about any payments it receives from the Investment Manager and/or its affiliates.

**Other Payments**. From time to time, the Investment Manager and/or its affiliate, at its expense, may provide additional compensation to intermediaries that 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 compensation provided by the Investment Manager and/or its affiliate may include financial assistance to intermediaries that enables the Investment Manager and/or its affiliate to participate in and/or present at intermediary-sponsored conferences or seminars, sales or training programs for invited registered representatives and other intermediary employees, intermediary entertainment, and other intermediary-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, retention and due diligence trips. The Investment Manager and/or its affiliates make payments for entertainment events it deems appropriate, subject to internal guidelines and applicable law. These payments may vary upon the nature of the event.

**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 series of Putnam ETF Trust that disclose their holdings daily,

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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 Franklin Templeton Investment Management Limited ("FTIML"), Franklin Advisers, Putnam Management, and/or PanAgora Asset Management, Inc. ("PanAgora") serve as sub-adviser (as described in the fund's prospectus), references to the Investment Manager in this section include FTIML, Franklin Advisers, Putnam Management, and/or PanAgora, as appropriate.

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp; Bank Loans, Loan Participations, and Assignments | Market Risk |
| &nbsp;&nbsp;&nbsp; Benchmark Reference Rate Risk | Master Limited Partnerships (MLPs) |
| &nbsp;&nbsp;&nbsp; Borrowing and Other Forms of Leverage | Money Market Instruments |
| &nbsp;&nbsp;&nbsp; Collateralized Debt and Loan Obligations | Mortgage-backed and Asset-backed Securities |
| &nbsp;&nbsp;&nbsp; Commodities and Commodity-Related Investments | Options on Securities |
| &nbsp;&nbsp;&nbsp; Derivatives | Preferred Stocks and Convertible Securities |
| &nbsp;&nbsp;&nbsp; ESG Considerations | Private Placements and Restricted Securities |
| &nbsp;&nbsp;&nbsp; Exchange-Traded Notes | Real Estate Investment Trusts (REITs) |
| &nbsp;&nbsp;&nbsp; Floating Rate and Variable Rate Demand Notes | Redeemable Securities |
| &nbsp;&nbsp;&nbsp; Foreign Currency Transactions | Repurchase Agreements |
| &nbsp;&nbsp;&nbsp; Foreign Investments and Related Risks | Securities of Other Investment Companies |
| &nbsp;&nbsp;&nbsp; Forward Commitments and Dollar Rolls | Short Sales |
| &nbsp;&nbsp;&nbsp; Futures Contracts and Related Options | Short-Term Trading |
| &nbsp;&nbsp;&nbsp; Hybrid Instruments | Special Purpose Acquisition Companies |
| &nbsp;&nbsp;&nbsp; Illiquid Investments | Structured Investments |
| &nbsp;&nbsp;&nbsp; Inflation-Protected Securities | Swap Agreements |
| &nbsp;&nbsp;&nbsp; Initial Public Offerings (IPOs) | Tax-exempt Securities |
| &nbsp;&nbsp;&nbsp; Inverse Floaters | Temporary Defensive Strategies |
| &nbsp;&nbsp;&nbsp; Large Shareholder Risk | Trade Policy |
| &nbsp;&nbsp;&nbsp; Legal and Regulatory Risks Relating to Investment Strategy | Warrants |
| &nbsp;&nbsp;&nbsp; Lower-rated Securities | Zero-coupon and Payment-in-kind Bonds |

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**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 the Investment Manager, 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 some impose restrictive covenants which must be met by the borrower, although these covenants have become less common, and the terms of covenants have eroded, in recent years. 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

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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, the Investment Manager will not rely solely on that credit analysis, but will perform its own investment analysis of the borrowers. The Investment Manager'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. The Investment Manager 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 the Investment Manager'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 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, the Investment Manager 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

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fair market value. The fund may hold investments in loans for a very short period of time when opportunities to resell the investments that the Investment Manager 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, the Investment Manager 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. The Investment Manager's decision not to receive Confidential Information may place the Investment Manager 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, the Investment Manager's ability to assess their significance or desirability may be adversely affected. For these and other reasons, it is possible that the Investment Manager's decision not to receive Confidential Information under normal circumstances could adversely affect the fund's investment performance.

Notwithstanding its intention generally not to receive material, non-public information with respect to its management of investments in loans, the Investment Manager 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 the Investment Manager's efforts to avoid such possession, but in other instances the Investment Manager 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, the Investment Manager'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 the Investment Manager'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 the Investment Manager 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, the Investment Manager may owe conflicting fiduciary duties to the fund and other client accounts. The Investment Manager 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 the Investment Manager'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.

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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.

**Benchmark Reference Rate Risk** 

Many debt securities, derivatives, and other financial instruments utilize benchmark or reference rates for variable interest rate calculations, including the Euro Interbank Offer Rate, Sterling Overnight Index Average Rate, and the Secured Overnight Financing Rate (each a "Reference Rate"). Instruments in which the fund invests may pay interest at floating rates based on such Reference Rates or may be subject to interest caps or floors based on such Reference Rates. The fund and issuers of instruments in which the fund invests may also obtain financing at floating rates based on such Reference Rates. The elimination of a Reference Rate or any other changes to or reforms of the determination or supervision of Reference Rates could have an adverse impact on the market for, or value of, any instruments or payments linked to those Reference Rates.

For example, some Reference Rates, as well as other types of rates and indices, are described as "benchmarks" and have been the subject of ongoing national and international regulatory reform, including under the European Union regulation on indices used as benchmarks in financial instruments and financial contracts (known as the "Benchmarks Regulation"). The Benchmarks Regulation has been enacted into United Kingdom law by virtue of the European Union (Withdrawal) Act 2018 (as amended), subject to amendments made by the Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019 (SI 2019/657) and other statutory instruments. Following the implementation of these reforms, the manner of administration of benchmarks has changed and may further change in the future, with the result that relevant benchmarks may perform differently than in the past, the use of benchmarks that are not compliant with the new standards by certain supervised entities may be restricted, and certain benchmarks may be eliminated entirely. Such changes could cause increased market volatility and disruptions in liquidity for instruments that rely on or are impacted by such benchmarks. Additionally, there could be other consequences which cannot be predicted.

**Borrowing and Other Forms of Leverage** 

The fund may borrow money to the extent permitted by its investment policies and restrictions and by Section 18 of the 1940 Act. 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.

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. 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.

**Collateralized Debt and Loan Obligations** 

The fund may invest in collateralized debt obligations ("CDOs"). CDOs are types of asset-backed securitized instruments and include collateralized loan obligations ("CLOs") and other similarly structured securities. Although certain CDOs may benefit from credit enhancement in the form of a senior-subordinate structure, overcollateralization or bond insurance, such enhancement may not always be present, and may fail to protect a fund against the risk of loss on default of the collateral. CDOs may charge management and administrative fees, which are in addition to those of a fund. CDOs may be less liquid than other types of securities.

The risks of an investment in a CDO largely depend on the type of underlying collateral securities and the tranche in which a fund invests. CDOs are subject to the typical risks associated with debt instruments and fixed income and/or asset-backed securities discussed elsewhere in the prospectus and in this SAI, including interest rate risk (which may be exacerbated if the

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interest rate payable on a structured financing changes based on multiples of changes in interest rates or inversely to changes in interest rates), prepayment risk, credit risk (including adverse credit spread moves), liquidity risk and market risk. CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments and one or more tranches may be subject to up to 100% loss of invested capital; (ii) the possibility that the quality of the collateral may decline in value or default, due to factors such as the availability of any credit enhancement, the level and timing of payments and recoveries on and the characteristics of the underlying receivables, loans, or other assets that are being securitized, remoteness of those assets from the originator or transferor, the adequacy of and ability to realize upon any related collateral, and the capability of the servicer of the securitized assets (particularly where the underlying collateral in a loan portfolio is not individually assessed prior to purchase); (iii) market and illiquidity risks affecting the price of a structured finance investment, if required to be sold, at the time of sale; and (iv) if the particular structured product is invested in a security in which a fund is also invested, this would tend to increase the fund's overall exposure to the credit of the issuer of such securities, at least on an absolute, if not on a relative basis. In addition, due to the complex nature of a CDO, an investment in a CDO may not perform as expected. An investment in a CDO also is subject to the risk that the issuer and the investors may interpret the terms of the instrument differently, giving rise to disputes.

A CLO is an obligation of a trust or other special purpose vehicle typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. CLOs may charge management and other administrative fees. Payments of principal and interest are passed through to investors in a CLO and divided into several tranches of rated debt securities, which vary in risk and yield, and typically at least one tranche of unrated subordinated securities, which may be debt or equity ("CLO Securities"). CLO Securities generally receive some variation of principal and/or interest installments and, with the exception of certain subordinated securities, bear different interest rates. If there are defaults or if a CLO's collateral otherwise underperforms, scheduled payments to senior tranches typically take priority over less senior tranches.

CLO Securities may be privately placed and thus subject to restrictions on transfer to meet securities law and other legal requirements. In the event that any fund does not satisfy certain of the applicable transfer restrictions at any time that it holds CLO Securities, it may be forced to sell the related CLO Securities and may suffer a loss on sale. CLO Securities may be considered illiquid investments in the event there is no secondary market for the CLO Securities. CLOs are also subject to the same risks associated with CDOs, as described above.

**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, war, and factors affecting a particular industry or commodity, such as drought, floods, or other weather conditions or natural disasters, livestock disease, trade embargoes, economic sanctions, competition from substitute products, transportation bottlenecks or shortages, insufficient storage capacity, 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. Certain commodities (and related derivatives) are also susceptible to price declines due to factors such as supply surpluses caused by global events.

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

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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 result in gains or losses greater than the amount invested in the instrument. See "Derivatives," "Forward Commitments and Dollar Rolls," "Futures Contracts and Related Options," "Hybrid Instruments," "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.

**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 (including credit default swaps and credit default swap indexes) 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 derivative instrument and the reference asset, or other factors, especially in unusual market conditions, and volatility in the value of derivatives could adversely impact the fund's returns, obligations and exposures. 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 will enable the fund to achieve its investment objective or that the Investment Manager 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 Internal Revenue Code of 1986, as amended (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.

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 derivative transactions are required to be centrally cleared and others are available for voluntary clearing. A party to a cleared derivative transaction is subject to the credit and counterparty 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 derivative 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

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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 margin requirements at a time when it may be disadvantageous to do so.

Other risks arise from the potential inability to terminate or sell derivative positions. Derivatives may be subject to liquidity risk due to the fund's obligation to make payments of margin, collateral, or settlement payments to counterparties. A liquid secondary market may not always exist for the fund's derivative positions. In fact, certain 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 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.

The funds are required to comply with the derivatives rule when they engage in derivatives transactions. See "Legal and Regulatory Risks Relating to Investment Strategy" below.Further information about these instruments and the risks involved in their use is included elsewhere in the prospectus and in this SAI.

<u>Combined Positions</u> 

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.

**ESG Considerations** 

A fund may integrate environmental, social, or governance ("ESG") considerations into its research process and/or investment decision-making. The Investment Manager believes that ESG considerations, like other, more traditional subjects of investment analysis such as market position, growth prospects, and business strategy, have the potential to impact risk and returns. The relevance and materiality of ESG considerations in a fund's process will differ from strategy to strategy, from sector to sector, and from portfolio manager to portfolio manager, and, in some cases (such as where the Investment Manager lacks relevant ESG data), ESG considerations may not represent a material component of a fund's investment process. The consideration of ESG factors as part of a fund's investment process does not mean that a fund pursues a specific "ESG" or "sustainable" investment strategy, and, depending on the fund, the Investment Manager may sometimes make investment decisions other than on the basis of relevant ESG considerations.

**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.

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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.

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

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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.

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" (e.g., 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 Chicago 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 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.

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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 otherwise settle 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 market in such contracts; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts.

Positions in foreign currency futures contracts and related options may be closed out only on an exchange or board of trade that provides a market in such contracts or options. Although the fund intends to purchase or sell foreign currency futures contracts and related options only on exchanges or boards of trade where there appears to be an active market, there is no assurance that a 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 or related option 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 or at 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 or at 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 or at 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 or at 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 the Investment Manager 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. The Investment Manager will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the fund. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge.

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, the Investment Manager 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.

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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 and related options) 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 and related options, 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 or related option 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, additional foreign currency transactions may be 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 the Investment Manager'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 the Investment Manager anticipates. There is no assurance that the Investment Manager'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

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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.

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. The Investment Manager 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

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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 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 the Investment Manager and its affiliates 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 non-local 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

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ownership registration being completely lost. The fund would absorb any loss resulting from such registration problems and may have no successful claim for compensation.

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 the Investment Manager 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.

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

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("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 CDCC 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.

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"). 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 the Investment Manager deems it appropriate to do so. The fund may realize short-term profits or losses upon the sale of forward commitments.

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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. 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.

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 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. See also "Legal and Regulatory Risks Relating to Investment Strategy" below.

**Futures Contracts and Related Options** 

Subject to applicable law, the fund may invest 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 sell the type of financial instrument or other asset called for in the contract in a specified month for a stated price. A futures contract purchase creates an obligation by the purchaser to buy the type of financial instrument or other asset called for in the contract in a specified month at a stated price. The specific assets bought or sold, respectively, at settlement date may not be 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 (brokerage firm) which is a member of the relevant contract market. Examples of futures contracts that the fund may use include, without limitation, U.S. Treasury 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 asset. Therefore, purchasing futures contracts will tend to increase the fund's exposure to positive and negative price fluctuations in the underlying asset, much as if it had purchased the underlying asset 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 asset. Selling futures contracts, therefore, will tend to offset both positive and negative market price changes, much as if the underlying asset 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 by the fund's broker 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

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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 by their terms may 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. Many futures contracts, such as 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 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 settlement 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.

With respect to each fund, the Investment Manager has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act ("CEA") pursuant to Rule 4.5 under the CEA (the "exclusion") promulgated by the CFTC. Accordingly, the Investment Manager (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, options on futures and certain swaps. In the event that the Investment Manager believes that a fund's investments in commodity interests exceed the thresholds set forth in the exclusion, the Investment Manager may be required to register as a "commodity pool operator" with the CFTC with respect to that fund. The Investment Manager'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 fund's ability to invest in commodity interests is limited by the Investment Manager's intention to operate the fund in a manner that would permit the Investment Manager 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 the Investment Manager 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, and the commodity pool operators ("CPOs") of any shareholders that are pooled investment vehicles may be unable to rely on certain CPO registration exemptions.

**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. 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

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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 selling 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).

The fund may use options on futures contracts in lieu of purchasing or writing options directly on the underlying assets 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 (or would result in a smaller loss), 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 purchase or 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 the Investment Manager's ability to predict movements in various factors affecting securities markets (or markets for other assets), 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, the Investment Manager'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.

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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 futures contracts and options themselves, and, in the case of hedging transactions, of the securities which are the subject of a hedge. To attempt to compensate for imperfect correlations, the fund may purchase or sell futures contracts in a greater amount than the hedged investments if the volatility of the price of the hedged investments is historically greater than the volatility of the futures contracts. Conversely, the fund may purchase or sell fewer futures contracts if the volatility of the price of the hedged investments is historically less than that of the futures contract. 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 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 the Investment Manager 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 transactions, 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 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, result in the institution by exchanges of special procedures that may interfere with the timely execution of customer orders, for example, by rendering certain market clearing facilities inadequate. 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 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 and 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. In addition, exchanges may cancel trades in limited circumstances, for example, if the exchange believes that allowing such trades to stand as executed could have an adverse impact on the stability or integrity of the market. Any such cancellation may adversely affect the performance of the fund. The fund's futures broker may also limit the fund's ability to invest in certain futures contracts. Such restrictions may adversely affect the fund's performance and its ability to achieve its investment objective.

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 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 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)

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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 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 settled or 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 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. The funds are required to comply with the derivatives rule when they engage in transactions involving futures and options thereon. See "Legal and Regulatory Risks Relating to Investment Strategy" below.

**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.

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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 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 any governmental regulatory authority, including the regulators typically associated with the derivatives and securities markets such as the CFTC and the SEC.

**Illiquid Investments** 

An illiquid investment 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 the Investment Manager 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.

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

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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.

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.

**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.

**Large Shareholder Risk** 

The fund may be an investment option for mutual funds that are managed by the Investment Manager and its affiliates as "funds of funds." Additionally, other investors from time to time may make substantial investments in the fund. Such shareholders may at times be considered to control the fund. Dispositions of a large number of shares by these shareholders may adversely affect the fund's liquidity and net assets to the extent such transactions are executed directly with the fund in the form of redemptions through an authorized participant, rather than executed in the secondary market. In addition, a large number of shareholders

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collectively may purchase or redeem fund shares in large amounts rapidly or unexpectedly (collectively, such transactions are referred to as "large shareholder transactions"). Large shareholder redemptions may also force the fund to sell securities to satisfy redemption requests or purchase securities for the portfolio in connection with the investment of subscription proceeds when the fund would otherwise not do so, and at unfavorable prices, which may increase the fund's brokerage costs and accelerate the realization of taxable income and/or gains to shareholders. The effects of taxable income and/or gains resulting from large shareholder transactions would particularly impact non-redeeming shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged plan. To the extent that such transactions result in short-term capital gains, such gains will generally be taxed at the ordinary income tax rate for shareholders who hold fund shares in a taxable account. In addition, fund returns may be adversely affected if the fund holds a portion of its assets in liquid, cash-like investments in connection with or in anticipation of shareholder redemptions. To the extent these large shareholders transact in shares of the fund on the secondary market, such transactions may account for a large percentage of the trading volume on the exchange and may, therefore, have a material effect (upward or downward) on the market price of the fund's shares. A number of circumstances may cause the fund to experience large redemptions, such as changes in the eligibility criteria for the fund or share class of the fund; liquidations, reorganizations, repositionings, or other announced fund events; or changes in investment objectives, strategies, policies, risks, or investment personnel.

**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. 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 or otherwise execute its investment strategy could have a material adverse impact on the fund's performance.

The regulatory environment for funds is evolving, and changes in regulation 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 derivatives (including 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 event of market emergencies. The regulation of securitization and derivative transactions and funds that engage in such transactions is an evolving area of law and is subject to modification by government, self-regulatory organization and judicial action.

Since 2021, the SEC has proposed and, in some cases, finalized several new rules regarding a wide range of topics related to the fund. For example, the SEC has proposed new rules requiring the reporting and public disclosure of a manager's positions in security-based swaps, including CDS, equity total return swaps and related positions. The SEC has also finalized new rules restricting activities that could be considered to be manipulative in connection with security-based swaps, new rules regarding beneficial ownership and public reporting by managers under Section 13 of the Exchange Act, and new rules requiring the central clearing of certain cash and repurchase transactions involving U.S. Treasuries. These and other proposed new rules, whether assessed on an individual or collective basis, could fundamentally change the current regulatory framework for relevant markets and market participants, including having a material impact on activities of private fund advisers and their funds. While it is currently difficult to predict the full impact of these new rules, these rules could make it more difficult for the fund to execute certain investment strategies and may have a material adverse effect on the fund's ability to generate returns.

In October 2016, the SEC adopted a liquidity risk management rule, Rule 22e-4 under the 1940 Act (the "Liquidity Rule") that requires each fund to establish a liquidity risk management program. The funds have implemented a liquidity risk management program, and the fund's trustees (such trustees, as referenced in the table below under the heading "Management- Trustees," shall hereinafter be referred to as the "Trustees," the "Board," or the "Board of Trustees") has appointed the Investment Manager to administer the program. Under the liquidity risk management program, the liquidity risk of each fund is assessed, managed, and periodically reviewed and each portfolio investment held by each fund is classified as a "highly liquid investment," "moderately liquid investment," "less liquid investment" or "illiquid investment." The Liquidity Rule defines "liquidity risk" as the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of the remaining investors' interest in the fund. The liquidity of a fund's portfolio investments is determined based on relevant market, trading and investment-specific considerations under the fund's liquidity risk management program. The impact the Liquidity Rule will have

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on the funds, and on the open-end mutual 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 regulation of the derivatives market, including clearing, margin, reporting and registration requirements. The CFTC, SEC, and other federal regulators have adopted and continue to develop 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"), the United Kingdom ("UK"), and some other countries have implemented and are in the process of implementing similar requirements that affect the fund when it enters into derivative transactions with a counterparty organized in that country or otherwise subject to that country's derivatives regulations. For example, the U.S. government, the EU, the UK and certain other jurisdictions have adopted mandatory minimum variation (and in some cases initial) margin requirements for bilateral derivatives. Such requirements could increase the amount of margin the fund needs to provide in connection with its derivative transactions and, therefore, make derivative transactions more expensive. The regulation of the derivatives markets may make derivatives more costly, may limit the availability or reduce the liquidity of derivatives, or may otherwise adversely affect the value or performance of derivatives. Because these requirements are evolving, their ultimate impact on the fund and the financial system is not yet known. While the rules and regulations like those imposing requirements for margin and central clearing of some derivative transactions are designed to reduce systemic risk (e.g., the risk that the interdependence of large derivatives dealers could cause them to suffer liquidity, solvency or other challenges simultaneously), there is no assurance that they will achieve that result, and, as noted, the requirements can expose the fund to new kinds of costs and risks.

In addition, in October 2020, the SEC adopted Rule 18f-4 under the 1940 Act (the "Derivatives Rule"), regulating the use by registered investment companies of derivatives and many related instruments (e.g. reverse repurchase agreements). The Derivatives Rule requires, among other things, that certain entities adopt a derivatives risk management program, comply with limitations on leverage-related risk based on a "value-at-risk" test and update reporting and disclosure procedures. Funds that use derivative instruments in a limited amount are not subject to the full requirements of the Derivatives Rule. In connection with the adoption of the Derivatives Rule, funds are no longer required to comply with the asset segregation framework arising from prior SEC guidance for covering certain derivative instruments and related transactions.

Regulatory changes also may affect counterparty risk. For example, regulatory requirements may limit the ability of the fund to protect its interests in the event of an insolvency of a derivatives counterparty. In the event of a counterparty's (or its affiliate's) insolvency, the fund's ability to exercise remedies, such as the termination of transactions, netting of obligations and realization on collateral, could be stayed or eliminated under special resolution regimes adopted in the United States, the EU, the UK, and various other jurisdictions. Such regimes provide government authorities with broad authority to intervene when a financial institution is experiencing financial difficulty. In particular, with respect to counterparties who are subject to such proceedings in the EU and the UK, the liabilities of such counterparties to the fund could be reduced, eliminated, or converted to equity in such counterparties (sometimes referred to as a "bail in").

The CFTC and domestic exchanges have established (and continue to evaluate and revise) speculative position limits, referred to as "position limits," on the maximum speculative positions which any person, or group of persons acting in concert, may hold or control in particular futures and options on futures contracts. In addition, federal position limits apply to swaps on agricultural, energy and metals commodities that are "economically equivalent," as defined by the CFTC, to certain futures contracts. Uncertainty surrounding which swaps qualify as "economically equivalent" may result in compliance challenges. An overly broad application of the definition could result in unnecessary restrictions in position sizes, whereas an overly narrow application could risk position limit overages. All positions owned or controlled by the same person or entity, even if in different accounts, must be aggregated for purposes of determining whether the applicable position limits have been exceeded unless an exemption applies. Thus, even if the fund does not intend to exceed applicable position limits, it is possible that positions of different clients managed by the Investment Manager and its affiliates or by any sub-adviser 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. Position limits may adversely affect the fund's ability to hold positions in certain futures contracts and related options and swaps. A violation of position limits could also lead to regulatory action materially adverse to the fund's investment strategy.

The SEC has adopted new rules that require managers to file monthly confidential reports with the SEC regarding equity short sales and related activity. Under the new rules, the SEC will publicly disclose aggregated short position information on a monthly basis. The SEC also adopted a rule that will require reporting and public disclosure of securities loan transaction information (not including party names); this may include, but is not limited to, information about securities loans entered into in connection with

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short sales. 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 new or increases in short sales of certain securities, including short positions on such securities acquired through swaps, in response to market events. Bans on short selling and such short positions 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.

In October 2020, the SEC adopted certain regulatory changes and took other actions related to the ability of an investment company to invest in another investment company. These changes include, among other things, amendments to Rule 12d1-1, the rescission of Rule 12d1-2, the adoption of Rule 12d1-4, and the rescission of certain exemptive relief issued by the SEC permitting such investments in excess of statutory limits. These regulatory changes may adversely impact each fund's investment strategies and operations.

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

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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 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, the Investment Manager 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 the Investment Manager or its affiliates, holds all or a major portion. Although the Investment Manager 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 the Investment Manager 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 the Investment Manager'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

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the financial markets or other regulation, and changes in fiscal, monetary or tax policies), geopolitical events or changes (including natural disasters, epidemics or pandemics, 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). 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 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. In addition, trade disputes (such as the "trade war" between the United States and China that intensified in 2018 and 2019) may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. Events such as these and their impact on the fund are difficult to predict. For example, Russia's military invasion of Ukraine in February 2022 resulted in the United States, other countries, and certain international organizations levying broad economic sanctions against Russia and Russian individuals. These sanctions and any additional sanctions or other intergovernmental actions that may be undertaken against Russia in the future may result in the devaluation of the ruble, a downgrade in the country's credit rating, and a decline in the value and liquidity of Russian securities. Such actions could result in a freeze of Russian securities, impairing the ability of a fund to buy, sell, receive, or deliver those securities. Retaliatory action by the Russian government could involve the seizure of U.S. and/or European residents' assets, and any such actions are likely to impair the value and liquidity of such assets. Any or all of these potential results could have an adverse/recessionary effect on Russia's economy. All of these factors could have a negative effect on the performance of funds that have significant exposure to Russia.

In addition, the extent and duration of the military action associated with Russia's invasion of Ukraine, resulting sanctions and resulting future market disruptions, including declines in Russian stock markets and the value of the ruble against the U.S. dollar, are impossible to predict, but could be significant. Any disruptions caused by such military action or other actions (including cyberattacks and espionage) or resulting actual and threatened responses to such activity, including purchasing and financing restrictions, boycotts or changes in consumer or purchaser preferences, sanctions, tariffs or cyberattacks on the Russian government, Russian companies, or Russian individuals, including politicians, may negatively impact Russia's economy and Russian issuers of securities in which the fund invests. Actual and threatened responses to such military action may also impact the markets for certain Russian commodities, such as oil and natural gas, as well as other sectors of the Russian economy, and may likely have collateral impacts on such sectors globally. These and any related events could have a significant impact on fund performance and the value of an investment in the fund.

Likewise, natural and environmental disasters, epidemics or pandemics, and systemic market dislocations may be highly disruptive to economies and markets, and may result in significant market volatility, exchange trading suspensions or closures, or a substantial economic downturn or recession. Those events, as well as other changes in foreign and domestic economic and political conditions, also could disrupt the operations of the fund or its service providers or adversely affect individual issuers or related groups of issuers, interest rates, credit ratings, default rates, inflation, supply chains, consumer demand, investor sentiment, and other factors affecting the value or liquidity of the fund's investments.

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An outbreak of respiratory disease caused by a novel coronavirus designated as COVID-19 was first detected in China in December 2019 and subsequently spread internationally. The transmission of COVID-19 and efforts to contain its spread have resulted in, among other things, border closings and other significant travel restrictions and disruptions; significant disruptions to business operations, supply chains and customer activity; lower consumer demand for goods and services; higher levels of unemployment; event cancellations and restrictions; service cancellations, reductions and other changes; significant challenges in healthcare service preparation and delivery; prolonged quarantines; and general concern and uncertainty. These impacts have negatively affected, and may continue to negatively affect, the global economy, the economies of individual countries, and the financial performance of individual issuers, sectors, industries, asset classes, and markets in significant and unforeseen ways. The COVID-19 pandemic also has resulted in significant market volatility, exchange trading suspensions and closures, declines in global financial markets, higher default rates, and economic downturns and recessions, and may continue to have similar effects in the future. In addition, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to the COVID-19 pandemic, including significant fiscal and monetary policies changes, may affect the value, volatility, and liquidity of some securities and other assets. Health crises caused by the COVID-19 pandemic may also exacerbate other pre-existing political, social, economic, market and financial risks. The effects of the outbreak in developing or emerging market countries may be greater due to less established health care systems. The foregoing could impair the fund's ability to maintain operational standards (such as with respect to creations and redemptions of fund shares), disrupt the operations of the fund's service providers, adversely affect the value and liquidity of the fund's investments, and negatively impact the fund's performance and your investment in the fund. Given the significant uncertainty surrounding the magnitude, duration, reach, costs and effects of the COVID-19 pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, it is difficult to predict its potential impacts on a fund's investments.

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. On January 31, 2020, the United Kingdom formally withdrew from the European Union (commonly known as "Brexit"). An agreement between the United Kingdom and the European Union governing their future trade relationship became effective January 1, 2021. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and global markets. Potential negative long-term effects could include, among others, greater market volatility and illiquidity, disruptions to world securities markets, currency fluctuations, deterioration in economic activity, a decrease in business confidence, and an increased likelihood of a recession in the United Kingdom. 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)** 

An 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 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.

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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 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

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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.

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 assets, including any cash balances in money market and/or short-term bond funds advised by the Investment Manager or its affiliates. In connection with such investments, the Investment Manager 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 the Investment Manager in connection with such investments.

**Mortgage-backed and Asset-backed Securities** 

Mortgage-backed securities, including collateralized mortgage obligations ("CMOs"), stripped mortgage-backed securities and securities that reflect an interest in reverse mortgages, represent a participation in, or are secured by, mortgage loans or otherwise are secured by real estate related collateral. Mortgage-backed securities may be issued by agencies or instrumentalities of the U.S. government (and may not be guaranteed or insured by the U.S. government, such as those issued by 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 typically pass through to the holders of the mortgage-backed securities or serve as the source for payments on 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 (and may or may not be guaranteed or insured by the U.S. government), foreign governments (or their agencies or instrumentalities), or non-governmental issuers.

Mortgage-backed securities may 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 or refinancing of the underlying mortgage loans or the foreclosure of collateral securing the underlying mortgage loans. If property owners make unscheduled prepayments on 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 those 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.

The fund may invest in mortgage-backed securities that represent pools of mortgage loans with variable rates of interest (such loans, "ARMs"). Adjustable-rate mortgage-backed securities, like traditional mortgage-backed securities, are interests in pools of

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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, adjustable-rate mortgage-backed securities are collateralized by or represent interests in ARMs. Interest rates for ARMs 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 ARMs 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 adjustable-rate mortgage-backed security may be adversely affected if interest rates increase faster than the rates of interest payable on the ARMs underlying the security. Also, some ARMs 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 ARM. As a result, changes in the interest rate on an ARM may not fully reflect changes in prevailing market interest rates during certain periods.

The fund may also invest in mortgage-backed securities that represent pools of "hybrid" ARMs, underlying mortgages that 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-rate mortgage loans. All hybrid ARMs have a reset date, the date on which 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 a security backed by that 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 greater losses on securities purchased at a premium than securities that are not purchased at a premium.

Mortgage-backed and asset-backed securities are subject to varying degrees of credit risk, depending on whether they are issued, or are guaranteed or insured, by agencies or instrumentalities of 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., 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.

Mortgage-related securities include, among other things, securities that reflect an interest in a pool of reverse mortgages. In a reverse mortgage, a lender makes a loan to a homeowner based on the homeowner's equity in his or her home. A homeowner must be age 62 or older to qualify for a reverse mortgage but is not necessarily required to have any minimum income. Generally, the homeowner is not required to pay interest or repay principal on the loan until the homeowner dies, sells the home, or ceases to use the home as his or her primary residence. There are three general types of reverse mortgages: (1) single-purpose reverse mortgages, which are offered by certain state and local government agencies and nonprofit organizations; (2) federally-insured reverse mortgages (known as home equity conversion mortgages), which are backed by the U. S. Department

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of Housing and Urban Development; and (3) proprietary reverse mortgages, which are privately offered loans. A mortgage-related security may be backed by a single type of reverse mortgage or by a combination of types of reverse mortgages. Reverse mortgage-related securities include agency and privately issued mortgage-related securities. The principal government guarantor of reverse mortgage-related securities is Ginnie Mae.

Reverse mortgage-related securities may be subject to risks different than other types of mortgage-related securities due to the unique nature of the underlying loans. The date of repayment for these loans is uncertain and may occur sooner or later than anticipated. The timing of payments for the corresponding mortgage-related security may also be uncertain. Because reverse mortgages are offered only to persons 62 and older and there may be no income restrictions, the loans may react differently than traditional home loans to market events. As a result, investors (which may include the fund) in notes issued by reverse mortgage trusts ("RMTs") may be deprived of payments to which they are entitled. This could result in losses to the fund. Investors, including the fund, may determine to pursue negotiations or legal claims or otherwise seek compensation from RMT service providers in certain instances. This may involve the fund incurring costs and expenses associated with such actions.

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.

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 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 stripped mortgage-backed security'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.

The value of asset-backed securities may be substantially dependent on the servicing of the underlying assets, and asset-backed securities are therefore subject to risks associated with negligence by, or defalcation of, the servicers of those assets.

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These risks may be heightened in the case of an asset-backed security collateralized by the fees earned by the servicer, as the servicer may have a reduced financial incentive to provide appropriate servicing. 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 (i.e., determination as to the amount of underlying assets or other support needed to produce the cash flows necessary to service interest and make principal payments), the quality of the underlying assets, the level of credit support, if any, provided for the securities, and the credit quality of the credit-support provider, if any. In recent years, a significant number of asset-backed security insurers have defaulted on their obligations.

Consistent with the fund's investment objective and policies, the fund may invest in other types of mortgage- and asset-backed securities offered currently or in the future, including certain yet-to-be-developed types of mortgage- and asset-backed securities which may be created as the market evolves.

***Additional Information Related to Freddie Mac and Fannie Mae****.* ****The extreme and unprecedented volatility and disruption ****that impacted the capital and credit markets beginning in 2008 led to market concerns regarding the ability of Freddie Mac and Fannie Mae to withstand future credit losses associated with securities held in their investment portfolios, and on which they provide guarantees, without the direct support of the federal government. On September 7, 2008, Freddie Mac and Fannie Mae were placed under the conservatorship of the Federal Housing Finance Agency (FHFA). Under the plan of conservatorship, the FHFA assumed control of, and generally has the power to direct, the operations of Freddie Mac and Fannie Mae, and is empowered to exercise all powers collectively held by their respective shareholders, directors and officers, including the power to: (1) take over the assets of and operate Freddie Mac and Fannie Mae with all the powers of the shareholders, the directors and the officers of Freddie Mac and Fannie Mae and conduct all business of Freddie Mac and Fannie Mae; (2) collect all obligations and money due to Freddie Mac and Fannie Mae; (3) perform all functions of Freddie Mac and Fannie Mae which are consistent with the conservator's appointment; (4) preserve and conserve the assets and property of Freddie Mac and Fannie Mae; and (5) contract for assistance in fulfilling any function, activity, action or duty of the conservator.

In connection with the actions taken by the FHFA, the Treasury has entered into certain preferred stock purchase agreements (SPAs) with each of Freddie Mac and Fannie Mae which establish the Treasury as the holder of a new class of senior preferred stock in each of Freddie Mac and Fannie Mae. The senior preferred stock was issued in connection with financial contributions from the Treasury to Freddie Mac and Fannie Mae. Although the SPAs are subject to amendment from time to time, currently the Treasury is obligated to provide such financial contributions up to an aggregate maximum amount determined by a formula set forth in the SPAs, and until such aggregate maximum amount is reached, there is not a specific end date to the Treasury's obligations.

The future status and role of Freddie Mac and Fannie Mae could be impacted by (among other things) the actions taken and restrictions placed on Freddie Mac and Fannie Mae by the FHFA in its role as conservator, the restrictions placed on

Freddie Mac's and Fannie Mae's operations and activities under the SPAs, market responses to developments at Freddie Mac and Fannie Mae, downgrades or upgrades in the credit ratings assigned to Freddie Mac and Fannie Mae by nationally recognized statistical rating organizations (NRSROs) or ratings services, and future legislative and regulatory action that alters the operations, ownership, structure and/or mission of these institutions, each of which may, in turn, impact the value of, and cash flows on, any securities guaranteed by Freddie Mac and Fannie Mae.

In addition, the future of Freddie Mac and Fannie Mae, and other U.S. government-sponsored enterprises that are not backed by the full faith and credit of the U.S. government (GSEs), remains in question as the U.S. government continues to consider options ranging from structural reform, nationalization, privatization, or consolidation, to outright elimination. The issues that have led to significant U.S. government support for Freddie Mac and Fannie Mae have sparked serious debate regarding the continued role of the U.S. government in providing mortgage loan liquidity.

**Options on Securities** 

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**Writing covered options**. The fund may write (*i.e.*, sell) covered call options and covered put options on optionable securities held in its portfolio or that it has an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by the Investment Manager in accordance with procedures established by the Trustees, in such amount as are set aside on the fund's books), when in the opinion of the Investment Manager such transactions are consistent with the fund's goal(s) and policies. Call options written by the fund give the purchaser the right to buy the underlying securities from the fund at a stated exercise price, regardless of the security's market price; put options written by the fund give the purchaser the right to sell the underlying securities to the fund at a stated exercise price, regardless of the security's market price.

The fund will receive a premium from writing a put or call option, which increases the fund's return on the underlying security in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, if the fund holds the security, the fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. If the fund does not hold the underlying security, the fund bears the risk that, if the market price exceeds the option strike price, the fund will suffer a loss equal to the difference at the time of exercise. By writing a put option, the fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value.

The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. A closing purchase transaction will ordinarily be effected in order to realize a profit on an outstanding option, to prevent an underlying instrument from being called, to permit the sale of the underlying instrument or to permit the writing of a new option containing different terms on such underlying instrument. The fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. Because increases in the market price of a call option generally reflect increases in the market price of the security underlying the option, any loss resulting from a closing purchase transaction may be offset in whole or in part by unrealized appreciation of the underlying security.

If the fund writes a call option but does not own the underlying security, and when it writes a put option, the fund may be required to deposit cash or securities with its broker as "margin," or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations.

**Purchasing put options**. The fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. If such a price decline occurs, the put option will permit the fund to sell the security at the higher exercise price or to close out the option at a profit. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. The fund may also purchase put options for other investment purposes, including to take a short position in the security underlying the put option.

**Purchasing call options**. The fund may purchase call options to hedge against an increase in the price of securities that the fund wants ultimately to buy. Such protection is provided during the life of the call option since the fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. If such a price increase occurs, a call option will permit the fund to purchase the securities at the exercise price or to close out the option at a profit. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. The fund may also purchase call options for other investment purposes.

**Risk factors in options transactions**. The successful use of the fund's options strategies depends on the ability of the Investment Manager to forecast correctly interest rate and market movements. For example, if the fund were to write a call option

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based on the Investment Manager's expectation that the price of the underlying security would fall, but the price were to rise instead, the fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the fund were to write a put option based on the Investment Manager's expectation that the price of the underlying security would rise, but the price were to fall instead, the fund could be required to purchase the security upon exercise at a price higher than the current market price.

When the fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the fund will lose part or all of its investment in the option. This contrasts with an investment by the fund in the underlying security, since the fund will not realize a loss if the security's price does not change.

The effective use of options also depends on the fund's ability to terminate option positions at times when the Investment Manager deems it desirable to do so. There is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events -- such as volume in excess of trading or clearing capability -- were to interrupt its normal operations. Although the fund may be able to offset to some extent any adverse effects of being unable to terminate an option position, the fund may experience losses in some cases as a result of such inability.

A market may at times find it necessary to impose restrictions on particular types of exchange-traded options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the fund, as option writer, would remain obligated under the option until expiration or exercise.

Disruptions in the markets for the securities underlying options purchased or sold by the fund could result in losses on the options. For example, if a fund is unable to purchase a security underlying a put option it had purchased, the fund may be unable to exercise the put option. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions in respect of exchange-traded options. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options. The fund, as holder of such a put option, could lose its entire investment if it is unable to exercise the put option prior to its expiration.

The fund may use both European-style options, which are only exercisable at a specific expiration time on the expiration date, and American-style options, which are exercisable at any time prior to the expiration date. Since an American-style option allows the holder to exercise its rights any time before the option's expiration, the writer of an American-style option has no control over when it will be required to fulfill its obligations as a writer of the option. (The writer of a European-style option is not subject to this risk because the holder may only exercise the option on its expiration date.)

Options can be traded either through established exchanges ("exchange traded options") or privately negotiated transactions (over-the-counter or "OTC" options). Exchange traded options are standardized with respect to, among other things, the underlying interest, expiration date, contract size and strike price. The terms of OTC options are generally negotiated by the parties to the option contract which allows the parties greater flexibility in customizing the agreement, but OTC options are generally less liquid than exchange traded options. OTC options purchased by the fund and assets held to cover OTC options written by the fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the fund's ability to invest in illiquid securities. All option contracts involve credit risk if the counterparty to the option contract (*e.g.*, the clearing house or OTC counterparty) or the third party effecting the transaction in the case of cleared options (*e.g.*, futures commission merchant or broker/dealer) fails to perform. The credit risk in OTC options that are not cleared is dependent on the

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credit worthiness of the individual counterparty to the contract and may be greater than the credit risk associated with cleared options.

Foreign-traded options are subject to many of the same risks presented by internationally-traded securities. In addition, because of time differences between the United States and other countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States.

There are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. In addition, many options, in particular OTC options, are complex and often valued based on subjective factors. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to the fund.

The market price of an option is affected by many factors, including changes in the market prices or dividend rates of underlying securities (or in the case of indices, the securities in such indices); the time remaining before expiration; changes in interest rates or exchange rates; and changes in the actual or perceived volatility of the relevant stock market and underlying securities. The market price of an option also may be adversely affected if the market for the option becomes less liquid.

In addition to options on securities and futures, the fund may also enter into options on futures, swaps, or other instruments as described elsewhere in this SAI.

**Preferred Stocks and Convertible Securities** 

The fund may invest in preferred stocks or convertible securities. A preferred stock is a class of stock that generally pays dividends at a specified rate and has preference over common stock in the payment of dividends and the liquidation of an issuer's assets but is junior to the debt securities of the issuer in those same respects. Under ordinary circumstances, preferred stock does not carry voting rights. As with all equity securities, the value of preferred stock fluctuates based on changes in a company's financial condition and on overall market and economic conditions. The value of preferred stocks is particularly sensitive to changes in interest rates and is more sensitive to changes in an issuer's creditworthiness than is the value of debt securities. In addition, many preferred stocks may be called or redeemed prior to their maturity by the issuer under certain conditions, which can limit the benefit to investors of a decline in interest rates. Shareholders of preferred stock may suffer a loss of value if dividends are not paid. Additionally, if the issuer of preferred stock experiences economic or financial difficulties, its preferred stock may lose value due to the reduced likelihood that its board of directors will declare a dividend. Certain preferred stocks contain provisions that allow an issuer under certain conditions to skip or defer distributions. If the fund owns a preferred stock that is deferring its distribution, it may be required to report income for tax purposes despite the fact that it is not receiving current income on this position. Preferred stocks often are subject to legal provisions that allow for redemption in the event of certain tax or legal changes or at the issuer's call. In the event of redemption, the fund may not be able to reinvest the proceeds at comparable rates of return. Preferred stocks are subordinated to bonds and other debt securities in an issuer's capital structure in terms of priority for corporate income and liquidation payments, and therefore will be subject to greater credit risk than those debt securities. Preferred stocks may trade less frequently and in a more limited volume and may be subject to more abrupt or erratic price movements than many other securities, such as common stocks, corporate debt securities, and U.S. government securities.

Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into or exchanged for, at a specific price or formula within a particular period of time, a prescribed amount of common stock or other equity securities of the same or a different issuer. The conversion may occur automatically upon the occurrence of a predetermined event or at the option of either the issuer or the security holder. The holder of a convertible security is generally entitled to participate in the capital appreciation resulting from a market price increase in the issuer's common stock and to receive interest paid or accrued on debt or dividends paid or accrued until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics similar to non-convertible debt or preferred securities, as applicable. Convertible securities rank senior to common stock in an issuer's capital structure and, therefore, normally entail less risk than the issuer's common stock. However, convertible securities may also be subordinate to any senior debt obligations of the issuer, and, therefore, an issuer's convertible securities may entail more risk than such senior debt obligations. Convertible securities usually offer lower interest or dividend yields than non-convertible debt securities of similar credit quality because of the potential for capital appreciation. In addition, convertible securities are often lower-rated securities.

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The market value of a convertible security is a function of its "investment value" and its "conversion value." A security's "investment value" represents the value of the security without its conversion feature (*i.e.*, a nonconvertible fixed income security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value may be dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. A security's "conversion value" is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current market price of the underlying security. Because of the conversion feature, the market value of a convertible security will normally fluctuate in some proportion to changes in the market value of the underlying security, and, accordingly, convertible securities are subject to risks relating to the activities of the issuer and/or general market and economic conditions.

A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. If the conversion value of a convertible security is significantly below its investment value, the convertible security generally trades like nonconvertible debt or preferred stock and its market value will not be influenced greatly by fluctuations in the market price of the underlying security. Conversely, if the conversion value of a convertible security is near or above its investment value, the market value of the convertible security is typically more heavily influenced by fluctuations in the market price of the underlying security. Generally, the amount of the premium decreases as the convertible security approaches maturity. Convertible securities generally have less potential for gain than common stocks.

The fund's investments in convertible securities may at times include securities that have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities at a specified date and a specified conversion ratio, or that are convertible at the option of the issuer. Because conversion of the security is not at the option of the holder, the fund may be required to convert the security into the underlying common stock even at times when the value of the underlying common stock or other equity security has declined substantially.

The fund's investments in preferred stocks and convertible securities, particularly securities that are convertible into securities of an issuer other than the issuer of the convertible security, may be illiquid. The fund may not be able to dispose of such securities in a timely fashion or for a fair price, which could result in losses to the fund.

**Private Placements and Restricted Securities** 

The fund may invest in securities that are purchased in private placements and, accordingly, are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell such securities when the Investment Manager believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. There can be no assurance that a liquid market will exist for any such security at any particular time, and a security which when purchased was liquid in the institutional markets may subsequently become illiquid.

Many private placement securities are issued by companies that are not required to file periodic financial reports, leading to challenges in evaluating the company's overall business prospects and gauging how the investment is likely to perform over time. In addition, market quotations for these securities are less readily available. Due to the more limited financial information and lack of publicly available prices, it may be more difficult to determine the fair value of these securities for purposes of computing the fund's net asset value. As a result, the judgment of the Investment Manager may at times play a greater role in valuing these securities than in the case of publicly traded securities, and the fair value prices determined for the fund could differ from those of other market participants.

While such private placements may offer attractive opportunities for investment not otherwise available on the open market, the securities so purchased are often "restricted securities," i.e., securities which cannot be sold to the public without registration under the Securities Act of 1933 (the "Securities Act") or the availability of an exemption from registration (such as Rules 144, 144A or Regulation S), or which are "not readily marketable" because they are subject to other legal or contractual delays in or restrictions on resale. In addition, the issuer typically does not have an obligation to provide liquidity to investors by buying the securities back when the investor wants to sell. Disposing of these securities may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the fund to sell them promptly at an acceptable price. The fund may have to bear the extra expense of registering these securities for resale and the risk of substantial delay in effecting the registration.

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Since the offering is not registered with the SEC, investors in a private placement have less protection under the federal securities laws against improper practices than investors in registered securities.

Generally speaking, restricted securities may be sold only to qualified institutional buyers, or in a privately negotiated transaction to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration, or in a public offering for which a registration statement is in effect under the Securities Act. The fund may be deemed to be an "underwriter" for purposes of the Securities Act when selling restricted securities to the public, and in such event the fund may be liable to purchasers of such securities if the registration statement prepared by the issuer, or the prospectus forming a part of it, is materially inaccurate or misleading. The SEC Staff currently takes the view that any delegation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the funds) must be pursuant to written procedures established by the Trustees and the Trustees have delegated such authority to the Investment Manager.

**Real Estate Investment Trusts (REITs)** 

The fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. REITs may concentrate their investments in specific geographic areas or in specific property types (i.e., hotels, shopping malls, residential complexes and office buildings). Like regulated investment companies such as the fund, REITs are not taxed on income distributed to shareholders provided that they comply with certain requirements under the Code. The fund will indirectly bear its proportionate share of any expenses (such as operating expenses and advisory fees) paid by REITs in which it invests in addition to the fund's own expenses.

Investing in REITs may involve certain unique risks in addition to those risks associated with investing in the real estate industry in general (such as possible declines in the value of real estate, lack of availability of mortgage funds, or extended vacancies of property). The market value of REIT shares and the ability of the REITs to distribute income may be adversely affected by several factors, including rising interest rates, changes in the national, state and local economic climate and real estate conditions, perceptions of prospective tenants of the safety, convenience and attractiveness of the properties, the ability of the owners to provide adequate management, maintenance and insurance, the cost of complying with the Americans with Disabilities Act, increased competition from new properties, the impact of present or future environmental legislation and compliance with environmental laws, failing to maintain their exemptions from registration under the Investment Company Act, changes in real estate taxes and other operating expenses, adverse changes in governmental rules and fiscal policies, adverse changes in zoning laws, and other factors beyond the control of the issuers of the REITs.

REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs ("hybrid REITs"). Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the risk of borrower default, the likelihood of which is increased for mortgage REITs that invest in sub-prime mortgages. REITs, and mortgage REITs in particular, are also subject to interest rate risk. Rising interest rates may cause REIT investors to demand a higher annual yield, which may, in turn, cause a decline in the market price of the equity securities issued by a REIT. Rising interest rates also generally increase the costs of obtaining financing, which could cause the value of the fund's REIT investments to decline. During periods when interest rates are declining, mortgages are often refinanced. Refinancing may reduce the yield on investments in mortgage REITs. In addition, since REITs depend on payment under their mortgage loans and leases to generate cash to make distributions to their shareholders, investments in REITs may be adversely affected by defaults on such mortgage loans or leases. A hybrid REIT combines the characteristics of equity REITs and mortgage REITs, generally by holding both ownership interests and mortgage interests in real estate, and thus may be subject to risks associated with both real estate ownership and investments in mortgage-related securities.

Investing in certain REITs, which often have small market capitalizations, may also involve the same risks as investing in other small capitalization companies. REITs may have limited financial resources and their securities may trade less frequently and in limited volume and may be subject to more abrupt or erratic price movements than larger company securities. Historically, small capitalization stocks, such as REITs, have been more volatile in price than the larger capitalization stocks such as those included in the S&P 500 Index. The management of a REIT may be subject to conflicts of interest with respect to the operation of the business of the REIT and may be involved in real estate activities competitive with the REIT. REITs may own properties through

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joint ventures or in other circumstances in which the REIT may not have control over its investments. REITs may incur significant amounts of leverage.

REITs are dependent upon their operators' management skills, are generally not diversified (except to the extent the Code requires), and are subject to heavy cash flow dependency, borrower default or self-liquidation. REITs are also subject to the possibility of failing to qualify for the tax-advantaged treatment available to REITs under the Code or failing to maintain their exemptions from registration under the 1940 Act. In addition, REITs may be adversely affected by changes in federal tax law, for example, by limiting their permissible businesses or investments. REITs may have limited financial resources, may trade less frequently and in a limited volume, and may be subject to more abrupt or erratic price movements than more widely held securities.

The fund's investment in a REIT may result in the fund making distributions that constitute a return of capital to fund shareholders for federal income tax purposes or may require the fund to accrue and distribute income not yet received. In addition, distributions by a fund from REITs will not qualify for the corporate dividends-received deduction, or, generally, for treatment as qualified dividend income.

**Redeemable Securities** 

Certain securities held by the fund may permit the issuer at its option to "call" or redeem its securities. Issuers of redeemable securities are generally more likely to exercise a "call" option in periods when interest rates are below the rate at which the original security was issued. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. The fund also may fail to recover additional amounts (i.e., premiums) paid for securities with higher interest rates, resulting in an unexpected capital loss.

**Repurchase Agreements** 

A repurchase agreement is a contract under which the fund, the buyer under the contract, acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller (or repurchase agreement counterparty) to repurchase, and the fund to resell, the security at a fixed time and price, which represents the fund's cost plus interest (or, for repurchase agreements under which the fund acquires a security and then sells it short, the fund's cost of "borrowing" the security). A repurchase agreement with a stated maturity of longer than one week is generally considered an illiquid investment. It is the fund's present intention to enter into repurchase agreements only with banks and registered broker-dealers. The fund may enter into repurchase agreements, including with respect to securities it wishes to sell short. See "Short Sales" in this SAI. Certain of the repurchase agreements related to securities sold short may provide that, at the option of the fund, settlement may be made by delivery of cash equal to the difference between (a) the sum of (i) the market value of the securities sold short at the time the repurchase agreement is closed out and (ii) transaction costs associated with the acquisition in the market by the repurchase agreement counterparty of the securities sold short and (b) the repurchase price specified in the repurchase agreement.

The fund may be exposed to the credit risk of the repurchase agreement counterparty (or seller) in the event that the counterparty is unable or unwilling to close out the repurchase agreement in accordance with its terms or the parties disagree as to the meaning or application of those terms. In such an event, the fund may be subject to expenses, delays, and risk of loss, including: (i) possible declines in the value of the underlying security while the fund seeks to enforce its rights under the agreement; (ii) possible reduced levels of income and lack of access to income during this period; and (iii) the inability to enforce its rights and the expenses involved in attempted enforcement. If the seller defaults, the fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate. The fund is also subject to the risk that the repurchase agreement instrument may not perform as expected.

Pursuant to no-action relief granted by the SEC, the fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments.

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The fund may also enter into reverse repurchase agreements. Under a reverse repurchase agreement, the fund sells portfolio assets to another party subject to an agreement by the fund to repurchase the same assets from that party at an agreed upon price and date. During the reverse repurchase agreement period, the fund continues to receive principal and interest payments on the assets and also has the opportunity to earn a return on the collateral furnished by the counterparty to secure its obligation to redeliver the assets. The fund can use the proceeds received from entering into a reverse repurchase agreement to make additional investments, which generally causes the fund's portfolio to behave as if it were leveraged.

When entering into a reverse repurchase agreement, the fund bears the risk of delay and costs involved in recovery of securities if the initial purchaser of the securities fails to return the securities upon repurchase or fails financially. These delays and costs could be greater with respect to foreign securities. Although securities repurchase transactions are generally marked to market daily, the fund also faces the risk that securities subject to a reverse repurchase transaction will decline quickly in value, and the fund will remain obligated to repurchase those securities at a higher price, potentially resulting in a loss. If the buyer in a reverse repurchase agreement files for bankruptcy or becomes insolvent, the fund may be unable to recover the securities it sold and as a result would realize a loss equal to the difference between the value of those securities and the payment it received for them. The size of this loss will depend upon the difference between what the buyer paid for the securities the fund sold to it and the value of those securities (*e.g.*, a buyer may pay $95 for a bond with a market value of $100). In the event of a buyer's bankruptcy or insolvency, the fund's use of proceeds from the sale of its securities may be restricted while the other party or its trustee or receiver determines whether to honor the fund's right to repurchase the securities. The fund's use of reverse repurchase agreements also subjects the fund to interest costs based on the difference between the sale and repurchase price of a security involved in such a transaction. Additionally, reverse repurchase agreements entail the same risks as over-the-counter derivatives. These include the risk that the counterparty to the reverse repurchase agreement may not be able to fulfill its obligations, as discussed above, that the parties may disagree as to the meaning or application of contractual terms, or that the instrument may not perform as expected.

**Securities of Other Investment Companies** 

Securities of other investment companies, including shares of open- and closed-end investment companies and unit investment trusts (which may include ETFs), 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 the Investment Manager believes is advisable, when there is a shortage of direct investments available, or when the Investment Manager believes that investment companies offer attractive values.

Investment companies may be structured to perform in a similar fashion to a broad-based securities index or may focus on a particular strategy or class of assets. Passive ETFs typically seek to track the performance or dividend yield of specific indexes or companies in related industries, though unlike the index, an ETF incurs administrative expenses and transaction costs in trading securities. These indexes may be broad-based, sector-based or international. 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 duplication of expenses while the fund owns another investment company's shares. In addition, investing in investment companies involves the risk that they will not perform in exactly the same fashion, or in response to the same factors, as the underlying instruments or index. To the extent the fund invests in other investment companies that are professionally managed, its performance will also depend on the investment and research abilities of investment managers other than the Investment Manager.

Open-end investment companies typically offer their shares continuously at net asset value plus any applicable sales charge and stand ready to redeem shares upon shareholder request. The shares of certain other types of investment companies, such as ETFs and closed-end investment companies, typically trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. In the case of closed-end investment companies, the number of shares is typically fixed. The securities of closed-end investment companies and ETFs carry the risk that the price the fund pays or receives may be higher or lower than the investment company's net asset value. ETFs also are subject to the risk that the timing and magnitude of cash inflows and outflows from and to investors buying and redeeming shares in the ETF could create cash balances that cause the ETF's performance to deviate from the index (which remains "fully invested" at all times). Performance of an ETF and the index it is designed to track also may diverge because the composition of the index and the securities held by the ETF may occasionally differ. ETFs and closed-end investment companies are also subject to certain additional risks, including the risks of illiquidity and of possible trading halts or interruptions due to policies of the relevant exchange, unusual market conditions or other reasons. There can be no assurance that shares of a closed-end investment company or ETF will continue to be listed on an active

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exchange. The shares of investment companies, particularly closed-end investment companies, may also be leveraged, which would increase the volatility of the fund's net asset value.

**Business development companies ("BDCs").** BDCs are a type of closed-end fund regulated under the 1940 Act, which typically invest in and lend to small-and medium-sized private companies that may lack access to public equity markets for capital raising. Under the 1940 Act, BDCs must invest at least 70% of the value of their total assets in certain asset types, which are typically the securities of private U.S. businesses. Additionally, BDCs must make available significant managerial assistance to the issuers of such securities. BDCs are not taxed on income distributed to shareholders provided they qualify as a regulated investment company under the Code. The funds will indirectly bear their proportionate share of any management and other expenses charged by the BDCs in which they invest.

Because BDCs typically invest in small and medium-sized companies, a BDC's portfolio is subject to the risks inherent in investing in smaller companies, including that portfolio companies may be dependent on a small number of products or services and may be more adversely affected by poor economic or market conditions. Some BDCs invest substantially, or even exclusively, in one sector or industry group and therefore the BDC may be susceptible to adverse conditions and economic or regulatory occurrences affecting the sector or industry group, which tends to increase volatility and result in higher risk. Investments in BDCs are also subject to management risk, including management's ability to meet the BDC's investment objective, and management's ability to manage the BDC's portfolio during periods of market turmoil and as investors' perceptions regarding a BDC or its underlying investments change.

The extent to which the fund can invest in securities of other investment companies, including ETFs, is generally limited by federal securities laws. For more information regarding the tax treatment of ETFs, please see "Taxes" below.

**Short Sales** 

The fund may engage in short sales of securities and/or currencies either as a hedge against potential declines in value of a portfolio security or currency or to realize appreciation when a security or currency that the fund does not own declines in value. Short sales are transactions in which the fund sells a security or currency it does not own to a third party by borrowing the security or currency in anticipation of purchasing the same security or currency at the market price on a later date to close out the short position. The fund may also engage in short sales by entering into a repurchase agreement with respect to the security it wishes to sell short. See "Repurchase Agreements" in this SAI. The fund will incur a gain if the price of the security or currency declines between the date of the short sale and the date on which the fund replaces the borrowed security or currency; and the fund will incur a loss if the price of the security or currency increases between those dates. Such a loss is theoretically unlimited since the potential increase in the market price of the security or currency sold short is not limited. Until the security is replaced, the fund must pay the lender (or repurchase agreement counterparty) any dividends or interest that accrues during the period of the loan (or repurchase agreement). To borrow (or enter into a repurchase agreement with respect to) the security, the fund also may be required to pay a premium, which would increase the cost of the security sold. The fund's successful use of short sales is subject to the Investment Manager's ability to accurately predict movements in the market price of the security or currency sold short. Short selling may involve financial leverage because the fund is exposed both to changes in the market price of the security or currency sold short and to changes in the value of securities or currencies purchased with the proceeds of the short sale, effectively leveraging its assets. Under adverse market conditions, a fund may have difficulty purchasing securities to meet its short sale delivery obligations, and may be required to close out its short position at a time when the fund would not choose to do so, and may therefore have to sell portfolio securities to raise the capital necessary to meet its short sale obligations at a time when fundamental investment considerations may not favor such sales. There is also a risk that a borrowed security will need to be returned to the lender on short notice. If a request for return of borrowed securities occurs at a time when other short sellers of the securities are receiving similar requests, a "short squeeze" can occur, and the fund may be compelled to replace borrowed securities previously sold short with purchases on the open market at the most disadvantageous time, possibly at prices significantly in excess of the proceeds received in originally selling the securities short. In addition, the fund may have difficulty purchasing securities to meet its delivery obligations in the case of less liquid securities sold short by the fund, such as certain emerging market country securities or securities of companies with smaller market capitalizations. In connection with short sale transactions, the fund may be required to pledge certain additional assets for the benefit of the securities lender (or repurchase agreement counterparty) and the fund may, while such assets remain pledged, be limited in its ability to invest those assets in accordance with the fund's investment strategies.

Short selling is a technique that may be considered speculative and involves risks beyond the initial capital necessary to secure each transaction. It should be noted that possible losses from short sales differ from those losses that could arise from a cash

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investment in a security because losses from a short sale may be limitless, while the losses from a cash investment in a security cannot exceed the total amount of the investment in the security.

Certain of the repurchase agreements related to securities sold short may provide that, at the option of the fund, in lieu of delivering the securities sold short, settlement may be made by delivery of cash equal to the difference between (a) the sum of (i) the market value of the securities sold short at the time the repurchase agreement is closed out and (ii) transaction costs associated with the acquisition in the market by the repurchase agreement counterparty of the securities sold short and (b) the repurchase price specified in the repurchase agreement. Because that cash amount represents the fund's maximum loss in the event of the insolvency of the counterparty, the fund will, except where the local market practice for foreign securities to be sold short requires payment prior to delivery of such securities, treat such amount, rather than the full notional amount of the repurchase agreement, as its "investment" in securities of the counterparty for purposes of all applicable investment restrictions, including its fundamental policy with respect to diversification.

See "Legal and Regulatory Risks Relating to Investment Strategy" in this SAI.

**Short-Term Trading** 

In seeking the fund's objective(s), the Investment Manager will buy or sell portfolio securities whenever the Investment Manager believes it appropriate to do so. From time to time the fund will buy securities intending to seek short-term trading profits. A change in the securities held by the fund is known as "portfolio turnover" and generally involves some expense to the fund. This expense may include brokerage commissions or dealer markups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. If sales of portfolio securities cause the fund to realize net short-term capital gains, such gains will be taxable as ordinary income when distributed to taxable individual shareholders. As a result of the fund's investment policies, under certain market conditions the fund's portfolio turnover rate may be higher than that of other ETFs. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly average of the value of portfolio securities -- excluding securities whose maturities at acquisition were one year or less. The fund's portfolio turnover rate is not a limiting factor when the Investment Manager considers a change in the fund's portfolio.

**Special Purpose Acquisition Companies** 

The fund may invest in stock, rights, warrants, and other securities of special purpose acquisition companies ("SPACs") or similar special purpose entities. A SPAC is a publicly traded company that raises investment capital in the form of a blind pool via an IPO for the purpose of acquiring an existing company. The shares of a SPAC are typically issued in "units" that include one share of common stock and one right or warrant (or partial right or warrant) conveying the right to purchase additional shares or partial shares. At a specified time following the SPAC's IPO (generally 1-2 months), the rights and warrants may be separated from the common stock at the election of the holder, after which they become freely tradeable. After going public and until an acquisition is completed, a SPAC generally invests the proceeds of its IPO (less a portion retained to cover expenses), which are held in trust, in U.S. government securities, money market securities and cash. To the extent the SPAC is invested in cash or similar securities, this may impact a fund's ability to meet its investment objective. If a SPAC does not complete an acquisition within a specified period of time after going public, the SPAC is dissolved, at which point the invested funds are returned to the SPAC's shareholders (less certain permitted expenses) and any rights or warrants issued by the SPAC expire worthless.

Because SPACs and similar entities are in essence blank check companies without an operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the entity's management to identify and complete a profitable acquisition. Some SPACs may pursue acquisitions only within certain industries or regions, which may increase the volatility of their prices. In addition, the securities issued by a SPAC, which are typically traded in the over-the-counter market, may be considered illiquid and/or be subject to restrictions on resale.

**Structured Investments** 

A structured investment is a security having a return tied to an underlying index or other security or asset class. Structured investments generally are individually negotiated agreements and may be traded over-the-counter. Structured investments are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, or specified instruments (such as commercial bank loans) and the issuance by that entity or one or more classes of securities ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued

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structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class of structured securities that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there currently is no active trading market for structured securities. Investments in government and government-related and restructured debt instruments are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt and requests to extend additional loan amounts.

**Swap Agreements** 

The fund may enter into swap agreements and other types of over-the-counter transactions such as caps, floors and collars with broker-dealers or other financial institutions for hedging or investment purposes. A swap involves the exchange by the fund with another party of their respective commitments to pay or receive cash flows, e.g., an exchange of floating rate payments for fixed-rate payments. The purchase of a cap entitles the purchaser, to the extent that a specified index or other underlying financial measure exceeds a predetermined value on a predetermined date or dates, to receive payments on a notional principal amount from the party selling the cap. The purchase of a floor entitles the purchaser, to the extent that a specified index or other underlying financial measure falls or other underlying measure below a predetermined value on a predetermined date or dates, to receive payments on a notional principal amount from the party selling the floor. A collar combines elements of a cap and a floor.

Swap agreements and similar transactions can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. A swap agreement may be structured with reference to an index of securities that is created and maintained by the swap counterparty. Depending on their structures, swap agreements may increase or decrease the fund's exposure to long-or short-term interest rates (in the United States or abroad), foreign currency values, mortgage securities, mortgage rates, corporate borrowing rates, or other factors such as security prices, inflation rates or the volatility of an index or one or more securities. For example, if the fund agrees to exchange payments in U.S. dollars for payments in a non-U.S. currency, the swap agreement would tend to decrease the fund's exposure to U.S. interest rates and increase its exposure to that non-U.S. currency and interest rates.

The fund may also engage in total return swaps, in which payments made by the fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity or fixed-income security, a combination of such securities, or an index). Total return swap agreements may be used to obtain exposure to a security, commodity, or market without owning or taking physical custody of such security or investing directly in such market. The fund may also enter into swap agreements on futures contracts including, but not limited to, index futures contracts. Swap agreements on futures contracts are generally subject to the same risks involved in the fund's use of futures contracts, in addition to the risks involved in the fund's use of swap agreements. See "Futures Contracts and Related Options." A total return swap, or a swap on a futures contract, may add leverage to a portfolio by providing investment exposure to an underlying asset or market where the fund does not own or take physical custody of such asset or invest directly in such market.

The value of the fund's swap positions would increase or decrease depending on the changes in value of the underlying rates, currency values, volatility or other indices or measures. Caps and floors have an effect similar to buying or writing options. Depending on how they are used, swap agreements may increase or decrease the overall volatility of the fund's investments and its share price. The fund's ability to engage in certain swap transactions may be limited by tax considerations.

The fund's ability to realize a profit from such transactions will depend on the ability of the financial institutions with which it enters into the transactions to meet their obligations to the fund. If a counterparty's creditworthiness declines, the value of the agreement would be likely to decline, potentially resulting in losses. If a default occurs by the other party to such transaction, the fund will have contractual remedies pursuant to the agreements related to the transaction, which may be limited by applicable law in the case of a counterparty's insolvency. If the returns of an index upon which a swap is based are unavailable or cannot be calculated (including where the index is created and maintained by the swap counterparty), the fund may experience difficulty in valuing the swap or in determining the amounts owed to or by the counterparty, regardless of whether the counterparty has defaulted. Under certain circumstances, suitable transactions may not be available to the fund, or the fund may be unable to close out its position under such transactions at the same time, or at the same price, as if it had purchased comparable publicly

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traded securities. Swaps carry counterparty risks that cannot be fully anticipated. Also, because swap transactions typically involve a contract between the two parties, such swap investments can be extremely illiquid, as it is uncertain as to whether another counterparty would wish to take assignment of the rights under the swap contract at a price acceptable to the fund.

The fund's investments in swaps will generate ordinary income and losses for federal income tax purposes and 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. The fund 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.

A credit default swap is an agreement between the fund and a counterparty that enables the fund to buy or sell protection against a credit event related to a particular issuer. One party, acting as a "protection buyer," makes periodic payments to the other party, a "protection seller," in exchange for a promise by the protection seller to make a payment to the protection buyer if a negative credit event (such as a delinquent payment or default) occurs with respect to a referenced bond or group of bonds. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors (for example, the Nth default within a basket, or defaults by a particular combination of issuers within the basket, may trigger a payment obligation). The fund may enter into credit default swap contracts for investment purposes. As a credit protection seller in a credit default swap contract, the fund would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty in the event of a default by a third party, such as a U.S. or non-U.S. corporate issuer, on the debt obligation. In return for its obligation, the fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the fund would keep the stream of payments and would have no payment obligations to the counterparty. As the seller, the fund would be subject to investment exposure on the notional amount of the swap.

The fund may also invest in credit default swap contracts to hedge against the risk of default of the debt of a particular issuer or basket of issuers or to attempt to profit from changes or perceived changes in the creditworthiness of the particular issuer(s) (also known as "buying credit protection"). In these cases, the fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment may expire worthless and would only generate income in the event of an actual default by the issuer(s) of the underlying obligation(s) (or, as applicable, a credit downgrade or other indication of financial instability). It would also involve the risk that the seller may fail to satisfy its payment obligations to the fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce the fund's return.

Credit default swaps involve a number of special risks. A protection seller may have to pay out amounts following a negative credit event greater than the value of the reference obligation delivered to it by its counterparty and the amount of periodic payments previously received by it from the counterparty. When the fund acts as a seller of a credit default swap, it is exposed to, among other things, leverage risk because if an event of default occurs the seller must pay the buyer the full notional value of the reference obligation. Each party to a credit default swap is subject to the credit risk of its counterparty (the risk that its counterparty may be unwilling or unable to perform its obligations on the swap as they come due). The value of the credit default swap to each party will change based on changes in the actual or perceived creditworthiness of the underlying issuer.

A protection buyer may lose its investment and recover nothing should an event of default not occur. The fund may seek to realize gains on its credit default swap positions, or limit losses on its positions, by selling those positions in the secondary market. There can be no assurance that a liquid secondary market will exist at any given time for any particular credit default swap or for credit default swaps generally.

The market for credit default swaps has at times become more volatile as the creditworthiness of certain counterparties has been questioned and/or downgraded. The parties to a credit default swap are generally required to post collateral to each other. If the fund posts initial or periodic collateral to its counterparty, it may not be able to recover that collateral from the counterparty in accordance with the terms of the swap. In addition, if the fund receives collateral from its counterparty, it may be delayed or prevented from realizing on the collateral in the event of the insolvency or bankruptcy of the counterparty. The fund may exit its obligations under a credit default swap by terminating the contract and paying applicable breakage fees, by selling its position in the secondary market, or by entering into an offsetting credit default swap position, which may cause the fund to incur more losses.

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The fund may also enter into options on swap agreements ("swaptions"). A swaption is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. The fund may purchase and write (sell) put and call swaptions to the same extent it may make use of standard options on securities or other instruments. Swaptions are generally subject to the same risks involved in the fund's use of options. See "Options on Securities."

Many over-the-counter derivatives (including many swaps) are complex and their valuation often requires subjective modeling and judgment, which increases the risk of mispricing or incorrect valuation. The pricing models used may not produce valuations that are consistent with the values the fund realizes when it closes or sells an over-the-counter derivative. Valuation risk is more pronounced when the fund enters into over-the-counter derivatives with specialized terms because the market value of those derivatives in some cases is determined in part by reference to similar derivatives with more standardized terms. Incorrect valuations may result in increased cash payment requirements to counterparties, undercollateralization and/or errors in calculation of the fund's NAV.

**Tax-exempt Securities** 

**General description**. As used in this SAI, the term "Tax-exempt Securities" includes debt obligations issued by a state, a territory or possession of the United States, the District of Columbia, Puerto Rico, Guam and their political subdivisions (for example, counties, cities, towns, villages, districts and authorities), agencies, instrumentalities or other governmental units, the interest from which is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) the corresponding state's personal income tax. Such obligations are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which Tax-exempt Securities may be issued include to refund of outstanding obligations, to obtain funds for general operating expenses, or to obtain funds to lend to other public institutions and facilities in anticipation of the receipt of revenue or the issuance of other obligations.

Tax-exempt Securities can be classified into two principal categories, including "general obligation" bonds and other securities and "revenue" bonds and other securities. General obligation bonds are secured by the issuer's full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific revenue source, such as the user of the facility being financed. Tax-exempt Securities may be structured as fixed-, variable- or floating-rate obligations or as zero-coupon, payment-in-kind and step-coupon securities and may be privately placed or publicly offered.

Short-term Tax-exempt Securities are generally issued by state and local governments and public authorities as interim financing in anticipation of tax collections, revenue receipts or bond sales to finance such public purposes.

In addition, certain types of "private activity" bonds may be issued by public authorities to finance projects of privately-owned entities, such as privately - operated housing facilities; certain local facilities for supplying water, gas or electricity; sewage or solid waste disposal facilities; student loans; or public or private institutions for the construction of educational, hospital, housing and other facilities. Such obligations are included within the term Tax-exempt Securities if the interest paid thereon is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) state personal income tax (such interest may, however, be subject to federal alternative minimum tax). Other types of private activity bonds, the proceeds of which are used for the construction, repair or improvement of, or to obtain equipment for, privately operated industrial or commercial facilities, may also constitute Tax-exempt Securities, although the current federal tax laws place substantial limitations on the size of such issues. The credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.

Tax-exempt Securities share many of the structural features and risks of other bonds, as described elsewhere in this SAI. For example, the fund may purchase callable Tax-exempt Securities, zero-coupon Tax-exempt Securities, or "stripped" Tax-exempt Securities, which entail additional risks. The fund may also purchase structured or asset-backed Tax-exempt Securities, such as the securities (including preferred stock) of special purpose entities that hold interests in the Tax-exempt Securities of one or more issuers and issue "tranched" securities that are entitled to receive payments based on the cash flows from those underlying securities. See "Redeemable securities," "-Zero-coupon and Payment-in-kind Bonds," "-Structured investments," and "Mortgage-backed and Asset-backed Securities" in this SAI. Structured Tax-exempt Securities may involve increased risk that the interest received by the fund may not be exempt from federal or state income tax, or that such interest may result in liability for the alternative minimum tax for shareholders of the fund. For example, in certain cases, the issuers of certain securities held by a

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special purpose entity may not have received an unqualified opinion of bond counsel that the interest from the securities will be exempt from federal income tax and (if applicable) the corresponding state's personal income tax.

Even though Tax-exempt Securities are interest-bearing investments that promise a stable flow of income, their prices are generally inversely affected by changes in interest rates and, therefore, are subject to the risk of market price fluctuations. The values of Tax-exempt Securities with longer remaining maturities typically fluctuate more than those of similarly rated Tax-exempt Securities with shorter remaining maturities. The values of Tax-exempt Securities also may be affected by changes in their actual or perceived credit quality. The credit quality of Tax-exempt Securities can be affected by, among other things, the financial condition of the issuer or guarantor, the issuer's future borrowing plans and sources of revenue, the economic feasibility of the revenue bond project or general borrowing purpose, political or economic developments in the state or region where the security is issued, and the liquidity of the security. The amount of information about the financial condition of an issuer of Tax-exempt Securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. As a result, the achievement of the fund's goals is more dependent on the Investment Manager's investment analysis than would be the case if the fund were investing in securities of better-known issuers. In addition, Tax-exempt Securities may be harder to value than securities issued by corporations that are publicly traded.

The secondary market for some Tax-exempt Securities issued within a state (including issues that are privately placed with the fund) is less liquid than that for taxable debt obligations or other more widely traded municipal obligations. No established resale market exists for certain of the Tax-exempt Securities in which the fund may invest. The market for Tax-exempt Securities rated below investment grade is also likely to be less liquid than the market for higher rated obligations. As a result, the fund may be unable to dispose of these municipal obligations at times when it would otherwise wish to do so at the prices at which they are valued.

Tax-exempt Securities Issued by the Commonwealth of Puerto Rico. Tax-exempt Securities issued by the Commonwealth of Puerto Rico or its political subdivisions, agencies, instrumentalities, or public corporations may be affected by economic, market, political, and social conditions in Puerto Rico. Puerto Rico has recently experienced (and may in the future experience) significant fiscal and economic challenges, including substantial debt service obligations, high levels of unemployment, underfunded public retirement systems, and persistent government budget deficits. These challenges may negatively affect the value of the fund's investments in Puerto Rico Tax-Exempt Securities. Major ratings agencies have downgraded the general obligation debt of Puerto Rico to below investment grade and continue to maintain a negative outlook for this debt, which increases the likelihood that the rating will be lowered further. In both August 2015 and January 2016, Puerto Rico defaulted on its debt by failing to make full payment due on its outstanding bonds, and there can be no assurance that Puerto Rico will be able to satisfy its future debt obligations. Further downgrades or defaults may place additional strain on the Puerto Rico economy and may negatively affect the value, liquidity, and volatility of the fund's investments in Puerto Rico Tax-exempt Securities. In 2016, the Puerto Rico Oversight, Management, and Economic Stability Act, known as "PROMESA," was signed into law. Among other things, PROMESA established a federally-appointed Oversight Board to oversee Puerto Rico's financial operations and provides Puerto Rico a path to restructuring its debts, thus increasing the risk that Puerto Rico may never pay off municipal indebtedness, or may pay only a small fraction of the amount owed. Proceedings under PROMESA remain ongoing, and it is unclear at this time how those proceedings will be resolved or what impact they will have on the value of a fund's investments in Puerto Rico municipal securities.

These challenges and uncertainties have been exacerbated by Hurricane Maria and the resulting natural disaster in Puerto Rico. In September 2017, Hurricane Maria struck Puerto Rico, causing major damage across the Commonwealth, including damage to its water, power, and telecommunications infrastructure. The length of time needed to rebuild Puerto Rico's infrastructure is unclear, but could amount to years, during which the Commonwealth is likely to be in an uncertain economic state. The full extent of the natural disaster's impact on Puerto Rico's economy and foreign investment in Puerto Rico is difficult to estimate.

**Escrow-secured or pre-refunded bonds**. These securities are created when an issuer uses the proceeds from a new bond issue to buy high grade, interest-bearing debt securities, generally direct obligations of the U.S. government, in order to redeem (or "pre-refund"), before maturity, an outstanding bond issue that is not immediately callable. These securities are then deposited in an irrevocable escrow account held by a trustee bank to secure all future payments of principal and interest on the pre-refunded bond until that bond's call date. Pre-refunded bonds often receive an 'AAA' or equivalent rating. Because pre-refunded bonds still bear the same interest rate, and have a very high credit quality, their price may increase. However, as the original bond approaches its call date, the bond's price will fall to its call price. The escrow account securities pledged to pay the principal and interest of the pre-refunded municipal bonds held by the fund nonetheless still subject the fund to interest rate risk and market risk. In addition, while a secondary market exists for pre-refunded municipal bonds, if the fund sells pre-refunded

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municipal bonds prior to maturity, the price received may be more or less than the original cost, depending on market conditions at the time of sale. The interest on pre-refunded bonds issued on or before December 31, 2017 is exempt from federal income tax; the interest on such bonds issued after December 31, 2017 is not exempt from federal income tax.

**Low Income Housing Tax Credits.** The fund may invest in loans and other instruments tied to the Low Income Housing Tax Credit ("LIHTC") program, which seeks to increase the supply of affordable housing by offering tax credits to projects that rehabilitate or create new affordable rental properties. LIHTCs offer investors a dollar-for-dollar reduction in their federal tax liability to incentivize the construction and rehabilitation of affordable housing properties. Certain of these investments may be issued, or are guaranteed or insured, by agencies or instrumentalities of the U.S. government, such as Fannie Mae or Freddie Mac, while other such investments may be issued by non-governmental entities and therefore not guaranteed or insured.

The LIHTC program requires ongoing compliance with numerous eligibility requirements. Failure to comply with these requirements, including failures by persons other than the fund or which are outside the fund's control, may result in recapture of some or all of the related tax credits as well as the possibility of the loss of future credits. In addition to a recapture of credits and the potential loss of future credits, failure to comply with such eligibility requirements may trigger a default event on the underlying bonds. The fund's investments in loans or other instruments tied to LIHTCs are subject to many of the risks facing other fixed income investments, including interest rate, credit, and prepayment risk.

**Tobacco Settlement Revenue Bonds**. The fund may invest in tobacco settlement revenue bonds, which are secured by an issuing state's proportionate share of periodic payments by tobacco companies made under the Master Settlement Agreement ("MSA"). The MSA is an agreement that was reached out of court in November 1998 between 46 states and six U.S. jurisdictions and tobacco manufacturers representing an overwhelming majority of U.S. market share in settlement of certain smoking-related litigation. The MSA provides for annual payments by the manufacturers to the states and jurisdictions in perpetuity in exchange for releasing all claims against the manufacturers and a pledge of no further litigation. The MSA established a base payment schedule and a formula for adjusting payments each year. Tobacco manufacturers pay into a master escrow trust based on their market share, and each state receives a fixed percentage of the payment as set forth in the MSA. Within some states, certain localities may in turn be allocated a specific portion of the state's MSA payment pursuant to an arrangement with the state.

A number of state and local governments have securitized the future flow of payments under the MSA by selling bonds pursuant to indentures, some through distinct governmental entities created for such purpose. The bonds are backed by the future revenue flow that is used for principal and interest payments on the bonds. Annual payments on the bonds, and thus risk to the fund, are dependent on the receipt of future settlement payments by the state or its instrumentality. The actual amount of future settlement payments may vary based on, among other things, annual domestic cigarette shipments, inflation, the financial capability of participating tobacco companies, and certain offsets for disputed payments. Payments made by tobacco manufacturers could be reduced if cigarette shipments continue to decline below the base levels used in establishing manufacturers' payment obligations under the MSA. Demand for cigarettes in the U.S. could continue to decline based on many factors, including, without limitation, anti-smoking campaigns, tax increases, price increases implemented to recoup the cost of payments by tobacco companies under the MSA, reduced ability to advertise, enforcement of laws prohibiting sales to minors, elimination of certain sales venues such as vending machines, the spread of local ordinances restricting smoking in public places, and increases in the use of other nicotine delivery devices (such as electronic cigarettes, smoking cessation products, and smokeless tobacco).

Because tobacco settlement bonds are backed by payments from the tobacco manufacturers, and generally not by the credit of the state or local government issuing the bonds, their creditworthiness depends on the ability of tobacco manufacturers to meet

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their obligations. The bankruptcy of an MSA-participating manufacturer could cause delays or reductions in bond payments, which would affect the fund's net asset value. Under the MSA, a market share loss by MSA-participating tobacco manufacturers to non-MSA participating manufacturers would also cause a downward adjustment in the payment amounts under some circumstances.

The MSA and tobacco manufacturers have been and continue to be subject to various legal claims, including, among others, claims that the MSA violates federal antitrust law. In addition, the United States Department of Justice has alleged in a civil lawsuit that the major tobacco companies defrauded and misled the American public about the health risks associated with smoking cigarettes. An adverse outcome to this lawsuit or to any other litigation matters or regulatory actions relating to the MSA or affecting tobacco manufacturers could adversely affect the payment streams associated with the MSA or cause delays or reductions in bond payments by tobacco manufacturers.

In addition to the risks described above, tobacco settlement revenue bonds are subject to other risks described in this SAI, including the risks of asset-backed securities discussed under "Mortgage-backed and Asset-backed Securities."

**Stand-by commitments**. When the fund purchases Tax-exempt Securities, it has the authority to acquire stand-by commitments from banks and broker-dealers with respect to those Tax-exempt Securities. A stand-by commitment is a right acquired by the fund to sell up to the principal amount of such Tax-exempt Securities back to the seller or a third party (typically an institution such as a bank or broker-dealer) at an agreed-upon price or yield within specified periods prior to their maturity dates. A stand-by commitment may be considered a security independent of the Tax-exempt security to which it relates. The amount payable by a bank or dealer during the time a stand-by commitment is exercisable, absent unusual circumstances, would be substantially the same as the market value of the underlying Tax-exempt security to a third party at any time. The fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. The fund does not expect to assign any value to stand-by commitments when determining the fund's net asset value. The fund will be subject to credit risk with respect to an institution providing a stand-by commitment and a decline in the credit quality of the institution could cause losses to the fund.

**Yields**. The yields on Tax-exempt Securities depend on a variety of factors, including general money market conditions, effective marginal tax rates, the financial condition of the issuer, general conditions of the Tax-exempt security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of nationally recognized securities rating agencies represent their opinions as to the credit quality of the Tax-exempt Securities which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, Tax-exempt Securities with the same maturity, interest rate and rating may have different yields while Tax-exempt Securities of the same maturity and interest rate but with different ratings may have the same yield. Yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates and may be due to such factors as changes in the overall demand or supply of various types of Tax-exempt Securities or changes in the investment objectives of investors. Subsequent to purchase by the fund, an issue of Tax-exempt Securities or other investments may cease to be rated, or its rating may be reduced below the minimum rating required for purchase by the fund. The Investment Manager will consider such an event in its determination of whether the fund should continue to hold an investment in its portfolio. Downgrades of Tax-exempt Securities held by a money market fund may require the fund to sell such securities, potentially at a loss.

**"Moral obligation" bonds**. The fund may invest in so-called "moral obligation" bonds, where repayment of the bond is backed by a moral (but not legally binding) commitment of an entity other than the issuer, such as a state legislature, to pay. Such a commitment may be in addition to the legal commitment of the issuer to repay the bond or may represent the only payment obligation with respect to the bond (where, for example, no amount has yet been specifically appropriated to pay the bond. See "-Municipal leases" below.)

**Municipal leases**. The fund may acquire participations in lease obligations or installment purchase contract obligations (collectively, "lease obligations") of municipal authorities or entities. A lease obligation is an obligation in the form of a lease or installment purchase that is issued by a state or local government to acquire equipment and facilities. Income from such obligations generally is exempt from state and local tax in the state of issuance. Lease obligations may be secured or unsecured. Lease obligations do not constitute general obligations of the municipality for which the municipality's taxing power is pledged.

Municipal leases may be subject to greater risks than general obligation or revenue bonds. Although lease obligations do not constitute general obligations of the municipality, a lease obligation ordinarily is backed by the municipality's covenant to budget for, appropriate, and make the payments due under the lease obligation. However, certain of these lease obligations contain

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"non-appropriation" clauses, which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In the case of a "non-appropriation" lease, the fund's ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, and in any event, foreclosure of that property might prove difficult. If a municipality does not fulfill its payment obligation, it may be difficult to sell the lease obligation and the proceeds of a sale may not cover the fund's loss.

In addition to the "non-appropriation" risk, many municipal lease obligations have not yet developed the depth of marketability associated with municipal bonds. Moreover, such leases may be subject to the temporary abatement of payments in the event the issuer is prevented from maintaining occupancy of the leased premises or utilizing the leased equipment or facilities. Although the obligations may be secured by the leased equipment or facilities, the disposition of the property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly, and result in a delay in recovering, or the failure to recover fully, the fund's original investment.

**Additional risks**. Securities in which the fund may invest, including Tax-exempt Securities, are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code (including special provisions related to municipalities and other public entities), and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, such as the recent bankruptcy-type proceedings by the Commonwealth of Puerto Rico the power, ability or willingness of issuers to meet their obligations for the payment of interest and principal on their Tax-exempt Securities may be materially affected or their obligations may be found to be invalid or unenforceable. Such litigation or conditions may from time to time have the effect of introducing uncertainties in the market for municipal bonds or certain segments thereof, or of materially affecting the credit risk with respect to particular bonds. Adverse economic, business, legal or political developments might affect all or a substantial portion of the fund's municipal bonds in the same manner.

From time to time, legislation may be introduced or litigation may arise that may restrict or eliminate the federal income tax exemption for interest on debt obligations issued by states and their political subdivisions. Federal tax laws limit the types and amounts of tax-exempt bonds issuable for certain purposes, especially industrial development bonds and private activity bonds. Such limits may affect the future supply and yields of these types of Tax-exempt Securities. Further proposals limiting the issuance of Tax-exempt Securities may well be introduced in the future. Shareholders should consult their tax advisors for the current law on tax-exempt bonds and securities.

**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 the Investment Manager 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.

**Trade Policy** 

In 2025, the U.S. government indicated its intent to alter its approach to international trade policy and, in some cases, to renegotiate or potentially terminate certain existing bilateral or multilateral trade agreements and treaties with foreign countries and has made proposals and taken actions related thereto. In addition, the U.S. government has recently imposed tariffs on certain foreign goods and has indicated a willingness to impose tariffs on imports of other products. Some foreign governments, including China, have instituted retaliatory tariffs on certain U.S. goods and have indicated a willingness to impose additional tariffs on U.S. products. Other countries, including Mexico, have threatened retaliatory tariffs on certain U.S. products.

Global trade disruption, significant introductions of trade barriers, and bilateral trade frictions, together with any future downturns in the global economy resulting therefrom, could adversely affect the financial performance of the fund and its investments.

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Trade policy may be an ongoing source of instability, potentially resulting in significant currency fluctuations and/or having other adverse effects on international markets, international trade agreements, and/or other existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory, or otherwise). To the extent trade disputes escalate globally, there could be additional significant impacts on the sectors or industries in which the fund invests and other adverse impacts on the fund's overall performance.

**Warrants** 

The fund may invest in or acquire warrants, which are instruments that give the fund the right (but not the obligation) to purchase certain securities from an issuer at a specific price (the "strike price") until a stated expiration date. The purchase of warrants involves the risk that the effective price paid for the warrant added to the strike price of the underlying security may exceed the value of the security's market price, such as when there is no movement in the level of the underlying security. Also, the strike price of warrants typically is much lower than the current market price of the underlying securities, yet they are subject to similar price fluctuations. As a result, warrants may be more volatile investments than the underlying securities and may offer greater potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to dividends or voting rights with respect to the underlying securities and do not represent any rights in the assets of the issuing company. Also, the value of the warrant does not necessarily change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to the expiration date. These factors can make warrants more speculative than other types of investments.

In addition to warrants on securities, the fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If the fund were not to exercise an index warrant prior to its expiration, then the fund would lose the amount of the purchase price paid by it for the warrant.

The fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the fund's ability to exercise the warrants at such time, or in such quantities, as the fund would otherwise wish to do.

**Zero-coupon and Payment-in-kind Bonds** 

The fund may invest without limit in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in-kind bonds do not pay current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. The fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders even though such bonds do not pay current interest in cash. Thus, it may be necessary at times for the fund to liquidate investments, including when it is not advantageous to do so, in order to satisfy its distribution requirements under the Code. The market for zero-coupon and payment-in-kind bonds may be limited, making it difficult for the fund to value them or dispose of its holdings quickly at an acceptable price.

**EXCHANGE TRADED FUND RISKS** 

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**Continuous Offering** 

The method by which Creation Units of shares are created and traded may raise certain issues under applicable securities laws. Because new Creation Units of shares are issued and sold by a fund on an ongoing basis, at any point a "distribution," as such term is used in the 1933 Act, may occur. Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus delivery and liability provisions of the 1933 Act.

For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with Franklin Distributors, each fund's distributor, breaks them down into constituent shares, and sells such shares directly to customers, or if it chooses to couple the creation of a supply of new shares with an active selling effort involving solicitation of secondary market demand for shares. A determination of whether one is an underwriter for purposes of the 1933 Act must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that 12 could lead to a categorization as an underwriter.

Broker-dealer firms should also note that dealers who are not "underwriters," but are effecting transactions in shares of a fund, whether or not participating in the distribution of shares, are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(a)(3) of the 1933 Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that dealers who are not underwriters but are participating in a distribution (as opposed to engaging in ordinary secondary market transactions) and thus dealing with the shares that are part of an overallotment within the meaning of Section 4(a)(3)(A) of the 1933 Act would be unable to take advantage of the prospectus delivery exemption provided by Section 4(a)(3) of the 1933 Act. Firms that incur a prospectus-delivery obligation with respect to shares of each fund are reminded that, under Rule 153 under the 1933 Act, a prospectus-delivery obligation under Section 5(b)(2) of the 1933 Act owed to an exchange member in connection with a sale on an exchange is satisfied by the fact that the prospectus is available from the exchange upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to transactions on an exchange.

**Listing and Trading** 

Shares of each fund have been approved for listing and trading on an exchange. Each fund's shares trade on an exchange at prices that may differ to some degree from their NAV. The listing exchange may remove a fund's shares from listing if, among other things (i) following the initial 12-month period beginning upon the commencement of trading of the fund, there are fewer than 50 beneficial owners of the fund's shares ; (ii) the listing exchange becomes aware that the fund is no longer eligible to operate in reliance on Rule 6c-11 under the 1940 Act; (iii) the fund no longer complies with certain listing exchange rules; or (iv) such other event shall occur or condition exists that, in the opinion of the listing exchange, makes further dealings on the exchange inadvisable.

The listing exchange will remove a fund's shares from listing and trading upon termination of the trust. There can be no assurance that the requirements of the listing exchange necessary to maintain the listing of the fund's shares will continue to be met. As in the case of other publicly-traded securities, brokers' commissions on transactions will be based on negotiated commission rates at customary levels. The existence of a liquid trading market for certain securities may depend on whether dealers will make a market in such securities. There can be no assurance that such a market will be made or maintained or that any such market will be or remain liquid. The price at which securities may be sold and the value of the fund's shares will be adversely affected if trading markets for the fund's portfolio securities are limited or absent, or if bid/ask spreads are wide.

**TAXES** 

The following discussion of U.S. federal income tax consequences is based on the Code, existing U.S. Treasury regulations, and other applicable authority, as of the date of this SAI. These authorities are subject to change by legislative or administrative action, possibly with retroactive effect. The following discussion is only a summary of some of the important U.S. federal income tax considerations generally applicable to investments in the fund. There may be other tax considerations applicable to particular shareholders. Shareholders should consult their own tax advisors regarding their particular situation and the possible application of foreign, state and local tax laws.

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**Taxation of the fund.** The fund has elected and intends to qualify each year as a regulated investment company under Subchapter M of the Code. In order to qualify for the special tax treatment accorded regulated investment companies and their shareholders, the fund must, among other things:

(a) derive at least 90% of its gross income for each taxable year from (i) dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and (ii) net income from interests in "qualified publicly traded partnerships" (as defined below);

(b) diversify its holdings so that, at the end of each quarter of the fund's taxable year, (i) at least 50% of the market value of the fund's total assets is represented by cash and cash items (including receivables), U.S. government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the fund's total assets and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the fund's total assets is invested, including through corporations in which the fund owns a 20% or more voting stock interest, (x) in the securities (other than those of the U.S. government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related trades or businesses, or (y) in the securities of one or more qualified publicly traded partnerships (as defined below); and

(c) distribute with respect to each taxable year at least 90% of the sum of its investment company taxable income (as that term is defined in the Code without regard to the deduction for dividends paid—generally, taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses) and net tax-exempt interest income, for such year.

In general, for purposes of the 90% gross income requirement described in paragraph (a) above, income derived from a partnership will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership which would be qualifying income if realized by the regulated investment company. However, 100% of the net income of a regulated investment company derived from an interest in a "qualified publicly traded partnership" (defined as a partnership (i) interests in which are traded on an established securities market or readily tradable on a secondary market or the substantial equivalent thereof, and (ii) that derives less than 90% of its income from the qualifying income described in paragraph (a)(i) above) will be treated as qualifying income. In general, such entities will be treated as partnerships for federal income tax purposes because they meet the passive income requirement under Code section 7704(c)(2). In addition, although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated investment company with respect to items attributable to an interest in a qualified publicly traded partnership.

For purposes of the diversification test in paragraph (b) above, identification of the issuer (or, in some cases, issuers) of a particular fund investment will depend on the terms and conditions of that investment. In some cases, identification of the issuer (or issuers) is uncertain under current law, and an adverse determination or future guidance by the IRS with respect to issuer identification for a particular type of investment may adversely affect the fund's ability to meet the diversification test in (b) above. Also, for the purposes of the diversification test in paragraph (b) above, the term "outstanding voting securities of such issuer" will include the equity securities of a qualified publicly traded partnership.

If the fund qualifies as a regulated investment company that is accorded special tax treatment, the fund will not be subject to U. S. federal income tax on income or gains distributed in a timely manner to its shareholders in the form of dividends (including Capital Gain Dividends, as defined below).

If the fund were to fail to meet the income, diversification or distribution test described above, the fund could in some cases cure such failure, including by paying a fund-level tax, paying interest, making additional distributions, or disposing of certain assets. If the fund were ineligible to or otherwise did not cure such failure for any year, or were otherwise to fail to qualify as a regulated investment company accorded special tax treatment in any taxable year, the fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. Some portions of such distributions may be eligible for the dividends received deduction in the case of corporate shareholders, and may be eligible to be treated as "qualified dividend income" in the case of shareholders taxed as individuals, provided, in both cases, that the shareholder meets certain holding period and other requirements in respect of the fund's shares (as described below). In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment.

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The fund intends to distribute at least annually to its shareholders all or substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction) and its net tax-exempt income (if any). The fund may distribute its net capital gain (that is, the excess of net long-term capital gain over net short-term capital loss, in each case determined with reference to any loss carryforwards). Investment company taxable income (which is retained by the fund) will be subject to tax at regular corporate rates. The fund may also retain for investment its net capital gain. If the fund retains any net capital gain, it will be subject to tax at regular corporate rates on the amount retained, but may designate the retained amount as undistributed capital gains in a notice to its shareholders who will be (i) required to include in income for U.S. federal income tax purposes, as long-term capital gain, their shares of such undistributed amount, and (ii) entitled to credit their proportionate shares of the tax paid by the fund on such undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds on a properly-filed U.S. tax return to the extent the credit exceeds such liabilities. If the fund makes this designation, for U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the fund will be increased by an amount equal to the difference between the amount of undistributed capital gains included in the shareholder's gross income under clause (i) of the preceding sentence and the tax deemed paid by the shareholder under clause (ii) of the preceding sentence. The fund is not required to, and there can be no assurance the fund will, make this designation if it retains all or a portion of its net capital gain in a taxable year.

In determining its net capital gain, including in connection with determining the amount available to support a Capital Gain Dividend (as defined below), its taxable income and its earnings and profits, a regulated investment company generally may also elect to treat part or all of any post-October capital loss (defined as any net capital loss attributable to the portion, if any, of the taxable year after October 31 or, if there is no such loss, the net long-term capital loss or net short-term capital loss attributable to any such portion of the taxable year) or late-year ordinary loss (generally, the sum of its (i) net ordinary loss, if any, from the sale, exchange or other taxable disposition of property, attributable to the portion, if any, of the taxable year after October 31, and its (ii) other net ordinary loss, if any, attributable to the portion, if any, of the taxable year after December 31) as if incurred in the succeeding taxable year.

If the fund fails to distribute in a calendar year at least an amount equal to the sum of 98% of its ordinary income for such year and 98.2% of its capital gain net income for the one-year period ending October 31 of such year, plus any retained amount from the prior year, the fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. For these purposes, ordinary gains and losses from the sale, exchange, or other taxable disposition of property that would otherwise be properly taken into account after October 31 are treated as arising on January 1 of the following calendar year. For purposes of the excise tax, the fund will be treated as having distributed any amount on which it has been subject to corporate income tax in the taxable year ending within the calendar year. A dividend paid to shareholders in January of a year generally is deemed to have been paid by the fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax, although there can be no assurance that it will be able to do so.

The fund distributes its net investment income and capital gains to shareholders as dividends at least annually to the extent required to qualify as a regulated investment company under the Code and generally to avoid U.S. federal income or excise tax. Provided it is not treated as a "personal holding company" for U.S. federal income tax purposes, the fund is permitted to treat the portion of redemption proceeds paid to redeeming shareholders that represents the redeeming shareholders' portion of the fund's accumulated earnings and profits as a dividend on the fund's tax return. This practice, which involves the use of tax equalization, will have the effect of reducing the amount of income and gains that the fund is required to distribute as dividends to shareholders in order for the fund to avoid U. S. federal income tax and excise tax. This practice may also reduce the amount of distributions required to be made to non-redeeming shareholders and the amount of any undistributed income will be reflected in the value of the shares of the fund; the total return on a shareholder's investment will not be reduced as a result of this distribution policy.

**Fund distributions.** Distributions from the fund (other than exempt-interest dividends, as discussed below) generally are taxable to shareholders as ordinary income to the extent derived from the fund's investment income and net short-term capital gains. Distributions are taxable whether shareholders receive them in cash or reinvest them in additional shares of the fund or other Putnam funds.

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 how long a shareholder has owned his or her shares. In general, the fund will recognize long-term capital gain or loss on investments it has owned for more than one year, and short-term capital gain or loss on investments it has owned for one year or less. Tax rules can alter the fund's holding period in investments and thereby affect

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the tax treatment of gain or loss on such investments. Distributions of net capital gain that are properly reported by the fund as capital gain dividends ("Capital Gain Dividends") will be treated as long-term capital gains includible in net capital gain and taxed to individuals at reduced rates. The IRS and the Department of the Treasury have issued regulations that impose special rules in respect of Capital Gain Dividends received through partnership interests constituting "applicable partnership interests" under Section 1061 of the Code. Distributions from capital gains generally are made after applying any available capital loss carryforwards. Distributions of net short-term capital gain (as reduced by any net long-term capital loss for the taxable year) will be taxable to shareholders as ordinary income.

The Code generally imposes a 3.8% Medicare contribution tax on the net investment income of certain individuals, trusts and estates to the extent their income exceeds certain threshold amounts. For these purposes, "net investment income" generally includes, among other things, (i) distributions paid by the fund of net investment income and capital gains (other than exempt-interest dividends) as described herein, and (ii) any net gain from the sale, redemption, exchange or other taxable disposition of fund shares. Shareholders are advised to consult their tax advisers regarding the possible implications of this additional tax on their investment in the fund.

Distributions of investment income reported by the fund as "qualified dividend income" received by an individual will be taxed at the reduced rates applicable to net capital gain. In order for some portion of the dividends received by a fund shareholder to be qualified dividend income, the fund must meet holding period and other requirements with respect to some portion of the dividend-paying stocks in its portfolio and the shareholder must meet holding period and other requirements with respect to the fund's shares. In general, a dividend will not be treated as qualified dividend income (at either the fund or shareholder level) (1) if the dividend is received with respect to any share of stock held for fewer than 61 days during the 121-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividend (or, in the case of certain preferred stock, 91 days during the 181-day period beginning 90 days before such date), (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, (3) if the recipient elects to have the dividend income treated as investment interest, or (4) if the dividend is received from a foreign corporation that is (a) not eligible for the benefits of a comprehensive income tax treaty with the United States (with the exception of dividends paid on stock of such a foreign corporation readily tradable on an established securities market in the United States) or (b) treated as a passive foreign investment company. Each fund, other than fixed-income and money market funds, generally expects to report eligible dividends as qualified dividend income.

In general, distributions of investment income reported by the fund as derived from qualified dividend income will be treated as qualified dividend income by a shareholder taxed as an individual provided the shareholder meets the holding period and other requirements described above with respect to such fund's shares. In any event, if the aggregate qualified dividends received by the fund during any taxable year are 95% or more of its gross income (excluding net long-term capital gain over net short-term capital loss), then 100% of the fund's dividends (other than dividends properly reported as Capital Gain Dividends) will be eligible to be treated as qualified dividend income.

Individuals (and certain other non-corporate entities) are generally eligible with respect to tax years beginning after December 31, 2017 and ending on or before December 31, 2025 for a 20% deduction with respect to taxable ordinary dividends from REITs and certain taxable income from publicly traded partnerships. Currently, regulated investment companies may pass through the 20% deduction to shareholders for REIT dividends, but not for income from publicly traded partnerships. Distributions by the fund to its shareholders that the fund properly reports as "section 199A dividends," as defined and subject to certain conditions described below, are treated as qualified REIT dividends in the hands of non-corporate shareholders.

Subject to future regulatory guidance to the contrary, distributions attributable to qualified publicly traded partnership income from a fund's investments in MLPs will ostensibly not qualify for the deduction available to non-corporate taxpayers in respect of such amounts received directly from an MLP.

In general, fixed-income and money market funds receive interest, rather than dividends, from their portfolio securities. As a result, it is not currently expected that any significant portion of such funds' distributions to shareholders will be derived from qualified dividend income. For information regarding qualified dividend income received from underlying funds, see "Funds of funds" below.

Certain distributions reported by a Fund as section 163(j) interest dividends may be treated as interest income by shareholders for purposes of the tax rules applicable to interest expense limitations under Code section 163(j). Such treatment by the

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shareholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that a Fund is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of the Fund's business interest income over the sum of the Fund's (i) business interest expense and (ii) other deductions properly allocable to the Fund's business interest income.

In general, dividends of net investment income received by corporate shareholders of the fund will qualify for the dividends-received deduction generally available to corporations only to the extent of the amount of eligible dividends received by the fund from domestic corporations for the taxable year. A dividend received by the fund will not be treated as a dividend eligible for the dividends-received deduction (1) if it has been received with respect to any share of stock that the fund has held for less than 46 days (91 days in the case of certain preferred stock) during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend (during the 181-day period beginning 90 days before such date in the case of certain preferred stock) or (2) to the extent that the fund is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Moreover, the dividends received deduction may otherwise be disallowed or reduced (1) if the corporate shareholder fails to satisfy the foregoing requirements with respect to its shares of the fund or (2) by application of various provisions of the Code (for instance, the dividends-received deduction is reduced in the case of a dividend received on debt-financed portfolio stock (generally, stock acquired with borrowed funds)). For information regarding eligibility for the dividends-received deduction of dividend income derived from an underlying fund, see "Funds of funds" below.

**Exempt-interest dividends.** A fund will be qualified to pay exempt-interest dividends to its shareholders if, at the close of each quarter of the fund's taxable year, at least 50% of the total value of the fund's assets consists of obligations the interest on which is exempt from federal income tax under Section 103(a) of the Code. In some cases, the fund may also pass through to its shareholders the tax-exempt character of any exempt-interest dividends it receives from underlying funds in which it invests (see "Funds of funds," below). Distributions that the fund reports as exempt-interest dividends are treated as interest excludable from shareholders' gross income for federal income tax purposes but may be taxable for federal alternative minimum tax ("AMT") purposes and for state and local purposes. If the fund intends to qualify to pay exempt-interest dividends, the fund may be limited in its ability to enter into taxable transactions involving forward commitments, repurchase agreements, financial futures and options contracts on financial futures, tax-exempt bond indices and other assets.

Part or all of the interest on indebtedness, if any, incurred or continued by a shareholder to purchase or carry shares of the fund paying exempt-interest dividends is not deductible. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness, multiplied by the percentage of the fund's total distributions (not including distributions from net long-term capital gains) paid to the shareholder that are exempt-interest dividends. Under rules used by the IRS to determine when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares.

In general, exempt-interest dividends, if any, attributable to interest received on certain private activity obligations and certain industrial development bonds will not be tax-exempt to any shareholders who are "substantial users" of the facilities financed by such obligations or bonds or who are "related persons" of such substantial users.

A fund that is qualified to pay exempt-interest dividends will notify its shareholders in a written statement of the portion of distributions for the taxable year that constitutes exempt-interest dividends.

Exempt-interest dividends may be taxable for purposes of the federal AMT. For individual shareholders, exempt-interest dividends that are derived from interest on private activity bonds that are issued after August 7, 1986 (other than a "qualified 501(c)(3) bond," as such term is defined in the Code) generally must be included in an individual's tax base for purposes of calculating the shareholder's liability for U.S. federal AMT. For taxable years beginning after December 31, 2017, corporations are no longer subject to the federal AMT.

**Funds of funds.** If the fund invests in shares of underlying funds, a portion of its distributable income and gains will consist of distributions from the underlying funds and gains and losses on the disposition of shares of the underlying funds. To the extent that an underlying fund realizes net losses on its investments for a given taxable year, the fund will not be able to recognize its share of those losses (so as to offset distributions of net income or capital gains from other underlying funds) until and only to the extent that it disposes of shares of the underlying fund in a transaction qualifying for sale or exchange treatment or those losses

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reduce distributions required to be made by the underlying fund. Moreover, even when the fund does make such a disposition, a portion of its loss may be recognized as a long-term capital loss, which will not be treated as favorably for U.S. federal income tax purposes as a short-term capital loss or an ordinary deduction. In particular, the fund will not be able to offset any capital losses from its dispositions of underlying fund shares against its ordinary income (including distributions of any net short-term capital gains realized by an underlying fund).

In addition, in certain circumstances, the "wash sale" rules under Section 1091 of the Code may apply to the fund's sales of underlying fund shares that have generated losses. A wash sale occurs if shares of an underlying fund are sold by the fund at a loss and the fund acquires additional shares of that same underlying fund 30 days before or after the date of the sale. The wash-sale rules could defer losses in the fund's hands on sales of underlying fund shares (to the extent such sales are wash sales) for extended (and, in certain cases, potentially indefinite) periods of time.

As a result of the foregoing rules, and certain other special rules, the amounts of net investment income and net capital gains that the fund will be required to distribute to shareholders may be greater than such amounts would have been had the fund invested directly in the securities held by the underlying funds, rather than investing in shares of the underlying funds. For similar reasons, the amount or timing of distributions from the fund qualifying for treatment as being of a particular character (e.g., as long-term capital gain, exempt interest, eligible for dividends-received deduction, etc.) will not necessarily be the same as it would have been had the fund invested directly in the securities held by the underlying funds.

If the fund receives dividends from an underlying fund that qualifies as a regulated investment company, and the underlying fund reports such dividends as "qualified dividend income," then the fund may, in turn, report a portion of its distributions as "qualified dividend income" as well, provided the fund meets the holding period and other requirements with respect to shares of the underlying fund.

If the fund receives dividends from an underlying fund and the underlying fund reports such dividends as eligible for the dividends-received deduction, then the fund is permitted, in turn, to designate a portion of its distributions as eligible for the dividends-received deduction, provided the fund meets the holding period and other requirements with respect to shares of the underlying fund.

If the fund were to own 20% or more of the voting interests of an underlying fund, subject to a safe harbor in respect of certain fund of funds arrangements, the fund would be required to "look through" the underlying fund to its holdings and combine the appropriate percentage (as determined pursuant to the applicable Treasury Regulations) of the underlying fund's assets with the fund's assets for purposes of satisfying the 25% diversification test described above.

If, at the close of each quarter of the fund's taxable year, at least 50% of its total assets consists of interests in other regulated investment companies (such fund, a "qualified fund of funds"), the fund will be permitted to distribute exempt-interest dividends and thereby pass through to its shareholders the tax-exempt character of any exempt-interest dividends it receives from underlying funds in which it invests, or interest on any tax-exempt obligations in which it directly invests, if any. For further information regarding exempt-interest dividends, see "Exempt-interest dividends," above.

If the fund is a qualified fund of funds, the fund will be entitled to elect to pass through to its shareholders a credit or deduction for foreign taxes (if any) borne in respect of foreign securities income earned by the fund, or by any underlying funds and passed through to the fund. If the fund so elects, shareholders will include in gross income from foreign sources their pro rata shares of such taxes, if any, treated as paid by the fund. Even if the fund is eligible to make such an election for a given year, it may determine not to do so. If the fund elects to pass through to its shareholders foreign tax credits or deductions, tax-exempt shareholders and those who invest in the fund through tax-advantaged accounts such as IRAs will not benefit from any such tax credit or deduction. See "Foreign taxes" below for more information.

**Derivatives, hedging and related transactions; certain exposure to commodities.** In general, option premiums received by the fund are not immediately included in the income of the fund. Instead, the premiums are recognized when the option contract expires, the option is exercised by the holder, or the fund transfers or otherwise terminates the option (*e.g.*, through a closing transaction). If a call option written by the fund is exercised and the fund sells or delivers the underlying stock, the fund generally will recognize capital gain or loss equal to (a) the sum of the strike price and the option premium received by the fund minus (b) the fund's basis in the stock. Such gain or loss generally will be short-term or long-term depending upon the holding period of the underlying stock. If securities are purchased by the fund pursuant to the exercise of a put option written by it, the fund generally will subtract the premium received for purposes of computing its cost basis in the securities purchased. Gain or loss arising in

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respect of a termination of the fund's obligation under an option other than through the exercise of the option will be short-term gain or loss depending on whether the premium income received by the fund is greater or less than the amount paid by the fund (if any) in terminating the transaction. Thus, for example, if an option written by the fund expires unexercised, the fund generally will recognize short-term gain equal to the premium received.

Certain covered call writing activities of the fund may trigger the U.S. federal income tax straddle rules contained primarily in Section 1092 of the Code. Very generally, where applicable, Section 1092 requires (i) that losses be deferred on positions deemed to be offsetting positions with respect to "substantially similar or related property," to the extent of unrealized gain in the latter, and (ii) that the holding period of such a straddle position that has not already been held for the long-term holding period be terminated and begin anew once the position is no longer part of a straddle. Options on single stocks that are not "deep in the money" may constitute qualified covered calls, which generally are not subject to the straddle rules; the holding period on stock underlying qualified covered calls that are "in the money" although not "deep in the money" will be suspended during the period that such calls are outstanding. Thus, the straddle rules and the rules governing qualified covered calls could cause gains that would otherwise constitute long-term capital gains to be treated as short-term capital gains, and distributions that would otherwise constitute "qualified dividend income" or qualify for the dividends-received deduction to fail to satisfy the holding period requirements and therefore to be taxed as ordinary income or to fail to qualify for the dividends-received deduction, as the case may be.

In general, 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the Commodities Futures Trading Commission is treated as short-term gain or loss, and 60% is treated as long-term gain or loss, although certain foreign currency gains and losses from such contracts may be treated as ordinary in character. Also, such contracts held by the fund at the end of each taxable year (and, for purposes of the 4% excise tax, on certain other dates as prescribed under the Code) are "marked to market" with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as ordinary or 60/40 gain or loss, as applicable.

The fund's investment in swaps, if any, will generate ordinary income and losses for federal income tax purposes. The fund's investments in futures and swaps 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. The fund 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.

In addition to the special rules described above in respect of options, futures transactions and swaps, the fund's derivative transactions, including transactions in options, futures contracts, straddles, securities loan and other similar transactions, including for hedging purposes, will be subject to special tax rules (including constructive sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund's securities, convert long-term capital gains into short-term capital gains, short-term capital losses into long-term capital losses, or capital gains into ordinary income. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund may make any applicable elections pertaining to such transactions consistent with the interests of the fund.

Because these and other tax rules applicable to these types of transactions are in some cases uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which determination or guidance could be retroactive) may affect whether the fund has made sufficient distributions, and otherwise satisfied the relevant requirements, to maintain its qualification as a regulated investment company and avoid a fund-level tax.

A fund's use of commodity-linked derivatives can be limited by the fund's intention to qualify as a regulated investment company and can bear on its ability to so qualify. Income and gains from certain commodity-linked derivatives do not constitute qualifying income to a regulated investment company for purposes of the 90% gross income test described above. The tax treatment of certain other commodity-linked derivative instruments in which the fund might invest is not certain, in particular with respect to whether income or gains from such instruments constitute qualifying income to a regulated investment company. If the fund were to treat income or gain from a particular instrument as qualifying income and the income or gain were later determined not to constitute qualifying income and, together with any other nonqualifying income, caused the fund's nonqualifying income to exceed 10% of its gross income in any taxable year, the fund would fail to qualify as a regulated investment company unless it is eligible to and does pay a tax at the fund level.

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The tax rules are uncertain with respect to the treatment of income or gains arising in respect of commodity-linked exchange-traded notes ("ETNs") and certain commodity-linked structured notes; also, the timing and character of income or gains arising from ETNs can be uncertain. An adverse determination or future guidance by the IRS (which determination or guidance could be retroactive) may affect the fund's ability to qualify for treatment as a regulated investment company and to avoid a fund-level tax.

To the extent that, in order to achieve exposure to commodities, the fund invests in entities that are treated as pass-through vehicles for U.S. federal income tax purposes, including, for instance, certain ETFs (e.g., ETFs investing in gold bullion) and partnerships other than qualified publicly traded partnerships (as defined earlier), all or a portion of any income and gains from such entities could constitute non-qualifying income to the fund for purposes of the 90% gross income requirement described above. In such a case, the fund's investments in such entities could be limited by its intention to qualify as a regulated investment company and could bear on its ability to so qualify. Certain commodities-related ETFs may qualify as qualified publicly traded partnerships. In such cases, the net income derived from such investments will constitute qualifying income for purposes of the 90% gross income requirement. If, however, such a vehicle were to fail to qualify as a qualified publicly traded partnership in a particular year, a portion of the gross income derived from it in such year could constitute non-qualifying income to the fund for purposes of the 90% gross income requirement and thus could adversely affect the fund's ability to qualify as a regulated investment company for a particular year. In addition, the diversification requirement described above for regulated investment company qualification will limit the fund's investments in one or more vehicles that are qualified publicly traded partnerships to 25% of the fund's total assets as of the close of each quarter of the fund's taxable year.

Certain of the fund's investments in derivative instruments and foreign currency-denominated instruments, and any of the fund's transactions in foreign currencies and hedging activities, are likely to produce a difference between its book income and its taxable income. If such a difference arises, and the fund's book income is less than its taxable income (or, for tax-exempt funds, the sum of its net tax-exempt and taxable income), the fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment and to eliminate fund-level income tax. In the alternative, if the fund's book income exceeds the sum of its taxable income and tax-exempt income, the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the fund's remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter as a return of capital to the extent of the recipient's basis in the shares, and (iii) thereafter as gain from the sale or exchange of a capital asset.

**Investments in REITs.** The fund's investment in REIT equity securities may result in the fund's receipt of cash in excess of the REIT's earnings. If the fund distributes such amounts, such distribution could constitute a return of capital to the fund shareholders for U.S. federal income tax purposes. Dividends received by the fund from a REIT generally will not constitute qualified dividend income and will not qualify for the corporate dividends-received deduction.

Distributions by the fund to its shareholders that the fund properly reports as "section 199A dividends," as defined and subject to certain conditions described below, are treated as qualified REIT dividends in the hands of non-corporate shareholders. Non-corporate shareholders are permitted a federal income tax deduction equal to 20% of qualified REIT dividends received by them, subject to certain limitations. Currently, eligible non-corporate shareholders can claim the deduction for tax years beginning after December 31, 2017 and ending on or before December 31, 2025. Very generally, a "section 199A dividend" is any dividend or portion thereof that is attributable to certain dividends received by a regulated investment company from REITs, to the extent such dividends are properly reported as such by the regulated investment company in a written notice to its shareholders. A section 199A dividend is treated as a qualified REIT dividend only if the shareholder receiving such dividend holds the dividend-paying regulated investment company shares for at least 46 days of the 91-day period beginning 45 days before the shares become ex-dividend, and is not under an obligation to make related payments with respect to a position in substantially similar or related property. A fund is permitted to report such part of its dividends as section 199A dividends as are eligible, but is not required to do so.

**Mortgage-related securities.** The fund may invest in REITs, including REITs that hold residual interests in real estate mortgage investment conduits ("REMICs") (including by investing in residual interests in collateralized mortgage obligations ("CMOs") with respect to which an election to be treated as a REMIC is in effect), REITs that are themselves taxable mortgage pools ("TMPs") or REITs that invest in TMPs. Under a notice issued by the IRS in October 2006 and Treasury regulations that have not yet been issued, but apply retroactively, a portion of the fund's income from a REIT that is attributable to the REIT's residual interest in a REMIC or TMP (referred to in the Code as an "excess inclusion") will be subject to U.S. federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a regulated investment company, such as the fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC or TMP residual

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interest directly. As a result, a fund investing in such interests may not be a suitable investment for charitable remainder trusts, as noted below.

In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income ("UBTI") to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a non-U.S. shareholder, will not qualify for any reduction in U.S. federal withholding tax. A shareholder will be subject to U.S. federal income tax on such inclusions notwithstanding any exemption from such income tax otherwise available under the Code. Any investment in residual interests of CMO that has elected to be treated as a REMIC can create complex tax problems, especially if the fund has state or local governments or other tax-exempt organizations as shareholders.

Income of a fund that would be UBTI if earned directly by a tax-exempt entity generally will not constitute UBTI when distributed to a tax-exempt shareholder of the fund. Notwithstanding the foregoing, a tax-exempt shareholder will recognize UBTI by virtue of its investment in the fund if shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code Section 514(b). Furthermore, a tax-exempt shareholder may recognize UBTI if the fund recognizes excess inclusion income derived from direct or indirect investments in REMIC residual interests or TMPs if the amount of such income recognized by the fund exceeds the fund's investment company taxable income (after taking into account deductions for dividends paid by the fund).

Under legislation enacted in December 2006, a charitable remainder trust ("CRT"), as defined in Section 664 of the Code, that realizes UBTI for a taxable year must pay an excise tax annually of an amount equal to such UBTI. Under IRS guidance issued in October 2006, a CRT will not recognize UBTI solely as a result of investing in a fund that recognizes excess inclusion income. Rather, if at any time during any taxable year a CRT (or one of certain other tax-exempt shareholders, such as the United States, a state or political subdivision, or an agency or instrumentality thereof, and certain energy cooperatives) is a record holder of a share in a fund that recognizes excess inclusion income, then the fund will be subject to a tax on that portion of its excess inclusion income for the taxable year that is allocable to such shareholders at the highest federal corporate income tax rate. The extent to which this IRS guidance remains applicable in light of the December 2006 legislation is unclear. To the extent permitted under the 1940 Act, the fund may elect to specially allocate any such tax to the applicable CRT, or other shareholder, and thus reduce such shareholder's distributions for the year by the amount of the tax that relates to such shareholder's interest in the fund. CRTs and other tax-exempt investors are urged to consult their tax advisors concerning the consequences of investing in the fund.

**Return of capital distributions**. If the fund makes a distribution in and with respect to any taxable year to a shareholder in excess of the fund's current and accumulated earnings and profits, the excess distribution will be treated as a return of capital to the extent of such shareholder's tax basis in its shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces a shareholder's tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares. Dividends and distributions on the fund's shares generally are subject to federal income tax as described herein to the extent they do not exceed the fund's realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder's investment. Such distributions are likely to occur in respect of shares purchased at a time when the fund's net asset value reflects gains that are either unrealized, or realized but not distributed. Such realized income and gains may be required to be distributed even when the fund's net asset value also reflects unrealized losses. Distributions are taxable to a shareholder even if they are paid from income or gains earned by the fund prior to the shareholder's investment (and thus included in the price paid by the shareholder).

**Securities issued or purchased at a discount.** Some debt obligations with a fixed maturity date of more than one year from the date of issuance (and zero-coupon debt obligations with a fixed maturity date of more than one year from the date of issuance) that are acquired by the fund will be treated as debt obligations that are issued originally at a discount. Generally, the amount of the original issue discount ("OID") is treated as interest income and is included in the fund's income (and required to be distributed by the fund) over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. In addition, payment-in-kind securities will give rise to income which is required to be distributed and is taxable even though the fund holding the security receives no interest payment in cash on the security during the year.

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Some debt obligations with a fixed maturity date of more than one year from the date of issuance that are acquired by the fund in the secondary market may be treated as having "market discount." Very generally, market discount is the excess of the stated redemption price of a debt obligation (or in the case of an obligation issued with OID, its "revised issue price") over the purchase price of such obligation. Generally any gain recognized on the disposition of, and any partial payment of principal on, a debt security having market discount is treated as ordinary income to the extent the gain, or principal payment, does not exceed the "accrued market discount" on such debt security. Alternatively, the fund may elect to accrue market discount currently, in which case the fund will be required to include the accrued market discount in the fund's income (as ordinary income) and thus distribute it over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. The rate at which the market discount accrues, and thus is included in the fund's income, will depend upon which of the permitted accrual methods the fund elects.

Some debt obligations with a fixed maturity date of one year or less from the date of issuance that are acquired by the fund may be treated as having "acquisition discount" (very generally, the excess of the stated redemption price over the purchase price) or OID. The fund will be required to include the acquisition discount or OID in income over the term of the debt security, even though payment of that amount is not received until a later time, usually when the debt security matures. The fund may make one or more of the elections applicable to debt obligations having acquisition discount or OID, which could affect the character and timing of recognition of income.

If the fund holds the foregoing kinds of obligations, or other obligations subject to special rules under the Code, it may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest the fund actually received. Such distributions may be made from the cash assets of the fund or, if necessary, by disposition of portfolio securities including at a time when it may not be advantageous to do so. These dispositions may cause the fund to realize higher amounts of short-term capital gains (generally taxed to shareholders at ordinary income tax rates) and, in the event the fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution than if the fund had not held such obligations.

**Securities purchased at a premium.** Very generally, where the fund purchases a bond at a price that exceeds the redemption price at maturity (*i*.*e*., a premium), the premium is amortizable over the remaining term of the bond. In the case of a taxable bond, if the fund makes an election applicable to all such bonds it purchases, which election is irrevocable without consent of the IRS, the fund reduces the current taxable income from the bond by the amortized premium and reduces its tax basis in the bond by the amount of such offset; upon the disposition or maturity of such bonds acquired on or after January 4, 2013, the fund is permitted to deduct any remaining premium allocable to a prior period. In the case of a tax-exempt bond, tax rules require the fund to reduce its tax basis by the amount of amortized premium.

**Higher-Risk obligations.** Investments in debt obligations that are at risk of or in default present special tax issues for the fund. Tax rules are not entirely clear about issues such as whether the fund should recognize market discount on a debt obligation and, if so, the amount of market discount the fund should recognize; when the fund may cease to accrue interest, OID or market discount, when and to what extent deductions may be taken for bad debts or worthless securities and how payments received on obligations in default should be allocated between principal and income. These and other related issues will be addressed by the fund when, as and if it invests in such obligations, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.

**Capital loss carryforward.** Distributions from capital gains generally are made after applying any available capital loss carryforwards. Capital loss carryforwards are reduced to the extent they offset current-year net realized capital gains, whether the fund retains or distributes such gains. If a fund incurs or has incurred capital losses in excess of capital gains ("net capital losses"), those losses will be carried forward to one or more subsequent taxable years; any such carryforward losses will retain their character as short-term or long-term.

**Foreign taxes.** If more than 50% of the fund's assets at taxable year end consists of the securities of foreign corporations, the fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries in respect of foreign securities the fund has held for at least the minimum period specified in the Code. A qualified fund of funds also may elect to pass through to its shareholders foreign taxes it has paid or foreign taxes passed through to it by any underlying fund that itself elected to pass through such taxes to shareholders (see "Funds of funds" above). In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholder's ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the

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amount of such taxes. In particular, shareholders must hold their fund shares (without protection from risk of loss) on the ex-dividend date and for at least 15 additional days during the 30-day period surrounding the ex-dividend date to be eligible to claim a foreign tax credit with respect to a given dividend. Shareholders who do not itemize on their U.S. federal income tax returns may claim a credit (but no deduction) for such foreign taxes. Even if the fund is eligible to make such an election for a given year, it may determine not to do so. However, even if the fund elects to pass through to its shareholders foreign tax credits or deductions, tax-exempt shareholders and those who invest in the fund through tax-advantaged accounts such as IRAs will not benefit from any such tax credit or deduction.

**Passive foreign investment companies.** Investments treated as equity for federal income tax purposes in certain "passive foreign investment companies" ("PFICs", as defined below) could subject the fund to a U.S. federal income tax (including interest charges) on distributions received from the company or on the proceeds from the disposition of its investment in such a company. This tax cannot be eliminated by making distributions to fund shareholders; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a "qualified electing fund." The QEF and mark-to-market elections may have the effect of accelerating the recognition of income (without the receipt of cash) and increasing the amount required to be distributed by the fund to avoid taxation. Making either of these elections therefore may require the fund to liquidate other investments to meet its distribution requirement, which may also accelerate the recognition of gain and affect the fund's total return. Dividends paid by PFICs will not be eligible to be treated as "qualified dividend income." If the fund indirectly invests in PFICs by virtue of the fund's investments in other funds, it may not make such PFIC elections; rather, the underlying funds directly investing in the PFICs would decide whether to make such elections.

Because it is not always possible to identify a foreign corporation as a PFIC, the fund may incur the tax and interest charges described above in some instances.

A PFIC is any foreign corporation: (i) 75 percent or more of the income of which for the taxable year is passive income, or (ii) the average percentage of the assets of which (generally by value, but by adjusted tax basis in certain cases) that produce or are held for the production of passive income is at least 50 percent. Generally, passive income for this purpose means dividends, interest (including income equivalent to interest), royalties, rents, annuities, the excess of gains over losses from certain property transactions and commodities transactions, and foreign currency gains. Passive income for this purpose does not include rents and royalties received by the foreign corporation from active business and certain income received from related persons.

**Foreign currency-denominated transactions and related hedging transactions.** The fund's transactions in foreign currencies, foreign currency-denominated debt obligations and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. Any such net gains could require a larger dividend toward the end of the calendar year. Any such net losses generally will reduce and potentially require the recharacterization of prior ordinary income distributions. Such ordinary income treatment may accelerate fund distributions to shareholders and increase the distributions taxed to shareholders as ordinary income. Any net ordinary losses so created cannot be carried forward by the fund to offset income or gains earned in subsequent taxable years.

**Sale or exchange of shares.** The sale or exchange of fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise the gain or loss on the sale or exchange of fund shares will be treated as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss generally will be disallowed for federal income tax purposes to the extent of any exempt-interest dividends received on such shares. This loss disallowance, however, does not apply with respect to dispositions of fund shares held for six months or less with respect to a regular exempt-interest dividend paid by the fund if such fund declares substantially all of its net tax-exempt income as exempt-interest dividends on a daily basis, and pays such dividends at least on a monthly basis. In addition, any loss (not already disallowed as provided in the preceding sentences) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any Capital Gain Dividends received (or deemed received) by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of fund shares will be disallowed if other shares of the same fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

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**Taxes on purchase and redemption of creation units**. Authorized Participants that are "dealers in securities" for U.S. federal income tax purposes are subject to different rules with respect to holding, acquiring and disposing of securities, including Creation Units. Authorized Participants should consult their own tax advisor with respect to transactions with a fund.

An Authorized Participant who exchanges securities for Creation Units generally will recognize a gain or a loss equal to the difference between the market value of the Creation Units at the time of the exchange and the sum of the exchanger's aggregate basis in the securities surrendered plus any Cash Component it pays. An Authorized Participant who exchanges Creation Units for securities will generally recognize a gain or loss equal to the difference between the exchanger's basis in the Creation Units and the sum of the aggregate market value of the securities received plus any cash equal to the difference between the NAV of the shares being redeemed and the value of the securities. The IRS, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing "wash sales" (for a person who does not mark-to-market its portfolio) or on the basis that there has been no significant change in economic position. Persons exchanging securities should consult their own tax advisor with respect to whether wash sale rules apply and when a loss might be deductible.

Any capital gain or loss realized upon the creation of Creation Units will generally be treated as long-term capital gain or loss if the securities exchanged for such Creation Units have been held for more than one year. Any capital gain or loss realized upon redemption of Creation Units is generally treated as long-term capital gain or loss if the shares have been held for more than one year and as short-term capital gain or loss if the shares have been held for one year or less. Any loss upon a redemption of Creation Units held for six months or less will be treated as a long-term capital loss to the extent of any amounts treated as distributions to the applicable Authorized Participant of long-term capital gain with respect to the Creation Units (including any amounts credited to the Authorized Participant as undistributed capital gains). In addition, any loss realized upon a redemption of fund shares held by an Authorized Participant for six months or less generally will be disallowed, to the extent of any exempt-interest dividends received by the Authorized Participant with respect to the shares.

The fund has the right to reject an order for a purchase of shares of the fund if the purchaser (or group of purchasers) would, upon obtaining the shares so ordered, own 80% or more of the outstanding shares of the fund and if, pursuant to Section 351 of the Code, the fund would have a basis in the securities contributed by such purchaser different from the market value of such securities on the date of deposit. The fund also has the right to require information necessary to determine beneficial share ownership for purposes of the 80% determination.

**Cost basis reporting.** Upon the redemption or exchange of a shareholder's shares in the fund, the fund, or, if such shareholder's shares are then held through a financial intermediary, the financial intermediary, will be required to provide the shareholder and the IRS with cost basis and certain other related tax information about the fund shares the shareholder redeemed or exchanged. This cost basis reporting requirement is effective for shares purchased, including through dividend reinvestment, on or after January 1, 2012. Shareholders should consult their financial representatives for more information regarding available methods for cost basis reporting and how to select a particular method. Shareholders should consult their tax advisors to determine which available cost basis method is best for them.

**Shares purchased through tax-qualified plans.** Special tax rules apply to investments through employer-sponsored retirement plans and other tax-qualified plans or tax-advantaged arrangements. Shareholders should consult their tax advisors to determine the suitability of shares of the fund as an investment through such plans and arrangements and the precise effect of an investment on their particular tax situation.

**Backup withholding.** The fund generally is required to withhold and remit to the U.S. Treasury a percentage of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the fund with a correct taxpayer identification number (TIN), who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is not subject to such withholding. The backup withholding rules may also apply to distributions that are properly reported as exempt-interest dividends. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder's U.S. federal income tax liability, provided the appropriate information is furnished to the IRS.

In order for a foreign investor to qualify for exemption from the backup withholding tax rates and for reduced withholding tax rates under income tax treaties, the foreign investor must comply with special certification and filing requirements. Foreign investors in a fund should consult their tax advisors in this regard.

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**Tax shelter reporting regulations.** Under U.S. Treasury regulations, if a shareholder recognizes a loss on disposition of fund shares of at least $2 million in any single taxable year or $4 million in any combination of taxable years for an individual shareholder or $10 million in any single taxable year or $20 million in any combination of taxable years for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.

**Non-U.S. shareholders.** Distributions by the fund to shareholders that are not "U.S. persons" within the meaning of the Code ("foreign shareholders") properly reported by the fund as (1) Capital Gain Dividends, (2) interest-related dividends, (3) short-term capital gain dividends, each as defined below and subject to certain conditions described below, and (4) exempt-interest dividends generally are not subject to withholding of U.S. federal income tax.

In general, the Code defines (1) "short-term capital gain dividends" as distributions of net short-term capital gains in excess of net long-term capital losses and (2) "interest-related dividends" as distributions from U.S. source interest income of types similar to those not subject to U.S. federal income tax if earned directly by an individual foreign shareholder, in each case to the extent such distributions are properly reported as such by the fund in a written notice to shareholders. The exceptions to withholding for Capital Gain Dividends and short-term capital gain dividends do not apply to (A) distributions to an individual foreign shareholder who is present in the United States for a period or periods aggregating 183 days or more during the year of the distribution and (B) distributions attributable to gain that is treated as effectively connected with the conduct by the foreign shareholder of a trade or business within the United States under special rules regarding the disposition of U.S. real property interests as described below. The exception to withholding for interest-related dividends does not apply to distributions to a foreign shareholder (A) that has not provided a satisfactory statement that the beneficial owner is not a U.S. person, (B) to the extent that the dividend is attributable to certain interest on an obligation if the foreign shareholder is the issuer or is a 10% shareholder of the issuer, (C) that is within certain foreign countries that have inadequate information exchange with the United States, or (D) to the extent the dividend is attributable to interest paid by a person that is a related person of the foreign shareholder and the foreign shareholder is a controlled foreign corporation. If the fund invests in other regulated investment companies that pay Capital Gain Dividends, short-term capital gain dividends or interest-related dividends to the fund, such distributions retain their character as not subject to withholding if properly reported when paid by the fund to foreign shareholders. The fund is permitted to report such part of its dividends as interest-related and/or short-term capital gain dividends as are eligible, but is not required to do so. In the case of shares held through an intermediary, the intermediary may withhold even if the fund reports all or a portion of a payment as an interest-related or short-term capital gain dividend to shareholders.

The fact that a fund achieves its goals by investing in underlying funds generally does not adversely affect the fund's ability to pass on to foreign shareholders the full benefit of the interest-related dividends and short-term capital gain dividends that it receives from its investments in underlying funds, except possibly to the extent that (1) interest-related dividends received by the fund are offset by deductions allocable to the fund's qualified interest income or (2) short-term capital gain dividends received by the fund are offset by the fund's net short- or long-term capital losses, in which case the amount of a distribution from the fund to a foreign shareholder that is properly reported as either an interest-related dividend or a short-term capital gain dividend, respectively, may be less than the amount that such shareholder would have received had they invested directly in the underlying funds.

Distributions by the fund to foreign shareholders other than Capital Gain Dividends, interest-related dividends, and short-term capital gain dividends and exempt-interest dividends (*e.g.*, dividends attributable to dividend and foreign-source interest income or to short-term capital gains or U.S.-source interest income to which the exception from withholding described above does not apply) are generally subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate).

Under U.S. federal tax law, a beneficial holder of shares who is a foreign shareholder is not, in general, subject to U.S. federal income tax on gains (and is not allowed a deduction for losses) realized on the sale of shares of the fund, unless (i) such gain is effectively connected with the conduct of a trade or business carried on by such holder within the United States; (ii) in the case of an individual holder, the holder is present in the United States for a period or periods aggregating 183 days or more during the year of the sale and certain other conditions are met; or (iii) the special rules relating to gain attributable to the sale or exchange of "U.S. real property interests" ("USRPIs") apply to the foreign shareholder's sale of shares of the fund (as described below).

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If a beneficial holder who is a foreign shareholder has a trade or business in the United States, and the dividends are effectively connected with the conduct by the beneficial holder of a trade or business in the United States, the dividend will be subject to U.S. federal net income taxation at regular income tax rates and, in the case of a foreign corporation, may also be subject to a branch profits tax. If a foreign shareholder is eligible for the benefits of a tax treaty, any effectively connected income or gain will generally be subject to U.S. federal income tax on a net basis only if it is also attributable to a permanent establishment maintained by the shareholder in the United States. More generally, foreign shareholders who are residents in a country with an income tax treaty with the United States may obtain different tax results than those described herein, and are urged to consult their tax advisors.

Special rules would apply if the fund were a qualified investment entity ("QIE") because it is either a "U.S. real property holding corporation" ("USRPHC") or would be a USRPHC but for the operation of certain exceptions to the definition of USRPIs described below. Very generally, a USRPHC is a domestic corporation that holds USRPIs the fair market value of which equals or exceeds 50% of the sum of the fair market values of the corporation's USRPIs, interests in real property located outside the United States, and other trade or business assets. USRPIs generally are defined as any interest in U.S. real property and any interest (other than solely as a creditor) in a USRPHC or, very generally, an entity that has been a USRPHC in the last five years. A fund that holds, directly or indirectly, significant interests in REITs may be a USRPHC. Interests in domestically controlled QIEs, including regulated investment companies and REITs that are QIEs, not-greater-than-10% interests in publicly traded classes of stock in REITs and not-greater-than-5% interests in publicly traded classes of stock in regulated investment companies generally are not USRPIs, but these exceptions do not apply for purposes of determining whether a fund is a QIE.

If an interest in the fund were a USRPI, the fund would be required to withhold U.S. tax on the proceeds of a share redemption by a greater-than-5% foreign shareholder, in which case such foreign shareholder generally would also be required to file U.S. tax returns and pay any additional taxes due in connection with the redemption.

If the fund were a QIE under a special "look-through" rule, any distributions by the fund to a foreign shareholder (including, in certain cases, distributions made by the fund in redemption of its shares) attributable directly or indirectly to (i) distributions received by the fund from a lower-tier regulated investment company or REIT that the fund is required to treat as USRPI gain in its hands and (ii) gains realized on the disposition of USRPIs by the fund would retain their character as gains realized from USRPIs in the hands of the fund's foreign shareholders and would be subject to U.S. tax withholding. In addition, such distributions could result in the foreign shareholder being required to file a U.S. tax return and pay tax on the distributions at regular U.S. federal income tax rates. The consequences to a foreign shareholder, including the rate of such withholding and character of such distributions (*e.g.*, as ordinary income or USRPI gain), would vary depending upon the extent of the foreign shareholder's current and past ownership of the fund.

Foreign shareholders of the fund also may be subject to "wash sale" rules to prevent the avoidance of the tax-filing and -payment obligations discussed above through the sale and repurchase of fund shares.

Foreign shareholders should consult their tax advisers and, if holding shares through intermediaries, their intermediaries, concerning the application of these rules to their investment in the fund.

**Other reporting and withholding requirements**. Sections 1471-1474 of the Code and the U.S. Treasury and IRS guidance issued thereunder (collectively, "FATCA") generally require a fund to obtain information sufficient to identify the status of each of its shareholders under FATCA or under an applicable intergovernmental agreement (an "IGA") between the United States and a foreign government. If a shareholder fails to provide the requested information or otherwise fails to comply with FATCA or an IGA, the fund may be required to withhold under FATCA at a rate of 30% with respect to that shareholder on ordinary dividends it pays. The IRS and the Department of Treasury have issued proposed regulations providing that these withholding rules will not be applicable to the gross proceeds of share redemptions or Capital Gain Dividends the fund pays. If a payment by the fund is subject to FATCA withholding, the fund is required to withhold even if such payment would otherwise be exempt from withholding under the rules applicable to foreign shareholders described above (*e.g.*, short-term capital gain dividends and interest-related dividends).

Each prospective investor is urged to consult its tax advisor regarding the applicability of FATCA and any other reporting requirements with respect to the prospective investor's own situation, including investments through an intermediary.

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**General Considerations.** The U.S. federal income tax discussion set forth above is for general information only. Prospective investors should consult their tax advisers regarding the specific federal tax consequences of purchasing, holding, and disposing of shares of the fund, as well as the effects of state, local and foreign tax law and any proposed tax law changes.

**MANAGEMENT** 

**Trustees** 

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>**  | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin**<br> **Templeton Funds**<br> **Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>**  | **Other Directorships Held by Trustee** |
| &nbsp;&nbsp;&nbsp;**Liaquat Ahamed** (Born 1952), Trustee since 2012 | Author; won Pulitzer Prize for *Lords of Finance: The Bankers Who Broke the World.* | 101 | Chair of the Sun Valley Writers Conference, a literary not-for-profit organization; and a Trustee of the Journal of Philosophy. |
| &nbsp;&nbsp;&nbsp;**Barbara M. Baumann** (Born 1955), Trustee since 2010, Vice Chair from 2022 to 2024, Chair since 2024 | President of Cross Creek Energy Corporation, a strategic consultant to domestic energy firms and direct investor in energy projects. | 101 | Director of Devon Energy Corporation, a publicly traded independent natural gas and oil exploration and production company; Director of National Fuel Gas Company, a publicly traded energy company that engages in the production, gathering, transportation, distribution and marketing of natural gas; Senior Advisor to the energy private equity firm First Reserve; member of the Finance Committee of the Children's Hospital of Colorado; member of the Investment Committee of the Board of The Denver Foundation; and previously a Director of publicly traded companies Buckeye Partners LP, UNS Energy Corporation, CVR Energy Company, and SM Energy Corporation. |
| &nbsp;&nbsp;&nbsp;**Katinka Domotorffy** (Born 1975), Trustee since 2012 | Voting member of the Investment Committees of the Anne Ray Foundation and Margaret A. Cargill Foundation, part of the Margaret A. Cargill Philanthropies. | 101 | Director of the Great Lakes Science Center and of College Now Greater Cleveland. |
| &nbsp;&nbsp;&nbsp;**Catharine Bond Hill** (Born 1954), Trustee since 2017 | Managing Director of Ithaka S+R, a not-for-profit service that helps the academic community navigate economic and technological change. From 2006 to 2016, Dr. Hill served as the 10th president of Vassar College. | 101 | Director of Yale-NUS College; and Trustee of Yale University. |
| &nbsp;&nbsp;&nbsp;**Gregory G. McGreevey** (Born 1962), Trustee | Until 2023, Senior Managing Director, Investments, Invesco | 101 | Previously, a Director of Invesco Mortgage Capital, Inc., a publicly traded |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>**  | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin**<br> **Templeton Funds**<br> **Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>**  | **Other Directorships Held by Trustee** |
| &nbsp;&nbsp;&nbsp;since 2024 | Ltd., a global investment firm. |  | real estate investment trust. |
| &nbsp;&nbsp;&nbsp;**\*Jennifer Williams Murphy** (Born 1964), Trustee since 2022 | Chief Executive Officer and Founder of Runa Digital Assets, LLC, an institutional investment advisory firm specializing in active management of digital assets. Until 2021, Chief Operating Officer of Western Asset Management, LLC, a global investment adviser, and Chief Executive Officer and President of Western Asset Mortgage Capital Corporation, a mortgage finance real estate investment trust. | 101 | Previously, a Director of Western Asset Mortgage Capital Corporation. |
| &nbsp;&nbsp;&nbsp;**Marie Pillai** (Born 1954), Trustee since 2022 | Senior Advisor, Hunter Street Partners, LP, an asset-oriented private investment firm; Director of Choice Bank, a private, community bank based in North Dakota. Until 2019, Vice President, Chief Investment Officer and Treasurer of General Mills, Inc., a global food company. | 101 | Member of the Investment Committee of the Bush Foundation, a nonprofit organization supporting community problem-solving in Minnesota, North Dakota and South Dakota; Member of the Finance Council and Corporate Board of the Archdiocese of Saint Paul and Minneapolis; Member of the Curriculum Committee of the Center for Board Certified Fiduciaries, a public benefit corporation providing coursework for developing fiduciaries; previously a Board Member of Catholic Charities of St. Paul and Minneapolis; former Director of the Catholic Community Foundation of Minnesota; and former Investment Advisory Board Member of the University of Minnesota. |
| &nbsp;&nbsp;&nbsp;**George Putnam III** (Born 1951), Trustee since 1984 | Chair of New Generation Research, Inc., a publisher of financial advisory and other research services, and President of New Generation Advisors, LLC, a registered investment adviser to private funds. | 101 | Director of The Boston Family Office, LLC, a registered investment adviser; a Director of the Gloucester Marine Genomics Institute; a Trustee of the Lowell Observatory Foundation; and previously a Trustee of the Marine Biological Laboratory. |
| &nbsp;&nbsp;&nbsp;**Manoj P. Singh** (Born 1952), Trustee since 2017 | Until 2015, Chief Operating Officer and Global Managing Director at Deloitte Touche Tohmatsu, Ltd., a global professional services organization, serving on the Deloitte U.S. Board of Directors and the boards of Deloitte member | 101 | Director of ReNew Energy Global Plc, a publicly traded renewable energy company; Director of Abt Associates, a global research firm working in the fields of health, social and environmental policy, and international development; Trustee of Carnegie Mellon University; |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>**  | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin**<br> **Templeton Funds**<br> **Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>**  | **Other Directorships Held by Trustee** |
|  | firms in China, Mexico and Southeast Asia. |  | Director of Pratham USA, an organization dedicated to children's education in India; member of the advisory board of Altimetrik, a business transformation and technology solutions firm; and Director of DXC Technology, a global IT services and consulting company. |
| &nbsp;&nbsp;&nbsp;**Mona K. Sutphen** (Born 1967), Trustee since 2020 | Partner, Investment Strategies at The Vistria Group, a private investment firm focused on middle- market companies in the healthcare, education, and financial services industries. From 2014 to 2018, Partner at Macro Advisory Partners, a global consulting firm. | 101 | Director of Spotify Technology S.A., a publicly traded audio content streaming service; Director of Unitek Learning, a private nursing and medical services education provider in the United States; Board Member, International Rescue Committee; Co-Chair of the Board of Human Rights First; Trustee of Mount Holyoke College; member of the Advisory Board for the Center on Global Energy Policy at Columbia University's School of International and Public Affairs; previously Director of Pattern Energy and Pioneer Natural Resources, publicly traded energy companies; and previously Managing Director of UBS AG. |
| &nbsp;&nbsp;&nbsp; **Interested Trustees** |  |  |  |
| &nbsp;&nbsp;&nbsp;**\*\*Robert L. Reynolds** (Born 1952), Trustee since 2008 | Chair of Great-West Lifeco U.S. LLC. Prior to 2019, also President and Chief Executive Officer of Great-West Financial, a financial services company that provides retirement savings plans, life insurance, and annuity and executive benefits products, and of Great-West Lifeco U.S. LLC, a holding company that owns Putnam Investments, LLC and Great-West Financial, and a member of Great-West Financial's Board of Directors. Until 2023, President and Chief Executive Officer of Putnam Investments, LLC, President and Chief Executive Officer of Putnam Management, and member of Putnam Investments' Board of Directors. | 101 | Director of the Concord Museum; Director of Dana-Farber Cancer Institute; Director of the U.S. Ski & Snowboard Foundation; Chair of the Boston Advisory Board of the American Ireland Fund; Council Co-Chair of the American Enterprise Institute; Member of U.S. Chamber of Commerce, Center for Capital Markets Competitiveness; Chair of Massachusetts High Technology Council; Member of the Chief Executives Club of Boston; Member of the Massachusetts General Hospital President's Council; Chairman of the Board of Directors of the Ron Burton Training Village; Director and former Chair of the Massachusetts Competitive Partnership; former Chair of the West Virginia University Foundation; and former Executive Committee Member of the Greater Boston Chamber of |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>**  | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin**<br> **Templeton Funds**<br> **Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>**  | **Other Directorships Held by Trustee** |
|  |  |  | Commerce. |
| &nbsp;&nbsp;&nbsp;**\*\*\* Jane E. Trust** (Born 1962), Trustee since 2024 | Since 2020, Senior Vice President, Fund Board Management, Franklin Templeton. Since 2015, Officer and/or Trustee/Director of 123 funds associated with Franklin Templeton Fund Advisor, LLC ("FTFA") or its affiliates, and President and Chief Executive Officer of FTFA. From 2018 to 2020, Senior Managing Director of Legg Mason & Co., LLC ("Legg Mason & Co."). From 2016 to 2018, Managing Director of Legg Mason & Co. In 2015, Senior Vice President of FTFA. | 224 | None. |

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<sup>1</sup> The address of each Trustee is 100 Federal Street, Boston, MA 02110.

<sup>2</sup> Each Trustee serves for an indefinite term, until his or her resignation, retirement during the year he or she reaches age 75, death or removal.

<sup>3</sup> The Franklin Templeton funds complex is composed of the registered investment companies advised by the Investment Manager or by its affiliates.

\* Ms. Murphy is the founder, controlling member, and Chief Executive Officer of Runa Digital Assets, LLC ("RDA"), the investment manager of Runa Digital Partners, LP ("RDP"), a private investment fund. Ms. Murphy also holds a controlling interest in RDP's general partner and is a limited partner in RDP. A subsidiary of Franklin Resources, Inc. ("Franklin Templeton") and certain individuals employed by Franklin Templeton or its affiliates have made passive investments as limited partners in RDP (one of whom serves on the advisory board for RDA, which has no governance or oversight authority over RDA), representing in the aggregate approximately 33% of RDP as of October 31, 2024. In addition, if certain conditions are met, Franklin Templeton will be entitled to receive a portion of any incentive compensation allocable to RDP's general partner. For so long as Franklin Templeton maintains its investment in RDP, Ms. Murphy also has agreed upon request to advise and consult with Franklin Templeton and its affiliates on the market for digital assets. Ms. Murphy provides similar service to other limited partners in RDP that request her advice. Ms. Murphy also is entitled to receive deferred cash compensation in connection with her prior employment by an affiliate of Franklin Templeton, which employment ended at the end of 2021. With regard to Ms. Murphy, the relationships described above may give rise to a potential conflict of interest with respect to the funds.

\*\* Trustee who is an "interested person" (as defined in the 1940 Act) of the fund and the Investment Manager. Mr. Reynolds is deemed an "interested person" by virtue of his position as an officer of the fund and his direct beneficial interest in shares of Franklin Templeton, of which the Investment Manager is an indirect wholly-owned subsidiary. Mr. Reynolds is the President of your fund and each of the other Putnam funds, and prior to January 1, 2024, Mr. Reynolds was President and Chief Executive Officer of Putnam Management and Putnam Investments, LLC ("Putnam Investments"), the previous parent company to Putnam Management.

\*\*\* Trustee who is an "interested person" (as defined in the 1940 Act) of the fund and the Investment Manager. Ms. Trust is deemed an "interested person" by virtue of her positions with certain affiliates of the Investment Manager.

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**Trustee Qualifications** 

Each of the fund's Trustees, with the exception of Ms. Trust and Mr. McGreevey, was most recently elected by shareholders of the fund during 2022, although most of the Trustees have served on the Board for many years. The Board Policy and Nominating Committee is responsible for recommending proposed nominees for election to the full Board of Trustees for its approval. As part of its deliberative process, the Committee considers the experience, qualifications, skills and attributes, including diversity of background, experience, and views, that it determines would most benefit the funds overseen by the Board of Trustees at the time.

In recommending the election of the board members as Trustees, the Committee generally considered the educational, business and professional experience of each Trustee in determining his or her qualifications to serve as a Trustee of the fund, including the Trustee's record of service as a director or trustee of public and private organizations. (This included, but was not limited to, consideration of the specific experience noted in the preceding table.) In the case of most members of the Board, the Committee considered his or her previous service as a member of the Board of Trustees, which demonstrated a high level of diligence and commitment to the interests of fund shareholders and an ability to work effectively and collegially with other members of the Board.

The Committee also considered, among other factors, the particular attributes described below with respect to the various individual Trustees and considered the attributes as indicative of the person's ability to deal effectively with the types of financial, regulatory, and/or investment matters that typically arise in the course of a Trustee's work:

<u>Independent Trustees</u> 

Liaquat Ahamed -- Mr. Ahamed's experience as Chief Executive Officer of a major investment management organization and as head of the investment division at the World Bank, as well as his experience as an author of economic literature.

Barbara M. Baumann -- Ms. Baumann's experience in the energy industry as a consultant, an investor, and in both financial and operational management positions at a global energy company, and her service as a director of multiple NYSE companies.

Katinka Domotorffy -- Ms. Domotorffy's experience as Chief Investment Officer and Global Head of Quantitative Investment Strategies at a major asset management organization.

Catharine Bond Hill -- Dr. Hill's education and experience as an economist and as president and provost of colleges in the United States.

Gregory G. McGreevey -- Mr. McGreevey's experience as a Senior Managing Director of a global investment firm and as a director of a publicly traded real estate investment trust.

Jennifer Williams Murphy -- Ms. Murphy's experience as Chief Operating Officer of a major global investment management organization and as Chief Executive Officer of an investment advisory firm specializing in digital assets.

Marie Pillai -- Ms. Pillai's experience as Vice President, Chief Investment Officer, and Treasurer of a global food company, her experience in similar positions at a global engineering company, and her experience in corporate and operational finance roles at a global consumer products company.

George Putnam III -- Mr. Putnam's training and experience as an attorney, his experience as the founder and Chief Executive Officer of an investment management firm and his experience as an author of various publications on the subject of investments.

Manoj P. Singh -- Mr. Singh's experience as chief operating officer and global managing director of a global professional services organization that provided accounting, consulting, tax, risk management, and financial advisory services.

Mona K. Sutphen -- Ms. Sutphen's extensive experience advising corporate, philanthropic and institutional investors on the intersection of geopolitics, policy and markets, as well as her prior service as White House Deputy Chief of Staff for Policy and as a US Foreign Service Officer, her work advising financial services companies on macro risks, and her service as director of public companies.

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<u>Interested Trustees</u> 

Robert L. Reynolds -- Mr. Reynolds's extensive experience as a senior executive of a major mutual fund organization in the United States and his previous role as President and Chief Executive Officer of Putnam Management and Putnam Investments, LLC, the previous parent company to Putnam Management and PAC.

Jane E. Trust -- Ms. Trust's investment management and risk oversight experience as an executive and portfolio manager and leadership roles within Franklin Templeton and affiliated entities.

**Officers** 

The other officers of the fund, in addition to Robert L. Reynolds, the fund's President, are shown below. All of the officers of your fund listed below are employees of the Investment Manager or its affiliates or are members of the Trustees' independent administrative staff.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year of Birth, Position(s)**<br> **Held with Fund** | **Length of Service**<br> **with the Putnam**<br> **Funds<sup>2</sup>**  | **Principal Occupation(s) During Past 5 Years and**<br> **Position(s) with Fund's Investment Adviser and**<br> **Distributor<sup>3</sup>**  |
| &nbsp;&nbsp;&nbsp; **Jonathan S. Horwitz<sup>4</sup>** (Born 1955)<br> Executive Vice President, Principal Executive Officer, and Compliance Liaison | Since 2004 | Executive Vice President, Principal Executive Officer, and Compliance Liaison, The Putnam Funds. |
| &nbsp;&nbsp;&nbsp; **Stephen J. Tate** (Born 1974)<br> Vice President and Chief Legal Officer | Since 2021 | Deputy General Counsel, Franklin Templeton, and Secretary, Putnam U.S. Holdings I, LLC ("Putnam Holdings") and Putnam Management (2024 – Present). General Counsel and related positions, Putnam Investments, Putnam Management and Putnam Retail Management (2004-2023). |
| &nbsp;&nbsp;&nbsp; **James F. Clark<sup>3</sup>** (Born 1974)<br> Vice President and Chief Compliance Officer | Since 2016 | Chief Compliance Officer, Putnam Holdings and Putnam Management (2016 – Present). Associate General Counsel, Putnam Investments, Putnam Management and Putnam Retail Management (2003- 2015). |
| &nbsp;&nbsp;&nbsp; **Michael J. Higgins<sup>4</sup>** (Born 1976)<br> Vice President, Treasurer, and Clerk | Since 2010 | Vice President, Treasurer, and Clerk, The Putnam Funds. |
| &nbsp;&nbsp;&nbsp; **Kevin R. Blatchford** (Born 1967)<br> Vice President and Assistant Treasurer | Since 2024 | Director, Financial Reporting, Putnam Holdings. |
| &nbsp;&nbsp;&nbsp; **Graham Cole** (Born 1984)<br> Vice President and Assistant Treasurer | Since 2024 | Director, Global Fund Tax, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Lindsey Hicks** (Born 1979)<br> Vice President and Assistant Treasurer | Since 2024 | Controller, Fund Administration and Oversight, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Monica Krogh** (Born 1981)<br> Vice President and Assistant Treasurer | Since 2024 | Assistant Treasurer, Fund Administration and Oversight, Franklin Templeton. |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year of Birth, Position(s)**<br> **Held with Fund** | **Length of Service**<br> **with the Putnam Funds<sup>2</sup>**  | **Principal Occupation(s) During Past 5 Years and**<br> **Position(s) with Fund's Investment Adviser and**<br> **Distributor<sup>3</sup>**  |
| &nbsp;&nbsp;&nbsp; **Kelley Hunt** (Born 1984)<br>AML Compliance Officer | Since 2024 | Manager, U.S. Financial Crime Compliance, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Jeffrey White** (Born 1971)<br>Vice President, Principal Financial Officer, Principal Accounting Officer, and Assistant Treasurer | Since 2024 | Vice President, Fund Administration and Reporting, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Denere P. Poulack<sup>4</sup>** (Born 1968)<br>Assistant Vice President, Assistant Clerk, and<br> Assistant Treasurer | Since 2004 | Assistant Vice President, Assistant Clerk, and Assistant Treasurer, The Putnam Funds. |

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<sup>1</sup> The address of each Officer, other than as noted below, is 100 Federal Street, Boston, MA 02110. Mr. Cole's address is 5000 Yonge St, Toronto, ON, Canada M2N0A7. Ms. Hicks address is 3355 Data Drive, Rancho Cordova, CA 95670. Ms. Krogh and Mr. Wheeler's address is 300 S.E. 2nd Street, Ft. Lauderdale, FL 33301. Ms. Hunt's address is 100 Fountain Parkway, St. Petersburg, FL 33716. Mr. White's address is One Franklin Parkway, San Mateo, CA 94403.

<sup>2</sup> Each officer serves for an indefinite term, until his or her resignation, retirement, death or removal.

<sup>3</sup> Prior positions and/or officer appointments with the fund or the fund's investment adviser and distributor have been omitted.

<sup>4</sup> Officers of the fund indicated are members of the Trustees' independent administrative staff. Compensation for these individuals is fixed by the Trustees and reimbursed to the Investment Manager by the funds, except in certain cases where a fund has a unitary fee and/or expense limitation arrangement whereby the Investment Manager is responsible for all or a portion of these individuals' compensation.

Except as stated above, the principal occupations of the officers and Trustees for the last five years have been with the employers as shown above, although in some cases they have held different positions with such employers.

**Leadership Structure and Standing Committees of the Board of Trustees** 

**For details regarding the number of times the standing committees of the Board of Trustees met during a fund's last fiscal year, see "Trustee responsibilities and fees" in Part I of this SAI.** 

**Board Leadership Structure**. Currently, 10 of the 12 Trustees of your fund are Independent Trustees, meaning that they are not considered "interested persons" of your fund or the Investment Manager. These Independent Trustees must vote separately to approve all financial arrangements and other agreements with the Investment Manager and other affiliated parties. The role of independent trustees has been characterized as that of a "watchdog" charged with oversight to protect shareholders' interests against overreaching and abuse by those who are in a position to control or influence a fund. Your fund's Independent Trustees meet regularly as a group in executive session (*i.e*., without representatives of the Investment Manager or its affiliates present). An Independent Trustee currently serves as chair of the Board.

Taking into account the number, the diversity and the complexity of the funds overseen by the Board and the aggregate amount of assets under management, your fund's Trustees have determined that the efficient conduct of the Board's affairs makes it desirable to delegate responsibility for certain specific matters to committees of the Board. The Executive Committee, Audit, Compliance and Risk Committee, and Board Policy and Nominating Committee are authorized to take action on certain matters as specified in their charters or in policies and procedures relating to the governance of the funds; with respect to other matters, these committees review and evaluate and make recommendations to the Trustees as they deem appropriate. The other committees also review and evaluate matters specified in their charters and make recommendations to the Trustees as they deem appropriate. Each committee may utilize the resources of your fund's independent staff, counsel and independent

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registered public accountants as well as other experts. The committees meet as often as appropriate, either in conjunction with regular meetings of the Trustees or otherwise. The membership and chair of each committee are appointed by the Trustees upon recommendation of the Board Policy and Nominating Committee. Each committee is chaired by an Independent Trustee and, except as noted below, the membership and chairs of each committee consist exclusively of Independent Trustees.

The Trustees have determined that this committee structure also allows the Board to focus more effectively on the oversight of risk as part of its broader oversight of the fund's affairs. While risk management is the primary responsibility of the Investment Manager, the Trustees receive reports regarding investment risks, compliance risks and other risks. The Board and certain committees also meet periodically with the funds' Chief Compliance Officer to receive compliance reports. In addition, the Board and its Investment Oversight Committees meet periodically with the portfolio managers of the funds to receive reports regarding the management of the funds. The Board's committee structure allows separate committees to focus on different aspects of these risks and their potential impact on some or all of the funds and to discuss with the Investment Manager how it monitors and controls risks.

The Board recognizes that the reports it receives concerning risk management matters are, by their nature, typically summaries of the relevant information. Moreover, the Board recognizes that not all risks that may affect your fund can be identified in advance; that it may not be practical or cost effective to eliminate or to mitigate certain risks; that it may be necessary to bear certain risks (such as investment-related risks) in seeking to achieve your fund's investment objectives; and that the processes, procedures and controls employed to address certain risks may be limited in their effectiveness. As a result of the foregoing and for other reasons, the Board's risk management oversight is subject to substantial limitations.

**Audit, Compliance and Risk Committee**. The Audit, Compliance and Risk Committee provides oversight on matters relating to the integrity of the funds' financial statements, compliance with legal and regulatory requirements, the performance of each fund's internal audit function, Codes of Ethics issues, and certain aspects of overseeing the Investment Manager's risk assessment and risk management. This oversight is discharged by regularly meeting with management and the funds' independent registered public accountants and remaining current with respect to industry developments. Duties of this Committee also include the review and evaluation of all matters and relationships pertaining to the funds' independent registered public accountants, including their independence, and the review of the Investment Manager's oversight of the funds' significant other service providers (unless another committee, or the Board, has this responsibility). The Committee also oversees all dividends and distributions by the funds by making recommendations to the Trustees regarding the amount and timing of dividends and distributions paid by the funds, and determining such matters when the Trustees are not in session. The Committee also oversees the policies and procedures pursuant to which the Investment Manager prepares recommendations for dividends and distributions, and meets regularly with representatives of the Investment Manager to review the implementation of these policies and procedures. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The members of the Committee include only Independent Trustees. Each member of the Committee also is "independent," as that term is interpreted for purposes of Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the listing standards of the NYSE. The Board has adopted a written charter for the Committee. The current members are Messrs. Singh (Chair) and McGreevey and Mses. Pillai and Sutphen.

**Board Policy and Nominating Committee.** The Board Policy and Nominating Committee reviews matters pertaining to the operations of the Board of Trustees and its Committees, the compensation of the Trustees and their staff, and the conduct of legal affairs for the funds. The Committee evaluates and recommends all candidates for election as Trustees and recommends the appointment of members and chairs of each board committee. The Committee will consider nominees for Trustee recommended by shareholders of a fund provided that such recommendations are submitted by the date disclosed in the fund's proxy statement and otherwise comply with applicable securities laws, including Rule 14a-8 under the Exchange Act. The Committee also reviews policy matters affecting the operation of the Board and its independent staff. In addition, the Committee oversees the voting of proxies associated with portfolio investments of the funds with the goal of ensuring that these proxies are voted in the best interest of the funds' shareholders. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee generally believes that the Board benefits from diversity of background, experience and views among its members, and considers this as a factor in evaluating the composition of the Board, but has not adopted any specific policy in this regard. The Committee is composed entirely of Independent Trustees. The current members are Dr. Hill (Chair), Mses. Baumann and Sutphen, and Mr. Putnam.

**Brokerage Committee**. The Brokerage Committee reviews the funds' policies regarding the execution of portfolio trades and the Investment Manager's (and its affiliates') practices and procedures relating to the implementation of those policies. The Committee reviews periodic reports on the cost and quality of execution of portfolio transactions and the extent to which

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brokerage commissions have been used (i) by the Investment Manager (or its affiliates) to obtain brokerage and research services generally useful to it (or its affiliates) in managing the portfolios of the funds and of its other clients, and (ii) by the funds to pay for certain fund expenses. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee is composed entirely of Independent Trustees. The current members are Messrs. Ahamed (Chair) and Putnam, Mses. Baumann and Domotorffy, and Dr. Hill.

**Contract Committee**. The Contract Committee reviews and evaluates at least annually arrangements pertaining to (i) the engagement of the Investment Manager and its affiliates to provide services to the funds, (ii) the expenditure of the funds' assets for distribution purposes pursuant to Distribution Plans of the funds, and (iii) the engagement of other persons to provide material services to the funds, including in particular those instances where the cost of services is shared between the funds and the Investment Manager and its affiliates or where the Investment Manager or its affiliates have a material interest. The Committee also reviews the proposed organization of new fund products and proposed structural changes to existing funds. In addition, the Committee also reviews communications with, and the quality of services provided to, shareholders and oversees the marketing and sale of fund shares by Franklin Distributors. The Committee reports and makes recommendations to the Trustees regarding these matters. The Committee is composed entirely of Independent Trustees. The current members are Messrs. Putnam (Chair) and Ahamed, Mses. Baumann and Domotorffy, and Dr. Hill.

**Exchange-Traded Fund Committee.** The Exchange-Traded Fund Committee is responsible for assisting the Trustees in their oversight of the funds that are ETFs. The Committee reviews matters arising from time to time relating to the ETFs that are not otherwise within the general subject matter purview of another committee, including, but not limited to: (i) service provider relationships that are specific to the ETFs, (ii) business, industry, legal, and regulatory matters that are specific to the ETFs, (iii) proposals relating to new ETFs, and (iii) transactions involving ETFs. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The current members are Messrs. Ahamed (Chair), McGreevey, and Reynolds, Dr. Hill, and Mses. Domotorffy, Murphy, Sutphen and Trust.

**Executive Committee**. The functions of the Executive Committee are twofold. The first is to ensure that the funds' business may be conducted at times when it is not feasible to convene a meeting of the Trustees or for the Trustees to act by written consent. The Committee may exercise any or all of the power and authority of the Trustees when the Trustees are not in session. The second is to review annual and ongoing goals, objectives and priorities for the Board and to facilitate coordination of all efforts between the Trustees and the Investment Manager on behalf of the shareholders of the funds. The Committee currently consists of Ms. Baumann (Chair) and Messrs. Putnam and Singh.

**Investment Oversight Committees.** The Investment Oversight Committees regularly meet with investment personnel of the Investment Manager and its affiliates to review the investment performance and strategies of the funds in light of their stated goals and policies. The Committees seek to identify any compliance issues that are unique to the applicable categories of funds and work with the appropriate board committees to ensure that any such issues are properly addressed. The Committees review the proposed investment objectives, policies and restrictions of new fund products and proposed changes to investment objectives, policies and restrictions of existing funds. The current members of Investment Oversight Committee A are Mses. Domotorffy (Chair), Murphy and Sutphen, and Messrs. Ahamed, Reynolds, and Singh, and the current members of Investment Oversight Committee B are Mses. Pillai (Chair), Baumann, and Trust, Dr. Hill, and Messrs. McGreevey and Putnam.

**Pricing Committee.** The Pricing Committee oversees the valuation of assets of the funds overseen by the Board of Trustees and reviews the funds' policies and procedures for achieving accurate and timely pricing of fund shares. The Committee oversees implementation of these policies, including fair value determinations of individual securities made by the Investment Manager or other designated agents of the funds. The Committee also reviews (i) compliance by money market funds with Rule 2a-7 under the 1940 Act, (ii) in-kind redemptions by the fund affiliates, (iii) the correction of occasional pricing errors, and (iv) the Investment Manager's oversight of pricing vendors. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The current members are Messrs. Singh (Chair), McGreevey, and Reynolds and Mses. Murphy, Pillai, Sutphen, and Trust.

**Indemnification** 

Subject to certain exceptions specified therein, the Trust's Amended and Restated Agreement and Declaration of Trust provides that the Trust and each fund will indemnify its Trustees and officers to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him or her in connection with any claim, action, suit or proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a trustee or officer of the Trust

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and against amounts paid or incurred by him or her in the settlement thereof. Each fund, at its expense, provides liability insurance for the benefit of its Trustees and officers.

**For details of Trustees' fees paid by the fund and information concerning retirement guidelines for the Trustees, see "Charges and expenses" in Part I of this SAI.** 

**The Investment Manager and its Affiliates** 

*Putnam Investment Management, LLC* 

If so disclosed in the fund's prospectus, Putnam Management serves as Investment Manager to the fund. Putnam Management is one of America's oldest money management firms. Putnam Management has been managing mutual funds since 1937.

*Franklin Advisers, Inc.* 

If so disclosed in the fund's prospectus, Franklin Advisers serves as Investment Manager to the fund. Franklin Advisers, Inc., a global investment organization, is a California corporation formed on October 31, 1985.

**Additional information about Putnam Management and Franklin Advisers** 

Putnam Management and Franklin Advisers are indirect, wholly-owned subsidiaries of Franklin Templeton, a Delaware corporation. Franklin Templeton, whose principal executive offices are at One Franklin Parkway, San Mateo, California 94403, is a global investment management organization.

Trustees and officers of the fund who are also officers of Putnam Management, Franklin Advisers or their affiliates or who are stockholders of Franklin Templeton or its affiliates will benefit from the advisory fees, sales commissions, distribution fees and transfer agency fees paid or allowed by the fund.

**The Management Contract** 

Under a management contract between the fund and the Investment Manager (the "Management Contract"), subject to such policies as the Trustees may determine, the Investment Manager, at its expense, furnishes continuously an investment program for the fund and makes investment decisions on behalf of the fund. Subject to the control of the Trustees, the Investment Manager also manages, supervises and conducts the other affairs and business of the fund, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully, furnishes office space and equipment, provides bookkeeping and clerical services (including determination of the fund's net asset value, but excluding shareholder accounting services) and typically places orders for the purchase and sale of the fund's portfolio securities (in some cases, Putnam Management and Franklin Advisers, in their capacities as sub-advisers to a fund, may place orders for the purchase and sale of the fund's portfolio securities, and references elsewhere in this SAI to the Investment Manager placing orders for the purchase and sale of portfolio securities shall be deemed to include Putnam Management and Franklin Advisers in their capacities as sub-advisers, as appropriate in the context). The Investment Manager may place fund portfolio transactions with broker-dealers that furnish the Investment Manager, without cost to it, certain research services of value to the Investment Manager and its affiliates in advising the fund and other clients. In so doing, the Investment Manager may cause the fund to pay greater brokerage commissions than it might otherwise pay.

Franklin Templeton Services, LLC ("FT Services") has entered into an agreement with the Investment Manager to provide certain administrative services and facilities for the fund. FT Services is an indirect, wholly-owned subsidiary of Franklin Templeton and is an affiliate of the Investment Manager, the fund's investment manager. The administrative services FT Services provides include preparing and maintaining books, records, and tax and financial reports, and monitoring compliance with regulatory requirements.The Investment Manager pays FT Services a monthly fee equal to 105% of the internal costs incurred by FTS for providing administrative services to the Putnam ETFs. The Investment Manager will also reimburse FT Services for fees paid by FT Services to any third-party service provider for sub-administration and other services for the fund.

**For details of the Investment Manager's compensation under the Management Contract, see "Charges and expenses" in Part I of this SAI.** 

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The Management Contract provides that the Investment Manager shall not be subject to any liability to the fund or to any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of the Investment Manager.

The Management Contract may be terminated without penalty by vote of the Trustees or the shareholders of the fund, or by the Investment Manager, on not less than 60 days' written notice. Subject to certain exceptions, it may be amended only by a vote of the shareholders of the fund. The Management Contract also terminates without payment of any penalty in the event of its assignment. The Management Contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

**The Sub-Advisers** 

*<u>Putnam Investment Management, LLC</u>*

If so disclosed in the fund's prospectus, Putnam Management, an affiliate of Franklin Advisers, has been retained as a sub-adviser by Franklin Advisers, at Franklin Advisers' own expense, to make investment decisions for such fund assets as may be designated from time to time for its management by Franklin Advisers and to provide certain other advisory and related services pursuant to a subadvisory agreement between Franklin Advisers and Putnam Management. The other advisory and related services may include the facilitation of derivative transactions, sharing of investment research if so requested by Franklin Advisers, and proxy voting, and these services are subject to change over time.

The subadvisory agreement provides that Putnam Management shall not be subject to any liability to Franklin Advisers, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of Putnam Management.

The subadvisory agreement may be terminated with respect to the fund without penalty by vote of the Trustees or shareholders of the fund, or by Franklin Advisers or Putnam Management upon 60 days' written notice. The subadvisory agreement also terminates without payment of any penalty in the event of its assignment or upon any termination of the management contract between Franklin Advisers and the fund. The subadvisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not parties to the subadvisory agreement or "interested persons" thereof. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

For additional information about Putnam Management, see "Putnam Investment Management, LLC" under "The Investment Manager and its Affiliates" above.

*<u>Franklin Advisers, Inc.</u>*

If so disclosed in the fund's prospectus, Franklin Advisers, an affiliate of Putnam Management, has been retained as a sub-adviser to provide by Putnam Management, at Putnam Management's own expense, to make investment decisions for such fund assets as may be designated from time to time for its management by Putnam Management and to provide certain other advisory and related services pursuant to a subadvisory agreement between Putnam Management and Franklin Advisers. The other advisory and related services may include the facilitation of foreign exchange transactions, sharing of investment research if so requested by Putnam Management, and managing the fund's investments in cash or cash equivalents, and these services are subject to change over time.

The subadvisory agreement provides that Franklin Advisers shall not be subject to any liability to Putnam Management, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of Franklin Advisers.

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The subadvisory agreement may be terminated with respect to the fund without penalty by vote of the Trustees or shareholders of the fund, or by Putnam Management or Franklin Advisers or upon 60 days' written notice. The subadvisory agreement also terminates without payment of any penalty in the event of its assignment or upon any termination of the management contract between Putnam Management and the fund. The subadvisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not parties to the subadvisory agreement or "interested persons" thereof. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

For additional information about Franklin Advisers, see "Franklin Advisers, Inc." under "The Investment Manager and its Affiliates" above.

*<u>Franklin Templeton Investment Management Limited</u>*

If so disclosed in the fund's prospectus, FTIML, an affiliate of the Investment Manager, has been retained as a sub-adviser for a portion of the assets of the fund, as determined from time to time by the Investment Manager pursuant to a sub-advisory agreement between the Investment Manager and FTIML. Under the terms of the sub-advisory agreement, FTIML, at its own expense, manages the investment and reinvestment of that portion of each such fund's portfolio that is allocated to FTIML from time to time by the Investment Manager, with FTIML determining what securities and other property will be purchased, retained or sold with respect to such portion, and placing all purchase and sale orders with respect to such portion, subject to the supervision of the Investment Manager. The Investment Manager may also, at its discretion, request FTIML to provide assistance with purchasing and selling securities for the fund, including placement of orders with certain broker-dealers, and to perform research and obtain and evaluate data relevant to the fund's investment strategies and policies.

Pursuant to the terms of the sub-advisory agreement, FTIML will pay all expenses incurred by it in connection with its activities under this agreement other than the cost of securities (including brokerage commissions, if any) purchased for the fund. The sub-advisory agreement provides that, in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of FTIML, neither FTIML, nor any of its directors, officers, employees or affiliates, shall be subject to liability to the Investment Manager, the fund or any shareholder of the fund for any error of judgment or mistake of law or any other act or omission in the course of, or connected with, rendering services to the fund or for any losses that may be sustained in the purchase, holding or sale of any security by the fund.

The sub-advisory agreement may be terminated at any time with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund upon not more than sixty days' written notice to the Investment Manager and FTIML, and by FTIML or the Investment Manager on not more than 60 days' written notice to the other party. The sub-advisory agreement also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. The sub-advisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

*<u>PanAgora Asset Management, Inc.</u>*

If so disclosed in the fund's prospectus, PanAgora, an affiliate of Putnam Management, has been retained as the sub-adviser for a portion of the assets of the fund, as determined from time to time by Putnam Management, by Putnam Management pursuant to a sub-advisory agreement between Putnam Management and PanAgora.

PanAgora, a Delaware corporation organized in 1985 and incorporated in 1989, is located at One International Place, 24th Floor, Boston, Massachusetts 02110. In addition, certain PanAgora employees own non-voting interests in PanAgora. Assuming all employee stock and options are issued and exercised, up to 20% of the economic interest in PanAgora would be owned by PanAgora employees.

Under certain terms of the sub-advisory agreement, PanAgora, at its own expense, furnishes continuously an investment program for that portion of each such fund that is allocated to PanAgora from time to time by Putnam Management, and makes

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investment decisions on behalf of such portion of the fund, subject to the supervision of the Board of Trustees and Putnam Management.

PanAgora, at its expense, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties. The sub-advisory agreement provides that PanAgora shall not be subject to any liability to Putnam Management, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of PanAgora.

The sub-advisory agreement may be terminated with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund, or by PanAgora or Putnam Management, on not more than 60 days' nor less than 30 days' written notice. The sub-advisory agreement also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. The sub-advisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

**Portfolio Transactions** 

**Potential conflicts of interest in managing multiple accounts.** 

*Investment Manager* 

Like other investment professionals with multiple clients, the fund's Portfolio Manager(s) may face certain potential conflicts of interest in connection with managing both the fund and the other accounts listed under **"PORTFOLIO MANAGER(S)" "Other accounts managed"** at the same time. The paragraphs below describe some of these potential conflicts, which the Investment Manager believes are faced by investment professionals at most major financial firms. As described below, the Investment Manager and the Trustees have adopted compliance policies and procedures that attempt to address certain of these potential conflicts.

The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance ("performance fee accounts"), may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The most attractive investments could be allocated to higher-fee accounts or performance fee accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The trading of higher-fee accounts could be favored as to timing and/or execution price. For example, higher-fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The trading of other accounts could be used to benefit higher-fee accounts (front-running).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation.

The Investment Manager attempts to address these potential conflicts of interest relating to higher-fee accounts through various compliance policies that are generally intended to place all accounts, regardless of fee structure, on the same footing for investment management purposes. For example, under the Investment Manager's policies:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Performance fee accounts must be included in all standard trading and allocation procedures with all other accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• All accounts must be allocated to a specific category of account and trade in parallel with allocations of similar accounts based on the procedures generally applicable to all accounts in those groups (e.g., based on relative risk budgets of accounts).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• All trading must be effected through Putnam's trading desks and normal queues and procedures must be followed (i.e., no special treatment is permitted for performance fee accounts or higher-fee accounts based on account fee structure).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Front running is strictly prohibited.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Except as provided in Part I of this SAI, the fund's Portfolio Manager(s) may not be guaranteed or specifically allocated any portion of a performance fee.

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As part of these policies, the Investment Manager has also implemented trade oversight and review procedures in order to monitor whether particular accounts (including higher-fee accounts or performance fee accounts) are being favored over time.

Potential conflicts of interest may also arise when the Portfolio Manager(s) have personal investments in other accounts that may create an incentive to favor those accounts. As a general matter and subject to limited exceptions, the Investment Manager's investment professionals do not have the opportunity to invest in client accounts, other than Putnam funds. However, in the ordinary course of business, the Investment Manager or related persons may from time to time establish "pilot" or "incubator" accounts for the purpose of testing proposed investment strategies and products before offering them to clients. These pilot accounts may be in the form of registered investment companies, private funds such as partnerships or separate accounts established by the Investment Manager or an affiliate. The Investment Manager or an affiliate supplies the funding for these accounts. Putnam employees, including the fund's Portfolio Manager(s), may also invest in certain pilot accounts. The Investment Manager, and to the extent applicable, the Portfolio Manager(s) will benefit from the favorable investment performance of pilot accounts. Pilot funds and accounts may, and frequently do, invest in the same securities as the client accounts. The Investment Manager's policy is to treat pilot accounts in the same manner as client accounts for purposes of trading allocation – neither favoring nor disfavoring them except as is legally required. For example, pilot accounts are normally included in the Investment Manager's daily block trades to the same extent as client accounts (except that pilot accounts do not participate in initial public offerings).

A potential conflict of interest may arise when the fund and other accounts purchase or sell the same securities. On occasions when the Portfolio Manager(s) consider the purchase or sale of a security to be in the best interests of the fund as well as other accounts, the Investment Manager's trading desk may, to the extent permitted by applicable laws and regulations and where practicable, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to the fund or another account if one account is favored over another in allocating the securities purchased or sold – for example, by allocating a disproportionate amount of a security that is likely to increase in value to a favored account. The Investment Manager's trade allocation policies generally provide that each day's transactions in securities that are purchased or sold by multiple accounts are, insofar as possible, averaged as to price and allocated between such accounts (including the fund) in a manner which in the Investment Manager's opinion is equitable to each account and in accordance with the amount being purchased or sold by each account. However, accounts advised or sub-advised by FTIML will only place trades at an execution-only commission rate, whereas other Putnam accounts may pay an additional amount for research and other products and services (a "bundled" or "full service" rate). The Investment Manager may aggregate trades in FTIML accounts with other Putnam accounts that pay a bundled rate as long as all participating accounts pay the same execution rate. To the extent that non- FTIML accounts pay a bundled rate, the FTIML and other the Investment Manager accounts would not be paying the same total commission rate. Certain other exceptions exist for specialty, regional or sector accounts. Trade allocations are reviewed on a periodic basis as part of the Investment Manager's trade oversight procedures in an attempt to ensure fairness over time across accounts.

"Cross trades," in which one Putnam account sells a particular security to another account (potentially saving transaction costs for both accounts), may also pose a potential conflict of interest. Cross trades may be seen to involve a potential conflict of interest if, for example, one account is permitted to sell a security to another account at a higher price than an independent third party would pay, or if such trades result in more attractive investments being allocated to higher-fee accounts. The Investment Manager and the fund's Trustees have adopted compliance procedures that provide that any transactions between the fund and another Putnam-advised account are to be made at an independent current market price, as required by law.

Another potential conflict of interest may arise based on the different goals and strategies of the fund and other accounts. For example, another account may have a shorter-term investment horizon or different goals, policies or restrictions than the fund. Depending on goals or other factors, the Portfolio Manager(s) may give advice and make decisions for another account that may differ from advice given, or the timing or nature of decisions made, with respect to the fund. In addition, investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a particular security may be bought or sold for certain accounts even though it could have been bought or sold for other accounts at the same time. More rarely, a particular security may be bought for one or more accounts managed by the Portfolio Manager(s) when one or more other accounts are selling the security (including short sales). There may be circumstances when purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts. As noted above, the Investment Manager has implemented trade oversight and review procedures to monitor whether any account is systematically favored over time.

Under federal securities laws, a short sale of a security by another client of the Investment Manager or its affiliates (other than another registered investment company) within five business days prior to a public offering of the same securities (the timing of

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which is generally not known to Putnam in advance) may prohibit the fund from participating in the public offering, which could cause the fund to miss an otherwise favorable investment opportunity or to pay a higher price for the securities in the secondary markets.

The fund's Portfolio Manager(s) may also face other potential conflicts of interest in managing the fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the fund and other accounts. For information on restrictions imposed on personal securities transactions of the fund's Portfolio Manager(s), please see "Personal Investments by Employees of the Investment Manager and Franklin Distributors and Officers and Trustees of the Fund."

*PanAgora* 

The portfolio managers' management of other accounts may give rise to potential conflicts of interest in connection with their management of the fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts include retirement plans and separately managed accounts ("SMA's"), as well as incubated accounts. The other accounts might have similar investment objectives as the fund, or hold, purchase or sell securities that are eligible to be held, purchased or sold by the fund. While the portfolio managers' management of other accounts may give rise to the following potential conflicts of interest, PanAgora does not believe that the conflicts, if any, are material or, to the extent any such conflicts are material, PanAgora believes that it has designed policies and procedures to manage those conflicts in an appropriate way.

A potential conflict of interest may arise as a result of the portfolio managers' day-to-day management of the fund. Because of their positions with the fund, the portfolio managers know the size, timing and possible market impact of the fund's trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of the fund. However, PanAgora has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.

A potential conflict of interest may arise as a result of the portfolio managers' management of the fund, and other accounts, which, in theory, may allow them to allocate investment opportunities in a way that favors other accounts over the fund. This conflict of interest may be exacerbated to the extent that PanAgora or the portfolio managers receive, or expect to receive, greater compensation from their management of the other accounts than the fund. Notwithstanding this theoretical conflict of interest, it is PanAgora's policy to manage each account based on its investment objectives and related restrictions and, as discussed above, PanAgora has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and in a manner consistent with each account's investment objectives and related restrictions. For example, while the portfolio managers may buy for other accounts securities that differ in identity or quantity from securities bought for the fund, such securities might not be suitable for the fund given its investment objective and related restrictions.

For information about other funds and accounts managed by the fund's Portfolio Manager(s), please refer to "Who oversees and manages the fund(s)?" in the prospectus and **"PORTFOLIO MANAGER(S)" "Other accounts managed"** in Part I of the SAI.

**Brokerage and research services.** 

Transactions on stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by the fund of negotiated brokerage commissions. Such commissions may vary among different brokers. A particular broker may charge different commissions according to such factors as execution venue and exchange. Although the fund does not typically pay commissions for principal transactions in the over-the-counter markets, such as the markets for most fixed income securities and certain derivatives, an undisclosed amount of profit or "mark-up" is included in the price the fund pays. In underwritten offerings, the price paid by the fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer. **See "Charges and expenses" in Part I of this SAI for information concerning commissions paid by the fund**.

It has for many years been a common practice in the investment advisory business for broker-dealers that execute portfolio transactions for the clients of advisers of investment companies and other institutional investors to provide those advisers with brokerage and research services, as defined in Section 28(e) of the Exchange Act. Consistent with this practice, the Investment Manager receives brokerage and research services from broker-dealers with which the Investment Manager places the fund's portfolio transactions. The products and services that broker-dealers may provide to the Investment Manager's managers and analysts include, among others, trading systems and other brokerage services, economic and political analysis, fundamental and macro investment research, industry and company reviews, statistical information, market data, evaluations of investments,

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strategies, markets and trading venues, recommendations as to the purchase and sale of investments, performance measurement services and meetings with management of current or prospective portfolio companies or with industry experts. Some of these services are of value to the Investment Manager and its affiliates in advising various of their clients (including the fund), although not all of these services are necessarily useful and of value in managing the fund. Research services provided by broker-dealers are supplemental to the Investment Manager's own research efforts and relieve the Investment Manager of expenses it might otherwise have borne in generating such research. The management fee paid by the fund is not reduced because the Investment Manager and its affiliates receive brokerage and research services even though the Investment Manager might otherwise be required to purchase some of these services for cash. The Investment Manager may also use portfolio transactions to generate "soft dollar" credits to pay for "mixed-use" services (i.e., products or services that may be used both for investment/brokerage- and non-investment/brokerage-related purposes), but in such instances the Investment Manager uses its own resources to pay for that portion of the mixed-use product or service that in its good-faith judgment does not relate to investment or brokerage purposes. The Investment Manager may also allocate trades to generate soft dollar credits for third-party investment research reports and related fundamental research.

The Investment Manager places all orders for the purchase and sale of portfolio investments for the funds, and buys and sells investments for the funds, through a substantial number of brokers and dealers. In selecting broker-dealers to execute the funds' portfolio transactions, the Investment Manager uses its best efforts to obtain for each fund the most favorable price and execution reasonably available under the circumstances, except to the extent it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution and in considering the overall reasonableness of the brokerage commissions paid, the Investment Manager, having in mind the fund's best interests, considers all factors it deems relevant, including, in no particular order of importance, and by way of illustration, the price, size and type of the transaction, the nature of the market for the security or other investment, the amount of the commission, research and brokerage services provided by a broker-dealer, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved, the benefit of any capital committed by a broker-dealer to facilitate the efficient execution of the transaction and the quality of service rendered by the broker-dealer in other transactions.

The Investment Manager may cause the fund to pay a broker-dealer that provides "brokerage and research services" (as defined in the Exchange Act and as described above) to the Investment Manager an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the fund on an agency basis in excess of the commission another broker-dealer would have charged for effecting that transaction. The Investment Manager may also instruct an executing broker to "step out" a portion of the trades placed with a broker to other brokers that provide brokerage and research services to the Investment Manager. The Investment Manager's authority to cause the fund to pay any such greater commissions or to instruct a broker to "step out" a portion of a trade is subject to the requirements of applicable law and such policies as the Trustees may adopt from time to time. It is the position of the staff of the SEC that Section 28(e) of the Exchange Act does not apply to the payment of such greater commissions in "principal" transactions. Accordingly, the Investment Manager will use its best effort to obtain the most favorable price and execution available with respect to such transactions, as described above.

The Management Contract provides that commissions, fees, brokerage or similar payments received by the Investment Manager or an affiliate in connection with the purchase and sale of portfolio investments of the fund, less any direct expenses approved by the Trustees, shall be recaptured by the fund through a reduction of the fee payable by the fund under the Management Contract. The Investment Manager seeks to recapture for the fund soliciting dealer fees on the tender of the fund's portfolio securities in tender or exchange offers. Any such fees which may be recaptured are likely to be minor in amount.

For those funds sub-advised by FTIML and where FTIML places trades on behalf of those funds, the rules of the United Kingdom's Financial Conduct Authority (the "FCA Rules") apply with respect to the receipt of investment research. Under the FCA Rules, FTIML may not obtain research using brokerage commissions paid by funds sub-advised by FTIML. FTIML will use only "hard dollars" (i.e., from its own resources) to acquire external research used by London-based personnel, including fixed income personnel, except with respect to Minor Non-Monetary Benefits.

Minor Non-Monetary Benefits include, among other categories:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research from independent research providers who are not engaged in execution services and are not part of a financial services group that offers execution or brokerage services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research on listed and unlisted small and medium-sized enterprises with a market capitalization below £200 million;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research focusing on fixed income, currency, and commodity investment strategies; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Written research that is openly available to other firms or to the general public.

FTIML may use soft dollar commissions generated by trades of the Investment Manager and other Putnam affiliates other than FTIML to obtain research received by employees of FTIML that qualify as a Minor Non-Monetary Benefit.

**Principal Underwriter** 

Franklin Distributors, located at One Franklin Parkway, San Mateo, CA 94403-1906, is the principal underwriter of shares of the fund and the other continuously offered Putnam Funds. Franklin Distributors is a registered broker-dealer, a member of the Financial Industry Regulatory Authority, and an indirect, wholly-owned subsidiary of Franklin Templeton. See "Charges and expenses" in Part I of this SAI for information on payments received by Franklin Distributors or Foreside Fund Services, LLC, the principal underwriter for the certain of the funds prior to August 2, 2024.

**Personal Investments by Employees of Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and Officers and Trustees of the Fund** 

Employees of Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and officers and Trustees of the fund are subject to significant restrictions on engaging in personal securities transactions. These restrictions are set forth in the Codes of Ethics adopted by Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and by the fund (the "Code of Ethics"). The Code of Ethics, in accordance with Rule 17j-1 under the 1940 Act, contains provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the fund.

The Code of Ethics does not prohibit personnel from investing in securities that may be purchased or held by the fund. However, the Code of Ethics, consistent with standards recommended by the Investment Company Institute's Advisory Group on Personal Investing and requirements established by Rule 17j-1 and rules adopted under the Investment Advisers Act of 1940, among other things, prohibits personal securities investments without pre-clearance, imposes time periods during which personal transactions may not be made in certain securities by employees with access to investment information, and requires the timely submission of broker confirmations and quarterly reporting of personal securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process.

The Code of Ethics does not prohibit unaffiliated officers and Trustees from investing in securities that may be held by the fund; however, the Putnam Funds Code of Ethics regulates the personal securities transactions of unaffiliated Trustees of the fund, including limiting the time periods during which they may personally buy and sell certain securities and requiring them to submit reports of personal securities transactions under certain circumstances.

The fund's Trustees, in compliance with Rule 17j-1, approved the Code of Ethics and are required to approve any material changes to the Code of Ethics. The Trustees also provide continued oversight of personal investment policies and annually evaluate the implementation and effectiveness of the Code of Ethics.

**Transfer Agent** 

State Street Bank and Trust Company, located at One Congress Street, Suite 1, Boston, Massachusetts 02114-2016, is the fund's transfer agent. The Investment Manager, and not the fund, bears the cost of these services under the terms of its management contract with the fund.

**Custodian** 

[State Street Bank and Trust Company, located at One Congress Street, Suite 1, Boston, Massachusetts 02114-2016, is the fund's custodian. State Street is responsible for safeguarding and controlling the fund's cash and securities, handling the receipt and delivery of securities, collecting interest and dividends on the fund's investments, serving as the fund's foreign custody manager, providing reports on foreign securities depositaries, making payments covering the expenses of the fund and performing other administrative duties. State Street does not determine the investment policies of the fund or decide which securities the fund will buy or sell. State Street has a lien on the fund's assets to secure charges and advances made by it. The fund may from time to time enter into brokerage arrangements that reduce or recapture fund expenses, including custody

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expenses. The fund also has an offset arrangement that may reduce the fund's custody fee based on the amount of cash maintained by its custodian.]

**Auditor** 

[ ], 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.

**Counsel to the Fund** 

Ropes & Gray LLP serves as counsel to the fund, and is located at Prudential Tower, 800 Boylston Street, Boston, Massachusetts 02199.

**DETERMINATION OF NET ASSET VALUE** 

The fund determines the net asset value per share once each day the NYSE is open. Currently, the NYSE is closed Saturdays, Sundays and the following holidays: New Year's Day, Rev. Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth, the Fourth of July, Labor Day, Thanksgiving Day and Christmas Day. The fund determines net asset value as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern Time. The net asset value per share equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares.

Securities and other assets ("Securities") for which market quotations are readily available, as defined by Rule 2a-5 under the 1940 Act, are valued at prices which, in the opinion of the Investment Manager, most nearly represent the market values of such Securities. Currently, prices for these Securities are determined using the last reported sale price (or official closing price for Securities listed on certain markets) or, if no sales are reported (as in the case of some Securities traded over-the-counter), the mean between the last reported bid and ask prices, the "mid price" (prior to July 22, 2024, the last reported bid price was used). All other Securities are valued by the Investment Manager or other parties at their fair value following procedures approved by the Trustees.

Reliable market quotations are not considered to be readily available for, among other Securities, long-term corporate bonds and notes, certain preferred stocks, tax-exempt securities, and certain foreign securities. These investments are valued at fair value, generally on the basis of valuations furnished by approved pricing services, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities that are generally recognized by institutional traders. Other Securities, such as various types of options, are valued at fair value on the basis of valuations furnished by broker-dealers or other market intermediaries.

The Investment Manager values all other Securities at fair value using its internal resources. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the Securities (including any registration expenses that might be borne by the fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted Securities of the same class, the size of the holding, the prices of any recent transactions or offers with respect to such Securities and any available analysts' reports regarding the issuer. In the case of Securities that are restricted as to resale, the Investment Manager determines fair value based on the inherent worth of the Security without regard to the restrictive feature, adjusted for any diminution in value resulting from the restrictive feature.

Generally, trading in certain Securities (such as foreign securities) is substantially completed each day at various times before the close of the NYSE. The closing prices for these Securities in markets or on exchanges outside the U.S. that close before the close of the NYSE may not fully reflect events that occur after such close but before the close of 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 fair value prices will be used will vary, it is possible that fair value prices will be used by the fund to a significant extent. In addition, Securities held by some of the funds may be traded in foreign markets that are open for business on days that the fund is not, and the trading of such Securities on those days may have an impact on the value of a shareholder's investment at a time when the shareholder cannot buy and sell shares of the fund.

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Currency exchange rates used in valuing Securities are normally determined as of 4:00 p.m. Eastern Time.

Occasionally, events affecting such exchange rates may occur between the time of the determination of exchange rates and the close of the NYSE, which, in the absence of fair valuation, would not be reflected in the computation of the fund's net asset value. If events materially affecting the currency exchange rates occur during such period, then the exchange rates used in valuing affected Securities will be valued by the Investment Manager at their fair value following procedures approved by the Trustees.

In addition, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain Securities (such as convertible bonds, U.S. government securities and tax-exempt securities) are determined based on market quotations collected before the close of the NYSE. Occasionally, events affecting the value of such Securities may occur between the time of the determination of value and the close of the NYSE, which, in the absence of fair value prices, would not be reflected in the computation of the fund's net asset value. If events materially affecting the value of such Securities occur during such period, then these Securities will be valued by the Investment Manager at their fair value following procedures approved by the Trustees. It is expected that any such instance would be very rare.

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 at a given point in time and does not reflect an actual market price.

The fund may also value its Securities at fair value under other circumstances pursuant to procedures approved by the Trustees.

**Money Market Funds** 

"Retail money market funds" and "government money market funds" each as defined by Rule 2a-7 under the 1940 Act generally value their portfolio securities at amortized cost according to Rule 2a-7 under the 1940 Act.

Since the net income of a money market fund is declared as a dividend each time it is determined, the net asset value per share of a retail money market fund and government money market fund typically remains at $1.00 per share immediately after such determination and dividend declaration. Any increase in the value of a shareholder's investment in a money market fund representing the reinvestment of dividend income is reflected by an increase in the number of shares of that fund in the shareholder's account on the last business day of each month. It is expected that a money market fund's net income will normally be positive each time it is determined. However, if because of realized losses on sales of portfolio investments, a sudden rise in interest rates, or for any other reason the net income of a fund determined at any time is a negative amount, a money market fund may offset such amount allocable to each then shareholder's account from dividends accrued during the month with respect to such account. If, at the time of payment of a dividend, such negative amount exceeds a shareholder's accrued dividends, a money market fund may reduce the number of outstanding shares by treating the shareholder as having contributed to the capital of the fund that number of full and fractional shares which represent the amount of the excess. Each shareholder is deemed to have agreed to such contribution in these circumstances by his or her investment in a money market fund.

**SHAREHOLDER LIABILITY** 

The Trust is a statutory trust organized under Delaware law. Delaware law provides that, except to the extent otherwise provided in the Amended and Restated Agreement and Declaration of Trust, shareholders shall be entitled to the same limitations of personal liability extended to stockholders of private corporations for profit organized under the general corporation law of Delaware. The courts of some states, however, may decline to apply Delaware law on this point. The Amended and Restated Agreement and Declaration of Trust contains an express disclaimer of shareholder liability for the debts, liabilities, obligations, and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or the funds.

The Amended and Restated Agreement and Declaration of Trust provides that the Trust shall not have any claim against shareholders except for the payment of the purchase price of shares and requires that each agreement, obligation, or instrument entered into or executed by the Trust or the Trustees relating to the Trust or to a fund shall include a provision limiting the obligations created thereby to the Trust or to one or more funds and its or their assets. The Amended and Restated Agreement and Declaration of Trust further provides that shareholders of a fund shall not have a claim on or right to any assets belonging to any other fund.

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**DISCLOSURE OF PORTFOLIO INFORMATION** 

The Trustees of the Putnam funds have adopted policies with respect to the disclosure of the fund's portfolio holdings by the fund, the Investment Manager, or their affiliates. These policies provide that information about the fund's portfolio generally may not be released to any party prior to (i) the day after the posting of such information on franklintempleton.com, (ii) the filing of the information with the SEC in a required filing, or (iii) the dissemination of such information to all shareholders simultaneously. Certain limited exceptions pursuant to the fund's policies are described below. In addition, these policies do not apply to the sharing of fund portfolio holdings information with investment personnel involved in the management of other funds that invest in such fund and that are managed by the Investment Manager or its affiliates. The Trustees will periodically receive reports from the fund's Chief Compliance Officer regarding the operation of these policies and procedures, including any arrangements to make non-public disclosures of the fund's portfolio information to third parties. The Investment Manager and its affiliates are not permitted to receive compensation or other consideration in connection with disclosing information about the fund's portfolio holdings to third parties.

**Public Disclosures** 

On each Business Day, before commencement of trading in shares on the listing exchange, each fund will disclose its complete portfolio holdings on its website. The fund will disclose its top 10 holdings and related portfolio information monthly beginning on or after 5 business days after the end of each month on franklintempleton.com. The find will also disclose on its website its complete holdings as of the end of the prior month on a monthly basis beginning on or before the 15th calendar day after the end of each month..

The fund will also file its portfolio holdings with the SEC twice each year on Form N-CSR (with respect to each annual period and semi-annual period). In addition, the fund will file reports of portfolio holdings on Form N-PORT 60 days after each fiscal quarter (for the respective fiscal quarter), with the schedule of portfolio holdings filed on Form N-PORT for the third month of the first and third fiscal quarter made publicly available. Shareholders may obtain the Form N-CSR filings and the publicly available portions of Form N-PORT filings on the SEC's website at http://www.sec.gov. Form N-CSR filings are available upon filing and information reported on Form N-PORT filings for the third month of a fiscal quarter is available 60 days after the end of the fiscal quarter. You may call the SEC at 1-800-SEC-0330 for information about the SEC's website.

The Investment Manager or its affiliates may include fund portfolio information that has already been made public through a Web posting or SEC filing in marketing literature and other communications to shareholders, advisors or other parties, provided that, in the case of information made public through the Web, the information is disclosed no earlier than the day after the date of posting to the website.

**Other Disclosures** 

In order to address potential conflicts between the interest of fund shareholders, on the one hand, and those of the Investment Manager, Franklin Distributors or any affiliated person of those entities or of the fund, on the other hand, the fund's policies require that non-public disclosures of information regarding the fund's portfolio may be made only if there is a legitimate business purpose consistent with fiduciary duties to all shareholders of the fund. In addition, the party receiving the non-public information must sign a non-disclosure agreement unless otherwise approved by the Chief Compliance Officer of the fund. Arrangements to make non-public disclosures of the fund's portfolio information must be approved by the Chief Compliance Officer of the fund. The Chief Compliance Officer will report on an ongoing basis to a committee of the fund's Board of Trustees consisting only of Trustees who are not "interested persons" of the fund or the Investment Manager regarding any such arrangement that the fund may enter into with third parties other than service providers to the fund.

Daily portfolio composition files ("PCFs") that identify a basket of specified securities that may overlap with the actual or expected portfolio holdings of a fund will be provided as frequently as daily to each fund's service providers to facilitate the provision of services to each fund and to certain other entities in connection with the dissemination of information necessary for transactions in Creation Units. Each business day prior to the opening of the listing exchange, a PCF containing a list of the names and the required number of shares of each Deposit Security for each fund will be provided for dissemination through the facilities of the NSCC; through other fee-based services to NSCC members; subscribers to the fee-based services, including Authorized Participants; and to entities that publish and/or analyze such information in connection with the process of purchasing or

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redeeming Creation Units or trading fund shares in the secondary market. In addition to making PCFs available to the NSCC, each fund will disclose the PCF or portions thereof as frequently as daily on franklintempleton.com.

The fund may also periodically provide non-public information about its portfolio holdings to rating and ranking organizations and other providers of industry data, such as Lipper Inc., Morningstar Inc., Bloomberg and Thomson Reuters, in connection with those firms' research on and classification of the fund and in order to gather information about how the fund's attributes (such as volatility, turnover, and expenses) compare with those of peer funds. The fund may also periodically provide non-public information about its portfolio holdings to consultants that provide portfolio analysis services or other investment research or trading analytics. Such recipients of portfolio holdings include Barclays, FactSet, ITG, Trade Informatics, ConsenSys, ENSO Financial Analytics, Bloomberg and Credit Suisse. Any such rating, ranking, or consulting or other firm would be required to keep the fund's portfolio information confidential and would be prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the fund. Such firms may receive portfolio holdings information only from certain funds and such information may be provided in greater or lesser detail depending on the nature of the services provided by the relevant firm.

In addition, the Investment Manager offers model separately managed account portfolios to sponsoring broker-dealers ("Program Sponsors") that in turn offer those portfolios to their customers. The Investment Manager also provides investment advisory services to retail separately managed account clients through managed account programs sponsored by broker-dealers and other financial intermediaries (together, "SMAs"). The model SMA portfolios may follow investment programs that are similar or identical in material respects to those of specific Putnam funds or other client accounts and, as a result, there may be substantial overlap between the securities holdings and transactions of an model SMA portfolio and those of any similarly managed funds or accounts. If such model portfolios are substantially similar to those of a U.S. registered fund, such model portfolios may be provided to Program Sponsors so long as: (1) the recipient Program Sponsors has executed a non-disclosure agreement or other agreement containing or incorporating confidentiality provisions that restrict the use and dissemination of confidential portfolio holdings information received by the Program Sponsor as described in the following sentence, or other provisions that impose similar restrictions on such use and dissemination and*,* (2) the model SMA portfolio has been deemed sufficiently liquid by the Investment Manager's liquidity committee or the Investment Manager, as determined in their reasonable judgment. Such agreement must provide that the Program Sponsor agrees that: (1) it is subject to a duty of confidentiality; (2) it will use confidential model portfolio information only to the extent necessary to perform its obligations under the agreement; and (3) it will not disclose confidential model portfolio information except to personnel or parties who have a need to know such confidential information in connection with, or in order to fulfill the purposes contemplated by, the agreement.

**INFORMATION SECURITY RISKS** 

*Cyber security risk.* With the increased use of interconnected technologies such as the Internet and the dependence on computer systems to perform necessary business functions, investment companies such as the fund and its service providers may be prone to operational, information security and related risks resulting from third-party cyber-attacks and/or other technological malfunctions. Cyber-attacks may include stealing or corrupting data maintained online or digitally, preventing legitimate users from accessing information or services on a website, releasing confidential information without authorization, and causing operational disruption. Successful cyber-attacks against, or security or technology breakdowns of, the fund or its adviser, custodian, transfer agent, or other affiliated or third-party service providers may adversely affect the fund and its shareholders. For example, cyber-attacks may interfere with the processing of shareholder transactions, impact the fund's ability to calculate its net asset value, cause the release of private shareholder information or confidential fund information, impede trading, cause reputational damage, and subject the fund or others to regulatory fines, penalties or financial losses, reimbursement or other compensation costs, and additional compliance costs. Similar types of cyber security risks also are present for issuers of securities in which the fund invests, which could result in material adverse consequences for such issuers, and may cause the fund's investment in such securities to lose value. The fund and the Investment Manager or sub-advisor (as applicable) may have limited ability to prevent or mitigate cyber-attacks or security or technology breakdowns affecting the fund's third-party service providers. While the Investment Manager and sub-advisor (as applicable) have established business continuity plans and systems designed to prevent or reduce the impact of cyber-attacks, such plans and systems are subject to inherent limitations.

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**PROXY VOTING GUIDELINES AND PROCEDURES** 

The Board of Trustees have delegated proxy voting authority for the securities held in the funds' portfolios to Putnam Management and have approved Putnam Management's current proxy voting guidelines and procedures. Putnam Management retained an independent proxy voting service to assist in vote analysis, implementation, recordkeeping and reporting services. The proxy voting guidelines summarize Putnam Management's positions on various issues of concern to investors and provide direction to the proxy voting service as to how fund portfolio securities should be voted on proposals dealing with particular issues. The proxy voting procedures explain the role of Putnam Management personnel and the proxy voting service in the proxy voting process, describe the procedures for referring matters involving investment considerations to the investment personnel of Putnam Management, and describe the procedures for handling potential conflicts of interest. Putnam Management's proxy voting guidelines and procedures are included in this SAI as Appendix A. The Trustees will review the funds' proxy voting from time to time and will review annually Putnam Management's proxy voting guidelines and procedures. Information regarding how the funds' proxies relating to portfolio securities were voted during the 12-month period ended June 30, 2024 is available on www.franklintempleton.com, and on the SEC's website at www.sec.gov. If you have questions about finding forms on the SEC's website, you may call the SEC at 1-800-SEC-0330. You may also obtain Putnam Management's proxy voting guidelines and procedures by calling Putnam's Shareholder Services at 1-800-225-1581.

**SECURITIES RATINGS** 

The ratings of securities in which the fund may invest will be measured at the time of purchase and, to the extent a security is assigned a different rating by one or more of the various rating agencies, the Investment Manager may use the highest rating assigned by any agency. The Investment Manager will not necessarily sell an investment if its rating is reduced. Below are descriptions of ratings, as provided by the rating agencies, which represent opinions as to the quality of various debt instruments.

**<u>Moody's Investors Service, Inc.</u>**

**Global Long-Term Rating Scale** (original maturity of 1 year or more)

**Aaa** – Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

**Aa** – Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

**A** – Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

**Baa** – Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

**Ba** – Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

**B** – Obligations rated B are considered speculative and are subject to high credit risk.

**Caa** – Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

**Ca** – Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

**C** – Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a "(hyb)" indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.

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By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.

**Global Short-Term Rating Scale** (original maturity of 13 months or less)

**P-1** – Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

**P-2** – Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

**P-3** – Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.

**NP** – Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

US Municipal Short-Term Obligation Ratings

**MIG 1** – This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

**MIG 2** – This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

**MIG 3** – This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

**SG** – This designation denotes speculative grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

**US Municipal Demand Obligation Ratings** 

**VMIG 1** – This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**VMIG 2** – This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**VMIG 3** – This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**SG** – This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.

**<u>Standard & Poor's</u>**

**Long-Term Issue Credit Ratings** (original maturity of one year or more)

**AAA** – An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.

**AA** – An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.

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**A** – An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.

**BBB** – An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

**BB; B; CCC; CC** and **C** – Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the lowest degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

**BB** – An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

**B** – An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

**CCC** – An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

**CC** – An obligation rated 'CC' is currently highly vulnerable to nonpayment. The 'CC' rating is used when a default has not yet occurred, but Standard & Poor's expects default to be a virtual certainty, regardless of the anticipated time to default.

**C** – An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.

**D** – An obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless Standard & Poor's believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer.

**NR** – This indicates that no rating has been requested, or that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.

Note: The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

**Short-Term Issue Credit Ratings** (original maturity of 365 days or less)

**A-1** – A short-term obligation rated'A-1' is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.

**A-2** – A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.

**A-3** – A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

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**B** – A short-term obligation rated 'B' is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitments.

**C** – A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.

**D** – A short-term obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the due date, unless Standard & Poor's believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer.

**Municipal Short-Term Note Ratings** (original maturity of 3 years or less)

**SP-1** – Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

**SP-2** – Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

**SP-3** – Speculative capacity to pay principal and interest.

**<u>Fitch Ratings</u>**

**Long-Term Rating Scales** 

**AAA** – Highest credit quality. 'AAA' ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

**AA** – Very high credit quality. 'AA' ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

**A** – High credit quality. 'A' ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.

**BBB** – Good credit quality. 'BBB' ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

**BB** – Speculative. 'BB' ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.

**B** – Highly speculative. 'B' ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.

**CCC** – Substantial credit risk. Default is a real possibility.

**CC** – Very high levels of credit risk. Default of some kind appears probable.

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**C** – Exceptionally high levels of credit risk. Default is imminent or inevitable, or the issuer is in standstill. Conditions that are indicative of a 'C' category rating for an issuer include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the issuer has entered into a grace or cure period following non-payment of a material financial obligation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default
on a material financial obligation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Fitch Ratings otherwise believes a condition of 'RD' or 'D' to be imminent or inevitable,
including through the formal announcement of a distressed debt exchange.

**RD** – Restricted default. 'RD' ratings indicate an issuer that in Fitch Ratings' opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased operating. This would include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the selective payment default on a specific class or currency of debt;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the uncured expiry of any applicable grace period, cure period or default forbearance period following a
payment default on a bank loan, capital markets security or other material financial obligation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. the extension of multiple waivers or forbearance periods upon a payment default on one or more material
financial obligations, either in series or in parallel; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. execution of a distressed debt exchange on one or more material financial obligations.

**D** – Default. 'D' ratings indicate an issuer that in Fitch Ratings' opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business.

Default ratings are not assigned prospectively to entities or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a distressed debt exchange.

"Imminent" default typically refers to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has formally announced a distressed debt exchange, but the date of the exchange still lies several days or weeks in the immediate future.

In all cases, the assignment of a default rating reflects the agency's opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the definition of default under the terms of an issuer's financial obligations or local commercial practice.

Note: The modifiers "+" or "-" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the 'AAA' Long-Term Issuer Default Rating (IDR) category, or to Long-Term IDR categories below 'B'.

**Short-Term Ratings** 

**F1** – Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature.

**F2** – Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments.

**F3** – Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.

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**B** – Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.

**C** – High short-term default risk. Default is a real possibility.

**RD** – Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations, typically applicable to entity ratings only.

**D** – Default. Indicates a broad-based default event for an entity, or the default of a short-term obligation.

**Appendix A** 

**Putnam Investments** 

<u>Proxy Voting Procedures</u>

*<u>Introduction and Summary</u>*

Many of Putnam's investment management clients have delegated to Putnam the authority to vote proxies for shares in the client accounts Putnam manages. Putnam believes that the voting of proxies can be an important tool for institutional investors to promote best practices in corporate governance and votes all proxies in the best interests of its clients as investors. In Putnam's view, strong corporate governance policies, most notably oversight by an independent board of qualified directors, best serve investors' interests. Putnam will vote proxies and maintain records of voting of shares for which Putnam has proxy voting authority in accordance with its fiduciary obligations and applicable law.

Putnam's voting policies are rooted in our views that (1) strong, independent corporate governance is important to long-term company financial performance, and (2) long-term investors' active engagement with company management, including through the proxy voting process, strengthens issuer accountability and overall market discipline, potentially reducing risk and improving returns over time. Our voting program is offered as a part of our investment management services, at no incremental fee to Putnam, and, while there can be no guarantees, it is intended to offer potential investment benefits over a long-term horizon. Our voting policies are designed with investment considerations in mind, not as a means to pursue particular political, social, or other goals. As a result, we may not support certain proposals whose costs to the issuer (including implementation costs, practicability, and other factors), in Putnam's view, outweigh their investment merits.

This memorandum sets forth Putnam's policies for voting proxies. It covers all accounts for which Putnam has proxy voting authority. These accounts include the Putnam Mutual Funds<sup>1</sup> and Putnam Exchange-Traded Funds, US and international institutional accounts and funds managed or sub-advised by The Putnam Advisory Company, LLC and Putnam Fiduciary Trust Company, LLC. In addition, the policies include US mutual funds and other accounts sub-advised by Putnam Investment Management, LLC.<sup>2</sup>

*<u>Proxy Committee</u>*

<sup>1</sup> Effective January 27, 2023, the Board of Trustees of the Putnam Mutual Funds delegated proxy voting authority to Putnam Investment Management, LLC, the investment manager to the Putnam Mutual Funds.

<sup>2</sup> The Putnam Proxy Voting Procedures and Guidelines will apply also to certain funds and institutional and other accounts managed by Franklin Advisers, Inc. ("FAV") but formerly managed or sub-advised by one of the Putnam adviser entities identified above, pursuant to sub-advisory agreements in effect from time to time between FAV and the relevant Putnam entity(ies).

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Putnam has a Proxy Committee composed of senior professionals, including from the Putnam Equity investment team and the Putnam Equity Sustainability Strategy group. The Chief Investment Officer of Putnam Equity appoints the members of the Proxy Committee. The Proxy Committee is responsible for setting general policy as to proxies. Specifically, the Committee:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Reviews these procedures and the Proxy Voting Guidelines annually and approves any amendments considered to be
advisable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Considers special proxy issues as they may from time to time arise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*3.* Must approve all vote overrides recommended by investment professionals.

*<u>Proxy Voting Administration</u>*

The Putnam Sustainability Strategy group administers Putnam's proxy voting through a Proxy Voting Team. The Proxy Voting Team has the following duties:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Annually prepares the Proxy Voting Guidelines and distributes them to the Proxy Committee for review.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Coordinates the Proxy Committee's review of any new or unusual proxy issues and serves as Secretary
thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Manages the process of referring issues to portfolio managers for voting instructions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Oversees the work of any third-party vendor hired to process proxy votes (as of the date of these procedures
Putnam has engaged Institutional Shareholder Services (ISS) to process proxy votes) and the process of setting up the voting process with ISS and custodial banks for new clients.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Coordinates responses to investment professionals' questions on proxy issues and proxy policies, including
forwarding specialized proxy research from ISS and other vendors and forwards information to investment professionals prepared by other areas at Putnam.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Implements the exception process with respect to referred items on securities held solely in accounts managed
by the Global Asset Allocation ("GAA") team within Franklin Templeton Investment Solutions described in more detail in the Proxy Referral section below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Maintains required records of proxy votes on behalf of the appropriate Putnam client accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Prepares and distributes reports required by Putnam clients.

*<u>Proxy Voting Guidelines</u>*

Putnam maintains written voting guidelines ("Guidelines") setting forth voting positions determined by the Proxy Committee on those issues believed most likely to arise day to day. The Guidelines may call for votes to be cast normally in favor of or opposed to a matter or may deem the matter an item to be referred to investment professionals on a case-by-case basis. A copy of the Guidelines is attached to this memorandum as Exhibit A.

In light of our views on the importance of issuer governance and investor engagement, which we believe are applicable across our various strategies and clients, regardless of a specific portfolio's investment objective, Putnam will vote all proxies in accordance with the Guidelines, subject to two exceptions as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If the portfolio managers of client accounts holding the stock of a company with a proxy vote believe that
following the Guidelines in any specific case would not be in the clients' best interests, they may request the Proxy Voting Team not to follow the guidelines in such case. The request must be in writing and include an explanation of the
rationale for doing so. The Proxy Voting Team will review any such request with the Proxy Committee (or, in cases with limited time, with the Chair of the Proxy Committee acting on the Proxy Committee's behalf) prior to implementing the
request.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Putnam may accept instructions to vote proxies under client specific guidelines subject to review and
acceptance by the Investment Division and the Legal and Compliance Department.

*<u>Other</u>*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Putnam may elect not to vote when the security is no longer held.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Putnam will  **<u>abstain</u>** on items that require case-by-case review when a vote recommendation from the appropriate investment professional(s) cannot be obtained due to restrictive voting deadlines or other prohibitive operational or administrative
requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Where securities held in Putnam client accounts, including the Putnam mutual funds, have been loaned to third
parties in connection with a securities lending program administered by Putnam (through securities lending agents overseen by Putnam), Putnam has instructed lending agents to recall U.S. securities on loan to vote proxies, in accordance with
Putnam's securities lending procedures. Due to differences in non-U.S. markets, Putnam does not currently seek to recall non-U.S. securities on loan. In addition,
where Putnam does not administer a client's securities lending program, this recall policy does not apply, since Putnam generally does not have information on loan details or authority to effect recalls in those cases. It is possible that, for
impracticability or other reasons, a recalled security may not be returned to the relevant custodian in time to allow Putnam to vote the relevant proxy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Putnam will make its reasonable best efforts to vote all proxies except when impeded by circumstances that are
reasonably beyond its control and responsibility, such as custodial proxy voting services, in part or whole, not available or not established by a client, or custodial error.

*<u>Proxy Voting Referrals</u>*

Under the Guidelines, certain proxy matters will be referred to Portfolio Managers. The Portfolio Manager receiving the referral request may delegate the vote decision to an appropriate Analyst from among a list of eligible analysts (such list to be approved by the Chief Investment Officer of the Putnam Equity group and the Director of Equity Research for the Putnam Equity group). The Analyst will be required to make the affirmation and disclosures identified in (3) below. Normally specific referral items will be referred to the portfolio team leader (or another member of the portfolio team he or she designates) whose accounts hold the greatest number of shares of the issuer of the proxies through the Proxy Referral Administration Database. The referral request contains (1) a field that will be used by the portfolio team leader or member for recommending a vote on each referral item, (2) a field for describing any contacts relating to the proxy referral item the portfolio team may have had with any Franklin Templeton employee outside Putnam Equity or with any person other than a proxy solicitor acting in the normal course of proxy solicitation, and (3) a field for portfolio managers to affirm that they are making vote recommendations in the best interest of client accounts and have disclosed to Compliance any potential conflicts of interest relevant to their vote recommendation.

Putnam may vote any referred items on securities held solely in accounts managed by the GAA team within Franklin Templeton Investment Solutions (and not held by any other investment product team) in accordance with the recommendation of Putnam's third-party proxy voting service provider. The Proxy Voting Team will first give the relevant portfolio manager(s) on the GAA team the opportunity to review the referred items and vote on them. If the portfolio manager(s) on the GAA team do not decide to make any active voting decision on any of the referred items, the items will be voted in accordance with the service provider's recommendation. If the security is also held by other investment teams at Putnam Equity, the items will be referred to the largest holder who is not a member of the GAA team.

The portfolio team leader or members who have been requested to provide a recommendation on a proxy referral item will complete the referral request. Upon receiving each completed referral request from the applicable Portfolio Manager or Analyst, the Proxy Voting Team will review the completed request for accuracy and completeness, and will follow up with investment personnel as appropriate.

*<u>Conflicts of Interest</u>*

A potential conflict of interest may arise when voting proxies of an issuer which has a significant business relationship with Putnam. For example, Putnam could manage a defined benefit or defined contribution pension plan for the issuer. Putnam's

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policy is to vote proxies based solely on the investment merits of the proposal. In order to guard against conflicts, the following procedures have been adopted:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Proxy Committee is composed of senior professionals, including Portfolio Managers in Putnam Equity and the
Putnam Equity Sustainability Strategy group. None of these individuals or groups reports to Franklin Templeton's marketing businesses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. No Franklin Templeton employee outside Putnam Equity may contact any portfolio manager about any proxy vote
without first contacting the Proxy Voting Team or a senior lawyer in the Legal and Compliance Department. There is no prohibition on employees seeking to communicate investment-related information to investment professionals except for Putnam's
restrictions on dissemination of material, non-public information. However, the Proxy Voting Team will coordinate the delivery of such information to investment professionals to avoid appearances of conflict.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Investment professionals responding to referral requests must disclose any contacts with third parties other
than normal contact with proxy solicitation firms and must affirm that they are making vote recommendations in the best interest of client accounts and have disclosed to the Proxy Voting Team any potential conflicts of interest relevant to their
vote recommendation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Proxy Voting Team will review the name of the issuer of each proxy that contains a referral item against
various sources of Putnam business relationships maintained by the Legal and Compliance Department or Client Service for potential material business relationships (i.e., conflicts of interest). For referrals, the Proxy Voting Team will complete the
Proxy Voting Conflict of Interest Disclosure Form (attached as Exhibit B and C) via the Proxy Referral Administration Database and will prepare a quarterly report for the Putnam Chief Compliance Officer identifying all completed Conflict of Interest
Disclosure forms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Putnam's Proxy Voting Guidelines may only be overridden with the written recommendation from a member of
the Investment Division and concurrence of the Proxy Committee (or, in cases with limited time, with the Chair of the Proxy Committee on the Proxy Committee's behalf).

*<u>Recordkeeping</u>*

The Putnam Equity Sustainability Strategy Group will retain copies of the following books and records:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A copy of the Proxy Voting Procedures and Guidelines as are from time to time in effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. A copy of each proxy statement received with respect to securities in client accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Records of each vote cast for each client;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Internal documents generated in connection with a proxy referral, such as emails, memoranda, etc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Written reports to clients on proxy voting and all client requests for information and Putnam's response.

All records will be maintained for seven years. A proxy vendor may on Putnam's behalf maintain the records noted in 2 and 3 above if it commits to providing copies promptly upon request.

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<u>Exhibit A to Proxy Procedures</u>

**Putnam Investments Proxy Voting Guidelines** 

The proxy voting guidelines below summarize Putnam's positions on various issues of concern to investors and indicate how client portfolio securities will be voted on proposals dealing with a particular issue. The proxy voting service is instructed to vote all proxies relating to client portfolio securities in accordance with these guidelines, except as otherwise instructed by the Proxy Voting Team.

Putnam's voting policies are rooted in our views that (1) strong, independent corporate governance is important to long-term company financial performance, and (2) long-term investors' active engagement with company management, including through the proxy voting process, strengthens issuer accountability and overall market discipline, potentially reducing risk and improving returns over time. Our voting program is offered as a part of our investment management services, at no incremental fee to Putnam, and, while there can be no guarantees, it is intended to offer potential investment benefits over a long-term horizon. Our voting policies are designed with investment considerations in mind, not as a means to pursue particular political, social, or other goals. As a result, we may not support certain proposals whose costs to the issuer (including implementation costs, practicability, and other factors), in Putnam's view, outweigh their investment merits.

These proxy voting policies are intended to be decision-making guidelines. The guidelines are not exhaustive and do not include all potential voting issues. In addition, as contemplated by and subject to Putnam's Proxy Voting Procedures, because proxy issues and the circumstances of individual companies are so varied, portfolio teams may recommend votes that may vary from the general policy choices set forth in the guidelines.

The following guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals which have been approved and recommended by a company's board of directors. Part II deals with proposals submitted by shareholders for inclusion in proxy statements. Part III addresses unique considerations pertaining to non-US issuers.

**I. Board-Approved Proposals** 

Proxies will be voted **<u>for</u>** board-approved proposals, except as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.  **<u>Matters Relating to the Board of Directors</u>** 

***Uncontested Election of Directors***

The board of directors has the important role of overseeing management and its performance on behalf of shareholders. When evaluating a company's board, Putnam may consider the diversity of professional backgrounds and personal characteristics. Putnam believes that companies generally benefit from diversity on the board, including diversity with respect to gender, ethnicity, race, skills, perspectives and experience.

Proxies will be voted **<u>for</u>** the election of the company's nominees for directors (and/or subsidiary directors) and **<u>for</u>** board-approved proposals on other matters relating to the board of directors (provided that such nominees and other matters have been approved by an independent nominating committee), except as follows:

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have a majority of independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have nominating, audit and compensation committees composed solely of independent directors,
or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has more than <u>15</u> members or fewer than <u>five</u> members, absent special circumstances.

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|:---|:---|
| ⮚ | Putnam may refrain from withholding votes from the board due to insufficient key committee independence due to director resignation, change in board structure, or other specific circumstances, provided that the company has stated (for example in an 8-K), or it can otherwise be determined, that the board will address committee composition to ensure compliance with the applicable corporate governance code in a timely manner after the shareholder meeting and the company has a history of appropriate board independence.  |

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Unless otherwise indicated, for the purposes of determining whether a board has a majority of independent directors and independent nominating, audit, and compensation committees, an independent director is a director who (1) meets all requirements to serve as an independent director of a company under the final NYSE Corporate Governance Rules (e.g., no material business relationships with the company and no present or recent employment relationship with the company (including employment of an immediate family member as an executive officer)), and (2) has not accepted directly or indirectly any consulting, advisory, or other compensatory fee (excluding immaterial fees for transactional services as defined by the NYSE Corporate Governance rules) from the company other than in his or her capacity as a member of the board of directors or any board committee. Putnam believes that the receipt of such compensation for services other than service as a director raises significant independence issues.

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director who is considered an independent director by the company and who has received compensation within the last three years from the company for the provision of professional services (e.g., investment banking, consulting, legal or financial advisory fees).  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director who attends fewer than 75% of board and committee meetings. Putnam may refrain from withholding votes on a **<u>case-by-case</u>** basis if a valid reason for the absence exists, such as illness, personal emergency, potential conflict of interest, etc.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any incumbent nominee for director who served on a board that has not acted to implement a policy requested in a shareholder proposal that received the support of a majority of the votes actually cast on the matter at its previous two annual meetings, or  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any incumbent nominee for director who served on a board that adopted, renewed, or made a material adverse modification to a shareholder rights plan (commonly referred to as a "poison pill") without shareholder approval during the current or prior calendar year. (This is applicable to any type of poison pill, for example, advance-warning type pill, EGM pill, and Trust Defense Plans in Japan.)  |

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Putnam will refrain from opposing the board members who served at the time of the adoption of the poison pill if the duration is one year or less, if the plan contains other suitable restrictions; or if the company publicly discloses convincing rationale for its adoption and seeks shareholder approval of future renewals of the poison pill. (Suitable restrictions could include but are not limited to, a higher threshold for passive investors. Convincing rationale could include circumstances such as, but not limited to, extreme market disruption or conditions, stock volatility, substantial merger, active investor interest, or takeover attempts.)

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|:---|:---|
| ⮚ | Putnam will vote on a **case-by-case** basis and may consider voting against the Nominating Committee Chair if there is a lack of evidence of board diversity.  |

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Putnam is concerned about over-committed directors. In some cases, directors may serve on too many boards to make a meaningful contribution. This may be particularly true for senior executives of public companies (or other directors with substantially full-time employment) who serve on more than a few outside boards.

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** any non-executive nominee for director who serves on more than four (4) public company boards, except where Putnam would otherwise be withholding votes for the entire board of directors. For the purpose of this guideline, boards of affiliated registered investment companies and other similar entities such as UCITS will count as one board. Generally, Putnam will withhold support from directors serving on more than four unaffiliated public company boards, although an exception may be made in the case of a director who represents an investing firm with the sole purpose of managing a portfolio of investments that includes the company.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold</u>** votes from any nominee for director who serves as an executive officer of any public company ("home company") while serving on more than two (2) public company board**s** other than the home company board. (Putnam will withhold votes from the nominee at each company where Putnam client portfolios own shares.) In addition, if Putnam client portfolios are shareholders of the executive's home company, Putnam will withhold votes from members of the company's governance committee. For the purpose of this guideline, boards of affiliated registered investment companies and other similar entities such as UCITS will count as one board.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director of a public company (Company A) who is employed as a senior executive of another public company (Company B) if a director of Company B serves as a senior executive of Company A (commonly referred to as an "interlocking directorate").  |

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Board independence depends not only on its members' individual relationships, but also the board's overall attitude toward management. Independent boards are committed to good corporate governance practices and, by providing objective independent judgment, enhancing shareholder value. Putnam may withhold votes on a case-by-case basis from some or all directors that, through their lack of independence, have failed to observe good corporate governance practices or, through specific corporate action, have demonstrated a disregard for the interest of shareholders.

Note: Designation of executive director is based on company disclosure.

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that provide that a director may be removed only for cause. Putnam will generally vote **<u>for</u>** proposals that permit the removal of directors with or without cause.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals authorizing a board to fill a director vacancy without shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on subsidiary director nominees if Putnam will be voting against the nominees of the parent company's board.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis for director nominees, including nominees for positions on Supervisory Boards or Supervisory Committees, or similar board entities (depending on board structure), for (re)election when cumulative voting applies.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to approve annual directors' fees, except that Putnam will vote on a **<u>case-by-case</u>** basis if Putnam's independent proxy voting service has recommended a vote against such proposal. Additionally, Putnam will vote **<u>for</u>** proposals to approve the grant of equity awards to directors, except that Putnam will consider these proposals on a **<u>case-by-case</u>** basis if Putnam's proxy service provider is recommending a vote against the proposal.  |

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***Classified Boards***

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to classify a board, absent special circumstances indicating that shareholder interests would be better served by this structure.  |

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***Ratification of Auditors***

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to ratify the selection of independent auditors if there is evidence that the audit firm's independence or the integrity of an audit is compromised. (Otherwise, Putnam will vote **<u>for</u>**.)  |

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***Contested Elections of Directors***

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis in contested elections of directors.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. <u>Executive Compensation</u>** 

Putnam will vote on a **<u>case-by-case</u>** basis on board-approved proposals relating to executive compensation, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** stock option and restricted stock plans that will result in an average annual dilution of 1.67% or less (based on the disclosed term of the plan and including all equity-based plans), except where Putnam would otherwise be withholding votes for the entire board of directors in which case Putnam will evaluate the plans on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option and restricted stock plans that will result in an average annual dilution of greater than 1.67% (based on the disclosed term of the plan and including all equity plans).  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** any stock option or restricted stock plan where the company's actual grants of stock options and restricted stock under all equity-based compensation plans during the prior three (3) fiscal years have resulted in an average annual dilution of greater than 1.67%.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Additionally, if the annualized dilution cannot be calculated, Putnam will vote  **<u>for</u>** plans where the
Total Potential Dilution is 5% or less. If the annualized dilution cannot be calculated and the Total Potential Dilution exceeds 5%, then Putnam will vote  **<u>against</u>** . Note: Such plans must first pass all of Putnam's other screens.

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|:---|:---|
| ⮚ | Putnam will vote proposals to issue equity grants to executives on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans that permit replacing or repricing of underwater options (and **<u>against</u>** any proposal to authorize such replacement or repricing of underwater options).  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans that permit issuance of options with an exercise price below the stock's current market price.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans/ restricted stock plans with evergreen features providing for automatic share replenishment.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** bonus plans under which payments are treated as performance-based compensation that is deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended, except as follows:  |

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Vote on a **<u>case-by-case</u>** basis on such proposals if any of the following circumstances exist:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the amount per employee under the plan is unlimited, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the maximum award pool is undisclosed, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the incentive bonus plan's performance criteria are undisclosed, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the independent proxy voting service recommends a vote against.

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|:---|:---|
| ⮚ | Putnam will vote in favor of the annual presentation of advisory votes on executive compensation (Say-on-Pay).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** advisory votes on executive compensation (Say-on-Pay). However, Putnam will vote **<u>against</u>** an advisory vote if the company fails to effectively link executive compensation to company performance according to benchmarking performed by the independent proxy voting service.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will review the proposal on a  **<u>case-by-case</u>** basis if there is no recommendation of the independent proxy voting service.

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on severance agreements (e.g., golden and tin parachutes)  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold</u>** votes from members of a Board of Directors which has approved compensation arrangements Putnam's investment personnel have determined are grossly unreasonable at the next election at which such director is up for re-election.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** employee stock purchase plans that have the following features: (1) the shares purchased under the plan are acquired for no less than 85% of their market value, (2) the offering period under the plan is 27 months or less, and (3) dilution is 10% or less.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** Non-qualified Employee Stock Purchase Plans with all the following features:  |

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1) Broad-based participation (i.e., all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company). 

2) Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary. 

3) Company matching contribution up to 25 percent of employee's contribution, which is effectively a discount of 20 percent from market value. 

4) No discount on the stock price on the date of purchase since there is a company matching contribution.

Putnam will vote **<u>against</u>** Non-qualified Employee Stock Purchase Plans when any of the plan features do not meet the above criteria.

Putnam may vote against executive compensation proposals on a **<u>case-by-case</u>** basis where compensation is excessive by reasonable corporate standards, or where a company fails to provide transparent disclosure of executive compensation. In voting on proposals relating to executive compensation, Putnam will consider whether the proposal has been approved by an independent compensation committee of the board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C. <u>Capitalization</u>** 

Putnam will vote on a case-by-case basis on board-approved proposals involving changes to a company's capitalization, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals relating to the authorization of additional common stock, except that Putnam will evaluate such proposals on a **<u>case-by-case</u>** basis if (i) they relate to a specific transaction or to common stock with special voting rights, (ii) the company has a non-shareholder approved poison pill in place, or (iii) the company has had sizeable stock placements to insiders within the past three years at prices substantially below market value without shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to effect stock splits (excluding reverse stock splits.)  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals authorizing share repurchase programs, except that Putnam will vote on a **<u>case-by-case</u>** basis if there are concerns that there may be abusive practices related to the share repurchase programs.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D. <u>Acquisitions, Mergers, Reorganizations and</u>** 

**<u>Other Transactions</u>** 

Putnam will vote on a **<u>case-by-case</u>** basis on business transactions such as acquisitions, mergers, reorganizations involving business combinations, liquidations and sale of all or substantially all of a company's assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E. <u>Anti-Takeover Measures</u>** 

Putnam will vote **<u>against</u>** board-approved proposals to adopt anti-takeover measures such as supermajority voting provisions, issuance of blank check preferred stock, the creation of a separate class of stock with disparate voting rights, control share acquisition provisions, targeted share placements, and ability to make greenmail payments, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to ratify or approve shareholder rights plans;  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to adopt fair price provisions.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to issue blank check preferred stock in the case of REITs (only).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals that enable or expand shareholders' ability to take action by written consent.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to <u>increase</u> shares of an existing class of stock with disparate voting rights from another share class.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on **shareholder or board-approved** proposals to eliminate supermajority voting provisions at controlled companies (companies in which an individual or a group voting collectively holds a majority of the voting interest).  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u> basis** on **board-approved** proposals to adopt supermajority voting provisions at controlled companies (companies in which an individual or a group voting collectively holds a majority of the voting interest).  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to issue blank check preferred stock if appropriate "*de-clawed"* language is present. Specifically, appropriate *de-clawed* language will include cases where the Company states (i.e., through 8-K, proxy statement or other public disclosure) it will not use the preferred stock for anti-takeover purposes, or in order to implement a shareholder rights plan, or discloses a commitment to submit any future issuances of preferred stock to be used in a shareholder rights plan/anti-takeover purpose to a shareholder vote prior to its adoption.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F. <u>Other Business Matters</u>** 

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved proposals approving routine business matters such as changing the company's name and procedural matters relating to the shareholder meeting, except as follows:  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to amend a company's charter or bylaws (except for charter amendments necessary or to effect stock splits, to change a company's name, to authorize additional shares of common stock or other matters which are considered routine (for example, director age or term limits), technical in nature, fall within Putnam's guidelines (for example, regarding board size or virtual meetings), are required pursuant to regulatory and/or listing rules, have little or no economic impact or will not negatively impact shareholder rights).  |

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|:---|:---|
| ⮚ | Additionally, Putnam believes the bundling of items, whether the items are related or unrelated, is generally not in shareholders' best interest. We may vote **<u>against</u>** the entire bundled proposal if we would normally vote against any of the items if presented individually. In these cases, we will review the bundled proposal on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam generally supports quorum requirements if the level is set high enough to ensure a broad range of shareholders is represented in person or by proxy but low enough so that the Company can transact necessary business. Putnam will vote on a **<u>case-by-case</u>** basis on proposals seeking to change quorum requirements; however, Putnam will normally support proposals that seek to comply with market or exchange requirements.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals seeking to change a company's state of incorporation. However, Putnam will vote **<u>for</u>** mergers and reorganizations involving business combinations designed solely to reincorporate a company in Delaware.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** authorization to transact other unidentified, substantive business at the meeting.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals where there is a lack of information to make an informed voting decision.  |

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|:---|:---|
| ⮚ | Putnam will vote as follows on proposals to adjourn shareholder meetings:  |

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If Putnam is withholding support for the board of the company at the meeting, any proposal to adjourn should be referred for **<u>case-by-case</u>** analysis.

If Putnam is not withholding support for the board, Putnam will vote in favor of adjourning, unless the vote concerns an issue that is being referred back to Putnam for case-by-case review. Under such circumstances, the proposal to adjourn should also be referred to Putnam for **<u>case-by-case</u>** analysis.

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** management proposals to adopt a specific state's courts, or a specific U.S. district court as the exclusive forum for certain disputes, except that Putnam will vote **<u>for</u>** proposals adopting the State of Delaware, or the Delaware Chancery Court, as the exclusive forum, for corporate law matters for issuers incorporated in Delaware. Requiring shareholders to bring actions solely in one state may discourage the pursuit of derivative claims by increasing their difficulty and cost. However, Putnam's guideline recognizes the expertise of the Delaware state court system in handling disputes involving Delaware corporations. In addition, Putnam will **<u>withhold votes</u>** from the chair of the Nominating/Governance committee if a company amends its Bylaws, or takes other actions, to adopt a specific state's courts (other than Delaware courts, for issuers incorporated in Delaware) or a specific U.S. district court as the exclusive forum for certain disputes <u>without</u> shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote on a case-by-case basis on management proposals seeking to adopt a bylaw amendment allowing the company to shift legal fees and costs to unsuccessful plaintiffs in intra-corporate litigation (fee-shifting bylaw). Additionally, Putnam will vote against the Chair of the Nominating/Governance committee if a company adopts a fee-shifting bylaw amendment without shareholder approval.  |

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⮚ Putnam will support management/shareholder proxy access proposals as long as the proposals align with the following principles for a shareholder (or up to 20 shareholders together as a group) to receive proxy access:

1) The required minimum aggregate ownership of the Company's outstanding common stock is no greater than 3%; 

2) The required minimum holding period for the shareholder proponent(s) is no greater than two years; and

3) The shareholder(s) are permitted to nominate at least 20% of director candidates for election to the board. 

Proposals requesting shares be held for 3 years will be reviewed on a **<u>case-by-case</u>** basis. Putnam will vote **<u>agains</u>**<u>t</u> proposals requesting shares be held for more than three years. Proposals that meet Putnam's stated criteria and include other requirements relating to issues such as, but not limited to, shares on loan or compensation agreements with nominees, will be reviewed on a **<u>case-by-case</u>** basis.

Additionally, shareholder proposals seeking an amendment to a company's proxy access policy which include any one of the supported criteria under Putnam's guidelines, for example, a 2-year holding period for shareholders, will be reviewed on a **<u>case-by-case</u>** basis.

Putnam supports management / shareholder proposals giving shareholders the right to call a special meeting as long as the ownership requirement in such proposals is at least **15%** of the company's outstanding common stock and not more than **25%**.

In general, Putnam will vote **<u>for</u>** management or shareholder proposals to reduce the ownership requirement below a company's existing threshold, as long as the new threshold is at least **15%** and not greater than **25%** of the company's outstanding common stock.

Putnam will vote **<u>against</u>** any proposal with an ownership requirement exceeding **25%** of the company's common stock or an ownership requirement that is less than **15%** of the company's outstanding common stock.

In cases where there are competing management and shareholder proposals giving shareholders the right to call a special meeting, Putnam will generally vote **<u>for</u>** the proposal which has the lower minimum shareholder ownership threshold, as long as that threshold is within Putnam's recommended minimum/maximum thresholds. If only one of the competing proposals has a threshold that falls within Putnam's threshold range, Putnam will normally support that proposal as long as

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it represents an improvement (reduction) from the previous requisite ownership level. Putnam will normally vote **<u>against</u>** both proposals if neither proposal has a requisite ownership level between **15%** and **25%** of the company's outstanding common stock**.**

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|:---|:---|
| ⮚ | Putnam will generally vote **fo**<u>r</u> management or shareholder proposals to allow a company to hold virtual-only or hybrid shareholder meetings or to amend its articles/charter/by-laws to allow for virtual-only or hybrid shareholder meetings, provided the proposal does not preclude in-person meetings (at any given time), and does not otherwise limit or impair shareholder participation; and if the company has provided clear disclosure to ensure that shareholders can effectively participate in virtual-only shareholder meetings and meaningfully communicate with company management and directors. Additionally, Putnam may consider the rationale of the proposal and whether there have been concerns about the company's previous meeting practices.  |

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Disclosure should address the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the ability of shareholders to ask questions during the meeting

<sup>○</sup> including time guidelines for shareholder questions

<sup>○</sup> rules around what types of questions are allowed

<sup>○</sup> and rules for how questions and comments will be recognized and disclosed to meeting participants

<sup>○</sup> the manner in which appropriate questions received during the meeting will be addressed by the board

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● procedures, if any, for posting appropriate questions received during the meeting and the company's answers
on the investor page of their website as soon as is practical after the meeting

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● technical and logistical issues related to accessing the virtual meeting platform; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● procedures for accessing technical support to assist in the event of any difficulties accessing the virtual
meeting

Putnam may vote against proposals that do not meet these criteria.

Additionally, Putnam may vote **<u>agains</u>**t the Chair of the Governance Committee when the board is planning to hold a virtual-only shareholder meeting and the company has not provided sufficient disclosure (as noted above) or shareholder access to the meeting.

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to approve a company's board-approved climate transition action plan ("say on climate" proposals in which the company's board proposes that shareholders indicate their support for the company's plan), unless the proxy voting service has recommended a vote against the proposal, in which case Putnam will vote on a **<u>case-by-case</u>** basis on the proposal.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on board-approved proposals that conflict with shareholder proposals.  |

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**II. Shareholder Proposals** 

Shareholder proposals are non-binding votes that are often opposed by management. Some proposals relate to matters that are financially immaterial to the company's business, while others may be impracticable or costly for a company to implement. At the same time, well-crafted shareholder proposals may serve the purpose of raising issues that are material to a company's business for management's consideration and response. Putnam seeks to weigh the costs of different types of proposals against their expected financial benefits. More specifically:

Putnam will vote **<u>in accordance with the recommendation of the company's board of directors</u>** on all shareholder proposals, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals that are consistent with Putnam's proxy voting guidelines for board-approved proposals.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals to declassify a board, absent special circumstances which would indicate that shareholder interests are better served by a classified board structure.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals to require shareholder approval of shareholder rights plans.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals asking that director nominees receive support from holders of a majority of votes cast or a majority of shares outstanding of the company in order to be (re) elected.  |

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|:---|:---|
| ⮚ | Putnam will review on a **<u>case-by-case</u>** basis, shareholder proposals requesting that the board adopt a policy whereby, in the event of a significant restatement of financial results or significant extraordinary write-off, the board will recoup, to the fullest extent practicable, for the benefit of the company, all performance-based bonuses or awards that were made to senior executives based on having met or exceeded specific performance targets to the extent that the specified performance targets were not met.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to seek shareholder approval of any future supplemental executive retirement plan ("SERP"), or individual retirement arrangement, for senior executives that provides credit for additional years of service not actually worked, preferential benefit formulas not provided under the company's tax-qualified retirement plans, accelerated vesting of retirement benefits or retirement perquisites and fringe benefits that are not generally offered to other company employees. (Implementation of this policy shall not breach any existing employment agreement or vested benefit.)  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to report on their executive retirement benefits. (Deferred compensation, split-dollar life insurance, SERPs and pension benefits)  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requesting that a company establish a pay-for-superior-performance standard whereby the company discloses defined financial and/or stock price performance criteria (along with the detailed list of comparative peer group) to allow shareholders to sufficiently determine the pay and performance correlation established in the company's performance-based equity program. In addition, no <u>multi-year</u> award should be paid out unless the company's performance exceeds, <u>during the current CEO's tenure (three or more years)</u>, its peer median or mean performance on selected financial and stock price performance criteria.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to disclose in a separate report to shareholders, the Company's relationships with its executive compensation consultants or firms. Specifically, the report should identify the entity that retained each consultant (the company, the board or the compensation committee) and the types of services provided by the consultant in the past five years (non-compensation-related services to the company or to senior management and a list of all public company clients where the Company's executives serve as a director.)  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to accelerate vesting of equity awards under management severance agreements only if both of the following conditions are met:  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the company undergoes a change in control, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the change in control results in the termination of employment for the person receiving the severance payment.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring that the chair's position be filled by an independent director (separate chair/CEO). However, Putnam will vote on a **<u>case-by-case</u>** basis on such proposals when the company's board has a lead-independent director (or already has an independent or separate chair) <u>and</u> Putnam is supporting the nominees for the board of directors.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals seeking the submission of golden coffins to a shareholder vote or the elimination of the practice altogether.  |

---

------

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals seeking a policy that forbids any director who receives more than 25% withhold votes cast (based on for and withhold votes) from serving on any key board committee for two years and asking the board to find replacement directors for the committees if need be.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to seek shareholder approval of severance agreements (e.g., golden and tin parachutes).  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● However, Putnam will vote  **<u>against</u>** such proposals when the company has a policy that minimally
requires shareholder approval of severance agreements for executives that provides for cash severance benefits exceeding 2.99 times the sum of the executive's base salary plus target annual non-equity incentive plan bonus opportunity.

Putnam will vote on a **<u>case-by-case</u>** basis on approving such compensation arrangements.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to make cash payments under management severance agreements only if both of the following conditions are met: the company undergoes a change in control, and the change in control results in the termination of employment for the person receiving the severance payment.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on shareholder proposals to limit a company's ability to make excise tax gross-up payments under management severance agreements as well as proposals to limit income or other tax gross-up payments.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>in accordance with the recommendation of the company's board of directors</u>** on shareholder proposals regarding corporate political spending, unless Putnam is voting against the directors, in which case the proposal would be reviewed on a **<u>case-by-case</u>** basis.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on shareholder proposals that conflict with board-approved proposals.  |

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**Environmental and Social** 

---

| | |
|:---|:---|
| ⮚ | Putnam believes that sustainable environmental practices and sustainable social policies are important components of long-term value creation. Companies should evaluate the potential risks to their business operations that are directly related to environmental and social factors (among others). In evaluating shareholder proposals relating to environmental and social initiatives, Putnam takes into account (1) the relevance and materiality of the proposal to the company's business, (2) whether the proposal is well crafted (e.g., whether it references science-based targets, or standard global protocols), and (3) the practicality or reasonableness of implementing the proposal.  |

---

Putnam may support well-crafted and well-targeted proposals that request additional reporting or disclosure on a company's plans to mitigate risk to the company related to the following issues and/or their strategies related to these issues: Environmental issues, including but not limited to, climate change, greenhouse gas emissions, renewable energy, and broader sustainability issues; and Social issues, including but not limited to, fair pay, employee diversity and development, safety, labor rights, supply chain management*,* privacy and data security.

In addition, Putnam will consider proposals related to Artificial Intelligence ("AI") on a case-by-case basis.

Putnam will consider factors such as (i) the industry in which the company operates, (ii) the company's current level of disclosure, (iii) the company's level of oversight, (iv) the company's management of risk arising out of these matters, (v) whether the company has suffered a material financial impact. Other factors may also be considered.

Putnam will consider the recommendation of its third-party proxy service provider and may consider other factors such as third-party evaluations of ESG performance.

Additionally, Putnam may vote on a **<u>case-by-case</u>** basis on proposals which ask a company to take action beyond reporting where our third-party proxy service provider has identified one or more reasons to warrant a vote FOR.

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**III. Voting Shares of Non-US Issuers** 

Many non-US jurisdictions impose material burdens on voting proxies. There are three primary types of limits as follows:

1) Share blocking. Shares must be frozen for certain periods of time to vote via proxy. 

2) Share re-registration. Shares must be re-registered out of the name of the local custodian or nominee into the name of the client for the meeting and, in many cases, then re-registered back. Shares are normally blocked in this period.

3) Powers of Attorney. Detailed documentation from a client must be given to the local sub-custodian. In many cases Putnam is not authorized to deliver this information or sign the relevant documents.

Putnam's policy is to weigh the benefits to clients from voting in these jurisdictions against the detriments of not doing so. For example, in a share blocking jurisdiction, it will normally not be in a client's interest to freeze shares simply to participate in a non-contested routine meeting. More specifically, Putnam will normally not vote shares in non-US jurisdictions imposing burdensome proxy voting requirements except in significant votes (such as contested elections and major corporate transactions) where directed by portfolio managers.

Putnam recognizes that the laws governing non**-**US issuers will vary significantly from US law and from jurisdiction to jurisdiction. Accordingly, it may not be possible or even advisable to apply these guidelines mechanically to non-US issuers. However, Putnam believes that shareholders of all companies are protected by the existence of a sound corporate governance and disclosure framework. Accordingly, Putnam will vote proxies of non**-**US issuers **<u>in accordance with the foregoing guidelines</u> <u>where applicable</u>**, except as follows:

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals calling for a majority of the directors to be independent of management.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals relating to (1) the issuance of common stock in excess of 20% of a company's outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of a company's outstanding common stock where shareholders have preemptive rights.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to authorize share repurchase programs that are recommended for approval by Putnam's proxy voting service provider, otherwise Putnam will vote **<u>against</u>** such proposals; except that Putnam will vote on a **<u>case-by-case basis</u>** if there are concerns that there may be abusive practices related to the share repurchase programs.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** authorizations to repurchase shares or issue shares or convertible debt instruments with or without preemptive rights when such authorization can be used as a takeover defense without shareholder approval. Putnam will not apply this policy to a company with a shareholder who controls more than 50% of its voting rights.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **for** proposals that include debt issuances, however substantive/non-routine proposals, and proposals that fall outside of normal market practice or reasonable standards, will be reviewed on a **<u>case-by-case</u>** basis.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved routine, market-practice proposals. These proposals are limited to (1) those issues that will have little or no economic impact, such as technical, editorial, or mandatory regulatory compliance items, (2) those issues that will not adversely affect and/or which clearly improve shareholder rights/values, and which do not violate Putnam's proxy voting guidelines, or (3) those issues that do not seek to deviate from existing laws or regulations. Examples include but are not limited to, related party transactions (non-strategic), profit-and-loss transfer agreements (Germany), authority to increase paid-in capital (Taiwan). Should any unusual circumstances be identified concerning a normally routine issue, such proposals will be referred back to Putnam for internal review.  |

---

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---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals regarding amendments seeking to expand business lines or to amend the corporate purpose, provided the proposal would not include a significant or material departure from the company's current business, and/or will provide the company with greater flexibility in the performance of its activities.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will normally vote **<u>for</u>** management proposals concerning allocation of income and the distribution of dividends. However, Putnam portfolio teams will override this guideline when they conclude that the proposals are outside the market norms (i.e., those seen as consistently and unusually small or large compared to market practices).  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals seeking to adjust the par value of common stock. However, non-routine, substantive proposals will be reviewed on a **<u>case-by-case</u>** basis.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that would authorize the company to reduce the notice period for calling special or extraordinary general meetings to less than 21-Days.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals relating to transfer of reserves/increase of reserves (i.e., France, Japan). However, Putnam will vote on a **<u>case-by-case</u>** basis if the proposal falls outside of normal market practice.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to increase the maximum variable pay ratio. However, Putnam will vote on a **<u>case-by-case</u>** basis if we are voting against a company's remuneration report or if the proposal seeks an increase in excess of 200%.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will review stock option plans on a **<u>case-by-case</u>** basis which allow for the options exercise price to be reduced by dividend payments (if the plan would normally pass Putnam's Guidelines).  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** requests to provide loan guarantees however, Putnam will vote on a **<u>case-by-case</u>** basis if the total amount of guarantees is in excess of 100% of the company's audited net assets.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally support remuneration report/policy proposals (i.e., advisory/binding) where a company's executive compensation is linked directly with the performance of the business and executive. Putnam will generally support compensation proposals which incorporate a mix of reasonable salary and performance based short- and long-term incentives. Companies should demonstrate that their remuneration policies are designed and managed to incentivize and retain executives while growing the company's long-term shareholder value.  |

---

Generally, Putnam will vote **<u>against</u>** remuneration report/policy proposals (i.e., advisory/binding) in the following cases:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Disconnect between pay and performance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● No performance metrics disclosed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● No relative performance metrics utilized;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Single performance metric was used and it was an absolute measure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Performance goals were lowered when management failed or was unlikely to meet original goals;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Long Term Incentive Plan is subject to retesting (e.g., Australia);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Service contracts longer than 12 months (e.g., United Kingdom);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Allows vesting below median for relative performance metrics;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Ex-gratia / non-contractual payments have been made (e.g., United Kingdom and Australia);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Contains provisions to automatically vest upon change-of-control; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Other poor compensation practices or structures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Pension provisions for new executives is not at the same level as the majority of the wider workforce; pension
provisions for incumbent executives are not set to decrease over time (United Kingdom)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Proposed CEO salary increases are not justifiably appropriate in comparison to wider workforce or rationale for
exception increases is not fully disclosed (United Kingdom)

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case basis</u>** on bonus payments to executive directors or senior management; however, Putnam will vote **<u>against</u>** payments that include outsiders or independent statutory auditors.  |

---

**<u>Matters Relating to Board of Directors</u>**

**<u>Uncontested Board Elections</u>**

***Asia: China, Hong Kong, India, Indonesia, Philippines, Taiwan and Thailand***

---

| | |
|:---|:---|
| ⮚ | Putnam will **vote <u>against</u>** the entire board of directors if  |

---

<sup>○</sup> fewer than one-third of the directors are independent directors, or

◾ the board has not established <u>audit</u>, <u>compensation</u> and <u>nominating</u> committees each composed of a majority of independent directors, or

◾ the chair of the audit, compensation or nominating committee is not an independent director.

Commentary: Companies listed in China (or dual-listed in China and Hong Kong) often have a separate supervisory committee in addition to a standard board of directors containing audit, compensation, and nominating committees. The supervisory committee provides oversight of the financial affairs of the company and supervises members of the board and management, while the board of directors makes decisions related to the company's business and investment strategies. The supervisory committee normally comprises employee representatives and shareholder representatives. Shareholder representatives are elected by shareholders of the company while employee representatives are elected by the company's staff. Shareholder representatives may be independent or may be affiliated with the company or its substantial shareholders. Current laws and regulations neither provide a basis for evaluation of supervisor independence nor do they require a supervisor to be independent.

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote in favor of nominees to the Supervisory Committee  |

---

***Australia***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire board of directors if  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● fewer than a majority of the directors are independent, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed solely of non-executive directors, a majority of whom, including the chair of the committee (who should not be the board chair), should be independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established nominating and compensation committees each composed of a majority of independent, non-executive directors, with an independent chair.

***Brazil***

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| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> proposals requesting cumulative voting unless there are more candidates than number of seats available, in which case vote for.  |

---

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---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals for the proportional allocation of cumulative votes if Putnam is supporting the entire slate of nominees. Putnam will vote **<u>against</u>** such proposals if Putnam is not supporting the entire slate.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will **<u>abstain</u>** on individual director allocation proposals if Putnam is voting for the proportional allocation of cumulative votes. Putnam will vote on a **<u>case-by-case</u>** basis on individual director allocation proposals if Putnam is voting against the proportional allocation of votes.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to cumulate votes of common and preferred shareholders if the nominees are known and Putnam is supporting the applicable nominees; Putnam will vote **<u>against</u>** such proposals if Putnam is not supporting the known nominees, or if the nominees are unknown.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>against</u>** proposals seeking the recasting of votes for amended slate (as new candidates could be included in the amended slate without prior disclosure to shareholders).  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals regarding instructions if meeting is held on second call if election of directors is part of the recasting as the slate can be amended without (prior) disclosure to shareholders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals regarding the casting of minority votes to the candidate with largest number of votes.  |

---

***Canada***

Canadian corporate governance requirements mirror corporate governance reforms that have been adopted by the NYSE and other U.S. national securities exchanges and stock markets. As a result, Putnam will vote on matters relating to the board of directors of Canadian issuers **<u>in accordance with the guidelines applicable to U.S. issuers.</u>**

<u>Commentary</u>: Like the UK's Combined Code on Corporate Governance, the policies on corporate governance issued by Canadian securities regulators embody the "comply and explain" approach to corporate governance. Because Putnam believes that the board independence standards contained in the proxy voting guidelines are integral to the protection of investors in Canadian companies, these standards will be applied in a prescriptive manner.

***Continental Europe (ex-Germany)***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire board of directors if  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● fewer than a majority of the directors are <u>i</u> ndependent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established <u>audit, nominating</u> and <u>compensation</u> committees each composed of a
majority of independent directors.

<u>Commentary</u>: An "independent director" under the European Commission's guidelines is one who is free of any business, family or other relationship, with the company, its controlling shareholder or the management of either, that creates a conflict of interest such as to impair his judgment. A "non-executive director" is one who is not engaged in the daily management of the company.

In France, Employee Representatives are employed by the company and represent rank and file employees. These representatives are elected by company employees. The law also provides for the appointment of employee shareholder representatives, if the employee shareholdings exceed 3% of the share capital. Employee shareholder representatives are elected by the company's shareholders (via general meeting).

***Germany***

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| | |
|:---|:---|
| ⮚ | For companies subject to "co-determination," Putnam will vote for the election of nominees to the supervisory board, except:  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the Supervisory Board if  |

---

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee comprising an Independent chair.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the audit committee chair serves as board chair.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board contains more than two former management board members.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the election of a former member of the company's managerial board to chair of the supervisory board.  |

---

<u>Commentary</u>: German corporate governance is characterized by a two-tier board system - a managerial board composed of the company's executive officers, and a supervisory board. The supervisory board appoints the members of the managerial board. Shareholders elect members of the supervisory board, except that in the case of companies with a large number of employees, company employees are allowed to elect some of the supervisory board members (one-half of supervisory board members are elected by company employees at companies with more than 2,000 employees; one-third of the supervisory board members are elected by company employees at companies with more than 500 employees but fewer than 2,000). This practice is known as co-determination.

***Israel***

**<u>Non-Controlled Banks</u>**<u>:</u> Director elections at Non-Controlled banks are overseen by the Supervisor of the Banks and nominees for election as "other" (non-external) directors and external directors (under Companies Law and Directive 301) are put forward by an external and independent committee. As such,

⮚ Putnam's guidelines regarding board Nominating Committees will not apply

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** on nominees when there are more nominees than seats available.  |

---

***Italy***

Election of directors and statutory auditors:

---

| | |
|:---|:---|
| ⮚ | Putnam will apply the director guidelines to the majority shareholder supported list and vote accordingly (**<u>for</u>** or **<u>against</u>**) if multiple lists of director candidates are presented. If there is no majority shareholder supported slate of nominees, Putnam will support the shareholder slate of nominees that is recommended for approval by Putnam's service provider.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire list of director nominees if the list is bundled as one proposal and if Putnam would otherwise be voting against any one director nominee.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** the majority shareholder supported list of statutory auditor nominees.  |

---

Note: Pursuant to Italian law, directors and statutory auditors are elected through a slate voting system whereby candidates are presented in lists submitted by shareholders representing a minimum percentage of share capital.

---

| | |
|:---|:---|
| ⮚ | Putnam will withhold votes from any director not identified in the proxy materials. (Example: Co-opted director nominees.)  |

---

***Japan***

---

| | |
|:---|:---|
| ⮚ | For companies that have established a U.S.-style corporate governance structure, Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have a majority of outside directors,

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established nominating and compensation committees composed of a majority of outside directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of a majority of independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder.

⮚ For companies that have established a statutory auditor board structure:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will  **<u>withhold votes</u>** from the appointment of members of a company's board of statutory
auditors if a majority of the members of the board of statutory auditors is not independent.

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| | |
|:---|:---|
| ⮚ | For companies that have established a statutory auditor board structure, Putnam will **withhold votes** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two outside directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will vote  **<u>against</u>** any statutory auditor nominee who attends fewer than 75% of board and
committee meeting without valid reasons for the absences (i.e., illness, personal emergency, etc.) (Note that Corporate Law requires disclosure of outsiders' attendance but not that of insiders, who are presumed to have no more important time
commitments.)

---

| | |
|:---|:---|
| ⮚ | For companies that have established an audit committee board structure (one-tier / one committee), Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two outside directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of a majority of independent directors

**Election of Executive Director and Election of Supervisory Director - REIT** 

REITs have a unique two-tier board structure with generally one or more executive directors and two or more supervisory directors. The number of supervisory directors must be greater than, not equal to, the number of executive directors. Shareholders are asked to vote on both types of directors. Putnam will vote as follows, provided each board of executive / supervisory directors meets legal requirements.

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote <u>for</u> the election of Executive Director  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote <u>for</u> the election of Supervisory Directors  |

---

<u>Commentary</u>:

**Definition of outside director and independent director:** 

The Japanese Companies Act focuses on two director classifications: Insider or Outsider. An outside director is a director who is not a director, executive, executive director, or employee of the company or its parent company, subsidiaries or affiliates. Further, a director, executive, executive director or employee, who have executive responsibilities, of the company or subsidiaries can regain eligibility ten years after his or her resignation, provided certain other requirements are met. An outside director is designated as an "independent" director based on the Tokyo Stock Exchange listing rules. An outside director is "independent" if that person can make decisions completely independent from the managers of the company, its parent, subsidiaries, or affiliates

------

and does not have a material relationship with the company (i.e., major client, trading partner, or other business relationship; familial relationship with current director or executive; etc.).

The guidelines have incorporated these definitions in applying the board independence standards above.

***Korea***

Putnam will **<u>withhold votes</u>** from the entire board of directors if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● For large companies (i.e., those with assets of at least KRW 2 trillion); the board does not have at least three
independent directors or less than a majority of directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● For small companies (i.e., those with assets of less than KRW 2 trillion), fewer than one-fourth of the directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has not established a nominating committee with at least half of the members being outside directors,
or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of at least three members and in which at least two-thirds of its members are independent directors.

<u>Commentary</u>: For purposes of these guidelines, an "outside director" is a director who is independent from the management or controlling shareholders of the company and holds no interests that might impair performing his or her duties impartially from the company, management or controlling shareholder. In determining whether a director is an outside director, Putnam will also apply the standards included in Article 382 of the Korean Commercial Act*,* i.e., no employment relationship with the company for a period of two years before serving on the committee, no director or employment relationship with the company's largest shareholder, etc.) and may consider other business relationships that would affect the independence of an outside director.

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to amend the Executive Officer Retirement Allowance Policy unless the recipients of the grants include non-executives; the proposal would have a negative impact on shareholders, or the proposal appear to be outside of normal market practice, in which case Putnam will vote **<u>against</u>**.  |

---

**Malaysia** 

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● less than 50% of the directors are independent directors, or less than a majority of the directors are
independent directors for large companies,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee with all members being independent directors, including the
committee chair,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a nominating committee with all members being non-executive directors, a majority of whom are independent, including the committee chair; the board chair should not serve as a member of the nomination committee, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a compensation committee with all members being non-executive directors, a majority of whom are independent; the board chair should not serve as a member of the remuneration committee.

***Nordic Markets – Finland, Norway, Sweden***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the entire board of directors if:  |

---

**<u>Board Independence:</u>**

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have a majority of directors independent from the company and management. (Sweden, Finland,
Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have at least two directors independent from the company and its major shareholders holding
> 10% of the Company's share capital. (Sweden, Finland, Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive director is a member of the board. (Norway)

**<u>Audit Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee does not consist of a majority of directors independent from the company and management.
(Sweden, Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee does not have at least one director independent from the company and its major shareholders
holding > 10% of the Company's share capital. (Sweden, Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee is not majority independent. (Norway)

**<u>Remuneration Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not fully independent of the company, excluding the chair. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not majority independent of the company. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee does not consist fully of non-executive directors. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not fully independent of management (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not majority independent from the company and its major shareholders holding >
50% of the Company's share capital. (Sweden, Finland, Norway)

**<u>Board Nomination Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The nomination committee does not consist of a majority of directors independent from the company. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive is a member of the nomination committee. (Finland)

**<u>External Nomination Committee:</u>** Vote against the establishment of the nomination committee and its guidelines when:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee is not majority independent of the company and management. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee does not have at least one director not affiliated to largest shareholder on the
committee. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee does not meet best practice based on ISS analysis. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee is not majority independent of the board and management. (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee has more than one member of the board of the directors sitting on the committee. (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● There is insufficient disclosure provided for new nominees (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive is a member of the committee. (Norway)

------

***Russia***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a <u>case-by-case basis</u> for the election of nominees to the board of directors.  |

---

<u>Commentary</u>: In Russia, director elections are handled through a cumulative voting process. Cumulative voting allows shareholders to cast all of their votes for a single nominee for the board of directors, or to allocate their votes among nominees in any other way. In contrast, in "regular" voting, shareholders may not give more than one vote per share to any single nominee. Cumulative voting can help to strengthen the ability of minority shareholders to elect a director.

***Singapore***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** from the entire board of directors if  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● in the case of a board with an independent director serving as chair, fewer than one-third of the directors are independent directors; or, in the case of a board not chaired by an independent director, fewer than half of the directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established <u>audit</u> and <u>compensation</u> committees, each with an independent director
serving as chair, with at least a majority of the members being independent directors, and with all of the directors being non-executive directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a <u>nominating</u> committee, with an independent director serving as chair, and
with at least a majority of the members being independent directors.

***United Kingdom, Ireland***

<u>Commentary</u>:

**Application of guidelines**: Although the Combined Code has adopted the "comply and explain" approach to corporate governance, Putnam believes that the guidelines discussed above with respect to board independence standards are integral to the protection of investors in UK companies. As a result, these guidelines will be applied in a prescriptive manner.

**Definition of independence**: For the purposes of these guidelines, a non-executive director shall be considered independent if the director meets the independence standards in section A.3.1 of the Combined Code (i.e., no material business or employment relationships with the company, no remuneration from the company for non-board services, no close family ties with senior employees or directors of the company, etc.), except that Putnam does not view service on the board for more than nine years as affecting a director's independence.

**Smaller companies**: A smaller company is one that is below the FTSE 350 throughout the year immediately prior to the reporting year.

---

| | |
|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board, excluding the Non-Executive Chair, is not comprised of at
least half independent non-executive directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a Nomination committee composed of a majority of independent non-executive directors, excluding the Non-Executive Chair, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a Compensation committee composed of (1) at least three directors (in the case
of smaller companies, as defined by the Combined Code, two directors) and (2) solely of independent non-executive directors. The company chair may be a member of, but not chair, the Committee provided he
or she was considered independent on appointment as chair, or

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has not established an Audit Committee composed of, (1) at least three directors (in the case of
smaller companies as defined by the Combined Code, two directors) and (2) solely of independent non-executive directors. The board chair may not serve on the audit committee of large or small companies.

***All other jurisdictions***

---

| | |
|:---|:---|
| ⮚ | In the absence of jurisdiction specific guidelines, Putnam will vote as follows for boards/supervisory boards:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Putnam will vote  **<u>against</u>** the entire board of directors if

◾ fewer than a majority of the directors are independent directors, or

◾ the board has not established audit, nominating and compensation committees each composed of a majority of independent directors.

**Additional Commentary regarding all Non-US jurisdictions:** 

Whether a director is considered "independent" or not will be determined by reference to local corporate law or listing standards.

Some jurisdictions may legally require or allow companies to have a certain number of employee representatives, employee shareholder representatives (e.g., France) and/or shareholder representatives on their board. Putnam generally does not consider these representatives independent. The presence of employee representatives or employee shareholder representatives on the board and key committees is generally legally mandated. In most markets, shareholders do not have the ability to vote on the election of employee representatives or employee shareholder representatives. In some markets, significant shareholders have a legal right to nominate shareholder representatives. Shareholders are required to approve the election of shareholder representatives to the board. Unlike employee representatives, there are no legal requirements regarding the presence of shareholder representatives on the board or its committees.

---

| | |
|:---|:---|
| ⮚ | Putnam will **not include** employee or employee shareholder representatives in the independence calculation of the board or key committees, nor in the calculation of the size of the board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will **include** shareholder representatives in the independence calculation of the board and key committees, and in the calculation of the size of the board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally support shareholder or employee representatives if included in the agenda Putnam will vote on a **<u>case-by-case</u>** basis when there are more candidates than seats. Additionally, Putnam will vote **<u>against</u>** such nominees when there is insufficient information disclosed.  |

---

⮚ Putnam Investments' policies regarding the provision of professional services and transactional relationship with regard to directors will apply.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **for** independent nominees for alternate director, unless such nominees do not meet Putnam's individual director standards.  |

---

**Shareholder nominated directors/self-nominated directors** 

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> shareholder nominees if Putnam supports the board of directors.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a <u>case-by case</u> basis if Putnam will be voting against the current board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a case-by-case basis if the proposal regarding a self-nominated/shareholder nominated director nominee would add an additional seat to the board if the nominee is approved.  |

---

**<u>Other Business Matters</u>**

------

***Japan***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>A. Article Amendments</u>**

---

| | |
|:---|:---|
| ⮚ | The Japanese Companies Act gives companies the option to adopt a U.S.-Style corporate structure (i.e., a board of directors and audit, nominating, and compensation committees). Putnam will vote **<u>for</u>** proposals to amend a company's articles of incorporation to adopt the U.S.-Style "Board with Committees" structure. However, the independence of the outside directors is critical to effective corporate governance under this new system. Putnam will, therefore, scrutinize the backgrounds of the outside director nominees at such companies, and will vote **<u>against</u>** the amendment where Putnam believes the board lacks the necessary level of independence from the company or a substantial shareholder.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on granting the board the authority to repurchase shares at its discretion.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** amendments to delete a requirement directing the company to reduce authorized capital by the number of treasury shares cancelled. If issued share capital decreases while authorized capital remains unchanged, then the company will have greater leeway to issue new shares (for example as a private placement or a takeover defense).  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to authorize appointment of special directors. Under the new Corporate Law, companies are allowed to appoint, from among their directors, "special directors" who will be authorized to make decisions regarding the purchase or sale of important assets and major borrowing or lending, on condition that the board has at least six directors, including at least one non-executive director. At least three special directors must participate in the decision-making process and decisions shall be made by a majority vote of the special directors. However, the law does not require any of the special directors to be non-executives, so in effect companies may use this mechanism to bypass outsiders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to create new class of shares or to conduct a share consolidation of outstanding shares to squeeze out minority shareholders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals seeking to enable companies to establish specific rules governing the exercise of shareholder rights. (Note: Such as, shareholders' right to submit shareholder proposals or call special meetings.)  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>B. Compensation Related Matters</u>**

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** option plans which allow the grant of options to suppliers, customers, and other outsiders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option grants to independent internal statutory auditors. The granting of stock options to internal auditors, at the discretion of the directors, can compromise the independence of the auditors and provide incentives to ignore accounting problems, which could affect the stock price over the long term.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the payment of retirement bonuses to directors and statutory auditors when one or more of the individuals to whom the grants are being proposed has not served in an executive capacity for the company. Putnam will also vote **<u>against</u>** payment of retirement bonuses to any directors or statutory auditors who have been designated by the company as independent. Retirement bonus proposals are all-or-nothing, meaning that split votes against individual payments cannot be made. If any one individual does not meet Putnam's criteria, Putnam will vote **<u>against</u>** the entire bundled item.  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>C. Other Business Matters</u>**

---

| | |
|:---|:---|
| ⮚ | Putnam votes **<u>for</u>** mergers by absorptions of wholly-owned subsidiaries by their parent companies. These deals do not require the issuance of shares, and do not result in any dilution or new obligations for shareholders of the parent company. These transactions are routine.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** the acquisition if it is between parent and wholly-owned subsidiary.  |

---

------

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** the formation of a holding company, if routine. Holding companies are once again legal in Japan and a number of companies, large and small, have sought approval to adopt a holding company structure. Most of the proposals are intended to help clarify operational authority for the different business areas in which the company is engaged and promote effective allocation of corporate resources. As most of the reorganization proposals do not entail any share issuances or any change in shareholders' ultimate ownership interest in the operating units, Putnam will treat most such proposals as routine.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that authorize the board to vary the AGM record date.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to abolish the retirement bonus system  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved director/officer indemnification proposals  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on private placements (Third-party share issuances). Where Putnam views the share issuance necessary to avoid bankruptcy or to put the company back on solid financial footing, Putnam will generally vote **<u>for</u>**. When a private placement allows a particular shareholder to obtain a controlling stake in the company at a discount to market prices, or where the private placement otherwise disadvantages ordinary shareholders, Putnam will vote **<u>against</u>**.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>against</u>** shareholder rights plans (poison pills). However, if all of the following criteria are met, Putnam will evaluate such poison pills on a **<u>case-by-case</u>** basis:  |

---

1) The poison pill must have a duration of no more than three years.

2) The trigger threshold must be no less than 20 percent of issued capital. 

3) The company must have no other types of takeover defenses in place.

4) The company must establish a committee to evaluate any takeover offers, and the members of that committee must all meet Putnam's' definition of independence.

5) At least 20 percent, and no fewer than two, of the directors must meet Putnam's definition of independence. These independent directors must also meet Putnam's guidelines on board meeting attendance. 

6) The directors must stand for reelection on an annual basis.

7) The company must release its proxy materials no less than three weeks before the meeting date.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to allow the board to decide on income allocation without shareholder vote.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to limit the liability of External Audit Firms ("Accounting Auditors")  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals seeking a reduction in board size that eliminates all vacant seats.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam may generally vote **<u>against</u>** proposals seeking an increase in authorized capital that leaves the company with as little as 25 percent of the authorized capital outstanding (general request). However, such proposals will be evaluated on a company specific basis, taking into consideration such factors as current authorization outstanding, existence (or lack thereof) of preemptive rights and rationale for the increase.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** corporate split agreement and transfer of sales operations to newly created wholly-owned subsidiaries where the transaction is a purely internal one which does not affect shareholders' ownership interests in the various operations. All other proposals will be referred back to Putnam for **<u>case-by-case</u>** review. These reorganizations usually accompany the switch to a holding company structure, but may be used in other contexts.  |

---

***United Kingdom***

------

---

| | |
|:---|:---|
| ⮚ | Putnam will not apply the U.S. standard 15% discount cap for employee share purchase schemes at U.K. companies. As such, Putnam will generally vote **<u>for</u>** 'Save-As-You-Earn' schemes in the U.K which allow for no more than a 20% purchase discount, and which otherwise comply with U.K. law and Putnam standards.  |

---

***France***

---

| | |
|:---|:---|
| ⮚ | Putnam will not apply the U.S. standard 15% discount cap for employee share purchase schemes at French companies. As such, Putnam will generally vote **<u>for</u>** employee share purchase schemes in France that allow for no greater than a 30% purchase discount, or 40% purchase discount if the vesting period is equal to or greater than ten years, and which otherwise comply with French law and Putnam standards.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** the Remuneration Report (established based on SRD II), however Putnam will vote on a **<u>case-by-case</u>** basis when Putnam is voting against both the ex-Post Remuneration Report (CEO) and ex-Ante Remuneration Policy (CEO, or proposal including CEO remuneration package) in the current year, and Putnam's third party service provider(s) is recommending a vote against.  |

---

***Canada***

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** Advance Notice provisions for submitting director nominations not less than 30 days prior to the date of the annual meeting. For Advance Notice provisions where the minimum number of days to submit a shareholder nominee is less than 30 days prior to the meeting date, Putnam will vote on a **<u>case-by-case</u>** basis. Putnam will also vote on a **<u>case-by-case</u>** basis if the company's policy expressly prohibits the commencement of a new notice period in the event the originally scheduled meeting is adjourned or postponed**.**  |

---

***Hong Kong***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>for</u> proposals to approve a general mandate permitting the company to engage in non-pro rata share issuances of up to 20% of total equity in a year if the company's board meets Putnam's independence standards; if the company's board does not meet Putnam's independence standards, then Putnam will vote against these proposals.  |

---

---

| | |
|:---|:---|
| ⮚ | Additionally, Putnam will vote <u>for</u> proposals to approve the reissuance of shares acquired by the company under a share repurchase program, provided that: (1) Putnam supported (or would have supported, in accordance with these guidelines) the share repurchase program, (2) the reissued shares represent no more than 10% of the company's outstanding shares (measured immediately before the reissuance), and (3) the reissued shares are sold for no less than 85% of current market value.  |

---

This policy supplements policies regarding share issuances as stated above under section

III. Voting Shares of Non-US Issuers.

***Taiwan***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to release the board of directors from the non-compete restrictions specified in Taiwanese Company Law. However, Putnam will vote **<u>for</u>** such proposals if the directors are engaged in activities with a wholly- owned subsidiary of the company.  |

---

***Australia***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to carve out, from the general cap on non-pro rata share issues of 15% of total equity in a rolling 12-month period, a particular proposed issue of shares or a particular issue of shares made previously within the 12-month period, if the company's board meets Putnam's independence standards; if the company's board does <u>not</u> meet Putnam's independence standards, then Putnam will vote **<u>against</u>** these proposals.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals renewing partial takeover provisions.  |

---

------

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on Board-Spill proposals.  |

---

***Turkey***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals involving related party transactions. However, Putnam will vote **<u>against</u>** when such proposals do not provide information on the specific transaction(s) to be entered into with the board members or executives.  |

---

------

**<u>Exhibit B to Proxy Procedures</u>**

<u>PUTNAM INVESTMENTS</u> 

<u>PROXY VOTING CONFLICT</u> 

OF INTEREST DISCLOSURE FORM

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. *Company name*:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Date of Meeting:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Referral Item(s):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Description of Putnam's Business Relationship with Issuer of Proxy which may give rise to a conflict of
interest:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.* *Describe procedures used to address any conflict of interest:* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. *Describe any contacts from parties outside Putnam Management (other than routine communications from proxy* solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

CERTIFICATION

The undersigned officer of Putnam Investments certifies that, to the best of his or her knowledge, any recommendation of an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

---

| |
|:---|
| Name: |
| Proxy Voting Team |

---

------

**<u>Exhibit C to Proxy Procedures</u>**

<u>PUTNAM INVESTMENTS</u> 

<u>PROXY VOTING CONFLICT</u> 

OF INTEREST DISCLOSURE FORM

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. *Company name*:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. *Date of Meeting*:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. *Referral Item(s)*:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. *Description of Putnam's Business Relationship with Issuer of Proxy which may give rise to a conflict of interest:* <u>None</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. *Describe procedures used to address any conflict of interest*: N/A

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. *Describe any contacts from parties outside Putnam Management (other than routine communications from proxy solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation*:

None

CERTIFICATION

The undersigned officer of Putnam Investments certifies that, to the best of his or her knowledge, any recommendation of an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

---

| |
|:---|
| Name: |
| Proxy Voting Team |

---

------

**APPENDIX A-3** 

**PUTNAM ETF TRUST** 

**STATEMENT OF ADDITIONAL INFORMATION ("SAI") OF FRANKLIN NEW YORK MUNICIPAL ETF AND FRANKLIN SHORT-TERM MUNICIPAL INCOME ETF** 

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**The information in this Statement of Additional Information is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.** 

**Subject to completion, May 30, 2025** 

[ ], 2025

Putnam ETF Trust

---

| | | |
|:---|:---|:---|
| **Fund** | **Symbol** | **Principal U.S. Listing Exchange** |
| &nbsp;&nbsp;&nbsp;Franklin New York Municipal Income ETF ("New York Municipal Income ETF") | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp;Franklin Short-Term Municipal Income ETF ("Short-Term Municipal Income ETF") | [ ] | [NYSE Arca, Inc.] |

---

**STATEMENT OF ADDITIONAL INFORMATION** 

This Statement of Additional Information ("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.

Each Fund has not commenced operations as of the date of this prospectus. Simultaneous with each Fund's commencement of operations, which is anticipated to occur on or about [ ], New York Municipal Income ETF and Short-Term Municipal Income ETF will acquire the assets and assume the liabilities of the Putnam New York Tax Exempt Income Fund and Putnam Short-Term Municipal Income Fund(each, a "Predecessor Fund"), respectively, in a reorganization (the "Reorganization"). As a result of the Reorganization, each Fund will adopt the performance and financial history of the respective Predecessor Fund's class R6 shares. The audited financial statements and report of the respective Predecessor Fund's independent registered public accounting firm in the respective Predecessor Fund's Form N-CSR, for the fiscal year ended [ ], are incorporated by reference into this SAI, which means that they are part of this SAI for legal purposes

Part I of this SAI contains specific information about each Fund listed above (references to the "Fund" mean each Fund listed on this cover page, unless otherwise noted). Part II includes information about the Fund and other Putnam mutual funds and exchange-traded funds (collectively, the "Putnam funds").

For a free copy of the Fund's current prospectus and, when available, shareholder reports, and/or financial statements, call Putnam Investor Services at 1-800-225-1581, write P.O. Box 219697, Kansas City, MO 64121-9697 or visit www.franklintempleton.com.

A-281 [ -SAI] [ ]

------

**Table of Contents** 

---

| | |
|:---|:---|
|  **[PART I](#sai12516_2_1)** |  |
|  **[FUND ORGANIZATION AND CLASSIFICATION](#sai12516_2_2)** | **A-283** |
|  **[INVESTMENT RESTRICTIONS](#sai12516_2_3)** | **A-283** |
|  **[CHARGES AND EXPENSES](#sai12516_2_4)** | **A-284** |
|  **[PORTFOLIO MANAGERS](#sai12516_2_5)** | **A-287** |
|  **[STATE SPECIFIC INFORMATION](#sai12516_2_6)** | **A-291** |
|  **[FINANCIAL STATEMENTS](#sai12516_2_7)** | **A-292** |
|  **[PART II](#sai12516_2_8)** |  |
|  **[TAXES](#sai12516_2_10)** | **A-351** |
|  **[MANAGEMENT](#sai12516_2_11)** | **A-365** |
|  **[DISCLOSURE OF PORTFOLIO INFORMATION](#sai12516_2_12)** | **A-384** |
|  **[INFORMATION SECURITY RISKS](#sai12516_2_13)** | **A-385** |
|  **[PROXY VOTING GUIDELINES AND PROCEDURES](#sai12516_2_14)** | **A-386** |
|  **[SECURITIES RATINGS](#sai12516_2_15)** | **A-386** |
|  **[APPENDIX A - PROXY VOTING GUIDELINES OF THE PUTNAM FUNDS](#sai12516_2_16)** | **A-391** |

---

------

**SAI** 

**PART I** 

**FUND ORGANIZATION AND CLASSIFICATION** 

The Fund is a diversified series of Putnam ETF Trust (the "Trust"). The Trust is a Delaware statutory trust organized on December 22, 2020.

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.

Each share has one vote per dollar of net asset value represented by such share.

Shares of all classes vote together as a single class except when otherwise required by law or as determined by the Trustees. The Trustees may take many actions affecting the fund without shareholder approval, including under certain circumstances merging the 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 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.

**Information about the Summary Prospectus, Prospectus, and SAI** 

The Fund has entered into contractual arrangements with an investment adviser, distributor, transfer 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 by a shareholder against or on behalf of the Trust (or its series), including claims against Trustees and Officers, must be brought in courts of the State of Delaware .

**INVESTMENT RESTRICTIONS** 

The Fund has adopted the fundamental investment restrictions below for the protection of shareholders. Fundamental investment restrictions may not be changed without a vote of a majority of the outstanding voting securities. The Investment Company Act of 1940, as amended, 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.

**As fundamental investment restrictions, the Fund may not and will not:** 

(1) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at the time the borrowing is made.

(2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws.

(3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities 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.

------

(4) New York Municipal Income ETF: Purchase or sell commodities or commodity contracts, except that the Fund may purchase and sell financial futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities.

Short-Term Municipal Income ETF: Purchase or sell commodities, except as permitted by applicable law.

(5) Make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.

(6) With respect to 75% of its total assets, invest in securities of any issuer if, immediately after such investment, more than 5% of the total assets of the Fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities or to securities issued by other investment companies.

(7) New York Municipal Income ETF: With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer.

Short-Term Municipal Income ETF: With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any 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

(8) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of nongovernmental issuers) 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.

New York Municipal Income ETF only: For purposes of the Fund's fundamental policy on commodities and commodities contracts (#4 above), at the time of the establishment of the policy, swap contracts on financial instruments or rates were not within the understanding of the terms "commodities" or "commodity contracts," and notwithstanding any federal legislation or regulatory action by the Commodity Futures Trading Commission ("CFTC") that subject such swaps to regulation by the CFTC, the Fund will not consider such instruments to be commodities or commodity contracts for purposes of this policy.

For purposes of the Fund's fundamental policy on industry concentration (#8 above), 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.

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.

**CHARGES AND EXPENSES** 

**Creation/Redemption Transaction Fees** 

The following table shows the standard transaction fees for creations and redemptions.

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| | |
|:---|:---|
| **Standard Creation/Redemption Transactions Fee (in kind)** | **Standard Creation/Redemption Transactions Fee (in cash)** |
| [ ] | [ ] |

---

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**Management fees** 

Franklin Advisers, Inc. (the "Investment Manager") serves as the Fund's investment manager. Under the Fund's management agreement with the Investment Manager (the "Management Contract"), the Fund pays an annual all-inclusive management fee to the Investment Manager as shown below. The management fee is based on the Fund's average daily net assets and is calculated and accrued daily. In consideration of the management fee, the Investment Manager pays all expenses incurred by the Fund, or reimburses the Fund for, all of the Fund's organizational and other operating expenses, excluding only: (i) interest and taxes (including, but not limited to, income, excise, transfer and withholding taxes); (ii) expenses of the Fund incurred with respect to the acquisition and disposition of portfolio securities, commodities or other financial instruments and the execution of portfolio transactions, including brokerage commissions; (iii) expenses incurred in connection with any distribution plan adopted by the Fund in compliance with Rule 12b-1 under the Investment Company Act of 1940, as amended, including distribution fees; (iv) expenses of printing and mailing proxy materials to shareholders of the Fund; (v) all other expenses incidental to holding meetings of the Fund's shareholders, including proxy solicitations therefor; (vi) litigation expenses (including, but not limited to, any indemnification obligation, attorneys' fees, expenses, costs, judgments, amounts paid in settlement, fines, penalties, fees of expert witnesses, document production fees, and all other liabilities whatsoever incurred or paid by the Fund or a person indemnified by the Fund); (vii) the fee payable to the Investment Manager hereunder; (viii) any extraordinary expenses (which, for the avoidance of doubt, do not include expenses related to the organization of any subsidiary for a fund or the ongoing corporate expenses of maintaining such subsidiary) and (ix) acquired fund fees and expenses.

Management Fee:

New York Municipal Income ETF: 0.35%

Short-Term Municipal Income ETF: 0.20%

**Brokerage commissions** 

Because the Fund has yet to commence investment operations as of the date of this SAI, the Fund has not paid any brokerage commissions.

Because the Fund has yet to commence investment operations, the Fund does not hold securities of its regular broker-dealers (or affiliates of such broker-dealers).

**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, the Investment Manager furnishes a continuing investment program for the Fund and makes investment decisions on its behalf. Subject to the control of the Trustees, the Investment Manager also manages the Fund's other affairs and business.

The table below shows the value of each Trustee's holdings in all registered investment companies in the Franklin Templeton family of funds overseen by the Trustee as of December 31, [2024].

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---

| | |
|:---|:---|
| **Trustees** | **Aggregate Dollar Range of Equity<br>Securities in All Registered Investment<br>Companies in the Franklin Templeton<br>Fund Complex Overseen by Trustee ($)** |
|  **Independent Trustees** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Liaquat Ahamed | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Barbara M. Baumann | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Katinka Domotorffy | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Catharine Bond Hill | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Gregory G. McGreevey |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Jennifer Williams Murphy | $10001-$50000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Marie Pillai | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; George Putnam III | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Manoj P. Singh | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Mona K. Sutphen | over $100,000 |
|  **Interested Trustees** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Jane E. Trust |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Robert L. Reynolds | over $100,000 |

---

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 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 Fund had not yet commenced investment operations as of the date of this SAI.

The following table shows the fees paid to each Trustee by all of the Putnam funds for services rendered during the calendar year ended December 31, [ ]. As the Fund has not yet commenced operations, no fees have been paid by the Fund. Certain Independent Trustees who serve in leadership positions of the Board of Trustees or Board committees receive additional compensation, which is included in the fees shown below.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Trustees** | **Aggregate**<br> **compensation**<br> **from the Fund<sup>1</sup>** | **Pension or**<br> **retirement**<br> **benefits**<br> **accrued as**<br> **part of Fund**<br> **expenses** | **Estimated<br>annual benefits<br>from Franklin<br>Templeton<br>fund complex<br>upon<br>retirement<sup>2</sup>**  | **Total<br>compensation<br>from Franklin<br>Templeton fund<br>complex** |
|  **Independent Trustees** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Liaquat Ahamed | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp; Barbara M. Baumann | N/A | N/A | N/A | $[464,500] |
| &nbsp;&nbsp;&nbsp;&nbsp; Katinka Domotorffy | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp; Catharine Bond Hill | N/A | N/A | N/A | $[368,660] |
| &nbsp;&nbsp;&nbsp;&nbsp; Kenneth R. Leibler<sup>3</sup>  | N/A | N/A | N/A | $[295,160] |
| &nbsp;&nbsp;&nbsp;&nbsp; Gregory G. McGreevey<sup>4</sup>  | N/A | N/A | N/A | $[189,590] |
| &nbsp;&nbsp;&nbsp;&nbsp; Jennifer Williams Murphy | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp; Marie Pillai | N/A | N/A | N/A | $[355,320] |
| &nbsp;&nbsp;&nbsp;&nbsp; George Putnam III | N/A | N/A | $[130,333] | $[407,000] |
| &nbsp;&nbsp;&nbsp;&nbsp; Manoj P. Singh | N/A | N/A | N/A | $[407,000] |
| &nbsp;&nbsp;&nbsp;&nbsp; Mona K. Sutphen | N/A | N/A | N/A | $[382,000] |
|  **Interested Trustees** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Robert L. Reynolds<sup>5</sup>  | N/A | N/A | N/A | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp; Jane E. Trust<sup>5</sup>  | N/A | N/A | N/A | N/A |

---

<sup>1</sup> Certain Trustees are also owed compensation deferred pursuant to a Trustee Compensation Deferral Plan.

<sup>2</sup> Estimated benefits for each Trustee are based on Trustee fee rates for calendar years 2003, 2004 and 2005.

<sup>3</sup> Mr. Leibler retired from the Board of Trustees effective June 30, 2024.

<sup>4</sup> Mr. McGreevey was appointed to the Board of Trustees on May 17, 2024.

<sup>5</sup> Mr. Reynolds and Ms. Trust are not compensated by the Fund for their service as Trustees because of their affiliation with the Investment Manager.

Under a retirement plan for Trustees of 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** 

Because the Fund had not commenced operations prior to the date of this SAI, the Fund has not issued any shares.

**PORTFOLIO MANAGERS** 

**Other Accounts Managed by the Portfolio Managers** 

The table below identifies the portfolio managers, the number of accounts (other than the Fund) for which the portfolio managers have day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. For each category, the number of

------

accounts and total assets in the accounts where fees are based on performance are also indicated, as applicable. Unless noted otherwise, all information is provided as of [ ].

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Portfolio Manager** | **Type of Account** | **Number of<br>Accounts<br>Managed** | **Total Assets<br>Managed<br>(Millions) ($)** | **Number of Accounts<br>Managed for which<br>Advisory Fee is<br>Performance-Based** | **Assets Managed for<br>which Advisory Fee<br>is**<br> **Performance-Based<br>(Millions) ($)** |
|  **New York Municipal Income ETF** | **New York Municipal Income ETF** |  |  |  |  |
|  John Bonelli | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Michael Conn | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | <br> Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | <br> Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Garrett L. Hamilton | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Christopher Sperry | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | <br> Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | <br> Other Accounts | [ ] | [ ] | [ ] | [ ] |

---

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  John Wiley | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  **Short-Term Municipal Income ETF** | **Short-Term Municipal Income ETF** |  |  |  |  |
|  Benjamin C. Barber | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  James Conn | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | <br> Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | <br> Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Garrett L. Hamilton | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Francisco Rivera | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | <br> Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | <br> Other Accounts | [ ] | [ ] | [ ] | [ ] |

---

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---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  Daniel Workman | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

---

**Compensation of portfolio managers** 

The Investment Manager seeks to maintain a compensation program that is competitively positioned to attract, retain and motivate top-quality investment professionals. Portfolio managers receive a base salary, a cash incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed annually, and the level of compensation is based on individual performance, the salary range for a portfolio manager's level of responsibility and Franklin Templeton guidelines. Portfolio managers are provided no financial incentive to favor one fund or account over another. Each portfolio manager's compensation consists of the following three elements:

**Base salary** Each portfolio manager is paid a base salary.

**Annual bonus** Annual bonuses are structured to align the interests of the portfolio manager with those of the Fund's shareholders. Each portfolio manager is eligible to receive an annual bonus. Bonuses generally are split between cash (50% to 65%) and restricted shares of Franklin Resources, Inc. ("Resources") stock and mutual fund shares. The deferred equity-based compensation is intended to build a vested interest of the portfolio manager in the financial performance of both Resources and mutual funds advised by the Investment Manager. The bonus plan is intended to provide a competitive level of annual bonus compensation that is tied to the portfolio manager achieving consistently strong investment performance, which aligns the financial incentives of the portfolio manager and Fund shareholders. The Chief Investment Officer of the Investment Manager and/or other officers of the Investment Manager, with responsibility for the Fund, have discretion in the granting of annual bonuses to portfolio managers in accordance with Franklin Templeton guidelines. The following factors are generally used in determining bonuses under the plan:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Investment performance.* Primary consideration is given to the historic investment performance over the 1,
3 and 5 preceding years of all accounts managed by the portfolio manager. The pre-tax performance of each fund managed is measured relative to a relevant peer group and/or applicable benchmark as appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Non-investment performance.* The more qualitative contributions of
the portfolio manager to the Investment Manager's business and the investment management team, including professional knowledge, productivity, responsiveness to client needs and communication, are evaluated in determining the amount of any
bonus award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● *Responsibilities.* The characteristics and complexity of funds managed by the portfolio manager are
factored in the Investment Manager's appraisal.

**Additional long-term equity-based compensation** Portfolio managers may also be awarded restricted shares or units of Resources stock or restricted shares or units of one or more mutual funds. Awards of such deferred equity-based compensation typically vest over time, so as to create incentives to retain key talent.

**Benefits** Portfolio managers also participate in benefit plans and programs available generally to all employees of the Investment Manager.

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**Portfolio managers' securities ownership** 

Because the Fund has not commended operations prior to the date of this SAI, the portfolio managers did not own any shares of the Fund as of the date of this SAI.

See "Management—Portfolio Transactions—Potential conflicts of interest in managing multiple accounts" in Part II of this SAI for information on how the Investment Manager addresses potential conflicts of interest resulting from an individual's management of more than one account.

**STATE SPECIFIC INFORMATION** 

<u>General information</u>. The New York Municipal Income ETF invests in tax exempt investments that are issued by the State of New York ("New York" or the "State") or its political subdivisions, agencies, authorities or other government agencies. As such, New York's economic conditions and the ability of its issuers to make principal and interest payment on their securities will have a direct impact on the New York Municipal Income ETF's performance. The following discussion was drawn from publicly available information and may be subject to change at any time.

As the fourth most populous state in the United States, New York has a population of 19.8 million people. While it has a diverse economy, New York primarily depends on the financial services, education, health, and tourism sectors for its economic wellbeing. As of December 2024, the State's unemployment rate was 4.4% compared to 4.6% in December 2023. In relation to other states, New York is particularly sensitive to any volatility in the equity markets because of the volume of financial activity that takes place in the State. The potential for a weaker or volatile equity market, an economic downturn or recession, supply-chain disruptions and labor shortages, and continued monetary policy to combat inflation, threaten the State's economy. In addition, the persistence of telework, relocation of urban workers out of State and general trend of domestic outmigration poses a long-run risk to the State's economy.

Climate change poses significant long-term threats to physical, biological, and economic systems in New York and around the world. Potential hazards and risks related to climate change for the State include, among other things, rising sea levels, increased coastal flooding and related erosion hazards, intensifying storms, and more extreme heat.

There are significant risks to the State's economic forecast, including, but not limited to, the effects of: general economic and business conditions; changes in political, social, economic, and environmental conditions, including climate change and extreme weather events; national and international events; ongoing financial risks in the Euro Zone; major terrorist events, hostilities or war, examples of which include Russia's military invasion of Ukraine and the Israel-Hamas conflict; the existence and likelihood of trade disputes, which could result in increasing tariffs, trade restrictions or other retaliatory countermeasures, changes in consumer confidence and markets for certain securities and commodities, including oil, natural gas, steel and aluminum; cyber security threats; Federal statutory and regulatory changes concerning financial sector activities, including financial sector compensation, as well as any future legislation governing the structure of compensation; severe epidemic or pandemic events, such as the COVID-19 pandemic; impediments to the implementation of gap-closing actions; regulatory initiatives and compliance with governmental regulations; litigation; Federal tax law changes; actions by the Federal government to reduce or disallow expected aid, including Federal aid authorized or appropriated by Congress but subject to sequestration, administrative actions, or other actions that would reduce aid to the State; shifts in monetary policy affecting interest rates in response to inflation and the financial markets; credit rating agency actions; financial and real estate market developments which may adversely affect bonus income and capital gains realizations; tech industry developments and employment; effect of household debt on consumer spending and State tax collections; outcomes of litigation and other claims affecting the State; the rapidly growing use of artificial intelligence; and various other events, conditions and circumstances.

The City of New York (the "City") plays a significant role in the economy of New York. The City has a population of approximately 8.2 million people, which constitutes approximately 42% of the State's population. The City is the leading center for the banking and securities, life insurance, communications, fashion design, health care, education, hospitality and retail sectors. The financial services sector is closely tied to the City's economic wellbeing, which contributes to the City's dependence on a robust equity market.

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On January 14, 2025, Governor Kathy Hochul released the proposed budget for fiscal year 2026 (the "Executive Budget"). The estimated total General Fund receipts for the Executive Budget are projected be $108.6 billion for fiscal year 2026, an annual decrease of $7 billion from fiscal year 2025. These estimated receipts consist of $68.9 billion in personal income tax ("PIT") revenues (a decrease of $95 million from fiscal year 2025), $18.9 billion in consumption/use tax receipts (an increase of $903 million from fiscal year 2025) and business tax receipts are expected to increase by $183 million from fiscal year 2025. The decrease in PIT reflects increases in all refund components partially offset by increases in all gross receipt components. The increase in consumption/use tax reflects an increase in growth of taxable consumption in the sales tax base. The decrease in business tax receipts is primarily attributable to an increase in corporation franchise tax ("CFT") gross receipts with audits increasing as well. Against these estimated revenues, the Executive Budget included approximately $116.3 billion in General Fund disbursements, an increase of $7.9 billion (or 7.3%) from fiscal year 2025. The Executive Budget estimates that the State will end fiscal year 2026 with a General Fund balance of $45.7 billion.

As of February 2025, the State's general obligation bonds have been assigned a long-term credit rating of AA+, Aa1, and AA+, by Fitch Ratings, Moody's Investors Services, Inc., and Standard & Poor's Rating Services, respectively.

<u>Tax information</u>. Distributions that the New York Municipal Income ETF properly reports to you as (i) "exempt-interest dividends" for federal income tax purposes derived from interest on New York qualifying state and local obligations that are tax-exempt pursuant to New York State law or (ii) dividends derived from interest on qualifying obligations of the United States and its possessions will generally be exempt from the New York State personal income tax and the New York City personal income and unincorporated business taxes (but not from New York State corporate franchise and New York City general corporation taxes). Interest on indebtedness incurred or continued to purchase or carry shares of the New York Municipal Income ETF generally will not be deductible for New York State personal income tax or for New York City personal income and unincorporated business tax purposes.

If a shareholder is subject to unincorporated business taxation by New York City, income and gains distributed by the New York Municipal Income ETF generally will be subject to such taxation, except to the extent such distributions are derived exclusively from interest income on obligations of New York State or any political subdivision thereof (including New York City) and are not properly includible in the shareholder's federal adjusted gross income. However, shareholders of the New York Municipal Income ETF generally will not be subject to the unincorporated business tax imposed by New York City solely by reason of their ownership of shares of the New York Municipal Income ETF.

Shareholders of the New York Municipal Income ETF that are subject to the New York State corporation franchise tax or the New York City general corporation tax will be required to include exempt-interest dividends paid by the New York Municipal Income ETF in their "entire net income" for purposes of such taxes and will be required to include their investment in shares of the New York Municipal Income ETF in their investment capital or business capital, but not both, for purposes of such taxes.

Distributions that are federally taxable as ordinary income or capital gains are generally subject to New York State and New York City personal income tax.

The foregoing is a general, abbreviated summary of certain of the provisions of the tax laws of New York State and New York City presently in effect as they govern the taxation of New York Municipal Income ETF shareholders. These provisions are subject to change by legislative or administrative action, and any such change may be retroactive with respect to the New York Municipal Income ETF's transactions. Shareholders are advised to consult their own tax advisers for more detailed information concerning state and local tax matters, including those involving New York State, New York City and any other applicable jurisdictions.

**FINANCIAL STATEMENTS** 

The Fund has not yet commenced operations as of the date of this SAI and, therefore, financial statements for the Fund are not available.

Each Predecessor Fund's Form N-CSR for the fiscal year ended [ ] ([ ]) contains that Predecessor Fund's audited financial statements, accompanying notes and the report of [ ], an independent registered public accounting firm, all of which are incorporated by reference into this SAI. These audited financial statements are available free of charge upon request by calling 1-800-225-1581.

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Throughout this SAI, references to the fund's investment manager (the "Investment Manager") shall refer to the entity indicated for each fund in the table below:

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;**Investment Manager** | Franklin Advisers, Inc.<br> ("Franklin Advisers") | Putnam Investment Management, LLC ("Putnam Management") |
| &nbsp;&nbsp;&nbsp;**Funds** | Franklin California Municipal Income ETF | Putnam BDC Income ETF |
|  | Franklin Massachusetts Municipal Income ETF | Putnam BioRevolution<sup>TM</sup> ETF |
|  | Franklin Minnesota Municipal Income ETF | Putnam Emerging Markets Ex-China ETF |
|  | Franklin Municipal High Yield ETF | Putnam Focused Large Cap Growth ETF |
|  | Franklin Municipal Income ETF | Putnam Focused Large Cap Value ETF |
|  | Franklin New Jersey Municipal Income ETF | Putnam PanAgora ESG Emerging Markets Equity |
|  | Franklin New York Municipal Income ETF | ETF |
|  | Franklin Ohio Municipal Income ETF | Putnam PanAgora ESG International Equity ETF |
|  | Franklin Pennsylvania Municipal Income ETF | Putnam Sustainable Future ETF |
|  | Franklin Short-Term Municipal Income ETF | Putnam Sustainable Leaders ETF |
|  | Putnam ESG Core Bond ETF |  |
|  | Putnam ESG High Yield ETF |  |
|  | Putnam ESG Ultra Short ETF |  |

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**THE PUTNAM ETFS** 

**STATEMENT OF ADDITIONAL INFORMATION ("SAI")** 

**PART II** 

**GENERAL DESCRIPTION OF THE FUNDS** 

Each fund is an actively managed exchange-traded fund ("ETF"). Each fund issues and redeems shares on a continuous basis at net asset value per share ("NAV") in aggregations of a specified number of shares called "Creation Units." Creation Units are generally issued in exchange for portfolio securities and/or cash. Shares are listed and traded on an exchange. Shares trade in the secondary market at market prices that may differ from the shares' NAV. Shares are not individually redeemable, but are redeemable only in Creation Unit aggregations, also in exchange for portfolio securities and/or cash. Shareholders who are not Authorized Participants (as defined herein), therefore, will not be able to purchase or redeem shares directly with or from a fund. Instead, most shareholders who are not Authorized Participants will buy and sell shares in the secondary market through a broker.

**BUYING AND SELLING SHARES** 

**Book-Entry Only System** 

The Depository Trust Company ("DTC") acts as securities depository for the shares. Shares of each fund are represented by securities registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. Certificates will not be issued for shares.

DTC, a limited-purpose trust company, was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among DTC participants in such securities through electronic book-entry changes in accounts of the DTC participants, thereby eliminating the need for physical movement of securities certificates. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. Access to the DTC system is also available to others such as banks, brokers,

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dealers, and trust companies that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly.

Beneficial ownership of shares is limited to DTC participants and persons holding interests through DTC participants. Ownership of beneficial interests in shares (owners of beneficial interests are referred to herein as Beneficial Owners) is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC participants) and on the records of DTC participants (with respect to indirect DTC participants and Beneficial Owners that are not DTC participants). Beneficial Owners will receive from or through a DTC participant a written confirmation relating to their purchase of shares.

Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the trust and DTC, DTC is required to make available to the trust upon request and for a fee to be charged to the trust a listing of the shares of each fund held by each DTC participant. The trust shall inquire of each such DTC participant as to the number of Beneficial Owners holding fund shares, directly or indirectly, through such DTC participant. The trust shall provide each such DTC participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC participant may reasonably request, in order that such notice, statement or communication may be transmitted by such DTC participant, directly or indirectly, to such Beneficial Owners. In addition, the trust shall pay to each such DTC participant a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements.

Share distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all shares. DTC or its nominee, upon receipt of any such distributions, shall credit immediately DTC participants' accounts with payments in amounts proportionate to their respective beneficial interests in shares of each fund as shown on the records of DTC or its nominee. Payments by DTC participants to indirect DTC participants and Beneficial Owners of shares held through such DTC participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in a "street name," and will be the responsibility of such DTC participants.

The trust has no responsibility or liability for any aspect of the records relating to or notices to Beneficial Owners, or payments made on account of beneficial ownership interests in such shares, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests, or for any other aspect of the relationship between DTC and the DTC participants or the relationship between such DTC participants and the indirect DTC participants and Beneficial Owners owning through such DTC participants.

DTC may decide to discontinue providing its service with respect to shares at any time by giving reasonable notice to the trust and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the trust shall take action either to find a replacement for DTC to perform its functions at a comparable cost or, if such a replacement is unavailable, to issue and deliver printed certificates representing ownership of shares, unless the trust makes other arrangements with respect thereto satisfactory to the listing exchange.

**Creation Units** 

The trust issues and redeems shares of each fund only in Creation Unit aggregations on a continuous basis through Franklin Distributors, LLC ("Franklin Distributors"), the Fund's distributor, without a sales load, at its NAV next determined after receipt, on any Business Day (as defined herein), of an order in proper form. An Authorized Participant that is not a "qualified institutional buyer," as such term is defined under Rule 144A of the 1933 Act, will not be able to receive, as part of a redemption, restricted securities eligible for resale under Rule 144A.

A "Business Day" with respect to each fund is any day on which the listing exchange or the NYSE is open for business. As of the date of the prospectus, the listing exchange and the NYSE observe the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day (Washington's Birthday) (U.S.), Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day (U.S.), Labor Day (U.S.), Thanksgiving Day (U.S.), and Christmas Day.

To be eligible to place orders to purchase a Creation Unit of each fund, an entity must be an "Authorized Participant" which is a member or participant of a clearing agency registered with the SEC, which has a written agreement with Franklin Distributors, the fund's distributor, that allows the Authorized Participant to place orders for the purchase and redemption of Creation Units ("Participant Agreement"). All shares of each fund, however created, will be entered on the records of DTC in the name of Cede & Co. for the account of a DTC participant.

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Each fund reserves the right to adjust the prices of fund shares and the number of shares in a Creation Unit in the future to maintain convenient trading ranges for investors. Any adjustments would be accomplished through stock splits or reverse stock splits, which would have no effect on the net assets of each fund.

**Portfolio Deposit** 

The consideration for purchase of a Creation Unit generally consists of an in-kind deposit of a portfolio of securities ("Deposit Securities") designated by a fund (or in certain circumstances, cash in lieu of certain Deposit Securities) together with a deposit of a specified cash payment ("Cash Component") computed as described herein. Alternatively, each fund may issue and redeem Creation Units in exchange for a specified all-cash payment ("Cash Deposit"). Together, the Deposit Securities (including any cash in lieu amounts) and the Cash Component or, alternatively, the Cash Deposit, constitute the "Portfolio Deposit," which represents the minimum initial and subsequent investment amount for a Creation Unit. In the event each fund requires Deposit Securities (including any cash in lieu amounts) and a Cash Component in consideration for purchasing a Creation Unit, the function of the Cash Component is to compensate for any differences between the NAV per Creation Unit and the Deposit Amount (as defined below). The Cash Component would be an amount equal to the difference between the NAV of the shares (per Creation Unit) and the "Deposit Amount," which is an amount equal to the market value of the Deposit Securities. If the Cash Component is a positive number (the NAV per Creation Unit exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (the NAV per Creation Unit is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Computation of the Cash Component excludes any stamp duty or other similar fees and expenses payable upon transfer of beneficial ownership of the Deposit Securities, which shall be the sole responsibility of the Authorized Participant.

A fund may determine, upon receiving a purchase order from an Authorized Participant, to accept a basket of securities or cash that differs from Deposit Securities or to permit the substitution of an amount of cash (i.e., a "cash-in-lieu" amount) to be added to the Cash Component to replace any Deposit Security. In cases where a fund purchases portfolio securities with cash, the Authorized Participant will reimburse the fund for, among other things, any difference between the market value at which the securities were purchased by the fund and the cash in lieu amount (which amount, at the Investment Manager's discretion, may be capped), applicable registration fees and taxes. Brokerage commissions incurred in connection with a fund's acquisition of Deposit Securities will be at the expense of the fund and will affect the value of all shares of the fund; but the Investment Manager may adjust the transaction fee to the extent the composition of the Deposit Securities changes or cash in lieu is added to the Cash Component to protect ongoing shareholders.

**Procedures for Creation Unit Purchases** 

All purchase orders must be placed for one or more Creation Units. All orders to purchase Creation Units must be received by Franklin Distributors or its agent no later than the closing time of regular trading hours on the listing exchange or the NYSE (ordinarily 4:00 p.m. Eastern Time) (the Closing Time) or at an earlier time set forth in the Participant Agreement or otherwise provided to all Authorized Participants on the date such order is placed in order for the creation of Creation Units to be effected based on the NAV of shares of each fund as next determined on such date after receipt of the order in proper form. The date on which an order to purchase Creation Units (or an order to redeem Creation Units as discussed below) is placed is referred to as the "Transmittal Date." Orders must be transmitted by an Authorized Participant by telephone or other transmission method acceptable to Franklin Distributors pursuant to procedures set forth in the Participant Agreement. Severe economic or market disruptions or changes, or telephone or other communications failure may impede the ability to reach Franklin Distributors or an Authorized Participant.

All orders to purchase Creation Units shall be placed with an Authorized Participant, as applicable, in the form required by such Authorized Participant. In addition, in the event an Authorized Participant places an order on behalf of an investor, the Authorized Participant may request the investor to make certain representations or enter into agreements with respect to the order, including payments of cash to pay the Cash Component, when required. Investors should be aware that their particular broker may not have executed a Participant Agreement and that, therefore, orders to purchase Creation Units have to be placed by the investor's broker through an Authorized Participant that has executed a Participant Agreement. In such cases there may be additional charges to such investor. At any given time, there may be only a limited number of broker-dealers that have executed a Participant Agreement.

Those placing orders to purchase Creation Units should afford sufficient time to permit proper submission of the order to Franklin Distributors or its agent prior to the applicable deadlines on the Transmittal Date. Authorized participants may ascertain the

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deadlines applicable to DTC and the Federal Reserve Bank wire system by contacting the operations department of the broker or depository institution effecting such transfer of Deposit Securities and Cash Component.

Portfolio Deposits must be delivered through the Federal Reserve System (for cash and government securities) and through DTC (for corporate securities) by an Authorized Participant that has executed a Participant Agreement. The Portfolio Deposit transfer must be ordered by the Authorized Participant on the Transmittal Date in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities through DTC to the account of each fund by no later than 1:00 p.m. Eastern Time of the next Business Day immediately following the Transmittal Date. In certain cases, Authorized Participants will purchase and redeem Creation Units of each fund on the same Transmittal Date. In these instances, each fund reserves the right to settle these transactions on a net basis.

All questions as to the number of Deposit Securities to be delivered, and the validity, form and eligibility (including time of receipt) for the deposit of any tendered securities, will be determined by each fund, whose determination shall be final and binding. For purchase orders composed solely of a Cash Component, the amount of cash equal to the Cash Component must be transferred directly to each fund's custodian through the Federal Reserve Bank wire transfer system in a timely manner so as to be received by each fund's custodian no later than 10:00 a.m. Eastern Time on the next Business Day immediately following such Transmittal Date. An order to purchase Creation Units is deemed received by Franklin Distributors on the Transmittal Date if (i) such order is received by Franklin Distributors or its agent not later than the Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on such Transmittal Date; and (ii) all other procedures set forth in the Participant Agreement are properly followed. However, if each fund's custodian does not receive the required Deposit Securities together with the associated Cash Component by 1:00 p.m. or, with respect to purchase orders composed solely of a Cash Component, the Cash Component by 10:00 a.m. on the next Business Day immediately following the Transmittal Date, such order will be deemed not in proper form and canceled. Upon written notice to Franklin Distributors, such canceled order may be resubmitted the following Business Day using a Portfolio Deposit as newly constituted to reflect the next calculated NAV of each fund. The delivery of Creation Units so purchased will occur not later than the second (2nd) Business Day following the day on which the purchase order is deemed received by Franklin Distributors.

Franklin Distributors or its agent will inform the transfer agent, the Investment Manager and each fund's custodian upon receipt of a purchase order. The custodian will then provide such information to the appropriate sub-custodian. The custodian will cause the sub-custodian to maintain an account into which the Deposit Securities (or the cash value of all or part of such securities, in the case of a cash purchase or "cash in lieu" amount) will be delivered. Deposit Securities must be delivered to an account maintained at the applicable local custodian. The trust must also receive, on or before the contractual settlement date, immediately available or same day funds estimated by the custodian to be sufficient to pay the Cash Component next determined after receipt in proper form of the purchase order, together with the purchase transaction fee described in Part I of this SAI.

Once the Trust has accepted a purchase order, the trust will confirm the issuance of a Creation Unit of a fund against receipt of payment, at such NAV as will have been calculated after receipt in proper form of such order. Franklin Distributors or its agent will then transmit a confirmation of acceptance of such order.

Creation Units will not be issued until the transfer of good title to the trust of the Deposit Securities and the payment of the Cash Component have been completed. When the sub-custodian has confirmed to the custodian that the required Deposit Securities (or the cash value thereof) have been delivered to the account of the relevant sub-custodian, Franklin Distributors and the Investment Manager will be notified of such delivery and the trust will issue and cause the delivery of the Creation Units.

Creation Units may be created in advance of receipt by each fund of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the NAV of the shares on the date the order is placed in proper form since, in addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component (including any transaction fees), plus (ii) 105% of the market value of the undelivered Deposit Securities ("Additional Cash Deposit"). The order shall be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to 3:00 p.m. Eastern Time on such date and federal funds in the appropriate amount are deposited with each fund's custodian by 10:00 a.m. Eastern Time the following Business Day. If the order is not placed in proper form by 3:00 p.m. or federal funds in the appropriate amount are not received by 10:00 a.m. the next Business Day, then the order may be deemed to be rejected and the Authorized Participant shall be liable to each fund for losses, if any, resulting therefrom. An additional amount of cash shall be required to be deposited with each fund, pending delivery of the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with each fund in an

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amount at least equal to 105% of the daily marked to market value of the missing Deposit Securities. In the sole discretion of each fund following the Business Day on which the order was received a fund may use the cash on deposit to purchase the missing Deposit Securities. Authorized Participants will be liable to each fund for the costs incurred by each fund in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities exceeds the market value of such Deposit Securities on the day the purchase order was deemed received by Franklin Distributors plus the brokerage and related transaction costs associated with such purchases and the Authorized Participant shall be liable to the fund for any shortfall between the cost to the fund of purchasing any missing Deposit Securities and the value of the collateral. Each fund will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Securities have been properly received by Franklin Distributors or purchased by each fund and deposited into each fund.

**Acceptance of Purchase Orders** 

Each fund and Franklin Distributors reserve the right to reject or revoke acceptance of a creation order transmitted to it in respect to the fund, if, including but not limited to, the following conditions are present(i) the order is not in proper form; (ii) the investor(s), upon obtaining the shares ordered, would own 80% or more of the currently outstanding shares of each fund; (iii) acceptance of the Deposit Securities would have certain adverse tax consequences to each fund; (iv) acceptance of the Portfolio Deposit would, in the opinion of the fund, be unlawful; or (v) in the event that circumstances outside the control of each fund, make it impossible to process creation orders for all practical purposes. Examples of such circumstances include, without limitation, acts of God; public service or utility problems such as earthquakes, fires, floods, extreme weather conditions, and power outages resulting in telephone, telecopy, and computer failures; wars; civil or military disturbances, including acts of civil or military authority or governmental actions; terrorism; sabotage; epidemics; riots; labor disputes; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting each fund, the Investment Manager, Franklin Distributors, DTC, NSCC, the transfer agent, or any other participant in the purchase process, and similar extraordinary events. Each fund and Franklin Distributors have the right to require information to determine beneficial share ownership for purposes of (ii) above should it so choose or to rely on a certification from a broker-dealer who is a member of the Financial Industry Regulatory Authority, Inc. as to the cost basis of Deposit Securities. Franklin Distributors or the fund shall notify a prospective purchaser of a Creation Unit and/or the Authorized Participant acting on the purchaser's behalf, of its rejection of the purchaser's order. Each fund, the transfer agent, and Franklin Distributors are under no duty, however, to verify or give notification of any defects or irregularities in any written order or in the delivery of a Portfolio Deposit, nor shall any of them incur any liability for the failure to give any such notification.

**Redemption of Creation Units** 

Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by each fund through the transfer agent and only on a Business Day through an Authorized Participant that has entered into a Participant Agreement. Each fund generally will not redeem shares in amounts less than Creation Unit-size aggregations. Beneficial Owners must accumulate enough shares to constitute a Creation Unit in order to have such shares redeemed by each fund. There can be no assurance, however, that there will be sufficient liquidity in the public trading market at any time to permit assembly of a Creation Unit. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of shares to constitute a redeemable Creation Unit.

The redemption proceeds for a Creation Unit may consist of a portfolio of securities (Fund Securities) – as announced by the Investment Manager, or its agent, on the Business Day of the request for redemption received in proper form – plus cash in an amount equal to the difference between the NAV of the shares being redeemed, as next determined after a receipt of the request in proper form, and the value of the Fund Securities ("Cash Redemption Amount"), less a redemption transaction fee and any variable fee as listed in Part I of this SAI. In the event that the Fund Securities have a value greater than the NAV of the shares being redeemed, a compensating cash payment to a fund equal to the differential plus the applicable redemption transaction fee is required to be made by or through an Authorized Participant by the redeeming shareholder. Notwithstanding the foregoing, each fund will substitute a cash-in-lieu amount to replace any Fund Security that is a non-deliverable instrument. The amount of the cash paid out in such cases will be equivalent to the value of the instrument listed as a Fund Security.

The right of redemption may be suspended or the date of payment postponed with respect to each fund (i) for any period during which the NYSE is closed (other than customary weekend and holiday closings); (ii) for any period during which trading on the NYSE is suspended or restricted; (iii) for any period during which an emergency exists as a result of which disposal of the shares or determination of each fund's NAV is not reasonably practicable; or (iv) in such other circumstances as is permitted by the SEC.

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Orders to redeem Creation Units must be delivered through an Authorized Participant. An order to redeem Creation Units is deemed received by each fund on the Transmittal Date if (i) such order is received in proper form by the transfer agent not later than the Closing Time (or one hour prior to the Closing Time (ordinarily 3:00 p.m. Eastern Time) for nonconforming orders) on such Transmittal Date; (ii) such order is accompanied or followed by the requisite number of shares of each fund and the Cash Redemption Amount specified in such order, which delivery must be made through DTC to each fund's custodian no later than 1:00 p.m., for the shares, and 3:00 p.m., for the Cash Redemption Amount, Eastern Time on the next Business Day following such Transmittal Date (the "DTC Cut-Off-Time"); and (iii) all other procedures set forth in the Participant Agreement are properly followed. The requisite Fund Securities and the Cash Redemption Amount will generally be transferred by the second (2nd) Business Day following the date on which such request for redemption is deemed received, which will generally be no more than seven (7) days after such request for redemption but may be up to fifteen days for funds that invest in foreign securities. In certain cases, Authorized Participants will redeem and purchase Creation Units of each fund on the same Transmittal Date. In these instances, each fund reserves the right to settle these transactions on a net basis.

If each fund determines, based on information available to each fund when a redemption request is submitted by an Authorized Participant, that: (i) the short interest of each fund in the marketplace (*i.e.,* the number of shares of the fund that have been sold short but have not yet been covered or closed out) is greater than or equal to 100%; and (ii) the orders in the aggregate from all Authorized Participants redeeming shares on a Business Day represent 25% or more of the outstanding shares of each fund, such Authorized Participant will be required to verify to each fund the accuracy of its representations that are deemed to have been made by submitting a request for redemption. If, after receiving notice of the verification requirement, the Authorized Participant does not verify the accuracy of its representations that are deemed to have been made by submitting a request for redemption in accordance with this requirement, its redemption request will be considered not to have been received in proper form.

To the extent contemplated by an Authorized Participant's agreement, in the event the Authorized Participant has submitted a redemption request in proper form but is unable to transfer all or part of the Creation Units to be redeemed to Franklin Distributors, on behalf of each fund, at or prior to the closing time of regular trading on the listing exchange on the date such redemption request is submitted, Franklin Distributors will nonetheless accept the redemption request in reliance on the undertaking by the Authorized Participant to deliver the missing fund shares as soon as possible, which undertaking shall be secured by the Authorized Participant's delivery and maintenance of collateral consisting of cash having a value (marked to market daily) at least equal to 105% of the value of the missing fund shares. The current procedures for collateralization of missing shares require, among other things, that any cash collateral shall be in the form of U.S. dollars in immediately-available funds and shall be held by each fund and marked to market daily, and that the fees of each fund and any sub-custodians in respect of the delivery, maintenance, and redelivery of the cash collateral shall be payable by the Authorized Participant. The Participant Agreement will permit each fund to purchase the missing fund shares or acquire the Deposit Securities underlying such shares at any time and will subject the Authorized Participant to liability for any shortfall between the cost to each fund of purchasing such shares or Deposit Securities and the value of the collateral.

The calculation of the value of the Fund Securities and the Cash Redemption Amount to be delivered upon redemption will be made by the Investment Manager according to the procedures set forth in the section entitled "Determination of Net Asset Value" computed on the Business Day on which a redemption order is deemed received by the transfer agent. Therefore, if a conforming redemption order in proper form is submitted to the transfer agent by an Authorized Participant not later than Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on the Transmittal Date, and the requisite number of shares of each fund are delivered to each fund's custodian prior to the DTC Cut-Off-Time, then the value of the Fund Securities and the Cash Redemption Amount to be delivered will be determined by State Street Bank and Trust Company on such Transmittal Date. If, however, a conforming redemption order is submitted to the transfer agent by an Authorized Participant not later than the Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on the Transmittal Date but either (i) the requisite number of shares of each fund and the Cash Redemption Amount are not delivered by the DTC Cut-Off-Time as described above on the next Business Day following the Transmittal Date, or (ii) the redemption order is not submitted in proper form, then the redemption order will not be deemed received as of the Transmittal Date. In such case, the value of the Fund Securities and the Cash Redemption Amount to be delivered will be computed as of the Closing Time on the Business Day that such order is deemed received by the transfer agent, i.e., the Business Day on which the shares of each fund are delivered through DTC to Franklin Distributors by the DTC Cut-Off-Time on such Business Day pursuant to a properly submitted redemption order.

A fund may in its discretion exercise its option to redeem shares in cash, and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash that each fund may, in its

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sole discretion, permit. In either case, the investor will receive a cash payment equal to the NAV of its shares based on the NAV of shares of each fund next determined after the redemption request is received in proper from (minus a redemption transaction fee and additional charge for requested cash redemptions specified above, to offset each fund's brokerage and other transaction costs associated with the disposition of Fund Securities). In addition, each fund reserves the right to honor a redemption request by delivering a basket of securities or cash that differs from the Fund Securities.

Redemption of shares for Fund Securities will be subject to compliance with applicable federal and state securities laws and each fund (whether or not it otherwise permits cash redemptions) reserves the right to redeem Creation Units for cash to the extent that each fund could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Fund Securities under such laws. An Authorized Participant or a Beneficial Owner for which it is acting subject to a legal restriction with respect to a particular stock included in the Fund Securities applicable to the redemption of a Creation Unit may be paid an equivalent amount of cash. The Authorized Participant may request the redeeming Beneficial Owner of the shares to complete an order form or to enter into agreements with respect to such matters as compensating cash payment.

In connection with taking delivery of shares for Fund Securities upon redemption of Creation Units, a redeeming shareholder or entity acting on behalf of a redeeming shareholder must maintain appropriate custody arrangements with a qualified broker-dealer, bank or other custody providers in each jurisdiction in which any of the Fund Securities are customarily traded, to which account such Fund Securities will be delivered. If neither the redeeming shareholder nor the entity acting on behalf of a redeeming shareholder has appropriate arrangements to take delivery of the Fund Securities in the applicable foreign jurisdiction and it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Fund Securities in such jurisdictions, the trust may, in its discretion, exercise its option to redeem such shares in cash, and the redeeming shareholder will be required to receive its redemption proceeds in cash.

Deliveries of redemption proceeds generally will be made within two Business Days. Due to the schedule of holidays in certain countries, however, the delivery of redemption proceeds may take longer than two Business Days after the day on which the redemption request is received in proper form. In such cases, the local market settlement procedures will not commence until the end of the local holiday periods.

**Creation/Redemption Transaction Fees** 

The funds generally impose a "Transaction Fee" on investors purchasing or redeeming Creation Units. The Transaction Fee will be limited to amounts that have been determined by the Investment Manager to be appropriate. The purpose of the Transaction Fee is to protect the existing shareholders of the funds from the dilutive costs associated with the purchase and redemption of Creation Units. Where a fund permits cash creations (or redemptions) or cash in lieu of depositing one or more Deposit Securities, the purchaser (or redeemer) may be assessed a higher Transaction Fee to offset the transaction cost to a fund of buying (or selling) those particular Deposit Securities. To the extent a purchase/redemption transaction consists of cash and/or in-kind securities, the standard Transaction Fee applies to in-kind purchases and redemptions of creation units and an additional Transaction Fee may also be imposed. Each fund reserves the right to not impose the additional Transaction Fee or to vary the amount of the additional Transaction Fee, depending on the materiality of the fund's actual transaction costs incurred or where the Adviser believes that not imposing or varying the additional Transaction Fee would be in the fund's interest. Transaction Fees associated with the redemption of Creation Units will not exceed 2% of the value of shares redeemed. To the extent the fund cannot recoup the amount of transaction costs incurred in connection with a redemption from the redeeming shareholder because of the 2% cap or otherwise, those transaction costs will be borne by the fund's remaining shareholders (including, potentially, increased taxable income in respect of the fund, particularly if the redemption consists solely or partially of cash) and negatively affect the fund's performance. Actual transaction costs may vary depending on the time of day an order is received or the nature of the securities. Investors bear the costs of transferring Deposit Securities or Fund Securities to/from each fund to/from their account or on their order. See "Creation/Redemption Transaction Fees" in Part I of this SAI for information on standard Transaction Fees and maximum additional Transaction Fees.

**Additional Intermediary Payments** 

For purposes of this section the term "intermediary" includes any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator and any other institution that offers shares of the funds to its customers.

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The Investment Manager and/or its affiliates pay additional compensation to selected intermediaries under the categories described below. These categories are not mutually exclusive, and a single intermediary may receive payments under all categories. These payments may create an incentive for an intermediary 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 intermediaries 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, if any, and the expenses paid by the fund as shown under the heading "Fees and Expenses" in the prospectus.

**Marketing Support Payments.** The Investment Manager and/or its affiliates make payments to certain intermediaries for marketing support services. These payments are individually negotiated with each intermediary firm, taking into account the marketing support services provided by the intermediary, including business planning assistance, educating intermediary personnel about the Putnam funds and shareholder financial planning needs, placement on the intermediary's preferred or recommended fund company list, access to sales meetings, sales representatives and management representatives of the intermediary, market data, as well as the size of the intermediary's relationship with the Investment Manager.

No intermediaries received marketing support payments from the Investment Manager and its affiliates during the calendar year ended December 31, [2024]. Intermediaries may receive marketing support payments in [2025] and in future years from the Investment Manager and/or its affiliates. You can ask your intermediary about any payments it receives from the Investment Manager and/or its affiliates.

**Program Servicing Payments.** The Investment Manager and/or its affiliates also make payments to certain intermediaries that sell shares of the Putnam funds through intermediary platforms and other investment programs to compensate intermediaries for a variety of services they provide. An intermediary may perform program services itself or may arrange with a third party to perform program services. In addition to shareholder recordkeeping, reporting, or transaction processing, program services may include services rendered in connection with intermediary platform development and maintenance, fund/investment selection and monitoring, or other similar services.

The following intermediaries (and such intermediaries' respective affiliates) received program servicing payments from the Investment Manager and its affiliates during the calendar year ended December 31, [2024]:

Charles Schwab & Co., Inc.

Cetera Financial Group, Inc.

Fidelity Brokerage Services, LLC

National Financial Services LLC, and

UBS Financial Services Inc.

Additional or different intermediaries may also receive program servicing payments in [2025] and in future years from the

Investment Manager and/or its affiliates. Any additions, modifications or deletions to the list of intermediaries identified above that have occurred since December 31, [2024] are not reflected. You can ask your intermediary about any payments it receives from the Investment Manager and/or its affiliates.

**Other Payments.** From time to time, the Investment Manager and/or its affiliate, at its expense, may provide additional compensation to intermediaries that 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 compensation provided by the Investment Manager and/or its affiliate may include financial assistance to intermediaries that enables the Investment Manager and/or its affiliate to participate in and/or present at intermediary-sponsored conferences or seminars, sales or training programs for invited registered representatives and other intermediary employees, intermediary entertainment, and other intermediary-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, retention and due diligence trips. The Investment Manager and/or its affiliates make payments for entertainment events it deems appropriate, subject to internal guidelines and applicable law. These payments may vary upon the nature of the event.

**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 series of Putnam ETF Trust that disclose their holdings daily,

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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 Franklin Templeton Investment Management Limited ("FTIML"), Franklin Advisers, Putnam Management, and/or PanAgora Asset Management, Inc. ("PanAgora") serve as sub- adviser (as described in the fund's prospectus), references to the Investment Manager in this section include FTIML, Franklin Advisers, Putnam Management, and/or PanAgora, as appropriate.

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp; Bank Loans, Loan Participations, and Assignments | Market Risk |
| &nbsp;&nbsp;&nbsp; Benchmark Reference Rate Risk | Master Limited Partnerships (MLPs) |
| &nbsp;&nbsp;&nbsp; Borrowing and Other Forms of Leverage | Money Market Instruments |
| &nbsp;&nbsp;&nbsp; Collateralized Debt and Loan Obligations | Mortgage-backed and Asset-backed Securities |
| &nbsp;&nbsp;&nbsp; Commodities and Commodity-Related Investments | Options on Securities |
| &nbsp;&nbsp;&nbsp; Derivatives | Preferred Stocks and Convertible Securities |
| &nbsp;&nbsp;&nbsp; ESG Considerations | Private Placements and Restricted Securities |
| &nbsp;&nbsp;&nbsp; Exchange-Traded Notes | Real Estate Investment Trusts (REITs) |
| &nbsp;&nbsp;&nbsp; Floating Rate and Variable Rate Demand Notes | Redeemable Securities |
| &nbsp;&nbsp;&nbsp; Foreign Currency Transactions | Repurchase Agreements |
| &nbsp;&nbsp;&nbsp; Foreign Investments and Related Risks | Securities of Other Investment Companies |
| &nbsp;&nbsp;&nbsp; Forward Commitments and Dollar Rolls | Short Sales |
| &nbsp;&nbsp;&nbsp; Futures Contracts and Related Options | Short-Term Trading |
| &nbsp;&nbsp;&nbsp; Hybrid Instruments | Special Purpose Acquisition Companies |
| &nbsp;&nbsp;&nbsp; Illiquid Investments | Structured Investments |
| &nbsp;&nbsp;&nbsp; Inflation-Protected Securities | Swap Agreements |
| &nbsp;&nbsp;&nbsp; Initial Public Offerings (IPOs) | Tax-exempt Securities |
| &nbsp;&nbsp;&nbsp; Inverse Floaters | Temporary Defensive Strategies |
| &nbsp;&nbsp;&nbsp; Large Shareholder Risk | Trade Policy |
| &nbsp;&nbsp;&nbsp; Legal and Regulatory Risks Relating to Investment Strategy | Warrants |
| &nbsp;&nbsp;&nbsp; Lower-rated Securities | Zero-coupon and Payment-in-kind Bonds |

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**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 the Investment Manager, 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 some impose restrictive covenants which must be met by the borrower, although these covenants have become less common, and the terms of covenants have eroded, in recent years. 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

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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, the Investment Manager will not rely solely on that credit analysis, but will perform its own investment analysis of the borrowers. The Investment Manager'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. The Investment Manager 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 the Investment Manager'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 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, the Investment Manager 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

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fair market value. The fund may hold investments in loans for a very short period of time when opportunities to resell the investments that the Investment Manager 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, the Investment Manager 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. The Investment Manager's decision not to receive Confidential Information may place the Investment Manager 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, the Investment Manager's ability to assess their significance or desirability may be adversely affected. For these and other reasons, it is possible that the Investment Manager's decision not to receive Confidential Information under normal circumstances could adversely affect the fund's investment performance.

Notwithstanding its intention generally not to receive material, non-public information with respect to its management of investments in loans, the Investment Manager 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 the Investment Manager's efforts to avoid such possession, but in other instances the Investment Manager 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, the Investment Manager'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 the Investment Manager'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 the Investment Manager 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, the Investment Manager may owe conflicting fiduciary duties to the fund and other client accounts. The Investment Manager 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 the Investment Manager'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.

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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.

**Benchmark Reference Rate Risk** 

Many debt securities, derivatives, and other financial instruments utilize benchmark or reference rates for variable interest rate calculations, including the Euro Interbank Offer Rate, Sterling Overnight Index Average Rate, and the Secured Overnight Financing Rate (each a "Reference Rate"). Instruments in which the fund invests may pay interest at floating rates based on such Reference Rates or may be subject to interest caps or floors based on such Reference Rates. The fund and issuers of instruments in which the fund invests may also obtain financing at floating rates based on such Reference Rates. The elimination of a Reference Rate or any other changes to or reforms of the determination or supervision of Reference Rates could have an adverse impact on the market for, or value of, any instruments or payments linked to those Reference Rates.

For example, some Reference Rates, as well as other types of rates and indices, are described as "benchmarks" and have been the subject of ongoing national and international regulatory reform, including under the European Union regulation on indices used as benchmarks in financial instruments and financial contracts (known as the "Benchmarks Regulation"). The Benchmarks Regulation has been enacted into United Kingdom law by virtue of the European Union (Withdrawal) Act 2018 (as amended), subject to amendments made by the Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019 (SI 2019/657) and other statutory instruments. Following the implementation of these reforms, the manner of administration of benchmarks has changed and may further change in the future, with the result that relevant benchmarks may perform differently than in the past, the use of benchmarks that are not compliant with the new standards by certain supervised entities may be restricted, and certain benchmarks may be eliminated entirely. Such changes could cause increased market volatility and disruptions in liquidity for instruments that rely on or are impacted by such benchmarks. Additionally, there could be other consequences which cannot be predicted.

**Borrowing and Other Forms of Leverage** 

The fund may borrow money to the extent permitted by its investment policies and restrictions and by Section 18 of the 1940 Act. 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.

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. 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.

**Collateralized Debt and Loan Obligations** 

The fund may invest in collateralized debt obligations ("CDOs"). CDOs are types of asset-backed securitized instruments and include collateralized loan obligations ("CLOs") and other similarly structured securities. Although certain CDOs may benefit from credit enhancement in the form of a senior-subordinate structure, overcollateralization or bond insurance, such enhancement may not always be present, and may fail to protect a fund against the risk of loss on default of the collateral. CDOs may charge management and administrative fees, which are in addition to those of a fund. CDOs may be less liquid than other types of securities.

The risks of an investment in a CDO largely depend on the type of underlying collateral securities and the tranche in which a fund invests. CDOs are subject to the typical risks associated with debt instruments and fixed income and/or asset-backed securities discussed elsewhere in the prospectus and in this SAI, including interest rate risk (which may be exacerbated if the

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interest rate payable on a structured financing changes based on multiples of changes in interest rates or inversely to changes in interest rates), prepayment risk, credit risk (including adverse credit spread moves), liquidity risk and market risk. CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments and one or more tranches may be subject to up to 100% loss of invested capital; (ii) the possibility that the quality of the collateral may decline in value or default, due to factors such as the availability of any credit enhancement, the level and timing of payments and recoveries on and the characteristics of the underlying receivables, loans, or other assets that are being securitized, remoteness of those assets from the originator or transferor, the adequacy of and ability to realize upon any related collateral, and the capability of the servicer of the securitized assets (particularly where the underlying collateral in a loan portfolio is not individually assessed prior to purchase); (iii) market and illiquidity risks affecting the price of a structured finance investment, if required to be sold, at the time of sale; and (iv) if the particular structured product is invested in a security in which a fund is also invested, this would tend to increase the fund's overall exposure to the credit of the issuer of such securities, at least on an absolute, if not on a relative basis. In addition, due to the complex nature of a CDO, an investment in a CDO may not perform as expected. An investment in a CDO also is subject to the risk that the issuer and the investors may interpret the terms of the instrument differently, giving rise to disputes.

A CLO is an obligation of a trust or other special purpose vehicle typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. CLOs may charge management and other administrative fees. Payments of principal and interest are passed through to investors in a CLO and divided into several tranches of rated debt securities, which vary in risk and yield, and typically at least one tranche of unrated subordinated securities, which may be debt or equity ("CLO Securities"). CLO Securities generally receive some variation of principal and/or interest installments and, with the exception of certain subordinated securities, bear different interest rates. If there are defaults or if a CLO's collateral otherwise underperforms, scheduled payments to senior tranches typically take priority over less senior tranches.

CLO Securities may be privately placed and thus subject to restrictions on transfer to meet securities law and other legal requirements. In the event that any fund does not satisfy certain of the applicable transfer restrictions at any time that it holds CLO Securities, it may be forced to sell the related CLO Securities and may suffer a loss on sale. CLO Securities may be considered illiquid investments in the event there is no secondary market for the CLO Securities. CLOs are also subject to the same risks associated with CDOs, as described above.

**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, war, and factors affecting a particular industry or commodity, such as drought, floods, or other weather conditions or natural disasters, livestock disease, trade embargoes, economic sanctions, competition from substitute products, transportation bottlenecks or shortages, insufficient storage capacity, 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. Certain commodities (and related derivatives) are also susceptible to price declines due to factors such as supply surpluses caused by global events.

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

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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 result in gains or losses greater than the amount invested in the instrument. See "Derivatives," "Forward Commitments and Dollar Rolls," "Futures Contracts and Related Options," "Hybrid Instruments," "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.

**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 (including credit default swaps and credit default swap indexes) 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 derivative instrument and the reference asset, or other factors, especially in unusual market conditions, and volatility in the value of derivatives could adversely impact the fund's returns, obligations and exposures. 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 will enable the fund to achieve its investment objective or that the Investment Manager 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 Internal Revenue Code of 1986, as amended (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.

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 derivative transactions are required to be centrally cleared and others are available for voluntary clearing. A party to a cleared derivative transaction is subject to the credit and counterparty 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 derivative 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

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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 margin requirements at a time when it may be disadvantageous to do so.

Other risks arise from the potential inability to terminate or sell derivative positions. Derivatives may be subject to liquidity risk due to the fund's obligation to make payments of margin, collateral, or settlement payments to counterparties. A liquid secondary market may not always exist for the fund's derivative positions. In fact, certain 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 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.

The funds are required to comply with the derivatives rule when they engage in derivatives transactions. See "Legal and Regulatory Risks Relating to Investment Strategy" below. Further information about these instruments and the risks involved in their use is included elsewhere in the prospectus and in this SAI.

<u>Combined Positions</u>

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.

**ESG Considerations** 

A fund may integrate environmental, social, or governance ("ESG") considerations into its research process and/or investment decision-making. The Investment Manager believes that ESG considerations, like other, more traditional subjects of investment analysis such as market position, growth prospects, and business strategy, have the potential to impact risk and returns. The relevance and materiality of ESG considerations in a fund's process will differ from strategy to strategy, from sector to sector, and from portfolio manager to portfolio manager, and, in some cases (such as where the Investment Manager lacks relevant ESG data), ESG considerations may not represent a material component of a fund's investment process. The consideration of ESG factors as part of a fund's investment process does not mean that a fund pursues a specific "ESG" or "sustainable" investment strategy, and, depending on the fund, the Investment Manager may sometimes make investment decisions other than on the basis of relevant ESG considerations.

**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.

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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.

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

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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.

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" (e.g., 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 Chicago 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 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.

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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 otherwise settle 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 market in such contracts; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts.

Positions in foreign currency futures contracts and related options may be closed out only on an exchange or board of trade that provides a market in such contracts or options. Although the fund intends to purchase or sell foreign currency futures contracts and related options only on exchanges or boards of trade where there appears to be an active market, there is no assurance that a 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 or related option 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 or at 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 or at 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 or at 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 or at 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 the Investment Manager 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. The Investment Manager will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the fund. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge.

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, the Investment Manager 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.

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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 and related options) 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 and related options, 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 or related option 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, additional foreign currency transactions may be 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 the Investment Manager'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 the Investment Manager anticipates. There is no assurance that the Investment Manager'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

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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.

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. The Investment Manager 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

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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 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 the Investment Manager and its affiliates 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 non-local 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

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ownership registration being completely lost. The fund would absorb any loss resulting from such registration problems and may have no successful claim for compensation.

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 the Investment Manager 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.

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

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("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 CDCC 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.

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"). 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 the Investment Manager deems it appropriate to do so. The fund may realize short-term profits or losses upon the sale of forward commitments.

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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. 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.

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 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. See also "Legal and Regulatory Risks Relating to Investment Strategy" below.

**Futures Contracts and Related Options** 

Subject to applicable law, the fund may invest 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 sell the type of financial instrument or other asset called for in the contract in a specified month for a stated price. A futures contract purchase creates an obligation by the purchaser to buy the type of financial instrument or other asset called for in the contract in a specified month at a stated price. The specific assets bought or sold, respectively, at settlement date may not be 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 (brokerage firm) which is a member of the relevant contract market. Examples of futures contracts that the fund may use include, without limitation, U.S. Treasury 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 asset. Therefore, purchasing futures contracts will tend to increase the fund's exposure to positive and negative price fluctuations in the underlying asset, much as if it had purchased the underlying asset 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 asset. Selling futures contracts, therefore, will tend to offset both positive and negative market price changes, much as if the underlying asset 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 by the fund's broker 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

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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 by their terms may 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. Many futures contracts, such as 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 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 settlement 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.

With respect to each fund, the Investment Manager has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act ("CEA") pursuant to Rule 4.5 under the CEA (the "exclusion") promulgated by the CFTC. Accordingly, the Investment Manager (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, options on futures and certain swaps. In the event that the Investment Manager believes that a fund's investments in commodity interests exceed the thresholds set forth in the exclusion, the Investment Manager may be required to register as a "commodity pool operator" with the CFTC with respect to that fund. The Investment Manager'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 fund's ability to invest in commodity interests is limited by the Investment Manager's intention to operate the fund in a manner that would permit the Investment Manager 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 the Investment Manager 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, and the commodity pool operators ("CPOs") of any shareholders that are pooled investment vehicles may be unable to rely on certain CPO registration exemptions.

**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. 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

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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 selling 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).

The fund may use options on futures contracts in lieu of purchasing or writing options directly on the underlying assets 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 (or would result in a smaller loss), 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 purchase or 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 the Investment Manager's ability to predict movements in various factors affecting securities markets (or markets for other assets), 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, the Investment Manager'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.

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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 futures contracts and options themselves, and, in the case of hedging transactions, of the securities which are the subject of a hedge. To attempt to compensate for imperfect correlations, the fund may purchase or sell futures contracts in a greater amount than the hedged investments if the volatility of the price of the hedged investments is historically greater than the volatility of the futures contracts. Conversely, the fund may purchase or sell fewer futures contracts if the volatility of the price of the hedged investments is historically less than that of the futures contract. 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 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 the Investment Manager 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 transactions, 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 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, result in the institution by exchanges of special procedures that may interfere with the timely execution of customer orders, for example, by rendering certain market clearing facilities inadequate. 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 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 and 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. In addition, exchanges may cancel trades in limited circumstances, for example, if the exchange believes that allowing such trades to stand as executed could have an adverse impact on the stability or integrity of the market. Any such cancellation may adversely affect the performance of the fund. The fund's futures broker may also limit the fund's ability to invest in certain futures contracts. Such restrictions may adversely affect the fund's performance and its ability to achieve its investment objective.

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 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 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)

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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 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 settled or 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 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. The funds are required to comply with the derivatives rule when they engage in transactions involving futures and options thereon. See "Legal and Regulatory Risks Relating to Investment Strategy" below.

**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.

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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 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 any governmental regulatory authority, including the regulators typically associated with the derivatives and securities markets such as the CFTC and the SEC.

**Illiquid Investments** 

An illiquid investment 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 the Investment Manager 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.

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

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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.

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.

**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.

**Large Shareholder Risk** 

The fund may be an investment option for mutual funds that are managed by the Investment Manager and its affiliates as "funds of funds." Additionally, other investors from time to time may make substantial investments in the fund. Such shareholders may at times be considered to control the fund. Dispositions of a large number of shares by these shareholders may adversely affect the fund's liquidity and net assets to the extent such transactions are executed directly with the fund in the form of redemptions through an authorized participant, rather than executed in the secondary market. In addition, a large number of shareholders

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collectively may purchase or redeem fund shares in large amounts rapidly or unexpectedly (collectively, such transactions are referred to as "large shareholder transactions"). Large shareholder redemptions may also force the fund to sell securities to satisfy redemption requests or purchase securities for the portfolio in connection with the investment of subscription proceeds when the fund would otherwise not do so, and at unfavorable prices, which may increase the fund's brokerage costs and accelerate the realization of taxable income and/or gains to shareholders. The effects of taxable income and/or gains resulting from large shareholder transactions would particularly impact non-redeeming shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged plan. To the extent that such transactions result in short-term capital gains, such gains will generally be taxed at the ordinary income tax rate for shareholders who hold fund shares in a taxable account. In addition, fund returns may be adversely affected if the fund holds a portion of its assets in liquid, cash-like investments in connection with or in anticipation of shareholder redemptions. To the extent these large shareholders transact in shares of the fund on the secondary market, such transactions may account for a large percentage of the trading volume on the exchange and may, therefore, have a material effect (upward or downward) on the market price of the fund's shares. A number of circumstances may cause the fund to experience large redemptions, such as changes in the eligibility criteria for the fund or share class of the fund; liquidations, reorganizations, repositionings, or other announced fund events; or changes in investment objectives, strategies, policies, risks, or investment personnel.

**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. 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 or otherwise execute its investment strategy could have a material adverse impact on the fund's performance.

The regulatory environment for funds is evolving, and changes in regulation 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 derivatives (including 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 event of market emergencies. The regulation of securitization and derivative transactions and funds that engage in such transactions is an evolving area of law and is subject to modification by government, self-regulatory organization and judicial action.

Since 2021, the SEC has proposed and, in some cases, finalized several new rules regarding a wide range of topics related to the fund. For example, the SEC has proposed new rules requiring the reporting and public disclosure of a manager's positions in security-based swaps, including CDS, equity total return swaps and related positions. The SEC has also finalized new rules restricting activities that could be considered to be manipulative in connection with security-based swaps, new rules regarding beneficial ownership and public reporting by managers under Section 13 of the Exchange Act, and new rules requiring the central clearing of certain cash and repurchase transactions involving U.S. Treasuries. These and other proposed new rules, whether assessed on an individual or collective basis, could fundamentally change the current regulatory framework for relevant markets and market participants, including having a material impact on activities of private fund advisers and their funds. While it is currently difficult to predict the full impact of these new rules, these rules could make it more difficult for the fund to execute certain investment strategies and may have a material adverse effect on the fund's ability to generate returns.

In October 2016, the SEC adopted a liquidity risk management rule, Rule 22e-4 under the 1940 Act (the "Liquidity Rule") that requires each fund to establish a liquidity risk management program. The funds have implemented a liquidity risk management program, and the fund's trustees (such trustees, as referenced in the table below under the heading "Management- Trustees," shall hereinafter be referred to as the "Trustees," the "Board," or the "Board of Trustees") has appointed the Investment Manager to administer the program. Under the liquidity risk management program, the liquidity risk of each fund is assessed, managed, and periodically reviewed and each portfolio investment held by each fund is classified as a "highly liquid investment," "moderately liquid investment," "less liquid investment" or "illiquid investment." The Liquidity Rule defines "liquidity risk" as the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of the remaining investors' interest in the fund. The liquidity of a fund's portfolio investments is determined based on relevant market, trading and investment-specific considerations under the fund's liquidity risk management program. The impact the Liquidity Rule will have

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on the funds, and on the open-end mutual 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 regulation of the derivatives market, including clearing, margin, reporting and registration requirements. The CFTC, SEC, and other federal regulators have adopted and continue to develop 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"), the United Kingdom ("UK"), and some other countries have implemented and are in the process of implementing similar requirements that affect the fund when it enters into derivative transactions with a counterparty organized in that country or otherwise subject to that country's derivatives regulations. For example, the U.S. government, the EU, the UK and certain other jurisdictions have adopted mandatory minimum variation (and in some cases initial) margin requirements for bilateral derivatives. Such requirements could increase the amount of margin the fund needs to provide in connection with its derivative transactions and, therefore, make derivative transactions more expensive. The regulation of the derivatives markets may make derivatives more costly, may limit the availability or reduce the liquidity of derivatives, or may otherwise adversely affect the value or performance of derivatives. Because these requirements are evolving, their ultimate impact on the fund and the financial system is not yet known. While the rules and regulations like those imposing requirements for margin and central clearing of some derivative transactions are designed to reduce systemic risk (e.g., the risk that the interdependence of large derivatives dealers could cause them to suffer liquidity, solvency or other challenges simultaneously), there is no assurance that they will achieve that result, and, as noted, the requirements can expose the fund to new kinds of costs and risks.

In addition, in October 2020, the SEC adopted Rule 18f-4 under the 1940 Act (the "Derivatives Rule"), regulating the use by registered investment companies of derivatives and many related instruments (e.g. reverse repurchase agreements). The Derivatives Rule requires, among other things, that certain entities adopt a derivatives risk management program, comply with limitations on leverage-related risk based on a "value-at-risk" test and update reporting and disclosure procedures. Funds that use derivative instruments in a limited amount are not subject to the full requirements of the Derivatives Rule. In connection with the adoption of the Derivatives Rule, funds are no longer required to comply with the asset segregation framework arising from prior SEC guidance for covering certain derivative instruments and related transactions.

Regulatory changes also may affect counterparty risk. For example, regulatory requirements may limit the ability of the fund to protect its interests in the event of an insolvency of a derivatives counterparty. In the event of a counterparty's (or its affiliate's) insolvency, the fund's ability to exercise remedies, such as the termination of transactions, netting of obligations and realization on collateral, could be stayed or eliminated under special resolution regimes adopted in the United States, the EU, the UK, and various other jurisdictions. Such regimes provide government authorities with broad authority to intervene when a financial institution is experiencing financial difficulty. In particular, with respect to counterparties who are subject to such proceedings in the EU and the UK, the liabilities of such counterparties to the fund could be reduced, eliminated, or converted to equity in such counterparties (sometimes referred to as a "bail in").

The CFTC and domestic exchanges have established (and continue to evaluate and revise) speculative position limits, referred to as "position limits," on the maximum speculative positions which any person, or group of persons acting in concert, may hold or control in particular futures and options on futures contracts. In addition, federal position limits apply to swaps on agricultural, energy and metals commodities that are "economically equivalent," as defined by the CFTC, to certain futures contracts. Uncertainty surrounding which swaps qualify as "economically equivalent" may result in compliance challenges. An overly broad application of the definition could result in unnecessary restrictions in position sizes, whereas an overly narrow application could risk position limit overages. All positions owned or controlled by the same person or entity, even if in different accounts, must be aggregated for purposes of determining whether the applicable position limits have been exceeded unless an exemption applies. Thus, even if the fund does not intend to exceed applicable position limits, it is possible that positions of different clients managed by the Investment Manager and its affiliates or by any sub-adviser 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. Position limits may adversely affect the fund's ability to hold positions in certain futures contracts and related options and swaps. A violation of position limits could also lead to regulatory action materially adverse to the fund's investment strategy.

The SEC has adopted new rules that require managers to file monthly confidential reports with the SEC regarding equity short sales and related activity. Under the new rules, the SEC will publicly disclose aggregated short position information on a monthly basis. The SEC also adopted a rule that will require reporting and public disclosure of securities loan transaction information (not including party names); this may include, but is not limited to, information about securities loans entered into in connection with

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short sales. 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 new or increases in short sales of certain securities, including short positions on such securities acquired through swaps, in response to market events. Bans on short selling and such short positions 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.

In October 2020, the SEC adopted certain regulatory changes and took other actions related to the ability of an investment company to invest in another investment company. These changes include, among other things, amendments to Rule 12d1-1, the rescission of Rule 12d1-2, the adoption of Rule 12d1-4, and the rescission of certain exemptive relief issued by the SEC permitting such investments in excess of statutory limits. These regulatory changes may adversely impact each fund's investment strategies and operations.

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

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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 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, the Investment Manager 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 the Investment Manager or its affiliates, holds all or a major portion. Although the Investment Manager 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 the Investment Manager 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 the Investment Manager'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

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the financial markets or other regulation, and changes in fiscal, monetary or tax policies), geopolitical events or changes (including natural disasters, epidemics or pandemics, 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). 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 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. In addition, trade disputes (such as the "trade war" between the United States and China that intensified in 2018 and 2019) may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. Events such as these and their impact on the fund are difficult to predict. For example, Russia's military invasion of Ukraine in February 2022 resulted in the United States, other countries, and certain international organizations levying broad economic sanctions against Russia and Russian individuals. These sanctions and any additional sanctions or other intergovernmental actions that may be undertaken against Russia in the future may result in the devaluation of the ruble, a downgrade in the country's credit rating, and a decline in the value and liquidity of Russian securities. Such actions could result in a freeze of Russian securities, impairing the ability of a fund to buy, sell, receive, or deliver those securities. Retaliatory action by the Russian government could involve the seizure of U.S. and/or European residents' assets, and any such actions are likely to impair the value and liquidity of such assets. Any or all of these potential results could have an adverse/recessionary effect on Russia's economy. All of these factors could have a negative effect on the performance of funds that have significant exposure to Russia.

In addition, the extent and duration of the military action associated with Russia's invasion of Ukraine, resulting sanctions and resulting future market disruptions, including declines in Russian stock markets and the value of the ruble against the U.S. dollar, are impossible to predict, but could be significant. Any disruptions caused by such military action or other actions (including cyberattacks and espionage) or resulting actual and threatened responses to such activity, including purchasing and financing restrictions, boycotts or changes in consumer or purchaser preferences, sanctions, tariffs or cyberattacks on the Russian government, Russian companies, or Russian individuals, including politicians, may negatively impact Russia's economy and Russian issuers of securities in which the fund invests. Actual and threatened responses to such military action may also impact the markets for certain Russian commodities, such as oil and natural gas, as well as other sectors of the Russian economy, and may likely have collateral impacts on such sectors globally. These and any related events could have a significant impact on fund performance and the value of an investment in the fund.

Likewise, natural and environmental disasters, epidemics or pandemics, and systemic market dislocations may be highly disruptive to economies and markets, and may result in significant market volatility, exchange trading suspensions or closures, or a substantial economic downturn or recession. Those events, as well as other changes in foreign and domestic economic and political conditions, also could disrupt the operations of the fund or its service providers or adversely affect individual issuers or related groups of issuers, interest rates, credit ratings, default rates, inflation, supply chains, consumer demand, investor sentiment, and other factors affecting the value or liquidity of the fund's investments.

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An outbreak of respiratory disease caused by a novel coronavirus designated as COVID-19 was first detected in China in December 2019 and subsequently spread internationally. The transmission of COVID-19 and efforts to contain its spread have resulted in, among other things, border closings and other significant travel restrictions and disruptions; significant disruptions to business operations, supply chains and customer activity; lower consumer demand for goods and services; higher levels of unemployment; event cancellations and restrictions; service cancellations, reductions and other changes; significant challenges in healthcare service preparation and delivery; prolonged quarantines; and general concern and uncertainty. These impacts have negatively affected, and may continue to negatively affect, the global economy, the economies of individual countries, and the financial performance of individual issuers, sectors, industries, asset classes, and markets in significant and unforeseen ways. The COVID-19 pandemic also has resulted in significant market volatility, exchange trading suspensions and closures, declines in global financial markets, higher default rates, and economic downturns and recessions, and may continue to have similar effects in the future. In addition, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to the COVID-19 pandemic, including significant fiscal and monetary policies changes, may affect the value, volatility, and liquidity of some securities and other assets. Health crises caused by the COVID-19 pandemic may also exacerbate other pre-existing political, social, economic, market and financial risks. The effects of the outbreak in developing or emerging market countries may be greater due to less established health care systems. The foregoing could impair the fund's ability to maintain operational standards (such as with respect to creations and redemptions of fund shares), disrupt the operations of the fund's service providers, adversely affect the value and liquidity of the fund's investments, and negatively impact the fund's performance and your investment in the fund. Given the significant uncertainty surrounding the magnitude, duration, reach, costs and effects of the COVID-19 pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, it is difficult to predict its potential impacts on a fund's investments.

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. On January 31, 2020, the United Kingdom formally withdrew from the European Union (commonly known as "Brexit"). An agreement between the United Kingdom and the European Union governing their future trade relationship became effective January 1, 2021. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and global markets. Potential negative long-term effects could include, among others, greater market volatility and illiquidity, disruptions to world securities markets, currency fluctuations, deterioration in economic activity, a decrease in business confidence, and an increased likelihood of a recession in the United Kingdom. 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)** 

An 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 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.

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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 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

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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.

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 assets, including any cash balances in money market and/or short-term bond funds advised by the Investment Manager or its affiliates. In connection with such investments, the Investment Manager 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 the Investment Manager in connection with such investments.

**Mortgage-backed and Asset-backed Securities** 

Mortgage-backed securities, including collateralized mortgage obligations ("CMOs"), stripped mortgage-backed securities and securities that reflect an interest in reverse mortgages, represent a participation in, or are secured by, mortgage loans or otherwise are secured by real estate related collateral. Mortgage-backed securities may be issued by agencies or instrumentalities of the U.S. government (and may not be guaranteed or insured by the U.S. government, such as those issued by 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 typically pass through to the holders of the mortgage-backed securities or serve as the source for payments on 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 (and may or may not be guaranteed or insured by the U.S. government), foreign governments (or their agencies or instrumentalities), or non-governmental issuers.

Mortgage-backed securities may 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 or refinancing of the underlying mortgage loans or the foreclosure of collateral securing the underlying mortgage loans. If property owners make unscheduled prepayments on 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 those 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.

The fund may invest in mortgage-backed securities that represent pools of mortgage loans with variable rates of interest (such loans, "ARMs"). Adjustable-rate mortgage-backed securities, like traditional mortgage-backed securities, are interests in pools of

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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, adjustable-rate mortgage-backed securities are collateralized by or represent interests in ARMs. Interest rates for ARMs 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 ARMs 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 adjustable-rate mortgage-backed security may be adversely affected if interest rates increase faster than the rates of interest payable on the ARMs underlying the security. Also, some ARMs 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 ARM. As a result, changes in the interest rate on an ARM may not fully reflect changes in prevailing market interest rates during certain periods.

The fund may also invest in mortgage-backed securities that represent pools of "hybrid" ARMs, underlying mortgages that 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-rate mortgage loans. All hybrid ARMs have a reset date, the date on which 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 a security backed by that 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 greater losses on securities purchased at a premium than securities that are not purchased at a premium.

Mortgage-backed and asset-backed securities are subject to varying degrees of credit risk, depending on whether they are issued, or are guaranteed or insured, by agencies or instrumentalities of 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., 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.

Mortgage-related securities include, among other things, securities that reflect an interest in a pool of reverse mortgages. In a reverse mortgage, a lender makes a loan to a homeowner based on the homeowner's equity in his or her home. A homeowner must be age 62 or older to qualify for a reverse mortgage but is not necessarily required to have any minimum income. Generally, the homeowner is not required to pay interest or repay principal on the loan until the homeowner dies, sells the home, or ceases to use the home as his or her primary residence. There are three general types of reverse mortgages: (1) single- purpose reverse mortgages, which are offered by certain state and local government agencies and nonprofit organizations; (2) federally-insured reverse mortgages (known as home equity conversion mortgages), which are backed by the U. S. Department

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of Housing and Urban Development; and (3) proprietary reverse mortgages, which are privately offered loans. A mortgage- related security may be backed by a single type of reverse mortgage or by a combination of types of reverse mortgages. Reverse mortgage-related securities include agency and privately issued mortgage-related securities. The principal government guarantor of reverse mortgage-related securities is Ginnie Mae.

Reverse mortgage-related securities may be subject to risks different than other types of mortgage-related securities due to the unique nature of the underlying loans. The date of repayment for these loans is uncertain and may occur sooner or later than anticipated. The timing of payments for the corresponding mortgage-related security may also be uncertain. Because reverse mortgages are offered only to persons 62 and older and there may be no income restrictions, the loans may react differently than traditional home loans to market events. As a result, investors (which may include the fund) in notes issued by reverse mortgage trusts ("RMTs") may be deprived of payments to which they are entitled. This could result in losses to the fund. Investors, including the fund, may determine to pursue negotiations or legal claims or otherwise seek compensation from RMT service providers in certain instances. This may involve the fund incurring costs and expenses associated with such actions.

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.

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 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 stripped mortgage-backed security'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.

The value of asset-backed securities may be substantially dependent on the servicing of the underlying assets, and asset- backed securities are therefore subject to risks associated with negligence by, or defalcation of, the servicers of those assets.

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These risks may be heightened in the case of an asset-backed security collateralized by the fees earned by the servicer, as the servicer may have a reduced financial incentive to provide appropriate servicing. 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 (i.e., determination as to the amount of underlying assets or other support needed to produce the cash flows necessary to service interest and make principal payments), the quality of the underlying assets, the level of credit support, if any, provided for the securities, and the credit quality of the credit-support provider, if any. In recent years, a significant number of asset- backed security insurers have defaulted on their obligations.

Consistent with the fund's investment objective and policies, the fund may invest in other types of mortgage- and asset-backed securities offered currently or in the future, including certain yet-to-be-developed types of mortgage- and asset-backed securities which may be created as the market evolves.

***Additional Information Related to Freddie Mac and Fannie Mae*** *.*** The extreme and unprecedented volatility and disruption that impacted the capital and credit markets beginning in 2008 led to market concerns regarding the ability of Freddie Mac and Fannie Mae to withstand future credit losses associated with securities held in their investment portfolios, and on which they provide guarantees, without the direct support of the federal government. On September 7, 2008, Freddie Mac and Fannie Mae were placed under the conservatorship of the Federal Housing Finance Agency (FHFA). Under the plan of conservatorship, the FHFA assumed control of, and generally has the power to direct, the operations of Freddie Mac and Fannie Mae, and is empowered to exercise all powers collectively held by their respective shareholders, directors and officers, including the power to: (1) take over the assets of and operate Freddie Mac and Fannie Mae with all the powers of the shareholders, the directors and the officers of Freddie Mac and Fannie Mae and conduct all business of Freddie Mac and Fannie Mae; (2) collect all obligations and money due to Freddie Mac and Fannie Mae; (3) perform all functions of Freddie Mac and Fannie Mae which are consistent with the conservator's appointment; (4) preserve and conserve the assets and property of Freddie Mac and Fannie Mae; and (5) contract for assistance in fulfilling any function, activity, action or duty of the conservator.

In connection with the actions taken by the FHFA, the Treasury has entered into certain preferred stock purchase agreements (SPAs) with each of Freddie Mac and Fannie Mae which establish the Treasury as the holder of a new class of senior preferred stock in each of Freddie Mac and Fannie Mae. The senior preferred stock was issued in connection with financial contributions from the Treasury to Freddie Mac and Fannie Mae. Although the SPAs are subject to amendment from time to time, currently the Treasury is obligated to provide such financial contributions up to an aggregate maximum amount determined by a formula set forth in the SPAs, and until such aggregate maximum amount is reached, there is not a specific end date to the Treasury's obligations.

The future status and role of Freddie Mac and Fannie Mae could be impacted by (among other things) the actions taken and restrictions placed on Freddie Mac and Fannie Mae by the FHFA in its role as conservator, the restrictions placed on Freddie Mac's and Fannie Mae's operations and activities under the SPAs, market responses to developments at Freddie Mac and Fannie Mae, downgrades or upgrades in the credit ratings assigned to Freddie Mac and Fannie Mae by nationally recognized statistical rating organizations (NRSROs) or ratings services, and future legislative and regulatory action that alters the operations, ownership, structure and/or mission of these institutions, each of which may, in turn, impact the value of, and cash flows on, any securities guaranteed by Freddie Mac and Fannie Mae.

In addition, the future of Freddie Mac and Fannie Mae, and other U.S. government-sponsored enterprises that are not backed by the full faith and credit of the U.S. government (GSEs), remains in question as the U.S. government continues to consider options ranging from structural reform, nationalization, privatization, or consolidation, to outright elimination. The issues that have led to significant U.S. government support for Freddie Mac and Fannie Mae have sparked serious debate regarding the continued role of the U.S. government in providing mortgage loan liquidity.

Options on Securities

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**Writing covered options**. The fund may write (*i.e.*, sell) covered call options and covered put options on optionable securities held in its portfolio or that it has an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by the Investment Manager in accordance with procedures established by the Trustees, in such amount as are set aside on the fund's books), when in the opinion of the Investment Manager such transactions are consistent with the fund's goal(s) and policies. Call options written by the fund give the purchaser the right to buy the underlying securities from the fund at a stated exercise price, regardless of the security's market price; put options written by the fund give the purchaser the right to sell the underlying securities to the fund at a stated exercise price, regardless of the security's market price.

The fund will receive a premium from writing a put or call option, which increases the fund's return on the underlying security in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, if the fund holds the security, the fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. If the fund does not hold the underlying security, the fund bears the risk that, if the market price exceeds the option strike price, the fund will suffer a loss equal to the difference at the time of exercise. By writing a put option, the fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value.

The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. A closing purchase transaction will ordinarily be effected in order to realize a profit on an outstanding option, to prevent an underlying instrument from being called, to permit the sale of the underlying instrument or to permit the writing of a new option containing different terms on such underlying instrument. The fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. Because increases in the market price of a call option generally reflect increases in the market price of the security underlying the option, any loss resulting from a closing purchase transaction may be offset in whole or in part by unrealized appreciation of the underlying security.

If the fund writes a call option but does not own the underlying security, and when it writes a put option, the fund may be required to deposit cash or securities with its broker as "margin," or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations.

**Purchasing put options**. The fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. If such a price decline occurs, the put option will permit the fund to sell the security at the higher exercise price or to close out the option at a profit. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. The fund may also purchase put options for other investment purposes, including to take a short position in the security underlying the put option.

**Purchasing call options**. The fund may purchase call options to hedge against an increase in the price of securities that the fund wants ultimately to buy. Such protection is provided during the life of the call option since the fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. If such a price increase occurs, a call option will permit the fund to purchase the securities at the exercise price or to close out the option at a profit. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. The fund may also purchase call options for other investment purposes.

**Risk factors in options transactions**. The successful use of the fund's options strategies depends on the ability of the Investment Manager to forecast correctly interest rate and market movements. For example, if the fund were to write a call option

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based on the Investment Manager's expectation that the price of the underlying security would fall, but the price were to rise instead, the fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the fund were to write a put option based on the Investment Manager's expectation that the price of the underlying security would rise, but the price were to fall instead, the fund could be required to purchase the security upon exercise at a price higher than the current market price.

When the fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the fund will lose part or all of its investment in the option. This contrasts with an investment by the fund in the underlying security, since the fund will not realize a loss if the security's price does not change.

The effective use of options also depends on the fund's ability to terminate option positions at times when the Investment Manager deems it desirable to do so. There is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events – such as volume in excess of trading or clearing capability – were to interrupt its normal operations. Although the fund may be able to offset to some extent any adverse effects of being unable to terminate an option position, the fund may experience losses in some cases as a result of such inability.

A market may at times find it necessary to impose restrictions on particular types of exchange-traded options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the fund, as option writer, would remain obligated under the option until expiration or exercise.

Disruptions in the markets for the securities underlying options purchased or sold by the fund could result in losses on the options. For example, if a fund is unable to purchase a security underlying a put option it had purchased, the fund may be unable to exercise the put option. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions in respect of exchange- traded options. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options. The fund, as holder of such a put option, could lose its entire investment if it is unable to exercise the put option prior to its expiration.

The fund may use both European-style options, which are only exercisable at a specific expiration time on the expiration date, and American-style options, which are exercisable at any time prior to the expiration date. Since an American-style option allows the holder to exercise its rights any time before the option's expiration, the writer of an American-style option has no control over when it will be required to fulfill its obligations as a writer of the option. (The writer of a European-style option is not subject to this risk because the holder may only exercise the option on its expiration date.)

Options can be traded either through established exchanges ("exchange traded options") or privately negotiated transactions (over-the-counter or "OTC" options). Exchange traded options are standardized with respect to, among other things, the underlying interest, expiration date, contract size and strike price. The terms of OTC options are generally negotiated by the parties to the option contract which allows the parties greater flexibility in customizing the agreement, but OTC options are generally less liquid than exchange traded options. OTC options purchased by the fund and assets held to cover OTC options written by the fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the fund's ability to invest in illiquid securities. All option contracts involve credit risk if the counterparty to the option contract (*e.g.*, the clearing house or OTC counterparty) or the third party effecting the transaction in the case of cleared options (*e.g.*, futures commission merchant or broker/dealer) fails to perform. The credit risk in OTC options that are not cleared is dependent on the

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credit worthiness of the individual counterparty to the contract and may be greater than the credit risk associated with cleared options.

Foreign-traded options are subject to many of the same risks presented by internationally-traded securities. In addition, because of time differences between the United States and other countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States.

There are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. In addition, many options, in particular OTC options, are complex and often valued based on subjective factors. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to the fund.

The market price of an option is affected by many factors, including changes in the market prices or dividend rates of underlying securities (or in the case of indices, the securities in such indices); the time remaining before expiration; changes in interest rates or exchange rates; and changes in the actual or perceived volatility of the relevant stock market and underlying securities. The market price of an option also may be adversely affected if the market for the option becomes less liquid.

In addition to options on securities and futures, the fund may also enter into options on futures, swaps, or other instruments as described elsewhere in this SAI.

**Preferred Stocks and Convertible Securities** 

The fund may invest in preferred stocks or convertible securities. A preferred stock is a class of stock that generally pays dividends at a specified rate and has preference over common stock in the payment of dividends and the liquidation of an issuer's assets but is junior to the debt securities of the issuer in those same respects. Under ordinary circumstances, preferred stock does not carry voting rights. As with all equity securities, the value of preferred stock fluctuates based on changes in a company's financial condition and on overall market and economic conditions. The value of preferred stocks is particularly sensitive to changes in interest rates and is more sensitive to changes in an issuer's creditworthiness than is the value of debt securities. In addition, many preferred stocks may be called or redeemed prior to their maturity by the issuer under certain conditions, which can limit the benefit to investors of a decline in interest rates. Shareholders of preferred stock may suffer a loss of value if dividends are not paid. Additionally, if the issuer of preferred stock experiences economic or financial difficulties, its preferred stock may lose value due to the reduced likelihood that its board of directors will declare a dividend. Certain preferred stocks contain provisions that allow an issuer under certain conditions to skip or defer distributions. If the fund owns a preferred stock that is deferring its distribution, it may be required to report income for tax purposes despite the fact that it is not receiving current income on this position. Preferred stocks often are subject to legal provisions that allow for redemption in the event of certain tax or legal changes or at the issuer's call. In the event of redemption, the fund may not be able to reinvest the proceeds at comparable rates of return. Preferred stocks are subordinated to bonds and other debt securities in an issuer's capital structure in terms of priority for corporate income and liquidation payments, and therefore will be subject to greater credit risk than those debt securities. Preferred stocks may trade less frequently and in a more limited volume and may be subject to more abrupt or erratic price movements than many other securities, such as common stocks, corporate debt securities, and U.S. government securities.

Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into or exchanged for, at a specific price or formula within a particular period of time, a prescribed amount of common stock or other equity securities of the same or a different issuer. The conversion may occur automatically upon the occurrence of a predetermined event or at the option of either the issuer or the security holder. The holder of a convertible security is generally entitled to participate in the capital appreciation resulting from a market price increase in the issuer's common stock and to receive interest paid or accrued on debt or dividends paid or accrued until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics similar to non-convertible debt or preferred securities, as applicable. Convertible securities rank senior to common stock in an issuer's capital structure and, therefore, normally entail less risk than the issuer's common stock. However, convertible securities may also be subordinate to any senior debt obligations of the issuer, and, therefore, an issuer's convertible securities may entail more risk than such senior debt obligations. Convertible securities usually offer lower interest or dividend yields than non-convertible debt securities of similar credit quality because of the potential for capital appreciation. In addition, convertible securities are often lower-rated securities.

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The market value of a convertible security is a function of its "investment value" and its "conversion value." A security's "investment value" represents the value of the security without its conversion feature (*i.e.*, a nonconvertible fixed income security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value may be dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. A security's "conversion value" is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current market price of the underlying security. Because of the conversion feature, the market value of a convertible security will normally fluctuate in some proportion to changes in the market value of the underlying security, and, accordingly, convertible securities are subject to risks relating to the activities of the issuer and/or general market and economic conditions.

A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. If the conversion value of a convertible security is significantly below its investment value, the convertible security generally trades like nonconvertible debt or preferred stock and its market value will not be influenced greatly by fluctuations in the market price of the underlying security. Conversely, if the conversion value of a convertible security is near or above its investment value, the market value of the convertible security is typically more heavily influenced by fluctuations in the market price of the underlying security. Generally, the amount of the premium decreases as the convertible security approaches maturity. Convertible securities generally have less potential for gain than common stocks.

The fund's investments in convertible securities may at times include securities that have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities at a specified date and a specified conversion ratio, or that are convertible at the option of the issuer. Because conversion of the security is not at the option of the holder, the fund may be required to convert the security into the underlying common stock even at times when the value of the underlying common stock or other equity security has declined substantially.

The fund's investments in preferred stocks and convertible securities, particularly securities that are convertible into securities of an issuer other than the issuer of the convertible security, may be illiquid. The fund may not be able to dispose of such securities in a timely fashion or for a fair price, which could result in losses to the fund.

**Private Placements and Restricted Securities** 

The fund may invest in securities that are purchased in private placements and, accordingly, are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell such securities when the Investment Manager believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. There can be no assurance that a liquid market will exist for any such security at any particular time, and a security which when purchased was liquid in the institutional markets may subsequently become illiquid.

Many private placement securities are issued by companies that are not required to file periodic financial reports, leading to challenges in evaluating the company's overall business prospects and gauging how the investment is likely to perform over time. In addition, market quotations for these securities are less readily available. Due to the more limited financial information and lack of publicly available prices, it may be more difficult to determine the fair value of these securities for purposes of computing the fund's net asset value. As a result, the judgment of the Investment Manager may at times play a greater role in valuing these securities than in the case of publicly traded securities, and the fair value prices determined for the fund could differ from those of other market participants.

While such private placements may offer attractive opportunities for investment not otherwise available on the open market, the securities so purchased are often "restricted securities," i.e., securities which cannot be sold to the public without registration under the Securities Act of 1933 (the "Securities Act") or the availability of an exemption from registration (such as Rules 144, 144A or Regulation S), or which are "not readily marketable" because they are subject to other legal or contractual delays in or restrictions on resale. In addition, the issuer typically does not have an obligation to provide liquidity to investors by buying the securities back when the investor wants to sell. Disposing of these securities may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the fund to sell them promptly at an acceptable price. The fund may have to bear the extra expense of registering these securities for resale and the risk of substantial delay in effecting the registration.

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Since the offering is not registered with the SEC, investors in a private placement have less protection under the federal securities laws against improper practices than investors in registered securities.

Generally speaking, restricted securities may be sold only to qualified institutional buyers, or in a privately negotiated transaction to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration, or in a public offering for which a registration statement is in effect under the Securities Act. The fund may be deemed to be an "underwriter" for purposes of the Securities Act when selling restricted securities to the public, and in such event the fund may be liable to purchasers of such securities if the registration statement prepared by the issuer, or the prospectus forming a part of it, is materially inaccurate or misleading. The SEC Staff currently takes the view that any delegation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the funds) must be pursuant to written procedures established by the Trustees and the Trustees have delegated such authority to the Investment Manager.

**Real Estate Investment Trusts (REITs)** 

The fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. REITs may concentrate their investments in specific geographic areas or in specific property types (i.e., hotels, shopping malls, residential complexes and office buildings). Like regulated investment companies such as the fund, REITs are not taxed on income distributed to shareholders provided that they comply with certain requirements under the Code. The fund will indirectly bear its proportionate share of any expenses (such as operating expenses and advisory fees) paid by REITs in which it invests in addition to the fund's own expenses.

Investing in REITs may involve certain unique risks in addition to those risks associated with investing in the real estate industry in general (such as possible declines in the value of real estate, lack of availability of mortgage funds, or extended vacancies of property). The market value of REIT shares and the ability of the REITs to distribute income may be adversely affected by several factors, including rising interest rates, changes in the national, state and local economic climate and real estate conditions, perceptions of prospective tenants of the safety, convenience and attractiveness of the properties, the ability of the owners to provide adequate management, maintenance and insurance, the cost of complying with the Americans with Disabilities Act, increased competition from new properties, the impact of present or future environmental legislation and compliance with environmental laws, failing to maintain their exemptions from registration under the Investment Company Act, changes in real estate taxes and other operating expenses, adverse changes in governmental rules and fiscal policies, adverse changes in zoning laws, and other factors beyond the control of the issuers of the REITs.

REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs ("hybrid REITs"). Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the risk of borrower default, the likelihood of which is increased for mortgage REITs that invest in sub-prime mortgages. REITs, and mortgage REITs in particular, are also subject to interest rate risk. Rising interest rates may cause REIT investors to demand a higher annual yield, which may, in turn, cause a decline in the market price of the equity securities issued by a REIT. Rising interest rates also generally increase the costs of obtaining financing, which could cause the value of the fund's REIT investments to decline. During periods when interest rates are declining, mortgages are often refinanced. Refinancing may reduce the yield on investments in mortgage REITs. In addition, since REITs depend on payment under their mortgage loans and leases to generate cash to make distributions to their shareholders, investments in REITs may be adversely affected by defaults on such mortgage loans or leases. A hybrid REIT combines the characteristics of equity REITs and mortgage REITs, generally by holding both ownership interests and mortgage interests in real estate, and thus may be subject to risks associated with both real estate ownership and investments in mortgage-related securities.

Investing in certain REITs, which often have small market capitalizations, may also involve the same risks as investing in other small capitalization companies. REITs may have limited financial resources and their securities may trade less frequently and in limited volume and may be subject to more abrupt or erratic price movements than larger company securities. Historically, small capitalization stocks, such as REITs, have been more volatile in price than the larger capitalization stocks such as those included in the S&P 500 Index. The management of a REIT may be subject to conflicts of interest with respect to the operation of the business of the REIT and may be involved in real estate activities competitive with the REIT. REITs may own properties through

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joint ventures or in other circumstances in which the REIT may not have control over its investments. REITs may incur significant amounts of leverage.

REITs are dependent upon their operators' management skills, are generally not diversified (except to the extent the Code requires), and are subject to heavy cash flow dependency, borrower default or self-liquidation. REITs are also subject to the possibility of failing to qualify for the tax-advantaged treatment available to REITs under the Code or failing to maintain their exemptions from registration under the 1940 Act. In addition, REITs may be adversely affected by changes in federal tax law, for example, by limiting their permissible businesses or investments. REITs may have limited financial resources, may trade less frequently and in a limited volume, and may be subject to more abrupt or erratic price movements than more widely held securities.

The fund's investment in a REIT may result in the fund making distributions that constitute a return of capital to fund shareholders for federal income tax purposes or may require the fund to accrue and distribute income not yet received. In addition, distributions by a fund from REITs will not qualify for the corporate dividends-received deduction, or, generally, for treatment as qualified dividend income.

**Redeemable Securities** 

Certain securities held by the fund may permit the issuer at its option to "call" or redeem its securities. Issuers of redeemable securities are generally more likely to exercise a "call" option in periods when interest rates are below the rate at which the original security was issued. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. The fund also may fail to recover additional amounts (i.e., premiums) paid for securities with higher interest rates, resulting in an unexpected capital loss.

**Repurchase Agreements** 

A repurchase agreement is a contract under which the fund, the buyer under the contract, acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller (or repurchase agreement counterparty) to repurchase, and the fund to resell, the security at a fixed time and price, which represents the fund's cost plus interest (or, for repurchase agreements under which the fund acquires a security and then sells it short, the fund's cost of "borrowing" the security). A repurchase agreement with a stated maturity of longer than one week is generally considered an illiquid investment. It is the fund's present intention to enter into repurchase agreements only with banks and registered broker-dealers. The fund may enter into repurchase agreements, including with respect to securities it wishes to sell short. See "Short Sales" in this SAI. Certain of the repurchase agreements related to securities sold short may provide that, at the option of the fund, settlement may be made by delivery of cash equal to the difference between (a) the sum of (i) the market value of the securities sold short at the time the repurchase agreement is closed out and (ii) transaction costs associated with the acquisition in the market by the repurchase agreement counterparty of the securities sold short and (b) the repurchase price specified in the repurchase agreement.

The fund may be exposed to the credit risk of the repurchase agreement counterparty (or seller) in the event that the counterparty is unable or unwilling to close out the repurchase agreement in accordance with its terms or the parties disagree as to the meaning or application of those terms. In such an event, the fund may be subject to expenses, delays, and risk of loss, including: (i) possible declines in the value of the underlying security while the fund seeks to enforce its rights under the agreement; (ii) possible reduced levels of income and lack of access to income during this period; and (iii) the inability to enforce its rights and the expenses involved in attempted enforcement. If the seller defaults, the fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate. The fund is also subject to the risk that the repurchase agreement instrument may not perform as expected.

Pursuant to no-action relief granted by the SEC, the fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments.

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The fund may also enter into reverse repurchase agreements. Under a reverse repurchase agreement, the fund sells portfolio assets to another party subject to an agreement by the fund to repurchase the same assets from that party at an agreed upon price and date. During the reverse repurchase agreement period, the fund continues to receive principal and interest payments on the assets and also has the opportunity to earn a return on the collateral furnished by the counterparty to secure its obligation to redeliver the assets. The fund can use the proceeds received from entering into a reverse repurchase agreement to make additional investments, which generally causes the fund's portfolio to behave as if it were leveraged.

When entering into a reverse repurchase agreement, the fund bears the risk of delay and costs involved in recovery of securities if the initial purchaser of the securities fails to return the securities upon repurchase or fails financially. These delays and costs could be greater with respect to foreign securities. Although securities repurchase transactions are generally marked to market daily, the fund also faces the risk that securities subject to a reverse repurchase transaction will decline quickly in value, and the fund will remain obligated to repurchase those securities at a higher price, potentially resulting in a loss. If the buyer in a reverse repurchase agreement files for bankruptcy or becomes insolvent, the fund may be unable to recover the securities it sold and as a result would realize a loss equal to the difference between the value of those securities and the payment it received for them. The size of this loss will depend upon the difference between what the buyer paid for the securities the fund sold to it and the value of those securities (*e.g.*, a buyer may pay $95 for a bond with a market value of $100). In the event of a buyer's bankruptcy or insolvency, the fund's use of proceeds from the sale of its securities may be restricted while the other party or its trustee or receiver determines whether to honor the fund's right to repurchase the securities. The fund's use of reverse repurchase agreements also subjects the fund to interest costs based on the difference between the sale and repurchase price of a security involved in such a transaction. Additionally, reverse repurchase agreements entail the same risks as over-the-counter derivatives. These include the risk that the counterparty to the reverse repurchase agreement may not be able to fulfill its obligations, as discussed above, that the parties may disagree as to the meaning or application of contractual terms, or that the instrument may not perform as expected.

**Securities of Other Investment Companies** 

Securities of other investment companies, including shares of open- and closed-end investment companies and unit investment trusts (which may include ETFs), 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 the Investment Manager believes is advisable, when there is a shortage of direct investments available, or when the Investment Manager believes that investment companies offer attractive values.

Investment companies may be structured to perform in a similar fashion to a broad-based securities index or may focus on a particular strategy or class of assets. Passive ETFs typically seek to track the performance or dividend yield of specific indexes or companies in related industries, though unlike the index, an ETF incurs administrative expenses and transaction costs in trading securities. These indexes may be broad-based, sector-based or international. 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 duplication of expenses while the fund owns another investment company's shares. In addition, investing in investment companies involves the risk that they will not perform in exactly the same fashion, or in response to the same factors, as the underlying instruments or index. To the extent the fund invests in other investment companies that are professionally managed, its performance will also depend on the investment and research abilities of investment managers other than the Investment Manager.

Open-end investment companies typically offer their shares continuously at net asset value plus any applicable sales charge and stand ready to redeem shares upon shareholder request. The shares of certain other types of investment companies, such as ETFs and closed-end investment companies, typically trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. In the case of closed-end investment companies, the number of shares is typically fixed. The securities of closed-end investment companies and ETFs carry the risk that the price the fund pays or receives may be higher or lower than the investment company's net asset value. ETFs also are subject to the risk that the timing and magnitude of cash inflows and outflows from and to investors buying and redeeming shares in the ETF could create cash balances that cause the ETF's performance to deviate from the index (which remains "fully invested" at all times). Performance of an ETF and the index it is designed to track also may diverge because the composition of the index and the securities held by the ETF may occasionally differ. ETFs and closed-end investment companies are also subject to certain additional risks, including the risks of illiquidity and of possible trading halts or interruptions due to policies of the relevant exchange, unusual market conditions or other reasons. There can be no assurance that shares of a closed-end investment company or ETF will continue to be listed on an active

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exchange. The shares of investment companies, particularly closed-end investment companies, may also be leveraged, which would increase the volatility of the fund's net asset value.

**Business development companies ("BDCs").** BDCs are a type of closed-end fund regulated under the 1940 Act, which typically invest in and lend to small-and medium-sized private companies that may lack access to public equity markets for capital raising. Under the 1940 Act, BDCs must invest at least 70% of the value of their total assets in certain asset types, which are typically the securities of private U.S. businesses. Additionally, BDCs must make available significant managerial assistance to the issuers of such securities. BDCs are not taxed on income distributed to shareholders provided they qualify as a regulated investment company under the Code. The funds will indirectly bear their proportionate share of any management and other expenses charged by the BDCs in which they invest.

Because BDCs typically invest in small and medium-sized companies, a BDC's portfolio is subject to the risks inherent in investing in smaller companies, including that portfolio companies may be dependent on a small number of products or services and may be more adversely affected by poor economic or market conditions. Some BDCs invest substantially, or even exclusively, in one sector or industry group and therefore the BDC may be susceptible to adverse conditions and economic or regulatory occurrences affecting the sector or industry group, which tends to increase volatility and result in higher risk. Investments in BDCs are also subject to management risk, including management's ability to meet the BDC's investment objective, and management's ability to manage the BDC's portfolio during periods of market turmoil and as investors' perceptions regarding a BDC or its underlying investments change.

The extent to which the fund can invest in securities of other investment companies, including ETFs, is generally limited by federal securities laws. For more information regarding the tax treatment of ETFs, please see "Taxes" below.

**Short Sales** 

The fund may engage in short sales of securities and/or currencies either as a hedge against potential declines in value of a portfolio security or currency or to realize appreciation when a security or currency that the fund does not own declines in value. Short sales are transactions in which the fund sells a security or currency it does not own to a third party by borrowing the security or currency in anticipation of purchasing the same security or currency at the market price on a later date to close out the short position. The fund may also engage in short sales by entering into a repurchase agreement with respect to the security it wishes to sell short. See "Repurchase Agreements" in this SAI. The fund will incur a gain if the price of the security or currency declines between the date of the short sale and the date on which the fund replaces the borrowed security or currency; and the fund will incur a loss if the price of the security or currency increases between those dates. Such a loss is theoretically unlimited since the potential increase in the market price of the security or currency sold short is not limited. Until the security is replaced, the fund must pay the lender (or repurchase agreement counterparty) any dividends or interest that accrues during the period of the loan (or repurchase agreement). To borrow (or enter into a repurchase agreement with respect to) the security, the fund also may be required to pay a premium, which would increase the cost of the security sold. The fund's successful use of short sales is subject to the Investment Manager's ability to accurately predict movements in the market price of the security or currency sold short. Short selling may involve financial leverage because the fund is exposed both to changes in the market price of the security or currency sold short and to changes in the value of securities or currencies purchased with the proceeds of the short sale, effectively leveraging its assets. Under adverse market conditions, a fund may have difficulty purchasing securities to meet its short sale delivery obligations, and may be required to close out its short position at a time when the fund would not choose to do so, and may therefore have to sell portfolio securities to raise the capital necessary to meet its short sale obligations at a time when fundamental investment considerations may not favor such sales. There is also a risk that a borrowed security will need to be returned to the lender on short notice. If a request for return of borrowed securities occurs at a time when other short sellers of the securities are receiving similar requests, a "short squeeze" can occur, and the fund may be compelled to replace borrowed securities previously sold short with purchases on the open market at the most disadvantageous time, possibly at prices significantly in excess of the proceeds received in originally selling the securities short. In addition, the fund may have difficulty purchasing securities to meet its delivery obligations in the case of less liquid securities sold short by the fund, such as certain emerging market country securities or securities of companies with smaller market capitalizations. In connection with short sale transactions, the fund may be required to pledge certain additional assets for the benefit of the securities lender (or repurchase agreement counterparty) and the fund may, while such assets remain pledged, be limited in its ability to invest those assets in accordance with the fund's investment strategies.

Short selling is a technique that may be considered speculative and involves risks beyond the initial capital necessary to secure each transaction. It should be noted that possible losses from short sales differ from those losses that could arise from a cash

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investment in a security because losses from a short sale may be limitless, while the losses from a cash investment in a security cannot exceed the total amount of the investment in the security.

Certain of the repurchase agreements related to securities sold short may provide that, at the option of the fund, in lieu of delivering the securities sold short, settlement may be made by delivery of cash equal to the difference between (a) the sum of (i) the market value of the securities sold short at the time the repurchase agreement is closed out and (ii) transaction costs associated with the acquisition in the market by the repurchase agreement counterparty of the securities sold short and (b) the repurchase price specified in the repurchase agreement. Because that cash amount represents the fund's maximum loss in the event of the insolvency of the counterparty, the fund will, except where the local market practice for foreign securities to be sold short requires payment prior to delivery of such securities, treat such amount, rather than the full notional amount of the repurchase agreement, as its "investment" in securities of the counterparty for purposes of all applicable investment restrictions, including its fundamental policy with respect to diversification.

See "Legal and Regulatory Risks Relating to Investment Strategy" in this SAI.

**Short-Term Trading** 

In seeking the fund's objective(s), the Investment Manager will buy or sell portfolio securities whenever the Investment Manager believes it appropriate to do so. From time to time the fund will buy securities intending to seek short-term trading profits. A change in the securities held by the fund is known as "portfolio turnover" and generally involves some expense to the fund. This expense may include brokerage commissions or dealer markups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. If sales of portfolio securities cause the fund to realize net short-term capital gains, such gains will be taxable as ordinary income when distributed to taxable individual shareholders. As a result of the fund's investment policies, under certain market conditions the fund's portfolio turnover rate may be higher than that of other ETFs. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly average of the value of portfolio securities — excluding securities whose maturities at acquisition were one year or less. The fund's portfolio turnover rate is not a limiting factor when the Investment Manager considers a change in the fund's portfolio.

**Special Purpose Acquisition Companies** 

The fund may invest in stock, rights, warrants, and other securities of special purpose acquisition companies ("SPACs") or similar special purpose entities. A SPAC is a publicly traded company that raises investment capital in the form of a blind pool via an IPO for the purpose of acquiring an existing company. The shares of a SPAC are typically issued in "units" that include one share of common stock and one right or warrant (or partial right or warrant) conveying the right to purchase additional shares or partial shares. At a specified time following the SPAC's IPO (generally 1-2 months), the rights and warrants may be separated from the common stock at the election of the holder, after which they become freely tradeable. After going public and until an acquisition is completed, a SPAC generally invests the proceeds of its IPO (less a portion retained to cover expenses), which are held in trust, in U.S. government securities, money market securities and cash. To the extent the SPAC is invested in cash or similar securities, this may impact a fund's ability to meet its investment objective. If a SPAC does not complete an acquisition within a specified period of time after going public, the SPAC is dissolved, at which point the invested funds are returned to the SPAC's shareholders (less certain permitted expenses) and any rights or warrants issued by the SPAC expire worthless.

Because SPACs and similar entities are in essence blank check companies without an operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the entity's management to identify and complete a profitable acquisition. Some SPACs may pursue acquisitions only within certain industries or regions, which may increase the volatility of their prices. In addition, the securities issued by a SPAC, which are typically traded in the over-the-counter market, may be considered illiquid and/or be subject to restrictions on resale.

**Structured Investments** 

A structured investment is a security having a return tied to an underlying index or other security or asset class. Structured investments generally are individually negotiated agreements and may be traded over-the-counter. Structured investments are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, or specified instruments (such as commercial bank loans) and the issuance by that entity or one or more classes of securities ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued

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structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class of structured securities that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there currently is no active trading market for structured securities. Investments in government and government-related and restructured debt instruments are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt and requests to extend additional loan amounts.

**Swap Agreements** 

The fund may enter into swap agreements and other types of over-the-counter transactions such as caps, floors and collars with broker-dealers or other financial institutions for hedging or investment purposes. A swap involves the exchange by the fund with another party of their respective commitments to pay or receive cash flows, e.g., an exchange of floating rate payments for fixed- rate payments. The purchase of a cap entitles the purchaser, to the extent that a specified index or other underlying financial measure exceeds a predetermined value on a predetermined date or dates, to receive payments on a notional principal amount from the party selling the cap. The purchase of a floor entitles the purchaser, to the extent that a specified index or other underlying financial measure falls or other underlying measure below a predetermined value on a predetermined date or dates, to receive payments on a notional principal amount from the party selling the floor. A collar combines elements of a cap and a floor.

Swap agreements and similar transactions can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. A swap agreement may be structured with reference to an index of securities that is created and maintained by the swap counterparty. Depending on their structures, swap agreements may increase or decrease the fund's exposure to long-or short-term interest rates (in the United States or abroad), foreign currency values, mortgage securities, mortgage rates, corporate borrowing rates, or other factors such as security prices, inflation rates or the volatility of an index or one or more securities. For example, if the fund agrees to exchange payments in U.S. dollars for payments in a non-U.S. currency, the swap agreement would tend to decrease the fund's exposure to U.S. interest rates and increase its exposure to that non-U.S. currency and interest rates.

The fund may also engage in total return swaps, in which payments made by the fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity or fixed-income security, a combination of such securities, or an index). Total return swap agreements may be used to obtain exposure to a security, commodity, or market without owning or taking physical custody of such security or investing directly in such market. The fund may also enter into swap agreements on futures contracts including, but not limited to, index futures contracts. Swap agreements on futures contracts are generally subject to the same risks involved in the fund's use of futures contracts, in addition to the risks involved in the fund's use of swap agreements. See "Futures Contracts and Related Options." A total return swap, or a swap on a futures contract, may add leverage to a portfolio by providing investment exposure to an underlying asset or market where the fund does not own or take physical custody of such asset or invest directly in such market.

The value of the fund's swap positions would increase or decrease depending on the changes in value of the underlying rates, currency values, volatility or other indices or measures. Caps and floors have an effect similar to buying or writing options. Depending on how they are used, swap agreements may increase or decrease the overall volatility of the fund's investments and its share price. The fund's ability to engage in certain swap transactions may be limited by tax considerations.

The fund's ability to realize a profit from such transactions will depend on the ability of the financial institutions with which it enters into the transactions to meet their obligations to the fund. If a counterparty's creditworthiness declines, the value of the agreement would be likely to decline, potentially resulting in losses. If a default occurs by the other party to such transaction, the fund will have contractual remedies pursuant to the agreements related to the transaction, which may be limited by applicable law in the case of a counterparty's insolvency. If the returns of an index upon which a swap is based are unavailable or cannot be calculated (including where the index is created and maintained by the swap counterparty), the fund may experience difficulty in valuing the swap or in determining the amounts owed to or by the counterparty, regardless of whether the counterparty has defaulted. Under certain circumstances, suitable transactions may not be available to the fund, or the fund may be unable to close out its position under such transactions at the same time, or at the same price, as if it had purchased comparable publicly

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traded securities. Swaps carry counterparty risks that cannot be fully anticipated. Also, because swap transactions typically involve a contract between the two parties, such swap investments can be extremely illiquid, as it is uncertain as to whether another counterparty would wish to take assignment of the rights under the swap contract at a price acceptable to the fund.

The fund's investments in swaps will generate ordinary income and losses for federal income tax purposes and 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. The fund 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.

A credit default swap is an agreement between the fund and a counterparty that enables the fund to buy or sell protection against a credit event related to a particular issuer. One party, acting as a "protection buyer," makes periodic payments to the other party, a "protection seller," in exchange for a promise by the protection seller to make a payment to the protection buyer if a negative credit event (such as a delinquent payment or default) occurs with respect to a referenced bond or group of bonds. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors (for example, the Nth default within a basket, or defaults by a particular combination of issuers within the basket, may trigger a payment obligation). The fund may enter into credit default swap contracts for investment purposes. As a credit protection seller in a credit default swap contract, the fund would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty in the event of a default by a third party, such as a U.S. or non-U.S. corporate issuer, on the debt obligation. In return for its obligation, the fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the fund would keep the stream of payments and would have no payment obligations to the counterparty. As the seller, the fund would be subject to investment exposure on the notional amount of the swap.

The fund may also invest in credit default swap contracts to hedge against the risk of default of the debt of a particular issuer or basket of issuers or to attempt to profit from changes or perceived changes in the creditworthiness of the particular issuer(s) (also known as "buying credit protection"). In these cases, the fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment may expire worthless and would only generate income in the event of an actual default by the issuer(s) of the underlying obligation(s) (or, as applicable, a credit downgrade or other indication of financial instability). It would also involve the risk that the seller may fail to satisfy its payment obligations to the fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce the fund's return.

Credit default swaps involve a number of special risks. A protection seller may have to pay out amounts following a negative credit event greater than the value of the reference obligation delivered to it by its counterparty and the amount of periodic payments previously received by it from the counterparty. When the fund acts as a seller of a credit default swap, it is exposed to, among other things, leverage risk because if an event of default occurs the seller must pay the buyer the full notional value of the reference obligation. Each party to a credit default swap is subject to the credit risk of its counterparty (the risk that its counterparty may be unwilling or unable to perform its obligations on the swap as they come due). The value of the credit default swap to each party will change based on changes in the actual or perceived creditworthiness of the underlying issuer.

A protection buyer may lose its investment and recover nothing should an event of default not occur. The fund may seek to realize gains on its credit default swap positions, or limit losses on its positions, by selling those positions in the secondary market. There can be no assurance that a liquid secondary market will exist at any given time for any particular credit default swap or for credit default swaps generally.

The market for credit default swaps has at times become more volatile as the creditworthiness of certain counterparties has been questioned and/or downgraded. The parties to a credit default swap are generally required to post collateral to each other. If the fund posts initial or periodic collateral to its counterparty, it may not be able to recover that collateral from the counterparty in accordance with the terms of the swap. In addition, if the fund receives collateral from its counterparty, it may be delayed or prevented from realizing on the collateral in the event of the insolvency or bankruptcy of the counterparty. The fund may exit its obligations under a credit default swap by terminating the contract and paying applicable breakage fees, by selling its position in the secondary market, or by entering into an offsetting credit default swap position, which may cause the fund to incur more losses.

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The fund may also enter into options on swap agreements ("swaptions"). A swaption is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. The fund may purchase and write (sell) put and call swaptions to the same extent it may make use of standard options on securities or other instruments. Swaptions are generally subject to the same risks involved in the fund's use of options. See "Options on Securities."

Many over-the-counter derivatives (including many swaps) are complex and their valuation often requires subjective modeling and judgment, which increases the risk of mispricing or incorrect valuation. The pricing models used may not produce valuations that are consistent with the values the fund realizes when it closes or sells an over-the-counter derivative. Valuation risk is more pronounced when the fund enters into over-the-counter derivatives with specialized terms because the market value of those derivatives in some cases is determined in part by reference to similar derivatives with more standardized terms. Incorrect valuations may result in increased cash payment requirements to counterparties, undercollateralization and/or errors in calculation of the fund's NAV.

**Tax-exempt Securities** 

**General description**. As used in this SAI, the term "Tax-exempt Securities" includes debt obligations issued by a state, a territory or possession of the United States, the District of Columbia, Puerto Rico, Guam and their political subdivisions (for example, counties, cities, towns, villages, districts and authorities), agencies, instrumentalities or other governmental units, the interest from which is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) the corresponding state's personal income tax. Such obligations are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which Tax-exempt Securities may be issued include to refund of outstanding obligations, to obtain funds for general operating expenses, or to obtain funds to lend to other public institutions and facilities in anticipation of the receipt of revenue or the issuance of other obligations.

Tax-exempt Securities can be classified into two principal categories, including "general obligation" bonds and other securities and "revenue" bonds and other securities. General obligation bonds are secured by the issuer's full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific revenue source, such as the user of the facility being financed. Tax-exempt Securities may be structured as fixed-, variable- or floating-rate obligations or as zero-coupon, payment-in-kind and step-coupon securities and may be privately placed or publicly offered.

Short-term Tax-exempt Securities are generally issued by state and local governments and public authorities as interim financing in anticipation of tax collections, revenue receipts or bond sales to finance such public purposes.

In addition, certain types of "private activity" bonds may be issued by public authorities to finance projects of privately-owned entities, such as privately - operated housing facilities; certain local facilities for supplying water, gas or electricity; sewage or solid waste disposal facilities; student loans; or public or private institutions for the construction of educational, hospital, housing and other facilities. Such obligations are included within the term Tax-exempt Securities if the interest paid thereon is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) state personal income tax (such interest may, however, be subject to federal alternative minimum tax). Other types of private activity bonds, the proceeds of which are used for the construction, repair or improvement of, or to obtain equipment for, privately operated industrial or commercial facilities, may also constitute Tax-exempt Securities, although the current federal tax laws place substantial limitations on the size of such issues. The credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.

Tax-exempt Securities share many of the structural features and risks of other bonds, as described elsewhere in this SAI. For example, the fund may purchase callable Tax-exempt Securities, zero-coupon Tax-exempt Securities, or "stripped" Tax-exempt Securities, which entail additional risks. The fund may also purchase structured or asset-backed Tax-exempt Securities, such as the securities (including preferred stock) of special purpose entities that hold interests in the Tax-exempt Securities of one or more issuers and issue "tranched" securities that are entitled to receive payments based on the cash flows from those underlying securities. See "Redeemable securities," "-Zero-coupon and Payment-in-kind Bonds," "-Structured investments," and "Mortgage- backed and Asset-backed Securities" in this SAI. Structured Tax-exempt Securities may involve increased risk that the interest received by the fund may not be exempt from federal or state income tax, or that such interest may result in liability for the alternative minimum tax for shareholders of the fund. For example, in certain cases, the issuers of certain securities held by a

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special purpose entity may not have received an unqualified opinion of bond counsel that the interest from the securities will be exempt from federal income tax and (if applicable) the corresponding state's personal income tax.

Even though Tax-exempt Securities are interest-bearing investments that promise a stable flow of income, their prices are generally inversely affected by changes in interest rates and, therefore, are subject to the risk of market price fluctuations. The values of Tax-exempt Securities with longer remaining maturities typically fluctuate more than those of similarly rated Tax- exempt Securities with shorter remaining maturities. The values of Tax-exempt Securities also may be affected by changes in their actual or perceived credit quality. The credit quality of Tax-exempt Securities can be affected by, among other things, the financial condition of the issuer or guarantor, the issuer's future borrowing plans and sources of revenue, the economic feasibility of the revenue bond project or general borrowing purpose, political or economic developments in the state or region where the security is issued, and the liquidity of the security. The amount of information about the financial condition of an issuer of Tax- exempt Securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. As a result, the achievement of the fund's goals is more dependent on the Investment Manager's investment analysis than would be the case if the fund were investing in securities of better-known issuers. In addition, Tax-exempt Securities may be harder to value than securities issued by corporations that are publicly traded.

The secondary market for some Tax-exempt Securities issued within a state (including issues that are privately placed with the fund) is less liquid than that for taxable debt obligations or other more widely traded municipal obligations. No established resale market exists for certain of the Tax-exempt Securities in which the fund may invest. The market for Tax-exempt Securities rated below investment grade is also likely to be less liquid than the market for higher rated obligations. As a result, the fund may be unable to dispose of these municipal obligations at times when it would otherwise wish to do so at the prices at which they are valued.

Tax-exempt Securities Issued by the Commonwealth of Puerto Rico. Tax-exempt Securities issued by the Commonwealth of Puerto Rico or its political subdivisions, agencies, instrumentalities, or public corporations may be affected by economic, market, political, and social conditions in Puerto Rico. Puerto Rico has recently experienced (and may in the future experience) significant fiscal and economic challenges, including substantial debt service obligations, high levels of unemployment, underfunded public retirement systems, and persistent government budget deficits. These challenges may negatively affect the value of the fund's investments in Puerto Rico Tax-Exempt Securities. Major ratings agencies have downgraded the general obligation debt of Puerto Rico to below investment grade and continue to maintain a negative outlook for this debt, which increases the likelihood that the rating will be lowered further. In both August 2015 and January 2016, Puerto Rico defaulted on its debt by failing to make full payment due on its outstanding bonds, and there can be no assurance that Puerto Rico will be able to satisfy its future debt obligations. Further downgrades or defaults may place additional strain on the Puerto Rico economy and may negatively affect the value, liquidity, and volatility of the fund's investments in Puerto Rico Tax-exempt Securities. In 2016, the Puerto Rico Oversight, Management, and Economic Stability Act, known as "PROMESA," was signed into law. Among other things, PROMESA established a federally-appointed Oversight Board to oversee Puerto Rico's financial operations and provides Puerto Rico a path to restructuring its debts, thus increasing the risk that Puerto Rico may never pay off municipal indebtedness, or may pay only a small fraction of the amount owed. Proceedings under PROMESA remain ongoing, and it is unclear at this time how those proceedings will be resolved or what impact they will have on the value of a fund's investments in Puerto Rico municipal securities.

These challenges and uncertainties have been exacerbated by Hurricane Maria and the resulting natural disaster in Puerto Rico. In September 2017, Hurricane Maria struck Puerto Rico, causing major damage across the Commonwealth, including damage to its water, power, and telecommunications infrastructure. The length of time needed to rebuild Puerto Rico's infrastructure is unclear, but could amount to years, during which the Commonwealth is likely to be in an uncertain economic state. The full extent of the natural disaster's impact on Puerto Rico's economy and foreign investment in Puerto Rico is difficult to estimate.

**Escrow-secured or pre-refunded bonds**. These securities are created when an issuer uses the proceeds from a new bond issue to buy high grade, interest-bearing debt securities, generally direct obligations of the U.S. government, in order to redeem (or "pre-refund"), before maturity, an outstanding bond issue that is not immediately callable. These securities are then deposited in an irrevocable escrow account held by a trustee bank to secure all future payments of principal and interest on the pre- refunded bond until that bond's call date. Pre-refunded bonds often receive an 'AAA' or equivalent rating. Because pre-refunded bonds still bear the same interest rate, and have a very high credit quality, their price may increase. However, as the original bond approaches its call date, the bond's price will fall to its call price. The escrow account securities pledged to pay the principal and interest of the pre-refunded municipal bonds held by the fund nonetheless still subject the fund to interest rate risk and market risk. In addition, while a secondary market exists for pre-refunded municipal bonds, if the fund sells pre-refunded

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municipal bonds prior to maturity, the price received may be more or less than the original cost, depending on market conditions at the time of sale. The interest on pre-refunded bonds issued on or before December 31, 2017 is exempt from federal income tax; the interest on such bonds issued after December 31, 2017 is not exempt from federal income tax.

**Low Income Housing Tax Credits.** The fund may invest in loans and other instruments tied to the Low Income Housing Tax Credit ("LIHTC") program, which seeks to increase the supply of affordable housing by offering tax credits to projects that rehabilitate or create new affordable rental properties. LIHTCs offer investors a dollar-for-dollar reduction in their federal tax liability to incentivize the construction and rehabilitation of affordable housing properties. Certain of these investments may be issued, or are guaranteed or insured, by agencies or instrumentalities of the U.S. government, such as Fannie Mae or Freddie Mac, while other such investments may be issued by non-governmental entities and therefore not guaranteed or insured.

The LIHTC program requires ongoing compliance with numerous eligibility requirements. Failure to comply with these requirements, including failures by persons other than the fund or which are outside the fund's control, may result in recapture of some or all of the related tax credits as well as the possibility of the loss of future credits. In addition to a recapture of credits and the potential loss of future credits, failure to comply with such eligibility requirements may trigger a default event on the underlying bonds. The fund's investments in loans or other instruments tied to LIHTCs are subject to many of the risks facing other fixed income investments, including interest rate, credit, and prepayment risk.

**Tobacco Settlement Revenue Bonds**. The fund may invest in tobacco settlement revenue bonds, which are secured by an issuing state's proportionate share of periodic payments by tobacco companies made under the Master Settlement Agreement ("MSA"). The MSA is an agreement that was reached out of court in November 1998 between 46 states and six U.S. jurisdictions and tobacco manufacturers representing an overwhelming majority of U.S. market share in settlement of certain smoking-related litigation. The MSA provides for annual payments by the manufacturers to the states and jurisdictions in perpetuity in exchange for releasing all claims against the manufacturers and a pledge of no further litigation. The MSA established a base payment schedule and a formula for adjusting payments each year. Tobacco manufacturers pay into a master escrow trust based on their market share, and each state receives a fixed percentage of the payment as set forth in the MSA. Within some states, certain localities may in turn be allocated a specific portion of the state's MSA payment pursuant to an arrangement with the state.

A number of state and local governments have securitized the future flow of payments under the MSA by selling bonds pursuant to indentures, some through distinct governmental entities created for such purpose. The bonds are backed by the future revenue flow that is used for principal and interest payments on the bonds. Annual payments on the bonds, and thus risk to the fund, are dependent on the receipt of future settlement payments by the state or its instrumentality. The actual amount of future settlement payments may vary based on, among other things, annual domestic cigarette shipments, inflation, the financial capability of participating tobacco companies, and certain offsets for disputed payments. Payments made by tobacco manufacturers could be reduced if cigarette shipments continue to decline below the base levels used in establishing manufacturers' payment obligations under the MSA. Demand for cigarettes in the U.S. could continue to decline based on many factors, including, without limitation, anti-smoking campaigns, tax increases, price increases implemented to recoup the cost of payments by tobacco companies under the MSA, reduced ability to advertise, enforcement of laws prohibiting sales to minors, elimination of certain sales venues such as vending machines, the spread of local ordinances restricting smoking in public places, and increases in the use of other nicotine delivery devices (such as electronic cigarettes, smoking cessation products, and smokeless tobacco).

Because tobacco settlement bonds are backed by payments from the tobacco manufacturers, and generally not by the credit of the state or local government issuing the bonds, their creditworthiness depends on the ability of tobacco manufacturers to meet

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their obligations. The bankruptcy of an MSA-participating manufacturer could cause delays or reductions in bond payments, which would affect the fund's net asset value. Under the MSA, a market share loss by MSA-participating tobacco manufacturers to non-MSA participating manufacturers would also cause a downward adjustment in the payment amounts under some circumstances.

The MSA and tobacco manufacturers have been and continue to be subject to various legal claims, including, among others, claims that the MSA violates federal antitrust law. In addition, the United States Department of Justice has alleged in a civil lawsuit that the major tobacco companies defrauded and misled the American public about the health risks associated with smoking cigarettes. An adverse outcome to this lawsuit or to any other litigation matters or regulatory actions relating to the MSA or affecting tobacco manufacturers could adversely affect the payment streams associated with the MSA or cause delays or reductions in bond payments by tobacco manufacturers.

In addition to the risks described above, tobacco settlement revenue bonds are subject to other risks described in this SAI, including the risks of asset-backed securities discussed under "Mortgage-backed and Asset-backed Securities."

**Stand-by commitments**. When the fund purchases Tax-exempt Securities, it has the authority to acquire stand-by commitments from banks and broker-dealers with respect to those Tax-exempt Securities. A stand-by commitment is a right acquired by the fund to sell up to the principal amount of such Tax-exempt Securities back to the seller or a third party (typically an institution such as a bank or broker-dealer) at an agreed-upon price or yield within specified periods prior to their maturity dates. A stand- by commitment may be considered a security independent of the Tax-exempt security to which it relates. The amount payable by a bank or dealer during the time a stand-by commitment is exercisable, absent unusual circumstances, would be substantially the same as the market value of the underlying Tax-exempt security to a third party at any time. The fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. The fund does not expect to assign any value to stand-by commitments when determining the fund's net asset value. The fund will be subject to credit risk with respect to an institution providing a stand-by commitment and a decline in the credit quality of the institution could cause losses to the fund.

**Yields**. The yields on Tax-exempt Securities depend on a variety of factors, including general money market conditions, effective marginal tax rates, the financial condition of the issuer, general conditions of the Tax-exempt security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of nationally recognized securities rating agencies represent their opinions as to the credit quality of the Tax-exempt Securities which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, Tax-exempt Securities with the same maturity, interest rate and rating may have different yields while Tax-exempt Securities of the same maturity and interest rate but with different ratings may have the same yield. Yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates and may be due to such factors as changes in the overall demand or supply of various types of Tax-exempt Securities or changes in the investment objectives of investors. Subsequent to purchase by the fund, an issue of Tax-exempt Securities or other investments may cease to be rated, or its rating may be reduced below the minimum rating required for purchase by the fund. The Investment Manager will consider such an event in its determination of whether the fund should continue to hold an investment in its portfolio. Downgrades of Tax-exempt Securities held by a money market fund may require the fund to sell such securities, potentially at a loss.

**"Moral obligation" bonds**. The fund may invest in so-called "moral obligation" bonds, where repayment of the bond is backed by a moral (but not legally binding) commitment of an entity other than the issuer, such as a state legislature, to pay. Such a commitment may be in addition to the legal commitment of the issuer to repay the bond or may represent the only payment obligation with respect to the bond (where, for example, no amount has yet been specifically appropriated to pay the bond. See "- Municipal leases" below.)

**Municipal leases**. The fund may acquire participations in lease obligations or installment purchase contract obligations (collectively, "lease obligations") of municipal authorities or entities. A lease obligation is an obligation in the form of a lease or installment purchase that is issued by a state or local government to acquire equipment and facilities. Income from such obligations generally is exempt from state and local tax in the state of issuance. Lease obligations may be secured or unsecured. Lease obligations do not constitute general obligations of the municipality for which the municipality's taxing power is pledged.

Municipal leases may be subject to greater risks than general obligation or revenue bonds. Although lease obligations do not constitute general obligations of the municipality, a lease obligation ordinarily is backed by the municipality's covenant to budget for, appropriate, and make the payments due under the lease obligation. However, certain of these lease obligations contain

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"non-appropriation" clauses, which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In the case of a "non-appropriation" lease, the fund's ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, and in any event, foreclosure of that property might prove difficult. If a municipality does not fulfill its payment obligation, it may be difficult to sell the lease obligation and the proceeds of a sale may not cover the fund's loss.

In addition to the "non-appropriation" risk, many municipal lease obligations have not yet developed the depth of marketability associated with municipal bonds. Moreover, such leases may be subject to the temporary abatement of payments in the event the issuer is prevented from maintaining occupancy of the leased premises or utilizing the leased equipment or facilities. Although the obligations may be secured by the leased equipment or facilities, the disposition of the property in the event of non- appropriation or foreclosure might prove difficult, time consuming and costly, and result in a delay in recovering, or the failure to recover fully, the fund's original investment.

**Additional risks**. Securities in which the fund may invest, including Tax-exempt Securities, are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code (including special provisions related to municipalities and other public entities), and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, such as the recent bankruptcy-type proceedings by the Commonwealth of Puerto Rico the power, ability or willingness of issuers to meet their obligations for the payment of interest and principal on their Tax-exempt Securities may be materially affected or their obligations may be found to be invalid or unenforceable. Such litigation or conditions may from time to time have the effect of introducing uncertainties in the market for municipal bonds or certain segments thereof, or of materially affecting the credit risk with respect to particular bonds. Adverse economic, business, legal or political developments might affect all or a substantial portion of the fund's municipal bonds in the same manner.

From time to time, legislation may be introduced or litigation may arise that may restrict or eliminate the federal income tax exemption for interest on debt obligations issued by states and their political subdivisions. Federal tax laws limit the types and amounts of tax-exempt bonds issuable for certain purposes, especially industrial development bonds and private activity bonds. Such limits may affect the future supply and yields of these types of Tax-exempt Securities. Further proposals limiting the issuance of Tax-exempt Securities may well be introduced in the future. Shareholders should consult their tax advisors for the current law on tax-exempt bonds and securities.

**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 the Investment Manager 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.

**Trade Policy** 

In 2025, the U.S. government indicated its intent to alter its approach to international trade policy and, in some cases, to renegotiate or potentially terminate certain existing bilateral or multilateral trade agreements and treaties with foreign countries and has made proposals and taken actions related thereto. In addition, the U.S. government has recently imposed tariffs on certain foreign goods and has indicated a willingness to impose tariffs on imports of other products. Some foreign governments, including China, have instituted retaliatory tariffs on certain U.S. goods and have indicated a willingness to impose additional tariffs on U.S. products. Other countries, including Mexico, have threatened retaliatory tariffs on certain U.S. products.

Global trade disruption, significant introductions of trade barriers, and bilateral trade frictions, together with any future downturns in the global economy resulting therefrom, could adversely affect the financial performance of the fund and its investments.

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Trade policy may be an ongoing source of instability, potentially resulting in significant currency fluctuations and/or having other adverse effects on international markets, international trade agreements, and/or other existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory, or otherwise). To the extent trade disputes escalate globally, there could be additional significant impacts on the sectors or industries in which the fund invests and other adverse impacts on the fund's overall performance.

**Warrants** 

The fund may invest in or acquire warrants, which are instruments that give the fund the right (but not the obligation) to purchase certain securities from an issuer at a specific price (the "strike price") until a stated expiration date. The purchase of warrants involves the risk that the effective price paid for the warrant added to the strike price of the underlying security may exceed the value of the security's market price, such as when there is no movement in the level of the underlying security. Also, the strike price of warrants typically is much lower than the current market price of the underlying securities, yet they are subject to similar price fluctuations. As a result, warrants may be more volatile investments than the underlying securities and may offer greater potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to dividends or voting rights with respect to the underlying securities and do not represent any rights in the assets of the issuing company. Also, the value of the warrant does not necessarily change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to the expiration date. These factors can make warrants more speculative than other types of investments.

In addition to warrants on securities, the fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If the fund were not to exercise an index warrant prior to its expiration, then the fund would lose the amount of the purchase price paid by it for the warrant.

The fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the fund's ability to exercise the warrants at such time, or in such quantities, as the fund would otherwise wish to do.

**Zero-coupon and Payment-in-kind Bonds** 

The fund may invest without limit in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in-kind bonds do not pay current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks

than bonds paying interest currently in cash. The fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders even though such bonds do not pay current interest in cash. Thus, it may be necessary at times for the fund to liquidate investments, including when it is not advantageous to do so, in order to satisfy its distribution requirements under the Code. The market for zero-coupon and payment-in-kind bonds may be limited, making it difficult for the fund to value them or dispose of its holdings quickly at an acceptable price.

**EXCHANGE TRADED FUND RISKS** 

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**Continuous Offering** 

The method by which Creation Units of shares are created and traded may raise certain issues under applicable securities laws. Because new Creation Units of shares are issued and sold by a fund on an ongoing basis, at any point a "distribution," as such term is used in the 1933 Act, may occur. Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus delivery and liability provisions of the 1933 Act.

For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with Franklin Distributors, each fund's distributor, breaks them down into constituent shares, and sells such shares directly to customers, or if it chooses to couple the creation of a supply of new shares with an active selling effort involving solicitation of secondary market demand for shares. A determination of whether one is an underwriter for purposes of the 1933 Act must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that 12 could lead to a categorization as an underwriter.

Broker-dealer firms should also note that dealers who are not "underwriters," but are effecting transactions in shares of a fund, whether or not participating in the distribution of shares, are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(a)(3) of the 1933 Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that dealers who are not underwriters but are participating in a distribution (as opposed to engaging in ordinary secondary market transactions) and thus dealing with the shares that are part of an overallotment within the meaning of Section 4(a)(3)(A) of the 1933 Act would be unable to take advantage of the prospectus delivery exemption provided by Section 4(a)(3) of the 1933 Act. Firms that incur a prospectus- delivery obligation with respect to shares of each fund are reminded that, under Rule 153 under the 1933 Act, a prospectus-

delivery obligation under Section 5(b)(2) of the 1933 Act owed to an exchange member in connection with a sale on an exchange is satisfied by the fact that the prospectus is available from the exchange upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to transactions on an exchange.

**Listing and Trading** 

Shares of each fund have been approved for listing and trading on an exchange. Each fund's shares trade on an exchange at prices that may differ to some degree from their NAV. The listing exchange may remove a fund's shares from listing if, among other things (i) following the initial 12-month period beginning upon the commencement of trading of the fund, there are fewer than 50 beneficial owners of the fund's shares ; (ii) the listing exchange becomes aware that the fund is no longer eligible to operate in reliance on Rule 6c-11 under the 1940 Act; (iii) the fund no longer complies with certain listing exchange rules; or (iv) such other event shall occur or condition exists that, in the opinion of the listing exchange, makes further dealings on the exchange inadvisable.

The listing exchange will remove a fund's shares from listing and trading upon termination of the trust. There can be no assurance that the requirements of the listing exchange necessary to maintain the listing of the fund's shares will continue to be met. As in the case of other publicly-traded securities, brokers' commissions on transactions will be based on negotiated commission rates at customary levels. The existence of a liquid trading market for certain securities may depend on whether dealers will make a market in such securities. There can be no assurance that such a market will be made or maintained or that any such market will be or remain liquid. The price at which securities may be sold and the value of the fund's shares will be adversely affected if trading markets for the fund's portfolio securities are limited or absent, or if bid/ask spreads are wide.

**TAXES** 

The following discussion of U.S. federal income tax consequences is based on the Code, existing U.S. Treasury regulations, and other applicable authority, as of the date of this SAI. These authorities are subject to change by legislative or administrative action, possibly with retroactive effect. The following discussion is only a summary of some of the important U.S. federal income tax considerations generally applicable to investments in the fund. There may be other tax considerations applicable to particular shareholders. Shareholders should consult their own tax advisors regarding their particular situation and the possible application of foreign, state and local tax laws.

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**Taxation of the fund.** The fund has elected and intends to qualify each year as a regulated investment company under Subchapter M of the Code. In order to qualify for the special tax treatment accorded regulated investment companies and their shareholders, the fund must, among other things:

(a) derive at least 90% of its gross income for each taxable year from (i) dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and (ii) net income from interests in "qualified publicly traded partnerships" (as defined below);

(b) diversify its holdings so that, at the end of each quarter of the fund's taxable year, (i) at least 50% of the market value of the fund's total assets is represented by cash and cash items (including receivables), U.S. government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the fund's total assets and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the fund's total assets is invested, including through corporations in which the fund owns a 20% or more voting stock interest, (x) in the securities (other than those of the U.S. government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related trades or businesses, or (y) in the securities of one or more qualified publicly traded partnerships (as defined below); and

(c) distribute with respect to each taxable year at least 90% of the sum of its investment company taxable income (as that term is defined in the Code without regard to the deduction for dividends paid—generally, taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses) and net tax-exempt interest income, for such year.

In general, for purposes of the 90% gross income requirement described in paragraph (a) above, income derived from a partnership will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership which would be qualifying income if realized by the regulated investment company. However, 100% of the net income of a regulated investment company derived from an interest in a "qualified publicly traded partnership" (defined as a partnership (i) interests in which are traded on an established securities market or readily tradable on a secondary market or the substantial equivalent thereof, and (ii) that derives less than 90% of its income from the qualifying income described in paragraph (a)(i) above) will be treated as qualifying income. In general, such entities will be treated as partnerships for federal income tax purposes because they meet the passive income requirement under Code section 7704(c)(2). In addition, although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated investment company with respect to items attributable to an interest in a qualified publicly traded partnership.

For purposes of the diversification test in paragraph (b) above, identification of the issuer (or, in some cases, issuers) of a particular fund investment will depend on the terms and conditions of that investment. In some cases, identification of the issuer (or issuers) is uncertain under current law, and an adverse determination or future guidance by the IRS with respect to issuer identification for a particular type of investment may adversely affect the fund's ability to meet the diversification test in (b) above. Also, for the purposes of the diversification test in paragraph (b) above, the term "outstanding voting securities of such issuer" will include the equity securities of a qualified publicly traded partnership.

If the fund qualifies as a regulated investment company that is accorded special tax treatment, the fund will not be subject to U. S. federal income tax on income or gains distributed in a timely manner to its shareholders in the form of dividends (including Capital Gain Dividends, as defined below).

If the fund were to fail to meet the income, diversification or distribution test described above, the fund could in some cases cure such failure, including by paying a fund-level tax, paying interest, making additional distributions, or disposing of certain assets. If the fund were ineligible to or otherwise did not cure such failure for any year, or were otherwise to fail to qualify as a regulated investment company accorded special tax treatment in any taxable year, the fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. Some portions of such distributions may be eligible for the dividends received deduction in the case of corporate shareholders, and may be eligible to be treated as "qualified dividend income" in the case of shareholders taxed as individuals, provided, in both cases, that the shareholder meets certain holding period and other requirements in respect of the fund's shares (as described below). In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment.

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The fund intends to distribute at least annually to its shareholders all or substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction) and its net tax-exempt income (if any). The fund may distribute its net capital gain (that is, the excess of net long-term capital gain over net short-term capital loss, in each case determined with reference to any loss carryforwards). Investment company taxable income (which is retained by the fund) will be subject to tax at regular corporate rates. The fund may also retain for investment its net capital gain. If the fund retains any net capital gain, it will be subject to tax at regular corporate rates on the amount retained, but may designate the retained amount as undistributed capital gains in a notice to its shareholders who will be (i) required to include in income for U.S. federal income tax purposes, as long-term capital gain, their shares of such undistributed amount, and (ii) entitled to credit their proportionate shares of the tax paid by the fund on such undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds on a properly-filed U.S. tax return to the extent the credit exceeds such liabilities. If the fund makes this designation, for U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the fund will be increased by an amount equal to the difference between the amount of undistributed capital gains included in the shareholder's gross income under clause (i) of the preceding sentence and the tax deemed paid by the shareholder under clause (ii) of the preceding sentence. The fund is not required to, and there can be no assurance the fund will, make this designation if it retains all or a portion of its net capital gain in a taxable year.

In determining its net capital gain, including in connection with determining the amount available to support a Capital Gain Dividend (as defined below), its taxable income and its earnings and profits, a regulated investment company generally may also elect to treat part or all of any post-October capital loss (defined as any net capital loss attributable to the portion, if any, of the taxable year after October 31 or, if there is no such loss, the net long-term capital loss or net short-term capital loss attributable to any such portion of the taxable year) or late-year ordinary loss (generally, the sum of its (i) net ordinary loss, if any, from the sale, exchange or other taxable disposition of property, attributable to the portion, if any, of the taxable year after October 31, and its (ii) other net ordinary loss, if any, attributable to the portion, if any, of the taxable year after December 31) as if incurred in the succeeding taxable year.

If the fund fails to distribute in a calendar year at least an amount equal to the sum of 98% of its ordinary income for such year and 98.2% of its capital gain net income for the one-year period ending October 31 of such year, plus any retained amount from the prior year, the fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. For these purposes, ordinary gains and losses from the sale, exchange, or other taxable disposition of property that would otherwise be properly taken into account after October 31 are treated as arising on January 1 of the following calendar year. For purposes of the excise tax, the fund will be treated as having distributed any amount on which it has been subject to corporate income tax in the taxable year ending within the calendar year. A dividend paid to shareholders in January of a year generally is deemed to have been paid by the fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax, although there can be no assurance that it will be able to do so.

The fund distributes its net investment income and capital gains to shareholders as dividends at least annually to the extent required to qualify as a regulated investment company under the Code and generally to avoid U.S. federal income or excise tax. Provided it is not treated as a "personal holding company" for U.S. federal income tax purposes, the fund is permitted to treat the portion of redemption proceeds paid to redeeming shareholders that represents the redeeming shareholders' portion of the fund's accumulated earnings and profits as a dividend on the fund's tax return. This practice, which involves the use of tax equalization, will have the effect of reducing the amount of income and gains that the fund is required to distribute as dividends to shareholders in order for the fund to avoid U. S. federal income tax and excise tax. This practice may also reduce the amount of distributions required to be made to non-redeeming shareholders and the amount of any undistributed income will be reflected in the value of the shares of the fund; the total return on a shareholder's investment will not be reduced as a result of this distribution policy.

**Fund distributions.** Distributions from the fund (other than exempt-interest dividends, as discussed below) generally are taxable to shareholders as ordinary income to the extent derived from the fund's investment income and net short-term capital gains. Distributions are taxable whether shareholders receive them in cash or reinvest them in additional shares of the fund or other Putnam funds.

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 how long a shareholder has owned his or her shares. In general, the fund will recognize long-term capital gain or loss on investments it has owned for more than one year, and short-term capital gain or loss on investments it has owned for one year or less. Tax rules can alter the fund's holding period in investments and thereby affect

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the tax treatment of gain or loss on such investments. Distributions of net capital gain that are properly reported by the fund as capital gain dividends ("Capital Gain Dividends") will be treated as long-term capital gains includible in net capital gain and taxed to individuals at reduced rates. The IRS and the Department of the Treasury have issued regulations that impose special rules in respect of Capital Gain Dividends received through partnership interests constituting "applicable partnership interests" under Section 1061 of the Code. Distributions from capital gains generally are made after applying any available capital loss carryforwards. Distributions of net short-term capital gain (as reduced by any net long-term capital loss for the taxable year) will be taxable to shareholders as ordinary income.

The Code generally imposes a 3.8% Medicare contribution tax on the net investment income of certain individuals, trusts and estates to the extent their income exceeds certain threshold amounts. For these purposes, "net investment income" generally includes, among other things, (i) distributions paid by the fund of net investment income and capital gains (other than exempt- interest dividends) as described herein, and (ii) any net gain from the sale, redemption, exchange or other taxable disposition of fund shares. Shareholders are advised to consult their tax advisers regarding the possible implications of this additional tax on their investment in the fund.

Distributions of investment income reported by the fund as "qualified dividend income" received by an individual will be taxed at the reduced rates applicable to net capital gain. In order for some portion of the dividends received by a fund shareholder to be qualified dividend income, the fund must meet holding period and other requirements with respect to some portion of the dividend-paying stocks in its portfolio and the shareholder must meet holding period and other requirements with respect to the fund's shares. In general, a dividend will not be treated as qualified dividend income (at either the fund or shareholder level) (1) if the dividend is received with respect to any share of stock held for fewer than 61 days during the 121-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividend (or, in the case of certain preferred stock, 91 days during the 181-day period beginning 90 days before such date), (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, (3) if the recipient elects to have the dividend income treated as investment interest, or (4) if the dividend is received from a foreign corporation that is (a) not eligible for the benefits of a comprehensive income tax treaty with the United States (with the exception of dividends paid on stock of such a foreign corporation readily tradable on an established securities market in the United States) or (b) treated as a passive foreign investment company. Each fund, other than fixed-income and money market funds, generally expects to report eligible dividends as qualified dividend income.

In general, distributions of investment income reported by the fund as derived from qualified dividend income will be treated as qualified dividend income by a shareholder taxed as an individual provided the shareholder meets the holding period and other requirements described above with respect to such fund's shares. In any event, if the aggregate qualified dividends received by the fund during any taxable year are 95% or more of its gross income (excluding net long-term capital gain over net short-term capital loss), then 100% of the fund's dividends (other than dividends properly reported as Capital Gain Dividends) will be eligible to be treated as qualified dividend income.

Individuals (and certain other non-corporate entities) are generally eligible with respect to tax years beginning after December 31, 2017 and ending on or before December 31, 2025 for a 20% deduction with respect to taxable ordinary dividends from REITs and certain taxable income from publicly traded partnerships. Currently, regulated investment companies may pass through the 20% deduction to shareholders for REIT dividends, but not for income from publicly traded partnerships. Distributions by the fund to its shareholders that the fund properly reports as "section 199A dividends," as defined and subject to certain conditions described below, are treated as qualified REIT dividends in the hands of non-corporate shareholders.

Subject to future regulatory guidance to the contrary, distributions attributable to qualified publicly traded partnership income from a fund's investments in MLPs will ostensibly not qualify for the deduction available to non-corporate taxpayers in respect of such amounts received directly from an MLP.

In general, fixed-income and money market funds receive interest, rather than dividends, from their portfolio securities. As a result, it is not currently expected that any significant portion of such funds' distributions to shareholders will be derived from qualified dividend income. For information regarding qualified dividend income received from underlying funds, see "Funds of funds" below.

Certain distributions reported by a Fund as section 163(j) interest dividends may be treated as interest income by shareholders for purposes of the tax rules applicable to interest expense limitations under Code section 163(j). Such treatment by the

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shareholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that a Fund is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of the Fund's business interest income over the sum of the Fund's (i) business interest expense and (ii) other deductions properly allocable to the Fund's business interest income.

In general, dividends of net investment income received by corporate shareholders of the fund will qualify for the dividends- received deduction generally available to corporations only to the extent of the amount of eligible dividends received by the fund from domestic corporations for the taxable year. A dividend received by the fund will not be treated as a dividend eligible for the dividends-received deduction (1) if it has been received with respect to any share of stock that the fund has held for less than 46 days (91 days in the case of certain preferred stock) during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend (during the 181-day period beginning 90 days before such date in the case of certain preferred stock) or (2) to the extent that the fund is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Moreover, the dividends received deduction may otherwise be disallowed or reduced (1) if the corporate shareholder fails to satisfy the foregoing requirements with respect to its shares of the fund or (2) by application of various provisions of the Code (for instance, the dividends-received deduction is reduced in the case of a dividend received on debt-financed portfolio stock (generally, stock acquired with borrowed funds)). For information regarding eligibility for the dividends-received deduction of dividend income derived from an underlying fund, see "Funds of funds" below.

**Exempt-interest dividends.** A fund will be qualified to pay exempt-interest dividends to its shareholders if, at the close of each quarter of the fund's taxable year, at least 50% of the total value of the fund's assets consists of obligations the interest on which is exempt from federal income tax under Section 103(a) of the Code. In some cases, the fund may also pass through to its shareholders the tax-exempt character of any exempt-interest dividends it receives from underlying funds in which it invests (see "Funds of funds," below). Distributions that the fund reports as exempt-interest dividends are treated as interest excludable from shareholders' gross income for federal income tax purposes but may be taxable for federal alternative minimum tax ("AMT") purposes and for state and local purposes. If the fund intends to qualify to pay exempt-interest dividends, the fund may be limited in its ability to enter into taxable transactions involving forward commitments, repurchase agreements, financial futures and options contracts on financial futures, tax-exempt bond indices and other assets.

Part or all of the interest on indebtedness, if any, incurred or continued by a shareholder to purchase or carry shares of the fund paying exempt-interest dividends is not deductible. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness, multiplied by the percentage of the fund's total distributions (not including distributions from net long-term capital gains) paid to the shareholder that are exempt-interest dividends. Under rules used by the IRS to determine when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares.

In general, exempt-interest dividends, if any, attributable to interest received on certain private activity obligations and certain industrial development bonds will not be tax-exempt to any shareholders who are "substantial users" of the facilities financed by such obligations or bonds or who are "related persons" of such substantial users.

A fund that is qualified to pay exempt-interest dividends will notify its shareholders in a written statement of the portion of distributions for the taxable year that constitutes exempt-interest dividends.

Exempt-interest dividends may be taxable for purposes of the federal AMT. For individual shareholders, exempt-interest dividends that are derived from interest on private activity bonds that are issued after August 7, 1986 (other than a "qualified 501(c)(3) bond," as such term is defined in the Code) generally must be included in an individual's tax base for purposes of calculating the shareholder's liability for U.S. federal AMT. For taxable years beginning after December 31, 2017, corporations are no longer subject to the federal AMT.

**Funds of funds.** If the fund invests in shares of underlying funds, a portion of its distributable income and gains will consist of distributions from the underlying funds and gains and losses on the disposition of shares of the underlying funds. To the extent that an underlying fund realizes net losses on its investments for a given taxable year, the fund will not be able to recognize its share of those losses (so as to offset distributions of net income or capital gains from other underlying funds) until and only to the extent that it disposes of shares of the underlying fund in a transaction qualifying for sale or exchange treatment or those losses

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reduce distributions required to be made by the underlying fund. Moreover, even when the fund does make such a disposition, a portion of its loss may be recognized as a long-term capital loss, which will not be treated as favorably for U.S. federal income tax purposes as a short-term capital loss or an ordinary deduction. In particular, the fund will not be able to offset any capital losses from its dispositions of underlying fund shares against its ordinary income (including distributions of any net short-term capital gains realized by an underlying fund).

In addition, in certain circumstances, the "wash sale" rules under Section 1091 of the Code may apply to the fund's sales of underlying fund shares that have generated losses. A wash sale occurs if shares of an underlying fund are sold by the fund at a loss and the fund acquires additional shares of that same underlying fund 30 days before or after the date of the sale. The wash- sale rules could defer losses in the fund's hands on sales of underlying fund shares (to the extent such sales are wash sales) for extended (and, in certain cases, potentially indefinite) periods of time.

As a result of the foregoing rules, and certain other special rules, the amounts of net investment income and net capital gains that the fund will be required to distribute to shareholders may be greater than such amounts would have been had the fund invested directly in the securities held by the underlying funds, rather than investing in shares of the underlying funds. For similar reasons, the amount or timing of distributions from the fund qualifying for treatment as being of a particular character (e.g., as long-term capital gain, exempt interest, eligible for dividends-received deduction, etc.) will not necessarily be the same as it would have been had the fund invested directly in the securities held by the underlying funds.

If the fund receives dividends from an underlying fund that qualifies as a regulated investment company, and the underlying fund reports such dividends as "qualified dividend income," then the fund may, in turn, report a portion of its distributions as "qualified dividend income" as well, provided the fund meets the holding period and other requirements with respect to shares of the underlying fund.

If the fund receives dividends from an underlying fund and the underlying fund reports such dividends as eligible for the dividends-received deduction, then the fund is permitted, in turn, to designate a portion of its distributions as eligible for the dividends-received deduction, provided the fund meets the holding period and other requirements with respect to shares of the underlying fund.

If the fund were to own 20% or more of the voting interests of an underlying fund, subject to a safe harbor in respect of certain fund of funds arrangements, the fund would be required to "look through" the underlying fund to its holdings and combine the appropriate percentage (as determined pursuant to the applicable Treasury Regulations) of the underlying fund's assets with the fund's assets for purposes of satisfying the 25% diversification test described above.

If, at the close of each quarter of the fund's taxable year, at least 50% of its total assets consists of interests in other regulated investment companies (such fund, a "qualified fund of funds"), the fund will be permitted to distribute exempt-interest dividends and thereby pass through to its shareholders the tax-exempt character of any exempt-interest dividends it receives from underlying funds in which it invests, or interest on any tax-exempt obligations in which it directly invests, if any. For further information regarding exempt-interest dividends, see "Exempt-interest dividends," above.

If the fund is a qualified fund of funds, the fund will be entitled to elect to pass through to its shareholders a credit or deduction for foreign taxes (if any) borne in respect of foreign securities income earned by the fund, or by any underlying funds and passed through to the fund. If the fund so elects, shareholders will include in gross income from foreign sources their pro rata shares of such taxes, if any, treated as paid by the fund. Even if the fund is eligible to make such an election for a given year, it may determine not to do so. If the fund elects to pass through to its shareholders foreign tax credits or deductions, tax-exempt shareholders and those who invest in the fund through tax-advantaged accounts such as IRAs will not benefit from any such tax credit or deduction. See "Foreign taxes" below for more information.

**Derivatives, hedging and related transactions; certain exposure to commodities.** In general, option premiums received by the fund are not immediately included in the income of the fund. Instead, the premiums are recognized when the option contract expires, the option is exercised by the holder, or the fund transfers or otherwise terminates the option (*e.g.*, through a closing transaction). If a call option written by the fund is exercised and the fund sells or delivers the underlying stock, the fund generally will recognize capital gain or loss equal to (a) the sum of the strike price and the option premium received by the fund minus (b) the fund's basis in the stock. Such gain or loss generally will be short-term or long-term depending upon the holding period of the underlying stock. If securities are purchased by the fund pursuant to the exercise of a put option written by it, the fund generally will subtract the premium received for purposes of computing its cost basis in the securities purchased. Gain or loss arising in

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respect of a termination of the fund's obligation under an option other than through the exercise of the option will be short-term gain or loss depending on whether the premium income received by the fund is greater or less than the amount paid by the fund (if any) in terminating the transaction. Thus, for example, if an option written by the fund expires unexercised, the fund generally will recognize short-term gain equal to the premium received.

Certain covered call writing activities of the fund may trigger the U.S. federal income tax straddle rules contained primarily in Section 1092 of the Code. Very generally, where applicable, Section 1092 requires (i) that losses be deferred on positions deemed to be offsetting positions with respect to "substantially similar or related property," to the extent of unrealized gain in the latter, and (ii) that the holding period of such a straddle position that has not already been held for the long-term holding period be terminated and begin anew once the position is no longer part of a straddle. Options on single stocks that are not "deep in the money" may constitute qualified covered calls, which generally are not subject to the straddle rules; the holding period on stock underlying qualified covered calls that are "in the money" although not "deep in the money" will be suspended during the period that such calls are outstanding. Thus, the straddle rules and the rules governing qualified covered calls could cause gains that would otherwise constitute long-term capital gains to be treated as short-term capital gains, and distributions that would otherwise constitute "qualified dividend income" or qualify for the dividends-received deduction to fail to satisfy the holding period requirements and therefore to be taxed as ordinary income or to fail to qualify for the dividends-received deduction, as the case may be.

In general, 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the Commodities Futures Trading Commission is treated as short-term gain or loss, and 60% is treated as long-term gain or loss, although certain foreign currency gains and losses from such contracts may be treated as ordinary in character. Also, such contracts held by the fund at the end of each taxable year (and, for purposes of the 4% excise tax, on certain other dates as prescribed under the Code) are "marked to market" with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as ordinary or 60/40 gain or loss, as applicable.

The fund's investment in swaps, if any, will generate ordinary income and losses for federal income tax purposes. The fund's investments in futures and swaps 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. The fund 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.

In addition to the special rules described above in respect of options, futures transactions and swaps, the fund's derivative transactions, including transactions in options, futures contracts, straddles, securities loan and other similar transactions, including for hedging purposes, will be subject to special tax rules (including constructive sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund's securities, convert long-term capital gains into short-term capital gains, short- term capital losses into long-term capital losses, or capital gains into ordinary income. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund may make any applicable elections pertaining to such transactions consistent with the interests of the fund.

Because these and other tax rules applicable to these types of transactions are in some cases uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which determination or guidance could be retroactive) may affect whether the fund has made sufficient distributions, and otherwise satisfied the relevant requirements, to maintain its qualification as a regulated investment company and avoid a fund-level tax.

A fund's use of commodity-linked derivatives can be limited by the fund's intention to qualify as a regulated investment company and can bear on its ability to so qualify. Income and gains from certain commodity-linked derivatives do not constitute qualifying income to a regulated investment company for purposes of the 90% gross income test described above. The tax treatment of certain other commodity-linked derivative instruments in which the fund might invest is not certain, in particular with respect to whether income or gains from such instruments constitute qualifying income to a regulated investment company. If the fund were to treat income or gain from a particular instrument as qualifying income and the income or gain were later determined not to constitute qualifying income and, together with any other nonqualifying income, caused the fund's nonqualifying income to exceed 10% of its gross income in any taxable year, the fund would fail to qualify as a regulated investment company unless it is eligible to and does pay a tax at the fund level.

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The tax rules are uncertain with respect to the treatment of income or gains arising in respect of commodity-linked exchange- traded notes ("ETNs") and certain commodity-linked structured notes; also, the timing and character of income or gains arising from ETNs can be uncertain. An adverse determination or future guidance by the IRS (which determination or guidance could be retroactive) may affect the fund's ability to qualify for treatment as a regulated investment company and to avoid a fund-level tax.

To the extent that, in order to achieve exposure to commodities, the fund invests in entities that are treated as pass-through vehicles for U.S. federal income tax purposes, including, for instance, certain ETFs (e.g., ETFs investing in gold bullion) and partnerships other than qualified publicly traded partnerships (as defined earlier), all or a portion of any income and gains from such entities could constitute non-qualifying income to the fund for purposes of the 90% gross income requirement described above. In such a case, the fund's investments in such entities could be limited by its intention to qualify as a regulated investment company and could bear on its ability to so qualify. Certain commodities-related ETFs may qualify as qualified publicly traded partnerships. In such cases, the net income derived from such investments will constitute qualifying income for purposes of the 90% gross income requirement. If, however, such a vehicle were to fail to qualify as a qualified publicly traded partnership in a particular year, a portion of the gross income derived from it in such year could constitute non-qualifying income to the fund for purposes of the 90% gross income requirement and thus could adversely affect the fund's ability to qualify as a regulated investment company for a particular year. In addition, the diversification requirement described above for regulated investment company qualification will limit the fund's investments in one or more vehicles that are qualified publicly traded partnerships to 25% of the fund's total assets as of the close of each quarter of the fund's taxable year.

Certain of the fund's investments in derivative instruments and foreign currency-denominated instruments, and any of the fund's transactions in foreign currencies and hedging activities, are likely to produce a difference between its book income and its taxable income. If such a difference arises, and the fund's book income is less than its taxable income (or, for tax-exempt funds, the sum of its net tax-exempt and taxable income), the fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment and to eliminate fund-level income tax. In the alternative, if the fund's book income exceeds the sum of its taxable income and tax-exempt income, the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the fund's remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter as a return of capital to the extent of the recipient's basis in the shares, and (iii) thereafter as gain from the sale or exchange of a capital asset.

**Investments in REITs.** The fund's investment in REIT equity securities may result in the fund's receipt of cash in excess of the REIT's earnings. If the fund distributes such amounts, such distribution could constitute a return of capital to the fund shareholders for U.S. federal income tax purposes. Dividends received by the fund from a REIT generally will not constitute qualified dividend income and will not qualify for the corporate dividends-received deduction.

Distributions by the fund to its shareholders that the fund properly reports as "section 199A dividends," as defined and subject to certain conditions described below, are treated as qualified REIT dividends in the hands of non-corporate shareholders. Non- corporate shareholders are permitted a federal income tax deduction equal to 20% of qualified REIT dividends received by them, subject to certain limitations. Currently, eligible non-corporate shareholders can claim the deduction for tax years beginning after December 31, 2017 and ending on or before December 31, 2025. Very generally, a "section 199A dividend" is any dividend or portion thereof that is attributable to certain dividends received by a regulated investment company from REITs, to the extent such dividends are properly reported as such by the regulated investment company in a written notice to its shareholders. A section 199A dividend is treated as a qualified REIT dividend only if the shareholder receiving such dividend holds the dividend- paying regulated investment company shares for at least 46 days of the 91-day period beginning 45 days before the shares become ex-dividend, and is not under an obligation to make related payments with respect to a position in substantially similar or related property. A fund is permitted to report such part of its dividends as section 199A dividends as are eligible, but is not required to do so.

**Mortgage-related securities.** The fund may invest in REITs, including REITs that hold residual interests in real estate mortgage investment conduits ("REMICs") (including by investing in residual interests in collateralized mortgage obligations ("CMOs") with respect to which an election to be treated as a REMIC is in effect), REITs that are themselves taxable mortgage pools ("TMPs") or REITs that invest in TMPs. Under a notice issued by the IRS in October 2006 and Treasury regulations that have not yet been issued, but apply retroactively, a portion of the fund's income from a REIT that is attributable to the REIT's residual interest in a REMIC or TMP (referred to in the Code as an "excess inclusion") will be subject to U.S. federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a regulated investment company, such as the fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC or TMP residual

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interest directly. As a result, a fund investing in such interests may not be a suitable investment for charitable remainder trusts, as noted below.

In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income ("UBTI") to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a non-U.S. shareholder, will not qualify for any reduction in U.S. federal withholding tax. A shareholder will be subject to U.S. federal income tax on such inclusions notwithstanding any exemption from such income tax otherwise available under the Code. Any investment in residual interests of CMO that has elected to be treated as a REMIC can create complex tax problems, especially if the fund has state or local governments or other tax-exempt organizations as shareholders.

Income of a fund that would be UBTI if earned directly by a tax-exempt entity generally will not constitute UBTI when distributed to a tax-exempt shareholder of the fund. Notwithstanding the foregoing, a tax-exempt shareholder will recognize UBTI by virtue of its investment in the fund if shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code Section 514(b). Furthermore, a tax-exempt shareholder may recognize UBTI if the fund recognizes excess inclusion income derived from direct or indirect investments in REMIC residual interests or TMPs if the amount of such income recognized by the fund exceeds the fund's investment company taxable income (after taking into account deductions for dividends paid by the fund).

Under legislation enacted in December 2006, a charitable remainder trust ("CRT"), as defined in Section 664 of the Code, that realizes UBTI for a taxable year must pay an excise tax annually of an amount equal to such UBTI. Under IRS guidance issued in October 2006, a CRT will not recognize UBTI solely as a result of investing in a fund that recognizes excess inclusion income. Rather, if at any time during any taxable year a CRT (or one of certain other tax-exempt shareholders, such as the United States, a state or political subdivision, or an agency or instrumentality thereof, and certain energy cooperatives) is a record holder of a share in a fund that recognizes excess inclusion income, then the fund will be subject to a tax on that portion of its excess inclusion income for the taxable year that is allocable to such shareholders at the highest federal corporate income tax rate. The extent to which this IRS guidance remains applicable in light of the December 2006 legislation is unclear. To the extent permitted under the 1940 Act, the fund may elect to specially allocate any such tax to the applicable CRT, or other shareholder, and thus reduce such shareholder's distributions for the year by the amount of the tax that relates to such shareholder's interest in the fund. CRTs and other tax-exempt investors are urged to consult their tax advisors concerning the consequences of investing in the fund.

**Return of capital distributions**. If the fund makes a distribution in and with respect to any taxable year to a shareholder in excess of the fund's current and accumulated earnings and profits, the excess distribution will be treated as a return of capital to the extent of such shareholder's tax basis in its shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces a shareholder's tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares. Dividends and distributions on the fund's shares generally are subject to federal income tax as described herein to the extent they do not exceed the fund's realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder's investment. Such distributions are likely to occur in respect of shares purchased at a time when the fund's net asset value reflects gains that are either unrealized, or realized but not distributed. Such realized income and gains may be required to be distributed even when the fund's net asset value also reflects unrealized losses. Distributions are taxable to a shareholder even if they are paid from income or gains earned by the fund prior to the shareholder's investment (and thus included in the price paid by the shareholder).

**Securities issued or purchased at a discount.** Some debt obligations with a fixed maturity date of more than one year from the date of issuance (and zero-coupon debt obligations with a fixed maturity date of more than one year from the date of issuance) that are acquired by the fund will be treated as debt obligations that are issued originally at a discount. Generally, the amount of the original issue discount ("OID") is treated as interest income and is included in the fund's income (and required to be distributed by the fund) over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. In addition, payment-in-kind securities will give rise to income which is required to be distributed and is taxable even though the fund holding the security receives no interest payment in cash on the security during the year.

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Some debt obligations with a fixed maturity date of more than one year from the date of issuance that are acquired by the fund in the secondary market may be treated as having "market discount." Very generally, market discount is the excess of the stated redemption price of a debt obligation (or in the case of an obligation issued with OID, its "revised issue price") over the purchase price of such obligation. Generally any gain recognized on the disposition of, and any partial payment of principal on, a debt security having market discount is treated as ordinary income to the extent the gain, or principal payment, does not exceed the "accrued market discount" on such debt security. Alternatively, the fund may elect to accrue market discount currently, in which case the fund will be required to include the accrued market discount in the fund's income (as ordinary income) and thus distribute it over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. The rate at which the market discount accrues, and thus is included in the fund's income, will depend upon which of the permitted accrual methods the fund elects.

Some debt obligations with a fixed maturity date of one year or less from the date of issuance that are acquired by the fund may be treated as having "acquisition discount" (very generally, the excess of the stated redemption price over the purchase price) or OID. The fund will be required to include the acquisition discount or OID in income over the term of the debt security, even though payment of that amount is not received until a later time, usually when the debt security matures. The fund may make one or more of the elections applicable to debt obligations having acquisition discount or OID, which could affect the character and timing of recognition of income.

If the fund holds the foregoing kinds of obligations, or other obligations subject to special rules under the Code, it may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest the fund actually received. Such distributions may be made from the cash assets of the fund or, if necessary, by disposition of portfolio securities including at a time when it may not be advantageous to do so. These dispositions may cause the fund to realize higher amounts of short-term capital gains (generally taxed to shareholders at ordinary income tax rates) and, in the event the fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution than if the fund had not held such obligations.

**Securities purchased at a premium.** Very generally, where the fund purchases a bond at a price that exceeds the redemption price at maturity (*i*.*e*., a premium), the premium is amortizable over the remaining term of the bond. In the case of a taxable bond, if the fund makes an election applicable to all such bonds it purchases, which election is irrevocable without consent of the IRS, the fund reduces the current taxable income from the bond by the amortized premium and reduces its tax basis in the bond by the amount of such offset; upon the disposition or maturity of such bonds acquired on or after January 4, 2013, the fund is permitted to deduct any remaining premium allocable to a prior period. In the case of a tax-exempt bond, tax rules require the fund to reduce its tax basis by the amount of amortized premium.

**Higher-Risk obligations.** Investments in debt obligations that are at risk of or in default present special tax issues for the fund. Tax rules are not entirely clear about issues such as whether the fund should recognize market discount on a debt obligation and, if so, the amount of market discount the fund should recognize; when the fund may cease to accrue interest, OID or market discount, when and to what extent deductions may be taken for bad debts or worthless securities and how payments received on obligations in default should be allocated between principal and income. These and other related issues will be addressed by the fund when, as and if it invests in such obligations, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.

**Capital loss carryforward.** Distributions from capital gains generally are made after applying any available capital loss carryforwards. Capital loss carryforwards are reduced to the extent they offset current-year net realized capital gains, whether the fund retains or distributes such gains. If a fund incurs or has incurred capital losses in excess of capital gains ("net capital losses"), those losses will be carried forward to one or more subsequent taxable years; any such carryforward losses will retain their character as short-term or long-term.

**Foreign taxes.** If more than 50% of the fund's assets at taxable year end consists of the securities of foreign corporations, the fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries in respect of foreign securities the fund has held for at least the minimum period specified in the Code. A qualified fund of funds also may elect to pass through to its shareholders foreign taxes it has paid or foreign taxes passed through to it by any underlying fund that itself elected to pass through such taxes to shareholders (see "Funds of funds" above). In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholder's ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the

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amount of such taxes. In particular, shareholders must hold their fund shares (without protection from risk of loss) on the ex-dividend date and for at least 15 additional days during the 30-day period surrounding the ex-dividend date to be eligible to claim a foreign tax credit with respect to a given dividend. Shareholders who do not itemize on their U.S. federal income tax returns may claim a credit (but no deduction) for such foreign taxes. Even if the fund is eligible to make such an election for a given year, it may determine not to do so. However, even if the fund elects to pass through to its shareholders foreign tax credits or deductions, tax-exempt shareholders and those who invest in the fund through tax-advantaged accounts such as IRAs will not benefit from any such tax credit or deduction.

**Passive foreign investment companies.** Investments treated as equity for federal income tax purposes in certain "passive foreign investment companies" ("PFICs", as defined below) could subject the fund to a U.S. federal income tax (including interest charges) on distributions received from the company or on the proceeds from the disposition of its investment in such a company. This tax cannot be eliminated by making distributions to fund shareholders; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a "qualified electing fund." The QEF and mark-to-market elections may have the effect of accelerating the recognition of income (without the receipt of cash) and increasing the amount required to be distributed by the fund to avoid taxation. Making either of these elections therefore may require the fund to liquidate other investments to meet its distribution requirement, which may also accelerate the recognition of gain and affect the fund's total return. Dividends paid by PFICs will not be eligible to be treated as "qualified dividend income." If the fund indirectly invests in PFICs by virtue of the fund's investments in other funds, it may not make such PFIC elections; rather, the underlying funds directly investing in the PFICs would decide whether to make such elections.

Because it is not always possible to identify a foreign corporation as a PFIC, the fund may incur the tax and interest charges described above in some instances.

A PFIC is any foreign corporation: (i) 75 percent or more of the income of which for the taxable year is passive income, or (ii) the average percentage of the assets of which (generally by value, but by adjusted tax basis in certain cases) that produce or are held for the production of passive income is at least 50 percent. Generally, passive income for this purpose means dividends, interest (including income equivalent to interest), royalties, rents, annuities, the excess of gains over losses from certain property transactions and commodities transactions, and foreign currency gains. Passive income for this purpose does not include rents and royalties received by the foreign corporation from active business and certain income received from related persons.

**Foreign currency-denominated transactions and related hedging transactions.** The fund's transactions in foreign currencies, foreign currency-denominated debt obligations and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. Any such net gains could require a larger dividend toward the end of the calendar year. Any such net losses generally will reduce and potentially require the recharacterization of prior ordinary income distributions. Such ordinary income treatment may accelerate fund distributions to shareholders and increase the distributions taxed to shareholders as ordinary income. Any net ordinary losses so created cannot be carried forward by the fund to offset income or gains earned in subsequent taxable years.

**Sale or exchange of shares.** The sale or exchange of fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise the gain or loss on the sale or exchange of fund shares will be treated as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss generally will be disallowed for federal income tax purposes to the extent of any exempt-interest dividends received on such shares. This loss disallowance, however, does not apply with respect to dispositions of fund shares held for six months or less with respect to a regular exempt-interest dividend paid by the fund if such fund declares substantially all of its net tax-exempt income as exempt-interest dividends on a daily basis, and pays such dividends at least on a monthly basis. In addition, any loss (not already disallowed as provided in the preceding sentences) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any Capital Gain Dividends received (or deemed received) by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of fund shares will be disallowed if other shares of the same fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

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**Taxes on purchase and redemption of creation units**. Authorized Participants that are "dealers in securities" for U.S. federal income tax purposes are subject to different rules with respect to holding, acquiring and disposing of securities, including Creation Units. Authorized Participants should consult their own tax advisor with respect to transactions with a fund.

An Authorized Participant who exchanges securities for Creation Units generally will recognize a gain or a loss equal to the difference between the market value of the Creation Units at the time of the exchange and the sum of the exchanger's aggregate basis in the securities surrendered plus any Cash Component it pays. An Authorized Participant who exchanges Creation Units for securities will generally recognize a gain or loss equal to the difference between the exchanger's basis in the Creation Units and the sum of the aggregate market value of the securities received plus any cash equal to the difference between the NAV of the shares being redeemed and the value of the securities. The IRS, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing "wash sales" (for a person who does not mark-to-market its portfolio) or on the basis that there has been no significant change in economic position. Persons exchanging securities should consult their own tax advisor with respect to whether wash sale rules apply and when a loss might be deductible.

Any capital gain or loss realized upon the creation of Creation Units will generally be treated as long-term capital gain or loss if the securities exchanged for such Creation Units have been held for more than one year. Any capital gain or loss realized upon redemption of Creation Units is generally treated as long-term capital gain or loss if the shares have been held for more than one year and as short-term capital gain or loss if the shares have been held for one year or less. Any loss upon a redemption of Creation Units held for six months or less will be treated as a long-term capital loss to the extent of any amounts treated as distributions to the applicable Authorized Participant of long-term capital gain with respect to the Creation Units (including any amounts credited to the Authorized Participant as undistributed capital gains). In addition, any loss realized upon a redemption of fund shares held by an Authorized Participant for six months or less generally will be disallowed, to the extent of any exempt-interest dividends received by the Authorized Participant with respect to the shares.

The fund has the right to reject an order for a purchase of shares of the fund if the purchaser (or group of purchasers) would, upon obtaining the shares so ordered, own 80% or more of the outstanding shares of the fund and if, pursuant to Section 351 of the Code, the fund would have a basis in the securities contributed by such purchaser different from the market value of such securities on the date of deposit. The fund also has the right to require information necessary to determine beneficial share ownership for purposes of the 80% determination.

**Cost basis reporting.** Upon the redemption or exchange of a shareholder's shares in the fund, the fund, or, if such shareholder's shares are then held through a financial intermediary, the financial intermediary, will be required to provide the shareholder and the IRS with cost basis and certain other related tax information about the fund shares the shareholder redeemed or exchanged. This cost basis reporting requirement is effective for shares purchased, including through dividend reinvestment, on or after January 1, 2012. Shareholders should consult their financial representatives for more information regarding available methods for cost basis reporting and how to select a particular method. Shareholders should consult their tax advisors to determine which available cost basis method is best for them.

**Shares purchased through tax-qualified plans.** Special tax rules apply to investments through employer-sponsored retirement plans and other tax-qualified plans or tax-advantaged arrangements. Shareholders should consult their tax advisors to determine the suitability of shares of the fund as an investment through such plans and arrangements and the precise effect of an investment on their particular tax situation.

**Backup withholding.** The fund generally is required to withhold and remit to the U.S. Treasury a percentage of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the fund with a correct taxpayer identification number (TIN), who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is not subject to such withholding. The backup withholding rules may also apply to distributions that are properly reported as exempt-interest dividends. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder's U.S. federal income tax liability, provided the appropriate information is furnished to the IRS.

In order for a foreign investor to qualify for exemption from the backup withholding tax rates and for reduced withholding tax rates under income tax treaties, the foreign investor must comply with special certification and filing requirements. Foreign investors in a fund should consult their tax advisors in this regard.

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**Tax shelter reporting regulations.** Under U.S. Treasury regulations, if a shareholder recognizes a loss on disposition of fund shares of at least $2 million in any single taxable year or $4 million in any combination of taxable years for an individual shareholder or $10 million in any single taxable year or $20 million in any combination of taxable years for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.

**Non-U.S. shareholders.** Distributions by the fund to shareholders that are not "U.S. persons" within the meaning of the Code ("foreign shareholders") properly reported by the fund as (1) Capital Gain Dividends, (2) interest-related dividends, (3) short-term capital gain dividends, each as defined below and subject to certain conditions described below, and (4) exempt-interest dividends generally are not subject to withholding of U.S. federal income tax.

In general, the Code defines (1) "short-term capital gain dividends" as distributions of net short-term capital gains in excess of net long-term capital losses and (2) "interest-related dividends" as distributions from U.S. source interest income of types similar to those not subject to U.S. federal income tax if earned directly by an individual foreign shareholder, in each case to the extent such distributions are properly reported as such by the fund in a written notice to shareholders. The exceptions to withholding for Capital Gain Dividends and short-term capital gain dividends do not apply to (A) distributions to an individual foreign shareholder who is present in the United States for a period or periods aggregating 183 days or more during the year of the distribution and (B) distributions attributable to gain that is treated as effectively connected with the conduct by the foreign shareholder of a trade or business within the United States under special rules regarding the disposition of U.S. real property interests as described below. The exception to withholding for interest-related dividends does not apply to distributions to a foreign shareholder (A) that has not provided a satisfactory statement that the beneficial owner is not a U.S. person, (B) to the extent that the dividend is attributable to certain interest on an obligation if the foreign shareholder is the issuer or is a 10% shareholder of the issuer, (C) that is within certain foreign countries that have inadequate information exchange with the United States, or (D) to the extent the dividend is attributable to interest paid by a person that is a related person of the foreign shareholder and the foreign shareholder is a controlled foreign corporation. If the fund invests in other regulated investment companies that pay Capital Gain Dividends, short-term capital gain dividends or interest-related dividends to the fund, such distributions retain their character as not subject to withholding if properly reported when paid by the fund to foreign shareholders. The fund is permitted to report such part of its dividends as interest-related and/or short-term capital gain dividends as are eligible, but is not required to do so. In the case of shares held through an intermediary, the intermediary may withhold even if the fund reports all or a portion of a payment as an interest-related or short-term capital gain dividend to shareholders.

The fact that a fund achieves its goals by investing in underlying funds generally does not adversely affect the fund's ability to pass on to foreign shareholders the full benefit of the interest-related dividends and short-term capital gain dividends that it receives from its investments in underlying funds, except possibly to the extent that (1) interest-related dividends received by the fund are offset by deductions allocable to the fund's qualified interest income or (2) short-term capital gain dividends received by the fund are offset by the fund's net short- or long-term capital losses, in which case the amount of a distribution from the fund to a foreign shareholder that is properly reported as either an interest-related dividend or a short-term capital gain dividend, respectively, may be less than the amount that such shareholder would have received had they invested directly in the underlying funds.

Distributions by the fund to foreign shareholders other than Capital Gain Dividends, interest-related dividends, and short-term capital gain dividends and exempt-interest dividends (*e.g.*, dividends attributable to dividend and foreign-source interest income or to short-term capital gains or U.S.-source interest income to which the exception from withholding described above does not apply) are generally subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate).

Under U.S. federal tax law, a beneficial holder of shares who is a foreign shareholder is not, in general, subject to U.S. federal income tax on gains (and is not allowed a deduction for losses) realized on the sale of shares of the fund, unless (i) such gain is effectively connected with the conduct of a trade or business carried on by such holder within the United States; (ii) in the case of an individual holder, the holder is present in the United States for a period or periods aggregating 183 days or more during the year of the sale and certain other conditions are met; or (iii) the special rules relating to gain attributable to the sale or exchange of "U.S. real property interests" ("USRPIs") apply to the foreign shareholder's sale of shares of the fund (as described below).

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If a beneficial holder who is a foreign shareholder has a trade or business in the United States, and the dividends are effectively connected with the conduct by the beneficial holder of a trade or business in the United States, the dividend will be subject to U.S. federal net income taxation at regular income tax rates and, in the case of a foreign corporation, may also be subject to a branch profits tax. If a foreign shareholder is eligible for the benefits of a tax treaty, any effectively connected income or gain will generally be subject to U.S. federal income tax on a net basis only if it is also attributable to a permanent establishment maintained by the shareholder in the United States. More generally, foreign shareholders who are residents in a country with an income tax treaty with the United States may obtain different tax results than those described herein, and are urged to consult their tax advisors.

Special rules would apply if the fund were a qualified investment entity ("QIE") because it is either a "U.S. real property holding corporation" ("USRPHC") or would be a USRPHC but for the operation of certain exceptions to the definition of USRPIs described below. Very generally, a USRPHC is a domestic corporation that holds USRPIs the fair market value of which equals or exceeds 50% of the sum of the fair market values of the corporation's USRPIs, interests in real property located outside the United States, and other trade or business assets. USRPIs generally are defined as any interest in U.S. real property and any interest (other than solely as a creditor) in a USRPHC or, very generally, an entity that has been a USRPHC in the last five years. A fund that holds, directly or indirectly, significant interests in REITs may be a USRPHC. Interests in domestically controlled QIEs, including regulated investment companies and REITs that are QIEs, not-greater-than-10% interests in publicly traded classes of stock in REITs and not-greater-than-5% interests in publicly traded classes of stock in regulated investment companies generally are not USRPIs, but these exceptions do not apply for purposes of determining whether a fund is a QIE.

If an interest in the fund were a USRPI, the fund would be required to withhold U.S. tax on the proceeds of a share redemption by a greater-than-5% foreign shareholder, in which case such foreign shareholder generally would also be required to file U.S. tax returns and pay any additional taxes due in connection with the redemption.

If the fund were a QIE under a special "look-through" rule, any distributions by the fund to a foreign shareholder (including, in certain cases, distributions made by the fund in redemption of its shares) attributable directly or indirectly to (i) distributions received by the fund from a lower-tier regulated investment company or REIT that the fund is required to treat as USRPI gain in its hands and (ii) gains realized on the disposition of USRPIs by the fund would retain their character as gains realized from USRPIs in the hands of the fund's foreign shareholders and would be subject to U.S. tax withholding. In addition, such distributions could result in the foreign shareholder being required to file a U.S. tax return and pay tax on the distributions at regular U.S. federal income tax rates. The consequences to a foreign shareholder, including the rate of such withholding and character of such distributions (*e.g.*, as ordinary income or USRPI gain), would vary depending upon the extent of the foreign shareholder's current and past ownership of the fund.

Foreign shareholders of the fund also may be subject to "wash sale" rules to prevent the avoidance of the tax-filing and -payment obligations discussed above through the sale and repurchase of fund shares.

Foreign shareholders should consult their tax advisers and, if holding shares through intermediaries, their intermediaries, concerning the application of these rules to their investment in the fund.

**Other reporting and withholding requirements**. Sections 1471-1474 of the Code and the U.S. Treasury and IRS guidance issued thereunder (collectively, "FATCA") generally require a fund to obtain information sufficient to identify the status of each of its shareholders under FATCA or under an applicable intergovernmental agreement (an "IGA") between the United States and a foreign government. If a shareholder fails to provide the requested information or otherwise fails to comply with FATCA or an IGA, the fund may be required to withhold under FATCA at a rate of 30% with respect to that shareholder on ordinary dividends it pays. The IRS and the Department of Treasury have issued proposed regulations providing that these withholding rules will not be applicable to the gross proceeds of share redemptions or Capital Gain Dividends the fund pays. If a payment by the fund is subject to FATCA withholding, the fund is required to withhold even if such payment would otherwise be exempt from withholding under the rules applicable to foreign shareholders described above (*e.g.*, short-term capital gain dividends and interest-related dividends).

Each prospective investor is urged to consult its tax advisor regarding the applicability of FATCA and any other reporting requirements with respect to the prospective investor's own situation, including investments through an intermediary.

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**General Considerations.** The U.S. federal income tax discussion set forth above is for general information only. Prospective investors should consult their tax advisers regarding the specific federal tax consequences of purchasing, holding, and disposing of shares of the fund, as well as the effects of state, local and foreign tax law and any proposed tax law changes.

**MANAGEMENT** 

**Trustees** 

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>** | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin<br>Templeton Funds<br>Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>** | **Other Directorships Held by Trustee** |
| &nbsp;&nbsp;&nbsp; **Liaquat Ahamed** (Born<br> 1952), Trustee since<br> 2012 | Author; won Pulitzer Prize for *Lords of Finance: The Bankers Who Broke the World.* | 101 | Chair of the Sun Valley Writers Conference, a literary not-for-profit organization; and a Trustee of the Journal of Philosophy.<br>|
| &nbsp;&nbsp;&nbsp;**Barbara M. Baumann** (Born 1955), Trustee since 2010, Vice Chair from 2022 to 2024, Chair since 2024 | President of Cross Creek Energy Corporation, a strategic consultant to domestic energy firms and direct investor in energy projects. | 101 | Director of Devon Energy Corporation, a publicly traded independent natural gas and oil exploration and production company; Director of National Fuel Gas Company, a publicly traded energy company that engages in the production, gathering, transportation, distribution and marketing of natural gas; Senior Advisor to the energy private equity firm First Reserve; member of the Finance Committee of the Children's Hospital of Colorado; member of the Investment Committee of the Board of The Denver Foundation; and previously a Director of publicly traded companies Buckeye Partners LP, UNS Energy Corporation, CVR Energy Company, and SM Energy Corporation.<br>|
| &nbsp;&nbsp;&nbsp;**Katinka Domotorffy** (Born 1975), Trustee since 2012 | Voting member of the Investment Committees of the Anne Ray Foundation and Margaret A. Cargill Foundation, part of the Margaret A. Cargill Philanthropies.<br>| 101 | Director of the Great Lakes Science Center and of College Now Greater Cleveland. |
| &nbsp;&nbsp;&nbsp;**Catharine Bond Hill** (Born 1954), Trustee since 2017 | Managing Director of Ithaka S+R, a not-for-profit service that helps the academic community navigate economic and technological change. From 2006 to 2016, Dr.<br> Hill served as the 10th president of<br> Vassar College.<br>| 101 | Director of Yale-NUS College; and<br> Trustee of Yale University. |
| &nbsp;&nbsp;&nbsp; **Gregory G. McGreevey**<br> (Born 1962), Trustee | Until 2023, Senior Managing<br> Director, Investments, Invesco | 101 | Previously, a Director of Invesco<br> Mortgage Capital, Inc., a publicly traded |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>** | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin<br>Templeton Funds<br>Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>** | **Other Directorships Held by Trustee** |
| &nbsp;&nbsp;&nbsp;since 2024 | Ltd., a global investment firm. |  | real estate investment trust. |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; <br> **\*Jennifer Williams Murphy** (Born 1964), Trustee since 2022 | <br> Chief Executive Officer and Founder of Runa Digital Assets, LLC, an institutional investment advisory firm specializing in active management of digital assets. Until<br> 2021, Chief Operating Officer of Western Asset Management, LLC, a global investment adviser, and Chief Executive Officer and President of Western Asset Mortgage Capital Corporation, a mortgage finance real estate investment trust. | <br> 101 | <br> Previously, a Director of Western Asset Mortgage Capital Corporation. |
| &nbsp;&nbsp;&nbsp;**Marie Pillai** (Born 1954), Trustee since 2022 | Senior Advisor, Hunter Street Partners, LP, an asset-oriented private investment firm; Director of Choice Bank, a private, community bank based in North Dakota. Until 2019, Vice President, Chief Investment Officer and Treasurer of General Mills, Inc., a global food company. | 101 | Member of the Investment Committee of the Bush Foundation, a nonprofit organization supporting community problem-solving in Minnesota, North Dakota and South Dakota; Member of the Finance Council and Corporate Board of the Archdiocese of Saint Paul and Minneapolis; Member of the Curriculum Committee of the Center for Board Certified Fiduciaries, a public<br> benefit corporation providing coursework for developing fiduciaries; previously a Board Member of Catholic Charities of<br> St. Paul and Minneapolis; former Director of the Catholic Community Foundation of Minnesota; and former Investment Advisory Board Member of the University of Minnesota. |
| &nbsp;&nbsp;&nbsp; **George Putnam III** (Born<br> 1951), Trustee since<br> 1984 | Chair of New Generation Research, Inc., a publisher of financial advisory and other research services, and President of New Generation Advisors, LLC, a registered investment adviser to private funds. | 101 | Director of The Boston Family Office, LLC, a registered investment adviser; a Director of the Gloucester Marine Genomics Institute; a Trustee of the Lowell Observatory Foundation; and previously a Trustee of the Marine Biological Laboratory. |
| &nbsp;&nbsp;&nbsp; **Manoj P. Singh** (Born<br> 1952), Trustee since<br> 2017 | Until 2015, Chief Operating Officer and Global Managing Director at Deloitte Touche Tohmatsu, Ltd., a global professional services organization, serving on the Deloitte U.S. Board of Directors and the boards of Deloitte member | 101 | Director of ReNew Energy Global Plc, a publicly traded renewable energy company; Director of Abt Associates, a global research firm working in the fields of health, social and environmental policy, and international development; Trustee of Carnegie Mellon University; |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>** | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin**<br> **Templeton Funds**<br> **Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>** | **Other Directorships Held by<br>Trustee** |
|  | firms in China, Mexico and Southeast Asia. |  | Director of Pratham USA, an organization dedicated to children's education in India; member of the advisory board of Altimetrik, a business transformation and technology solutions firm; and Director of DXC Technology, a global IT services and consulting company. |
| &nbsp;&nbsp;&nbsp; **Mona K. Sutphen** (Born<br> 1967), Trustee since<br> 2020 | Partner, Investment Strategies at The Vistria Group, a private investment firm focused on middle- market companies in the healthcare, education, and financial services industries. From 2014 to 2018, Partner at Macro Advisory Partners, a global consulting firm. | 101 | Director of Spotify Technology S.A., a publicly traded audio content streaming service; Director of Unitek Learning, a private nursing and medical services education provider in the United States; Board Member, International Rescue Committee; Co-Chair of the Board of Human Rights First; Trustee of Mount Holyoke College; member of the Advisory Board for the Center on Global Energy Policy at Columbia University's School of International and Public Affairs; previously Director of Pattern Energy and Pioneer Natural Resources, publicly traded energy companies; and previously Managing Director of UBS AG. |
| &nbsp;&nbsp;&nbsp;**Interested Trustees** |  |  |  |
| &nbsp;&nbsp;&nbsp;**\*\*Robert L. Reynolds** (Born 1952), Trustee since 2008 | Chair of Great-West Lifeco U.S. LLC. Prior to 2019, also President and Chief Executive Officer of Great-West Financial, a financial services company that provides retirement savings plans, life insurance, and annuity and executive benefits products, and of Great-West Lifeco U.S. LLC, a holding company that owns Putnam Investments, LLC and Great-West Financial, and a member of Great-West Financial's Board of Directors. Until 2023, President and Chief Executive Officer of Putnam Investments, LLC, President and Chief Executive Officer of Putnam Management, and member of Putnam Investments' Board of Directors. | 101 | Director of the Concord Museum;<br> Director of Dana-Farber Cancer Institute; Director of the U.S. Ski & Snowboard Foundation; Chair of the Boston<br> Advisory Board of the American Ireland Fund; Council Co-Chair of the American Enterprise Institute; Member of U.S. Chamber of Commerce, Center for Capital Markets Competitiveness; Chair of Massachusetts High Technology Council; Member of the Chief Executives Club of Boston; Member of the Massachusetts General Hospital President's Council; Chairman of the Board of Directors of the Ron Burton Training Village; Director and former Chair of the Massachusetts Competitive Partnership; former Chair of the West Virginia University Foundation; and former Executive Committee Member of the Greater Boston Chamber of |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>** | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin**<br> **Templeton Funds**<br> **Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>** | **Other Directorships Held by<br>Trustee** |
|  |  |  | Commerce. |
| &nbsp;&nbsp;&nbsp; **\*\*\* Jane E. Trust** (Born<br> 1962), Trustee since<br> 2024 | Since 2020, Senior Vice President, Fund Board Management, Franklin Templeton. Since 2015, Officer and/or Trustee/Director of 123 funds associated with Franklin Templeton Fund Advisor, LLC ("FTFA") or its affiliates, and President and Chief Executive Officer of FTFA. From 2018 to 2020, Senior Managing Director of Legg Mason & Co., LLC ("Legg Mason & Co."). From 2016 to 2018, Managing Director of Legg Mason & Co. In 2015, Senior Vice President of FTFA. | 224 | None. |

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<sup>1</sup> The address of each Trustee is 100 Federal Street, Boston, MA 02110.

<sup>2</sup> Each Trustee serves for an indefinite term, until his or her resignation, retirement during the year he or she reaches age 75, death or removal.

<sup>3</sup> The Franklin Templeton funds complex is composed of the registered investment companies advised by the Investment Manager or by its affiliates.

\* Ms. Murphy is the founder, controlling member, and Chief Executive Officer of Runa Digital Assets, LLC ("RDA"), the investment manager of Runa Digital Partners, LP ("RDP"), a private investment fund. Ms. Murphy also holds a controlling interest in RDP's general partner and is a limited partner in RDP. A subsidiary of Franklin Resources, Inc. ("Franklin Templeton") and certain individuals employed by Franklin Templeton or its affiliates have made passive investments as limited partners in RDP (one of whom serves on the advisory board for RDA, which has no governance or oversight authority over RDA), representing in the aggregate approximately 33% of RDP as of October 31, 2024. In addition, if certain conditions are met, Franklin Templeton will be entitled to receive a portion of any incentive compensation allocable to RDP's general partner. For so long as Franklin Templeton maintains its investment in RDP, Ms. Murphy also has agreed upon request to advise and consult with Franklin Templeton and its affiliates on the market for digital assets. Ms. Murphy provides similar service to other limited partners in RDP that request her advice. Ms. Murphy also is entitled to receive deferred cash compensation in connection with her prior employment by an affiliate of Franklin Templeton, which employment ended at the end of 2021. With regard to Ms. Murphy, the relationships described above may give rise to a potential conflict of interest with respect to the funds.

\*\* Trustee who is an "interested person" (as defined in the 1940 Act) of the fund and the Investment Manager. Mr. Reynolds is deemed an "interested person" by virtue of his position as an officer of the fund and his direct beneficial interest in shares of Franklin Templeton, of which the Investment Manager is an indirect wholly-owned subsidiary. Mr. Reynolds is the President of your fund and each of the other Putnam funds, and prior to January 1, 2024, Mr. Reynolds was President and Chief Executive Officer of Putnam Management and Putnam Investments, LLC ("Putnam Investments"), the previous parent company to Putnam Management.

\*\*\* Trustee who is an "interested person" (as defined in the 1940 Act) of the fund and the Investment Manager. Ms. Trust is deemed an "interested person" by virtue of her positions with certain affiliates of the Investment Manager.

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**Trustee Qualifications** 

Each of the fund's Trustees, with the exception of Ms. Trust and Mr. McGreevey, was most recently elected by shareholders of the fund during 2022, although most of the Trustees have served on the Board for many years. The Board Policy and Nominating Committee is responsible for recommending proposed nominees for election to the full Board of Trustees for its approval. As part of its deliberative process, the Committee considers the experience, qualifications, skills and attributes, including diversity of background, experience, and views, that it determines would most benefit the funds overseen by the Board of Trustees at the time.

In recommending the election of the board members as Trustees, the Committee generally considered the educational, business and professional experience of each Trustee in determining his or her qualifications to serve as a Trustee of the fund, including the Trustee's record of service as a director or trustee of public and private organizations. (This included, but was not limited to, consideration of the specific experience noted in the preceding table.) In the case of most members of the Board, the Committee considered his or her previous service as a member of the Board of Trustees, which demonstrated a high level of diligence and commitment to the interests of fund shareholders and an ability to work effectively and collegially with other members of the Board.

The Committee also considered, among other factors, the particular attributes described below with respect to the various individual Trustees and considered the attributes as indicative of the person's ability to deal effectively with the types of financial, regulatory, and/or investment matters that typically arise in the course of a Trustee's work:

<u>Independent Trustees</u>

Liaquat Ahamed -- Mr. Ahamed's experience as Chief Executive Officer of a major investment management organization and as head of the investment division at the World Bank, as well as his experience as an author of economic literature.

Barbara M. Baumann -- Ms. Baumann's experience in the energy industry as a consultant, an investor, and in both financial and operational management positions at a global energy company, and her service as a director of multiple NYSE companies.

Katinka Domotorffy -- Ms. Domotorffy's experience as Chief Investment Officer and Global Head of Quantitative Investment Strategies at a major asset management organization.

Catharine Bond Hill -- Dr. Hill's education and experience as an economist and as president and provost of colleges in the United States.

Gregory G. McGreevey -- Mr. McGreevey's experience as a Senior Managing Director of a global investment firm and as a director of a publicly traded real estate investment trust.

Jennifer Williams Murphy -- Ms. Murphy's experience as Chief Operating Officer of a major global investment management organization and as Chief Executive Officer of an investment advisory firm specializing in digital assets.

Marie Pillai -- Ms. Pillai's experience as Vice President, Chief Investment Officer, and Treasurer of a global food company, her experience in similar positions at a global engineering company, and her experience in corporate and operational finance roles at a global consumer products company.

George Putnam III -- Mr. Putnam's training and experience as an attorney, his experience as the founder and Chief Executive Officer of an investment management firm and his experience as an author of various publications on the subject of investments.

Manoj P. Singh -- Mr. Singh's experience as chief operating officer and global managing director of a global professional services organization that provided accounting, consulting, tax, risk management, and financial advisory services.

Mona K. Sutphen -- Ms. Sutphen's extensive experience advising corporate, philanthropic and institutional investors on the intersection of geopolitics, policy and markets, as well as her prior service as White House Deputy Chief of Staff for Policy and as a US Foreign Service Officer, her work advising financial services companies on macro risks, and her service as director of public companies.

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<u>Interested Trustees</u>

Robert L. Reynolds -- Mr. Reynolds's extensive experience as a senior executive of a major mutual fund organization in the United States and his previous role as President and Chief Executive Officer of Putnam Management and Putnam Investments, LLC, the previous parent company to Putnam Management and PAC.

Jane E. Trust -- Ms. Trust's investment management and risk oversight experience as an executive and portfolio manager and leadership roles within Franklin Templeton and affiliated entities.

**Officers** 

The other officers of the fund, in addition to Robert L. Reynolds, the fund's President, are shown below. All of the officers of your fund listed below are employees of the Investment Manager or its affiliates or are members of the Trustees' independent administrative staff.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year of Birth, Position(s)**<br> **Held with Fund** | **Length of Service**<br> **with the Putnam**<br> **Funds<sup>2</sup>** | **Principal Occupation(s) During Past 5 Years and**<br> **Position(s) with Fund's Investment Adviser and**<br> **Distributor<sup>3</sup>** |
| &nbsp;&nbsp;&nbsp; **Jonathan S. Horwitz<sup>4</sup>** (Born 1955)<br> Executive Vice President, Principal Executive Officer, and Compliance Liaison | Since 2004 | Executive Vice President, Principal Executive Officer, and Compliance Liaison, The Putnam Funds. |
| &nbsp;&nbsp;&nbsp; **Stephen J. Tate** (Born 1974)<br> Vice President and Chief Legal Officer | Since 2021 | Deputy General Counsel, Franklin Templeton, and Secretary, Putnam U.S. Holdings I, LLC ("Putnam Holdings") and Putnam Management (2024 – Present). General Counsel and related positions, Putnam Investments, Putnam Management and Putnam Retail Management (2004-2023). |
| &nbsp;&nbsp;&nbsp; **James F. Clark<sup>3</sup>** (Born 1974)<br> Vice President and Chief Compliance Officer | Since 2016 | Chief Compliance Officer, Putnam Holdings and Putnam Management (2016 – Present). Associate General Counsel, Putnam Investments, Putnam Management and Putnam Retail Management (2003- 2015). |
| &nbsp;&nbsp;&nbsp;**Michael J. Higgins<sup>4</sup>** (Born 1976) Vice President, Treasurer, and Clerk | Since 2010 | Vice President, Treasurer, and Clerk, The Putnam Funds. |
| &nbsp;&nbsp;&nbsp; **Kevin R. Blatchford** (Born 1967)<br> Vice President and Assistant Treasurer | Since 2024 | Director, Financial Reporting, Putnam Holdings. |
| &nbsp;&nbsp;&nbsp; **Graham Cole** (Born 1984)<br> Vice President and Assistant Treasurer | Since 2024 | Director, Global Fund Tax, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Lindsey Hicks** (Born 1979)<br> Vice President and Assistant Treasurer | Since 2024 | Controller, Fund Administration and Oversight, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Monica Krogh** (Born 1981)<br> Vice President and Assistant Treasurer | Since 2024 | Assistant Treasurer, Fund Administration and<br> Oversight, Franklin Templeton. |

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year of Birth, Position(s)**<br> **Held with Fund**<br>| **Length of Service**<br> **with the Putnam**<br> **Funds<sup>2</sup>**<br>| **Principal Occupation(s) During Past 5 Years and**<br> **Position(s) with Fund's Investment Adviser and**<br> **Distributor<sup>3</sup>**<br>|
| &nbsp;&nbsp;&nbsp; **Kelley Hunt** (Born 1984)<br> AML Compliance Officer | Since 2024 | Manager, U.S. Financial Crime Compliance, Franklin Templeton.<br>|
| &nbsp;&nbsp;&nbsp; **Jeffrey White** (Born 1971)<br> Vice President, Principal Financial Officer, Principal Accounting Officer, and Assistant Treasurer<br>| Since 2024 | Vice President, Fund Administration and Reporting, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Denere P. Poulack<sup>4</sup>** (Born 1968)<br> Assistant Vice President, Assistant Clerk, and Assistant Treasurer<br>| Since 2004 | Assistant Vice President, Assistant Clerk, and Assistant Treasurer, The Putnam Funds. |

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<sup>1</sup> The address of each Officer, other than as noted below, is 100 Federal Street, Boston, MA 02110. Mr. Cole's address is 5000 Yonge St, Toronto, ON, Canada M2N0A7. Ms. Hicks address is 3355 Data Drive, Rancho Cordova, CA 95670. Ms. Krogh and Mr. Wheeler's address is 300 S.E. 2nd Street, Ft. Lauderdale, FL 33301. Ms. Hunt's address is 100 Fountain Parkway, St. Petersburg, FL 33716. Mr. White's address is One Franklin Parkway, San Mateo, CA 94403.

<sup>2</sup> Each officer serves for an indefinite term, until his or her resignation, retirement, death or removal.

<sup>3</sup> Prior positions and/or officer appointments with the fund or the fund's investment adviser and distributor have been omitted.

<sup>4</sup> Officers of the fund indicated are members of the Trustees' independent administrative staff. Compensation for these individuals is fixed by the Trustees and reimbursed to the Investment Manager by the funds, except in certain cases where a fund has a unitary fee and/or expense limitation arrangement whereby the Investment Manager is responsible for all or a portion of these individuals' compensation.

Except as stated above, the principal occupations of the officers and Trustees for the last five years have been with the employers as shown above, although in some cases they have held different positions with such employers.

**Leadership Structure and Standing Committees of the Board of Trustees** 

**For details regarding the number of times the standing committees of the Board of Trustees met during a fund's last fiscal year, see "Trustee responsibilities and fees" in Part I of this SAI.** 

**Board Leadership Structure**. Currently, 10 of the 12 Trustees of your fund are Independent Trustees, meaning that they are not considered "interested persons" of your fund or the Investment Manager. These Independent Trustees must vote separately to approve all financial arrangements and other agreements with the Investment Manager and other affiliated parties. The role of independent trustees has been characterized as that of a "watchdog" charged with oversight to protect shareholders' interests against overreaching and abuse by those who are in a position to control or influence a fund. Your fund's Independent Trustees meet regularly as a group in executive session (*i.e*., without representatives of the Investment Manager or its affiliates present). An Independent Trustee currently serves as chair of the Board.

Taking into account the number, the diversity and the complexity of the funds overseen by the Board and the aggregate amount of assets under management, your fund's Trustees have determined that the efficient conduct of the Board's affairs makes it desirable to delegate responsibility for certain specific matters to committees of the Board. The Executive Committee, Audit, Compliance and Risk Committee, and Board Policy and Nominating Committee are authorized to take action on certain matters as specified in their charters or in policies and procedures relating to the governance of the funds; with respect to other matters, these committees review and evaluate and make recommendations to the Trustees as they deem appropriate. The other committees also review and evaluate matters specified in their charters and make recommendations to the Trustees as they deem appropriate. Each committee may utilize the resources of your fund's independent staff, counsel and independent

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registered public accountants as well as other experts. The committees meet as often as appropriate, either in conjunction with regular meetings of the Trustees or otherwise. The membership and chair of each committee are appointed by the Trustees upon recommendation of the Board Policy and Nominating Committee. Each committee is chaired by an Independent Trustee and, except as noted below, the membership and chairs of each committee consist exclusively of Independent Trustees.

The Trustees have determined that this committee structure also allows the Board to focus more effectively on the oversight of risk as part of its broader oversight of the fund's affairs. While risk management is the primary responsibility of the Investment Manager, the Trustees receive reports regarding investment risks, compliance risks and other risks. The Board and certain committees also meet periodically with the funds' Chief Compliance Officer to receive compliance reports. In addition, the Board and its Investment Oversight Committees meet periodically with the portfolio managers of the funds to receive reports regarding the management of the funds. The Board's committee structure allows separate committees to focus on different aspects of these risks and their potential impact on some or all of the funds and to discuss with the Investment Manager how it monitors and controls risks.

The Board recognizes that the reports it receives concerning risk management matters are, by their nature, typically summaries of the relevant information. Moreover, the Board recognizes that not all risks that may affect your fund can be identified in advance; that it may not be practical or cost effective to eliminate or to mitigate certain risks; that it may be necessary to bear certain risks (such as investment-related risks) in seeking to achieve your fund's investment objectives; and that the processes, procedures and controls employed to address certain risks may be limited in their effectiveness. As a result of the foregoing and for other reasons, the Board's risk management oversight is subject to substantial limitations.

**Audit, Compliance and Risk Committee**. The Audit, Compliance and Risk Committee provides oversight on matters relating to the integrity of the funds' financial statements, compliance with legal and regulatory requirements, the performance of each fund's internal audit function, Codes of Ethics issues, and certain aspects of overseeing the Investment Manager's risk assessment and risk management. This oversight is discharged by regularly meeting with management and the funds' independent registered public accountants and remaining current with respect to industry developments. Duties of this Committee also include the review and evaluation of all matters and relationships pertaining to the funds' independent registered public accountants, including their independence, and the review of the Investment Manager's oversight of the funds' significant other service providers (unless another committee, or the Board, has this responsibility). The Committee also oversees all dividends and distributions by the funds by making recommendations to the Trustees regarding the amount and timing of dividends and distributions paid by the funds, and determining such matters when the Trustees are not in session. The Committee also oversees the policies and procedures pursuant to which the Investment Manager prepares recommendations for dividends and distributions, and meets regularly with representatives of the Investment Manager to review the implementation of these policies and procedures. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The members of the Committee include only Independent Trustees. Each member of the Committee also is "independent," as that term is interpreted for purposes of Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the listing standards of the NYSE. The Board has adopted a written charter for the Committee. The current members are Messrs. Singh (Chair) and McGreevey and Mses. Pillai and Sutphen.

**Board Policy and Nominating Committee.** The Board Policy and Nominating Committee reviews matters pertaining to the operations of the Board of Trustees and its Committees, the compensation of the Trustees and their staff, and the conduct of legal affairs for the funds. The Committee evaluates and recommends all candidates for election as Trustees and recommends the appointment of members and chairs of each board committee. The Committee will consider nominees for Trustee recommended by shareholders of a fund provided that such recommendations are submitted by the date disclosed in the fund's proxy statement and otherwise comply with applicable securities laws, including Rule 14a-8 under the Exchange Act. The Committee also reviews policy matters affecting the operation of the Board and its independent staff. In addition, the Committee oversees the voting of proxies associated with portfolio investments of the funds with the goal of ensuring that these proxies are voted in the best interest of the funds' shareholders. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee generally believes that the Board benefits from diversity of background, experience and views among its members, and considers this as a factor in evaluating the composition of the Board, but has not adopted any specific policy in this regard. The Committee is composed entirely of Independent Trustees. The current members are Dr. Hill (Chair), Mses. Baumann and Sutphen, and Mr. Putnam.

**Brokerage Committee**. The Brokerage Committee reviews the funds' policies regarding the execution of portfolio trades and the Investment Manager's (and its affiliates') practices and procedures relating to the implementation of those policies. The Committee reviews periodic reports on the cost and quality of execution of portfolio transactions and the extent to which

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brokerage commissions have been used (i) by the Investment Manager (or its affiliates) to obtain brokerage and research services generally useful to it (or its affiliates) in managing the portfolios of the funds and of its other clients, and (ii) by the funds to pay for certain fund expenses. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee is composed entirely of Independent Trustees. The current members are Messrs. Ahamed (Chair) and Putnam, Mses. Baumann and Domotorffy, and Dr. Hill.

**Contract Committee**. The Contract Committee reviews and evaluates at least annually arrangements pertaining to (i) the engagement of the Investment Manager and its affiliates to provide services to the funds, (ii) the expenditure of the funds' assets for distribution purposes pursuant to Distribution Plans of the funds, and (iii) the engagement of other persons to provide material services to the funds, including in particular those instances where the cost of services is shared between the funds and the Investment Manager and its affiliates or where the Investment Manager or its affiliates have a material interest. The Committee also reviews the proposed organization of new fund products and proposed structural changes to existing funds. In addition, the Committee also reviews communications with, and the quality of services provided to, shareholders and oversees the marketing and sale of fund shares by Franklin Distributors. The Committee reports and makes recommendations to the Trustees regarding these matters. The Committee is composed entirely of Independent Trustees. The current members are Messrs. Putnam (Chair) and Ahamed, Mses. Baumann and Domotorffy, and Dr. Hill.

**Exchange-Traded Fund Committee.** The Exchange-Traded Fund Committee is responsible for assisting the Trustees in their oversight of the funds that are ETFs. The Committee reviews matters arising from time to time relating to the ETFs that are not otherwise within the general subject matter purview of another committee, including, but not limited to: (i) service provider relationships that are specific to the ETFs, (ii) business, industry, legal, and regulatory matters that are specific to the ETFs, (iii) proposals relating to new ETFs, and (iii) transactions involving ETFs. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The current members are Messrs. Ahamed (Chair), McGreevey, and Reynolds, Dr. Hill, and Mses. Domotorffy, Murphy, Sutphen and Trust.

**Executive Committee**. The functions of the Executive Committee are twofold. The first is to ensure that the funds' business may be conducted at times when it is not feasible to convene a meeting of the Trustees or for the Trustees to act by written consent. The Committee may exercise any or all of the power and authority of the Trustees when the Trustees are not in session. The second is to review annual and ongoing goals, objectives and priorities for the Board and to facilitate coordination of all efforts between the Trustees and the Investment Manager on behalf of the shareholders of the funds. The Committee currently consists of Ms. Baumann (Chair) and Messrs. Putnam and Singh.

**Investment Oversight Committees.** The Investment Oversight Committees regularly meet with investment personnel of the Investment Manager and its affiliates to review the investment performance and strategies of the funds in light of their stated goals and policies. The Committees seek to identify any compliance issues that are unique to the applicable categories of funds and work with the appropriate board committees to ensure that any such issues are properly addressed. The Committees review the proposed investment objectives, policies and restrictions of new fund products and proposed changes to investment objectives, policies and restrictions of existing funds. The current members of Investment Oversight Committee A are Mses. Domotorffy (Chair), Murphy and Sutphen, and Messrs. Ahamed, Reynolds, and Singh, and the current members of Investment Oversight Committee B are Mses. Pillai (Chair), Baumann, and Trust, Dr. Hill, and Messrs. McGreevey and Putnam.

**Pricing Committee.** The Pricing Committee oversees the valuation of assets of the funds overseen by the Board of Trustees and reviews the funds' policies and procedures for achieving accurate and timely pricing of fund shares. The Committee oversees implementation of these policies, including fair value determinations of individual securities made by the Investment Manager or other designated agents of the funds. The Committee also reviews (i) compliance by money market funds with Rule 2a-7 under the 1940 Act, (ii) in-kind redemptions by the fund affiliates, (iii) the correction of occasional pricing errors, and (iv) the Investment Manager's oversight of pricing vendors. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The current members are Messrs. Singh (Chair), McGreevey, and Reynolds and Mses. Murphy, Pillai, Sutphen, and Trust.

**Indemnification** 

Subject to certain exceptions specified therein, the Trust's Amended and Restated Agreement and Declaration of Trust provides that the Trust and each fund will indemnify its Trustees and officers to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him or her in connection with any claim, action, suit or proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a trustee or officer of the Trust

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and against amounts paid or incurred by him or her in the settlement thereof. Each fund, at its expense, provides liability insurance for the benefit of its Trustees and officers.

**For details of Trustees' fees paid by the fund and information concerning retirement guidelines for the Trustees, see "Charges and expenses" in Part I of this SAI.** 

**The Investment Manager and its Affiliates** 

*Putnam Investment Management, LLC*

If so disclosed in the fund's prospectus, Putnam Management serves as Investment Manager to the fund. Putnam Management is one of America's oldest money management firms. Putnam Management has been managing mutual funds since 1937.

Franklin Advisers, Inc.

If so disclosed in the fund's prospectus, Franklin Advisers serves as Investment Manager to the fund. Franklin Advisers, Inc., a global investment organization, is a California corporation formed on October 31, 1985.

**Additional information about Putnam Management and Franklin Advisers** 

Putnam Management and Franklin Advisers are indirect, wholly-owned subsidiaries of Franklin Templeton, a Delaware corporation. Franklin Templeton, whose principal executive offices are at One Franklin Parkway, San Mateo, California 94403, is a global investment management organization.

Trustees and officers of the fund who are also officers of Putnam Management, Franklin Advisers or their affiliates or who are stockholders of Franklin Templeton or its affiliates will benefit from the advisory fees, sales commissions, distribution fees and transfer agency fees paid or allowed by the fund.

**The Management Contract** 

Under a management contract between the fund and the Investment Manager (the "Management Contract"), subject to such policies as the Trustees may determine, the Investment Manager, at its expense, furnishes continuously an investment program for the fund and makes investment decisions on behalf of the fund. Subject to the control of the Trustees, the Investment Manager also manages, supervises and conducts the other affairs and business of the fund, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully, furnishes office space and equipment, provides bookkeeping and clerical services (including determination of the fund's net asset value, but excluding shareholder accounting services) and typically places orders for the purchase and sale of the fund's portfolio securities (in some cases, Putnam Management and Franklin Advisers, in their capacities as sub-advisers to a fund, may place orders for the purchase and sale of the fund's portfolio securities, and references elsewhere in this SAI to the Investment Manager placing orders for the purchase and sale of portfolio securities shall be deemed to include Putnam Management and Franklin Advisers in their capacities as sub-advisers, as appropriate in the context). The Investment Manager may place fund portfolio transactions with broker-dealers that furnish the Investment Manager, without cost to it, certain research services of value to the Investment Manager and its affiliates in advising the fund and other clients. In so doing, the Investment Manager may cause the fund to pay greater brokerage commissions than it might otherwise pay.

Franklin Templeton Services, LLC ("FT Services") has entered into an agreement with the Investment Manager to provide certain administrative services and facilities for the fund. FT Services is an indirect, wholly-owned subsidiary of Franklin Templeton and is an affiliate of the Investment Manager, the fund's investment manager. The administrative services FT Services provides include preparing and maintaining books, records, and tax and financial reports, and monitoring compliance with regulatory requirements. The Investment Manager pays FT Services a monthly fee equal to 105% of the internal costs incurred by FTS for providing administrative services to the Putnam ETFs. The Investment Manager will also reimburse FT Services for fees paid by FT Services to any third-party service provider for sub-administration and other services for the fund.

**For details of the Investment Manager's compensation under the Management Contract, see "Charges and expenses" in Part I of this SAI.** 

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The Management Contract provides that the Investment Manager shall not be subject to any liability to the fund or to any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of the Investment Manager.

The Management Contract may be terminated without penalty by vote of the Trustees or the shareholders of the fund, or by the Investment Manager, on not less than 60 days' written notice. Subject to certain exceptions, it may be amended only by a vote of the shareholders of the fund. The Management Contract also terminates without payment of any penalty in the event of its assignment. The Management Contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

**The Sub-Advisers** 

*<u>Putnam Investment Management, LLC</u>* 

If so disclosed in the fund's prospectus, Putnam Management, an affiliate of Franklin Advisers, has been retained as a sub- adviser by Franklin Advisers, at Franklin Advisers' own expense, to make investment decisions for such fund assets as may be designated from time to time for its management by Franklin Advisers and to provide certain other advisory and related services pursuant to a subadvisory agreement between Franklin Advisers and Putnam Management. The other advisory and related services may include the facilitation of derivative transactions, sharing of investment research if so requested by Franklin Advisers, and proxy voting, and these services are subject to change over time.

The subadvisory agreement provides that Putnam Management shall not be subject to any liability to Franklin Advisers, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of Putnam Management.

The subadvisory agreement may be terminated with respect to the fund without penalty by vote of the Trustees or shareholders of the fund, or by Franklin Advisers or Putnam Management upon 60 days' written notice. The subadvisory agreement also terminates without payment of any penalty in the event of its assignment or upon any termination of the management contract between Franklin Advisers and the fund. The subadvisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not parties to the subadvisory agreement or "interested persons" thereof. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

For additional information about Putnam Management, see "Putnam Investment Management, LLC" under "The Investment Manager and its Affiliates" above.

*<u>Franklin Advisers, Inc.</u>* 

If so disclosed in the fund's prospectus, Franklin Advisers, an affiliate of Putnam Management, has been retained as a sub- adviser to provide by Putnam Management, at Putnam Management's own expense, to make investment decisions for such fund assets as may be designated from time to time for its management by Putnam Management and to provide certain other advisory and related services pursuant to a subadvisory agreement between Putnam Management and Franklin Advisers. The other advisory and related services may include the facilitation of foreign exchange transactions, sharing of investment research if so requested by Putnam Management, and managing the fund's investments in cash or cash equivalents, and these services are subject to change over time.

The subadvisory agreement provides that Franklin Advisers shall not be subject to any liability to Putnam Management, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of Franklin Advisers.

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The subadvisory agreement may be terminated with respect to the fund without penalty by vote of the Trustees or shareholders of the fund, or by Putnam Management or Franklin Advisers or upon 60 days' written notice. The subadvisory agreement also terminates without payment of any penalty in the event of its assignment or upon any termination of the management contract between Putnam Management and the fund. The subadvisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not parties to the subadvisory agreement or "interested persons" thereof. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

For additional information about Franklin Advisers, see "Franklin Advisers, Inc." under "The Investment Manager and its Affiliates" above.

*<u>Franklin Templeton Investment Management Limited</u>* 

If so disclosed in the fund's prospectus, FTIML, an affiliate of the Investment Manager, has been retained as a sub-adviser for a portion of the assets of the fund, as determined from time to time by the Investment Manager pursuant to a sub-advisory agreement between the Investment Manager and FTIML. Under the terms of the sub-advisory agreement, FTIML, at its own expense, manages the investment and reinvestment of that portion of each such fund's portfolio that is allocated to FTIML from time to time by the Investment Manager, with FTIML determining what securities and other property will be purchased, retained or sold with respect to such portion, and placing all purchase and sale orders with respect to such portion, subject to the supervision of the Investment Manager. The Investment Manager may also, at its discretion, request FTIML to provide assistance with purchasing and selling securities for the fund, including placement of orders with certain broker-dealers, and to perform research and obtain and evaluate data relevant to the fund's investment strategies and policies.

Pursuant to the terms of the sub-advisory agreement, FTIML will pay all expenses incurred by it in connection with its activities under this agreement other than the cost of securities (including brokerage commissions, if any) purchased for the fund. The sub-advisory agreement provides that, in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of FTIML, neither FTIML, nor any of its directors, officers, employees or affiliates, shall be subject to liability to the Investment Manager, the fund or any shareholder of the fund for any error of judgment or mistake of law or any other act or omission in the course of, or connected with, rendering services to the fund or for any losses that may be sustained in the purchase, holding or sale of any security by the fund.

The sub-advisory agreement may be terminated at any time with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund upon not more than sixty days' written notice to the Investment Manager and FTIML, and by FTIML or the Investment Manager on not more than 60 days' written notice to the other party. The sub-advisory agreement also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. The sub-advisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

*<u>PanAgora Asset Management, Inc.</u>* 

If so disclosed in the fund's prospectus, PanAgora, an affiliate of Putnam Management, has been retained as the sub-adviser for a portion of the assets of the fund, as determined from time to time by Putnam Management, by Putnam Management pursuant to a sub-advisory agreement between Putnam Management and PanAgora.

PanAgora, a Delaware corporation organized in 1985 and incorporated in 1989, is located at One International Place, 24th Floor, Boston, Massachusetts 02110. In addition, certain PanAgora employees own non-voting interests in PanAgora. Assuming all employee stock and options are issued and exercised, up to 20% of the economic interest in PanAgora would be owned by PanAgora employees.

Under certain terms of the sub-advisory agreement, PanAgora, at its own expense, furnishes continuously an investment program for that portion of each such fund that is allocated to PanAgora from time to time by Putnam Management, and makes

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investment decisions on behalf of such portion of the fund, subject to the supervision of the Board of Trustees and Putnam Management.

PanAgora, at its expense, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties. The sub-advisory agreement provides that PanAgora shall not be subject to any liability to Putnam Management, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of PanAgora.

The sub-advisory agreement may be terminated with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund, or by PanAgora or Putnam Management, on not more than 60 days' nor less than 30 days' written notice. The sub-advisory agreement also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. The sub-advisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

**Portfolio Transactions** 

**Potential conflicts of interest in managing multiple accounts.** 

*Investment Manager* 

Like other investment professionals with multiple clients, the fund's Portfolio Manager(s) may face certain potential conflicts of interest in connection with managing both the fund and the other accounts listed under **"PORTFOLIO MANAGER(S)" "Other accounts managed"** at the same time. The paragraphs below describe some of these potential conflicts, which the Investment Manager believes are faced by investment professionals at most major financial firms. As described below, the Investment Manager and the Trustees have adopted compliance policies and procedures that attempt to address certain of these potential conflicts.

The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance ("performance fee accounts"), may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The most attractive investments could be allocated to higher-fee accounts or performance fee accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The trading of higher-fee accounts could be favored as to timing and/or execution price. For example, higher-fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The trading of other accounts could be used to benefit higher-fee accounts (front-running).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation.

The Investment Manager attempts to address these potential conflicts of interest relating to higher-fee accounts through various compliance policies that are generally intended to place all accounts, regardless of fee structure, on the same footing for investment management purposes. For example, under the Investment Manager's policies:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Performance fee accounts must be included in all standard trading and allocation procedures with all other accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• All accounts must be allocated to a specific category of account and trade in parallel with allocations of similar accounts based on the procedures generally applicable to all accounts in those groups (e.g., based on relative risk budgets of accounts).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• All trading must be effected through Putnam's trading desks and normal queues and procedures must be followed (i.e., no special treatment is permitted for performance fee accounts or higher-fee accounts based on account fee structure).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Front running is strictly prohibited.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Except as provided in Part I of this SAI, the fund's Portfolio Manager(s) may not be guaranteed or specifically allocated any portion of a performance fee.

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As part of these policies, the Investment Manager has also implemented trade oversight and review procedures in order to monitor whether particular accounts (including higher-fee accounts or performance fee accounts) are being favored over time.

Potential conflicts of interest may also arise when the Portfolio Manager(s) have personal investments in other accounts that may create an incentive to favor those accounts. As a general matter and subject to limited exceptions, the Investment Manager's investment professionals do not have the opportunity to invest in client accounts, other than Putnam funds. However, in the ordinary course of business, the Investment Manager or related persons may from time to time establish "pilot" or "incubator" accounts for the purpose of testing proposed investment strategies and products before offering them to clients. These pilot accounts may be in the form of registered investment companies, private funds such as partnerships or separate accounts established by the Investment Manager or an affiliate. The Investment Manager or an affiliate supplies the funding for these accounts. Putnam employees, including the fund's Portfolio Manager(s), may also invest in certain pilot accounts. The Investment Manager, and to the extent applicable, the Portfolio Manager(s) will benefit from the favorable investment performance of pilot accounts. Pilot funds and accounts may, and frequently do, invest in the same securities as the client accounts. The Investment Manager's policy is to treat pilot accounts in the same manner as client accounts for purposes of trading allocation – neither favoring nor disfavoring them except as is legally required. For example, pilot accounts are normally included in the Investment Manager's daily block trades to the same extent as client accounts (except that pilot accounts do not participate in initial public offerings).

A potential conflict of interest may arise when the fund and other accounts purchase or sell the same securities. On occasions when the Portfolio Manager(s) consider the purchase or sale of a security to be in the best interests of the fund as well as other accounts, the Investment Manager's trading desk may, to the extent permitted by applicable laws and regulations and where practicable, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to the fund or another account if one account is favored over another in allocating the securities purchased or sold – for example, by allocating a disproportionate amount of a security that is likely to increase in value to a favored account. The Investment Manager's trade allocation policies generally provide that each day's transactions in securities that are purchased or sold by multiple accounts are, insofar as possible, averaged as to price and allocated between such accounts (including the fund) in a manner which in the Investment Manager's opinion is equitable to each account and in accordance with the amount being purchased or sold by each account. However, accounts advised or sub-advised by FTIML will only place trades at an execution-only commission rate, whereas other Putnam accounts may pay an additional amount for research and other products and services (a "bundled" or "full service" rate). The Investment Manager may aggregate trades in FTIML accounts with other Putnam accounts that pay a bundled rate as long as all participating accounts pay the same execution rate. To the extent that non- FTIML accounts pay a bundled rate, the FTIML and other the Investment Manager accounts would not be paying the same total commission rate. Certain other exceptions exist for specialty, regional or sector accounts. Trade allocations are reviewed on a periodic basis as part of the Investment Manager's trade oversight procedures in an attempt to ensure fairness over time across accounts.

"Cross trades," in which one Putnam account sells a particular security to another account (potentially saving transaction costs for both accounts), may also pose a potential conflict of interest. Cross trades may be seen to involve a potential conflict of interest if, for example, one account is permitted to sell a security to another account at a higher price than an independent third party would pay, or if such trades result in more attractive investments being allocated to higher-fee accounts. The Investment Manager and the fund's Trustees have adopted compliance procedures that provide that any transactions between the fund and another Putnam-advised account are to be made at an independent current market price, as required by law.

Another potential conflict of interest may arise based on the different goals and strategies of the fund and other accounts. For example, another account may have a shorter-term investment horizon or different goals, policies or restrictions than the fund. Depending on goals or other factors, the Portfolio Manager(s) may give advice and make decisions for another account that may differ from advice given, or the timing or nature of decisions made, with respect to the fund. In addition, investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a particular security may be bought or sold for certain accounts even though it could have been bought or sold for other accounts at the same time. More rarely, a particular security may be bought for one or more accounts managed by the Portfolio Manager(s) when one or more other accounts are selling the security (including short sales). There may be circumstances when purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts. As noted above, the Investment Manager has implemented trade oversight and review procedures to monitor whether any account is systematically favored over time.

Under federal securities laws, a short sale of a security by another client of the Investment Manager or its affiliates (other than another registered investment company) within five business days prior to a public offering of the same securities (the timing of

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which is generally not known to Putnam in advance) may prohibit the fund from participating in the public offering, which could cause the fund to miss an otherwise favorable investment opportunity or to pay a higher price for the securities in the secondary markets.

The fund's Portfolio Manager(s) may also face other potential conflicts of interest in managing the fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the fund and other accounts. For information on restrictions imposed on personal securities transactions of the fund's Portfolio Manager(s), please see "Personal Investments by Employees of the Investment Manager and Franklin Distributors and Officers and Trustees of the Fund."

*PanAgora* 

The portfolio managers' management of other accounts may give rise to potential conflicts of interest in connection with their management of the fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts include retirement plans and separately managed accounts ("SMA's"), as well as incubated accounts. The other accounts might have similar investment objectives as the fund, or hold, purchase or sell securities that are eligible to be held, purchased or sold by the fund. While the portfolio managers' management of other accounts may give rise to the following potential conflicts of interest, PanAgora does not believe that the conflicts, if any, are material or, to the extent any such conflicts are material, PanAgora believes that it has designed policies and procedures to manage those conflicts in an appropriate way.

A potential conflict of interest may arise as a result of the portfolio managers' day-to-day management of the fund. Because of their positions with the fund, the portfolio managers know the size, timing and possible market impact of the fund's trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of the fund. However, PanAgora has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.

A potential conflict of interest may arise as a result of the portfolio managers' management of the fund, and other accounts, which, in theory, may allow them to allocate investment opportunities in a way that favors other accounts over the fund. This conflict of interest may be exacerbated to the extent that PanAgora or the portfolio managers receive, or expect to receive, greater compensation from their management of the other accounts than the fund. Notwithstanding this theoretical conflict of interest, it is PanAgora's policy to manage each account based on its investment objectives and related restrictions and, as discussed above, PanAgora has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and in a manner consistent with each account's investment objectives and related restrictions. For example, while the portfolio managers may buy for other accounts securities that differ in identity or quantity from securities bought for the fund, such securities might not be suitable for the fund given its investment objective and related restrictions.

For information about other funds and accounts managed by the fund's Portfolio Manager(s), please refer to "Who oversees and manages the fund(s)?" in the prospectus and **"PORTFOLIO MANAGER(S)" "Other accounts managed"** in Part I of the SAI.

**Brokerage and research services.** 

Transactions on stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by the fund of negotiated brokerage commissions. Such commissions may vary among different brokers. A particular broker may charge different commissions according to such factors as execution venue and exchange. Although the fund does not typically pay commissions for principal transactions in the over-the-counter markets, such as the markets for most fixed income securities and certain derivatives, an undisclosed amount of profit or "mark-up" is included in the price the fund pays. In underwritten offerings, the price paid by the fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer. **See "Charges and expenses" in Part I of this SAI for information concerning commissions paid by the fund**.

It has for many years been a common practice in the investment advisory business for broker-dealers that execute portfolio transactions for the clients of advisers of investment companies and other institutional investors to provide those advisers with brokerage and research services, as defined in Section 28(e) of the Exchange Act. Consistent with this practice, the Investment Manager receives brokerage and research services from broker-dealers with which the Investment Manager places the fund's portfolio transactions. The products and services that broker-dealers may provide to the Investment Manager's managers and analysts include, among others, trading systems and other brokerage services, economic and political analysis, fundamental and macro investment research, industry and company reviews, statistical information, market data, evaluations of investments,

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strategies, markets and trading venues, recommendations as to the purchase and sale of investments, performance measurement services and meetings with management of current or prospective portfolio companies or with industry experts. Some of these services are of value to the Investment Manager and its affiliates in advising various of their clients (including the fund), although not all of these services are necessarily useful and of value in managing the fund. Research services provided by broker-dealers are supplemental to the Investment Manager's own research efforts and relieve the Investment Manager of expenses it might otherwise have borne in generating such research. The management fee paid by the fund is not reduced because the Investment Manager and its affiliates receive brokerage and research services even though the Investment Manager might otherwise be required to purchase some of these services for cash. The Investment Manager may also use portfolio transactions to generate "soft dollar" credits to pay for "mixed-use" services (i.e., products or services that may be used both for investment/brokerage- and non-investment/brokerage-related purposes), but in such instances the Investment Manager uses its own resources to pay for that portion of the mixed-use product or service that in its good-faith judgment does not relate to investment or brokerage purposes. The Investment Manager may also allocate trades to generate soft dollar credits for third- party investment research reports and related fundamental research.

The Investment Manager places all orders for the purchase and sale of portfolio investments for the funds, and buys and sells investments for the funds, through a substantial number of brokers and dealers. In selecting broker-dealers to execute the funds' portfolio transactions, the Investment Manager uses its best efforts to obtain for each fund the most favorable price and execution reasonably available under the circumstances, except to the extent it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution and in considering the overall reasonableness of the brokerage commissions paid, the Investment Manager, having in mind the fund's best interests, considers all factors it deems relevant, including, in no particular order of importance, and by way of illustration, the price, size and type of the transaction, the nature of the market for the security or other investment, the amount of the commission, research and brokerage services provided by a broker-dealer, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved, the benefit of any capital committed by a broker-dealer to facilitate the efficient execution of the transaction and the quality of service rendered by the broker-dealer in other transactions.

The Investment Manager may cause the fund to pay a broker-dealer that provides "brokerage and research services" (as defined in the Exchange Act and as described above) to the Investment Manager an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the fund on an agency basis in excess of the commission another broker-dealer would have charged for effecting that transaction. The Investment Manager may also instruct an executing broker to "step out" a portion of the trades placed with a broker to other brokers that provide brokerage and research services to the Investment Manager. The Investment Manager's authority to cause the fund to pay any such greater commissions or to instruct a broker to "step out" a portion of a trade is subject to the requirements of applicable law and such policies as the Trustees may adopt from time to time. It is the position of the staff of the SEC that Section 28(e) of the Exchange Act does not apply to the payment of such greater commissions in "principal" transactions. Accordingly, the Investment Manager will use its best effort to obtain the most favorable price and execution available with respect to such transactions, as described above.

The Management Contract provides that commissions, fees, brokerage or similar payments received by the Investment Manager or an affiliate in connection with the purchase and sale of portfolio investments of the fund, less any direct expenses approved by the Trustees, shall be recaptured by the fund through a reduction of the fee payable by the fund under the Management Contract. The Investment Manager seeks to recapture for the fund soliciting dealer fees on the tender of the fund's portfolio securities in tender or exchange offers. Any such fees which may be recaptured are likely to be minor in amount.

For those funds sub-advised by FTIML and where FTIML places trades on behalf of those funds, the rules of the United Kingdom's Financial Conduct Authority (the "FCA Rules") apply with respect to the receipt of investment research. Under the FCA Rules, FTIML may not obtain research using brokerage commissions paid by funds sub-advised by FTIML. FTIML will use only "hard dollars" (i.e., from its own resources) to acquire external research used by London-based personnel, including fixed income personnel, except with respect to Minor Non-Monetary Benefits.

Minor Non-Monetary Benefits include, among other categories:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research from independent research providers who are not engaged in execution services and are not part of a financial services group that offers execution or brokerage services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research on listed and unlisted small and medium-sized enterprises with a market capitalization below £200 million;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research focusing on fixed income, currency, and commodity investment strategies; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Written research that is openly available to other firms or to the general public.

FTIML may use soft dollar commissions generated by trades of the Investment Manager and other Putnam affiliates other than FTIML to obtain research received by employees of FTIML that qualify as a Minor Non-Monetary Benefit.

**Principal Underwriter** 

Franklin Distributors, located at One Franklin Parkway, San Mateo, CA 94403-1906, is the principal underwriter of shares of the fund and the other continuously offered Putnam Funds. Franklin Distributors is a registered broker-dealer, a member of the Financial Industry Regulatory Authority, and an indirect, wholly-owned subsidiary of Franklin Templeton. See "Charges and expenses" in Part I of this SAI for information on payments received by Franklin Distributors or Foreside Fund Services, LLC, the principal underwriter for the certain of the funds prior to August 2, 2024.

**Personal Investments by Employees of Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and Officers and Trustees of the Fund** 

Employees of Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and officers and Trustees of the fund are subject to significant restrictions on engaging in personal securities transactions. These restrictions are set forth in the Codes of Ethics adopted by Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and by the fund (the "Code of Ethics"). The Code of Ethics, in accordance with Rule 17j-1 under the 1940 Act, contains provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the fund.

The Code of Ethics does not prohibit personnel from investing in securities that may be purchased or held by the fund. However, the Code of Ethics, consistent with standards recommended by the Investment Company Institute's Advisory Group on Personal Investing and requirements established by Rule 17j-1 and rules adopted under the Investment Advisers Act of 1940, among other things, prohibits personal securities investments without pre-clearance, imposes time periods during which personal transactions may not be made in certain securities by employees with access to investment information, and requires the timely submission of broker confirmations and quarterly reporting of personal securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process.

The Code of Ethics does not prohibit unaffiliated officers and Trustees from investing in securities that may be held by the fund; however, the Putnam Funds Code of Ethics regulates the personal securities transactions of unaffiliated Trustees of the fund, including limiting the time periods during which they may personally buy and sell certain securities and requiring them to submit reports of personal securities transactions under certain circumstances.

The fund's Trustees, in compliance with Rule 17j-1, approved the Code of Ethics and are required to approve any material changes to the Code of Ethics. The Trustees also provide continued oversight of personal investment policies and annually evaluate the implementation and effectiveness of the Code of Ethics.

**Transfer Agent** 

State Street Bank and Trust Company, located at One Congress Street, Suite 1, Boston, Massachusetts 02114-2016, is the fund's transfer agent. The Investment Manager, and not the fund, bears the cost of these services under the terms of its management contract with the fund.

**Custodian** 

[State Street Bank and Trust Company, located at One Congress Street, Suite 1, Boston, Massachusetts 02114-2016, is the fund's custodian. State Street is responsible for safeguarding and controlling the fund's cash and securities, handling the receipt and delivery of securities, collecting interest and dividends on the fund's investments, serving as the fund's foreign custody manager, providing reports on foreign securities depositaries, making payments covering the expenses of the fund and performing other administrative duties. State Street does not determine the investment policies of the fund or decide which securities the fund will buy or sell. State Street has a lien on the fund's assets to secure charges and advances made by it. The fund may from time to time enter into brokerage arrangements that reduce or recapture fund expenses, including custody

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expenses. The fund also has an offset arrangement that may reduce the fund's custody fee based on the amount of cash maintained by its custodian.]

**Auditor** 

[ ], 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.

**Counsel to the Fund** 

Ropes & Gray LLP serves as counsel to the fund, and is located at Prudential Tower, 800 Boylston Street, Boston, Massachusetts 02199.

**DETERMINATION OF NET ASSET VALUE** 

The fund determines the net asset value per share once each day the NYSE is open. Currently, the NYSE is closed Saturdays, Sundays and the following holidays: New Year's Day, Rev. Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth, the Fourth of July, Labor Day, Thanksgiving Day and Christmas Day. The fund determines net asset value as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern Time. The net asset value per share equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares.

Securities and other assets ("Securities") for which market quotations are readily available, as defined by Rule 2a-5 under the 1940 Act, are valued at prices which, in the opinion of the Investment Manager, most nearly represent the market values of such Securities. Currently, prices for these Securities are determined using the last reported sale price (or official closing price for Securities listed on certain markets) or, if no sales are reported (as in the case of some Securities traded over-the-counter), the mean between the last reported bid and ask prices, the "mid price" (prior to July 22, 2024, the last reported bid price was used). All other Securities are valued by the Investment Manager or other parties at their fair value following procedures approved by the Trustees.

Reliable market quotations are not considered to be readily available for, among other Securities, long-term corporate bonds and notes, certain preferred stocks, tax-exempt securities, and certain foreign securities. These investments are valued at fair value, generally on the basis of valuations furnished by approved pricing services, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities that are generally recognized by institutional traders. Other Securities, such as various types of options, are valued at fair value on the basis of valuations furnished by broker-dealers or other market intermediaries.

The Investment Manager values all other Securities at fair value using its internal resources. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the Securities (including any registration expenses that might be borne by the fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted Securities of the same class, the size of the holding, the prices of any recent transactions or offers with respect to such Securities and any available analysts' reports regarding the issuer. In the case of Securities that are restricted as to resale, the Investment Manager determines fair value based on the inherent worth of the Security without regard to the restrictive feature, adjusted for any diminution in value resulting from the restrictive feature.

Generally, trading in certain Securities (such as foreign securities) is substantially completed each day at various times before the close of the NYSE. The closing prices for these Securities in markets or on exchanges outside the U.S. that close before the close of the NYSE may not fully reflect events that occur after such close but before the close of 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 fair value prices will be used will vary, it is possible that fair value prices will be used by the fund to a significant extent. In addition, Securities held by some of the funds may be traded in foreign markets that are open for business on days that the fund is not, and the trading of such Securities on those days may have an impact on the value of a shareholder's investment at a time when the shareholder cannot buy and sell shares of the fund.

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Currency exchange rates used in valuing Securities are normally determined as of 4:00 p.m. Eastern Time.

Occasionally, events affecting such exchange rates may occur between the time of the determination of exchange rates and the close of the NYSE, which, in the absence of fair valuation, would not be reflected in the computation of the fund's net asset value. If events materially affecting the currency exchange rates occur during such period, then the exchange rates used in valuing affected Securities will be valued by the Investment Manager at their fair value following procedures approved by the Trustees.

In addition, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain Securities (such as convertible bonds, U.S. government securities and tax-exempt securities) are determined based on market quotations collected before the close of the NYSE. Occasionally, events affecting the value of such Securities may occur between the time of the determination of value and the close of the NYSE, which, in the absence of fair value prices, would not be reflected in the computation of the fund's net asset value. If events materially affecting the value of such Securities occur during such period, then these Securities will be valued by the Investment Manager at their fair value following procedures approved by the Trustees. It is expected that any such instance would be very rare.

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 at a given point in time and does not reflect an actual market price.

The fund may also value its Securities at fair value under other circumstances pursuant to procedures approved by the Trustees.

**Money Market Funds**

"Retail money market funds" and "government money market funds" each as defined by Rule 2a-7 under the 1940 Act generally value their portfolio securities at amortized cost according to Rule 2a-7 under the 1940 Act.

Since the net income of a money market fund is declared as a dividend each time it is determined, the net asset value per share of a retail money market fund and government money market fund typically remains at $1.00 per share immediately after such determination and dividend declaration. Any increase in the value of a shareholder's investment in a money market fund representing the reinvestment of dividend income is reflected by an increase in the number of shares of that fund in the shareholder's account on the last business day of each month. It is expected that a money market fund's net income will normally be positive each time it is determined. However, if because of realized losses on sales of portfolio investments, a sudden rise in interest rates, or for any other reason the net income of a fund determined at any time is a negative amount, a money market fund may offset such amount allocable to each then shareholder's account from dividends accrued during the month with respect to such account. If, at the time of payment of a dividend, such negative amount exceeds a shareholder's accrued dividends, a money market fund may reduce the number of outstanding shares by treating the shareholder as having contributed to the capital of the fund that number of full and fractional shares which represent the amount of the excess. Each shareholder is deemed to have agreed to such contribution in these circumstances by his or her investment in a money market fund.

**SHAREHOLDER LIABILITY** 

The Trust is a statutory trust organized under Delaware law. Delaware law provides that, except to the extent otherwise provided in the Amended and Restated Agreement and Declaration of Trust, shareholders shall be entitled to the same limitations of personal liability extended to stockholders of private corporations for profit organized under the general corporation law of Delaware. The courts of some states, however, may decline to apply Delaware law on this point. The Amended and Restated Agreement and Declaration of Trust contains an express disclaimer of shareholder liability for the debts, liabilities, obligations, and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or the funds.

The Amended and Restated Agreement and Declaration of Trust provides that the Trust shall not have any claim against shareholders except for the payment of the purchase price of shares and requires that each agreement, obligation, or instrument entered into or executed by the Trust or the Trustees relating to the Trust or to a fund shall include a provision limiting the obligations created thereby to the Trust or to one or more funds and its or their assets. The Amended and Restated Agreement and Declaration of Trust further provides that shareholders of a fund shall not have a claim on or right to any assets belonging to any other fund.

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**DISCLOSURE OF PORTFOLIO INFORMATION** 

The Trustees of the Putnam funds have adopted policies with respect to the disclosure of the fund's portfolio holdings by the fund, the Investment Manager, or their affiliates. These policies provide that information about the fund's portfolio generally may not be released to any party prior to (i) the day after the posting of such information on franklintempleton.com, (ii) the filing of the information with the SEC in a required filing, or (iii) the dissemination of such information to all shareholders simultaneously. Certain limited exceptions pursuant to the fund's policies are described below. In addition, these policies do not apply to the sharing of fund portfolio holdings information with investment personnel involved in the management of other funds that invest in such fund and that are managed by the Investment Manager or its affiliates. The Trustees will periodically receive reports from the fund's Chief Compliance Officer regarding the operation of these policies and procedures, including any arrangements to make non-public disclosures of the fund's portfolio information to third parties. The Investment Manager and its affiliates are not permitted to receive compensation or other consideration in connection with disclosing information about the fund's portfolio holdings to third parties.

**Public Disclosures** 

On each Business Day, before commencement of trading in shares on the listing exchange, each fund will disclose its complete portfolio holdings on its website. The fund will disclose its top 10 holdings and related portfolio information monthly beginning on or after 5 business days after the end of each month on franklintempleton.com. The find will also disclose on its website its complete holdings as of the end of the prior month on a monthly basis beginning on or before the 15th calendar day after the end of each month..

The fund will also file its portfolio holdings with the SEC twice each year on Form N-CSR (with respect to each annual period and semi-annual period). In addition, the fund will file reports of portfolio holdings on Form N-PORT 60 days after each fiscal quarter (for the respective fiscal quarter), with the schedule of portfolio holdings filed on Form N-PORT for the third month of the first and third fiscal quarter made publicly available. Shareholders may obtain the Form N-CSR filings and the publicly available portions of Form N-PORT filings on the SEC's website at http://www.sec.gov. Form N-CSR filings are available upon filing and information reported on Form N-PORT filings for the third month of a fiscal quarter is available 60 days after the end of the fiscal quarter. You may call the SEC at 1-800-SEC-0330 for information about the SEC's website.

The Investment Manager or its affiliates may include fund portfolio information that has already been made public through a Web posting or SEC filing in marketing literature and other communications to shareholders, advisors or other parties, provided that, in the case of information made public through the Web, the information is disclosed no earlier than the day after the date of posting to the website.

**Other Disclosures** 

In order to address potential conflicts between the interest of fund shareholders, on the one hand, and those of the Investment Manager, Franklin Distributors or any affiliated person of those entities or of the fund, on the other hand, the fund's policies require that non-public disclosures of information regarding the fund's portfolio may be made only if there is a legitimate business purpose consistent with fiduciary duties to all shareholders of the fund. In addition, the party receiving the non-public information must sign a non-disclosure agreement unless otherwise approved by the Chief Compliance Officer of the fund. Arrangements to make non-public disclosures of the fund's portfolio information must be approved by the Chief Compliance Officer of the fund. The Chief Compliance Officer will report on an ongoing basis to a committee of the fund's Board of Trustees consisting only of Trustees who are not "interested persons" of the fund or the Investment Manager regarding any such arrangement that the fund may enter into with third parties other than service providers to the fund.

Daily portfolio composition files ("PCFs") that identify a basket of specified securities that may overlap with the actual or expected portfolio holdings of a fund will be provided as frequently as daily to each fund's service providers to facilitate the provision of services to each fund and to certain other entities in connection with the dissemination of information necessary for transactions in Creation Units. Each business day prior to the opening of the listing exchange, a PCF containing a list of the names and the required number of shares of each Deposit Security for each fund will be provided for dissemination through the facilities of the NSCC; through other fee-based services to NSCC members; subscribers to the fee-based services, including Authorized Participants; and to entities that publish and/or analyze such information in connection with the process of purchasing or

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redeeming Creation Units or trading fund shares in the secondary market. In addition to making PCFs available to the NSCC, each fund will disclose the PCF or portions thereof as frequently as daily on franklintempleton.com.

The fund may also periodically provide non-public information about its portfolio holdings to rating and ranking organizations and other providers of industry data, such as Lipper Inc., Morningstar Inc., Bloomberg and Thomson Reuters, in connection with those firms' research on and classification of the fund and in order to gather information about how the fund's attributes (such as volatility, turnover, and expenses) compare with those of peer funds. The fund may also periodically provide non-public information about its portfolio holdings to consultants that provide portfolio analysis services or other investment research or trading analytics. Such recipients of portfolio holdings include Barclays, FactSet, ITG, Trade Informatics, ConsenSys, ENSO Financial Analytics, Bloomberg and Credit Suisse. Any such rating, ranking, or consulting or other firm would be required to keep the fund's portfolio information confidential and would be prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the fund. Such firms may receive portfolio holdings information only from certain funds and such information may be provided in greater or lesser detail depending on the nature of the services provided by the relevant firm.

In addition, the Investment Manager offers model separately managed account portfolios to sponsoring broker-dealers ("Program Sponsors") that in turn offer those portfolios to their customers. The Investment Manager also provides investment advisory services to retail separately managed account clients through managed account programs sponsored by broker-dealers and other financial intermediaries (together, "SMAs"). The model SMA portfolios may follow investment programs that are similar or identical in material respects to those of specific Putnam funds or other client accounts and, as a result, there may be substantial overlap between the securities holdings and transactions of an model SMA portfolio and those of any similarly managed funds or accounts. If such model portfolios are substantially similar to those of a U.S. registered fund, such model portfolios may be provided to Program Sponsors so long as: (1) the recipient Program Sponsors has executed a non-disclosure agreement or other agreement containing or incorporating confidentiality provisions that restrict the use and dissemination of confidential portfolio holdings information received by the Program Sponsor as described in the following sentence, or other provisions that impose similar restrictions on such use and dissemination and*,* (2) the model SMA portfolio has been deemed sufficiently liquid by the Investment Manager's liquidity committee or the Investment Manager, as determined in their reasonable judgment. Such agreement must provide that the Program Sponsor agrees that: (1) it is subject to a duty of confidentiality; (2) it will use confidential model portfolio information only to the extent necessary to perform its obligations under the agreement; and (3) it will not disclose confidential model portfolio information except to personnel or parties who have a need to know such confidential information in connection with, or in order to fulfill the purposes contemplated by, the agreement.

**INFORMATION SECURITY RISKS** 

*Cyber security risk.* With the increased use of interconnected technologies such as the Internet and the dependence on computer systems to perform necessary business functions, investment companies such as the fund and its service providers may be prone to operational, information security and related risks resulting from third-party cyber-attacks and/or other technological malfunctions. Cyber-attacks may include stealing or corrupting data maintained online or digitally, preventing legitimate users from accessing information or services on a website, releasing confidential information without authorization, and causing operational disruption. Successful cyber-attacks against, or security or technology breakdowns of, the fund or its adviser, custodian, transfer agent, or other affiliated or third-party service providers may adversely affect the fund and its shareholders. For example, cyber-attacks may interfere with the processing of shareholder transactions, impact the fund's ability to calculate its net asset value, cause the release of private shareholder information or confidential fund information, impede trading, cause reputational damage, and subject the fund or others to regulatory fines, penalties or financial losses, reimbursement or other compensation costs, and additional compliance costs. Similar types of cyber security risks also are present for issuers of securities in which the fund invests, which could result in material adverse consequences for such issuers, and may cause the fund's investment in such securities to lose value. The fund and the Investment Manager or sub-advisor (as applicable) may have limited ability to prevent or mitigate cyber-attacks or security or technology breakdowns affecting the fund's third-party service providers. While the Investment Manager and sub-advisor (as applicable) have established business continuity plans and systems designed to prevent or reduce the impact of cyber-attacks, such plans and systems are subject to inherent limitations.

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**PROXY VOTING GUIDELINES AND PROCEDURES** 

The Board of Trustees have delegated proxy voting authority for the securities held in the funds' portfolios to Putnam Management and have approved Putnam Management's current proxy voting guidelines and procedures. Putnam Management retained an independent proxy voting service to assist in vote analysis, implementation, recordkeeping and reporting services. The proxy voting guidelines summarize Putnam Management's positions on various issues of concern to investors and provide direction to the proxy voting service as to how fund portfolio securities should be voted on proposals dealing with particular issues. The proxy voting procedures explain the role of Putnam Management personnel and the proxy voting service in the proxy voting process, describe the procedures for referring matters involving investment considerations to the investment personnel of Putnam Management, and describe the procedures for handling potential conflicts of interest. Putnam Management's proxy voting guidelines and procedures are included in this SAI as Appendix A. The Trustees will review the funds' proxy voting from time to time and will review annually Putnam Management's proxy voting guidelines and procedures. Information regarding how the funds' proxies relating to portfolio securities were voted during the 12-month period ended June 30, 2024 is available on www.franklintempleton.com, and on the SEC's website at www.sec.gov. If you have questions about finding forms on the SEC's website, you may call the SEC at 1-800-SEC-0330. You may also obtain Putnam Management's proxy voting guidelines and procedures by calling Putnam's Shareholder Services at 1-800-225-1581.

**SECURITIES RATINGS** 

The ratings of securities in which the fund may invest will be measured at the time of purchase and, to the extent a security is assigned a different rating by one or more of the various rating agencies, the Investment Manager may use the highest rating assigned by any agency. The Investment Manager will not necessarily sell an investment if its rating is reduced. Below are descriptions of ratings, as provided by the rating agencies, which represent opinions as to the quality of various debt instruments.

**<u>Moody's Investors Service, Inc.</u>** 

**Global Long-Term Rating Scale** (original maturity of 1 year or more)

**Aaa –** Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

**Aa –** Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

**A –** Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

**Baa –** Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

**Ba –** Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

**B –** Obligations rated B are considered speculative and are subject to high credit risk.

**Caa –** Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

**Ca –** Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

**C –** Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a "(hyb)" indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.

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By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write- downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.

**Global Short-Term Rating Scale** (original maturity of 13 months or less)

**P-1 –** Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

**P-2 –** Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

**P-3 –** Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.

**NP –** Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

US Municipal Short-Term Obligation Ratings

**MIG 1 –** This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

**MIG 2 –** This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

**MIG 3 –** This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

**SG –** This designation denotes speculative grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

**US Municipal Demand Obligation Ratings** 

**VMIG 1 –** This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**VMIG 2 –** This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**VMIG 3 –** This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**SG –** This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.

**<u>Standard & Poor's</u>** 

**Long-Term Issue Credit Ratings** (original maturity of one year or more)

**AAA –** An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.

**AA –** An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.

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**A –** An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.

**BBB –** An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

**BB; B; CCC; CC** and **C –** Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the lowest degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

**BB –** An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

**B –** An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

**CCC –** An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

**CC –** An obligation rated 'CC' is currently highly vulnerable to nonpayment. The 'CC' rating is used when a default has not yet occurred, but Standard & Poor's expects default to be a virtual certainty, regardless of the anticipated time to default.

**C –** An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.

**D –** An obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless Standard & Poor's believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer.

**NR –** This indicates that no rating has been requested, or that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.

Note: The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

**Short-Term Issue Credit Ratings** (original maturity of 365 days or less)

**A-1 –** A short-term obligation rated'A-1' is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.

**A-2 –** A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.

**A-3 –** A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

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**B –** A short-term obligation rated 'B' is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitments.

**C –** A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.

**D –** A short-term obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the due date, unless Standard & Poor's believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer.

**Municipal Short-Term Note Ratings** (original maturity of 3 years or less)

**SP-1 –** Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

**SP-2 –** Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

**SP-3 –** Speculative capacity to pay principal and interest.

**<u>Fitch Ratings</u>**

**Long-Term Rating Scales** 

**AAA –** Highest credit quality. 'AAA' ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

**AA –** Very high credit quality. 'AA' ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

**A –** High credit quality. 'A' ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.

**BBB –** Good credit quality. 'BBB' ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

**BB –** Speculative. 'BB' ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.

**B –** Highly speculative. 'B' ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.

**CCC –** Substantial credit risk. Default is a real possibility.

**CC –** Very high levels of credit risk. Default of some kind appears probable.

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**C –** Exceptionally high levels of credit risk. Default is imminent or inevitable, or the issuer is in standstill. Conditions that are indicative of a 'C' category rating for an issuer include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the issuer has entered into a grace or cure period following non-payment of a material financial obligation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default
on a material financial obligation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Fitch Ratings otherwise believes a condition of 'RD' or 'D' to be imminent or inevitable,
including through the formal announcement of a distressed debt exchange.

**RD –** Restricted default. 'RD' ratings indicate an issuer that in Fitch Ratings' opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased operating. This would include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the selective payment default on a specific class or currency of debt;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the uncured expiry of any applicable grace period, cure period or default forbearance period following a
payment default on a bank loan, capital markets security or other material financial obligation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. the extension of multiple waivers or forbearance periods upon a payment default on one or more material
financial obligations, either in series or in parallel; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. execution of a distressed debt exchange on one or more material financial obligations.

**D –** Default. 'D' ratings indicate an issuer that in Fitch Ratings' opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business.

Default ratings are not assigned prospectively to entities or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a distressed debt exchange.

"Imminent" default typically refers to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has formally announced a distressed debt exchange, but the date of the exchange still lies several days or weeks in the immediate future.

In all cases, the assignment of a default rating reflects the agency's opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the definition of default under the terms of an issuer's financial obligations or local commercial practice.

Note: The modifiers "+" or "-" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the 'AAA' Long-Term Issuer Default Rating (IDR) category, or to Long-Term IDR categories below 'B'.

**Short-Term Ratings**

**F1 –** Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature.

**F2 –** Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments.

**F3 –** Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.

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**B** – Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.

**C** – High short-term default risk. Default is a real possibility.

**RD** – Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations, typically applicable to entity ratings only.

**D** – Default. Indicates a broad-based default event for an entity, or the default of a short-term obligation.

**Appendix A** 

**Putnam Investments** 

<u>Proxy Voting Procedures</u> 

*<u>Introduction and Summary</u>*

Many of Putnam's investment management clients have delegated to Putnam the authority to vote proxies for shares in the client accounts Putnam manages. Putnam believes that the voting of proxies can be an important tool for institutional investors to promote best practices in corporate governance and votes all proxies in the best interests of its clients as investors. In Putnam's view, strong corporate governance policies, most notably oversight by an independent board of qualified directors, best serve investors' interests. Putnam will vote proxies and maintain records of voting of shares for which Putnam has proxy voting authority in accordance with its fiduciary obligations and applicable law.

Putnam's voting policies are rooted in our views that (1) strong, independent corporate governance is important to long-term company financial performance, and (2) long-term investors' active engagement with company management, including through the proxy voting process, strengthens issuer accountability and overall market discipline, potentially reducing risk and improving returns over time. Our voting program is offered as a part of our investment management services, at no incremental fee to Putnam, and, while there can be no guarantees, it is intended to offer potential investment benefits over a long-term horizon. Our voting policies are designed with investment considerations in mind, not as a means to pursue particular political, social, or other goals. As a result, we may not support certain proposals whose costs to the issuer (including implementation costs, practicability, and other factors), in Putnam's view, outweigh their investment merits.

This memorandum sets forth Putnam's policies for voting proxies. It covers all accounts for which Putnam has proxy voting authority. These accounts include the Putnam Mutual Funds<sup>1</sup> and Putnam Exchange-Traded Funds, US and international institutional accounts and funds managed or sub-advised by The Putnam Advisory Company, LLC and Putnam Fiduciary Trust Company, LLC. In addition, the policies include US mutual funds and other accounts sub-advised by Putnam Investment Management, LLC.<sup>2</sup>

*<u>Proxy Committee</u>*

<sup>1</sup> Effective January 27, 2023, the Board of Trustees of the Putnam Mutual Funds delegated proxy voting authority to Putnam Investment Management, LLC, the investment manager to the Putnam Mutual Funds.

<sup>2</sup> The Putnam Proxy Voting Procedures and Guidelines will apply also to certain funds and institutional and other accounts managed by Franklin Advisers, Inc. ("FAV") but formerly managed or sub-advised by one of the Putnam adviser entities identified above, pursuant to sub-advisory agreements in effect from time to time between FAV and the relevant Putnam entity(ies).

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Putnam has a Proxy Committee composed of senior professionals, including from the Putnam Equity investment team and the Putnam Equity Sustainability Strategy group. The Chief Investment Officer of Putnam Equity appoints the members of the Proxy Committee. The Proxy Committee is responsible for setting general policy as to proxies. Specifically, the Committee:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Reviews these procedures and the Proxy Voting Guidelines annually and approves any amendments considered to be
advisable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Considers special proxy issues as they may from time to time arise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*3.* Must approve all vote overrides recommended by investment professionals.

*<u>Proxy Voting Administration</u>*

The Putnam Sustainability Strategy group administers Putnam's proxy voting through a Proxy Voting Team. The Proxy Voting Team has the following duties:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Annually prepares the Proxy Voting Guidelines and distributes them to the Proxy Committee for review.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Coordinates the Proxy Committee's review of any new or unusual proxy issues and serves as Secretary
thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Manages the process of referring issues to portfolio managers for voting instructions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Oversees the work of any third-party vendor hired to process proxy votes (as of the date of these procedures
Putnam has engaged Institutional Shareholder Services (ISS) to process proxy votes) and the process of setting up the voting process with ISS and custodial banks for new clients.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Coordinates responses to investment professionals' questions on proxy issues and proxy policies, including
forwarding specialized proxy research from ISS and other vendors and forwards information to investment professionals prepared by other areas at Putnam.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Implements the exception process with respect to referred items on securities held solely in accounts managed
by the Global Asset Allocation ("GAA") team within Franklin Templeton Investment Solutions described in more detail in the Proxy Referral section below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Maintains required records of proxy votes on behalf of the appropriate Putnam client accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Prepares and distributes reports required by Putnam clients.

*<u>Proxy Voting Guidelines</u>*

Putnam maintains written voting guidelines ("Guidelines") setting forth voting positions determined by the Proxy Committee on those issues believed most likely to arise day to day. The Guidelines may call for votes to be cast normally in favor of or opposed to a matter or may deem the matter an item to be referred to investment professionals on a case-by-case basis. A copy of the Guidelines is attached to this memorandum as Exhibit A.

In light of our views on the importance of issuer governance and investor engagement, which we believe are applicable across our various strategies and clients, regardless of a specific portfolio's investment objective, Putnam will vote all proxies in accordance with the Guidelines, subject to two exceptions as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If the portfolio managers of client accounts holding the stock of a company with a proxy vote believe that
following the Guidelines in any specific case would not be in the clients' best interests, they may request the Proxy Voting Team not to follow the guidelines in such case. The request must be in writing and include an explanation of the
rationale for doing so. The Proxy Voting Team will review any such request with the Proxy Committee (or, in cases with limited time, with the Chair of the Proxy Committee acting on the Proxy Committee's behalf) prior to implementing the
request.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Putnam may accept instructions to vote proxies under client specific guidelines subject to review and
acceptance by the Investment Division and the Legal and Compliance Department.

*<u>Other</u>*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Putnam may elect not to vote when the security is no longer held.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Putnam will  **<u>abstain</u>** on items that require case-by-case review when a vote recommendation from the appropriate investment professional(s) cannot be obtained due to restrictive voting deadlines or other prohibitive operational or administrative
requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Where securities held in Putnam client accounts, including the Putnam mutual funds, have been loaned to third
parties in connection with a securities lending program administered by Putnam (through securities lending agents overseen by Putnam), Putnam has instructed lending agents to recall U.S. securities on loan to vote proxies, in accordance with
Putnam's securities lending procedures. Due to differences in non-U.S. markets, Putnam does not currently seek to recall non-U.S. securities on loan. In addition,
where Putnam does not administer a client's securities lending program, this recall policy does not apply, since Putnam generally does not have information on loan details or authority to effect recalls in those cases. It is possible that, for
impracticability or other reasons, a recalled security may not be returned to the relevant custodian in time to allow Putnam to vote the relevant proxy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Putnam will make its reasonable best efforts to vote all proxies except when impeded by circumstances that are
reasonably beyond its control and responsibility, such as custodial proxy voting services, in part or whole, not available or not established by a client, or custodial error.

*<u>Proxy Voting Referrals</u>*

Under the Guidelines, certain proxy matters will be referred to Portfolio Managers. The Portfolio Manager receiving the referral request may delegate the vote decision to an appropriate Analyst from among a list of eligible analysts (such list to be approved by the Chief Investment Officer of the Putnam Equity group and the Director of Equity Research for the Putnam Equity group). The Analyst will be required to make the affirmation and disclosures identified in (3) below. Normally specific referral items will be referred to the portfolio team leader (or another member of the portfolio team he or she designates) whose accounts hold the greatest number of shares of the issuer of the proxies through the Proxy Referral Administration Database. The referral request contains (1) a field that will be used by the portfolio team leader or member for recommending a vote on each referral item, (2) a field for describing any contacts relating to the proxy referral item the portfolio team may have had with any Franklin Templeton employee outside Putnam Equity or with any person other than a proxy solicitor acting in the normal course of proxy solicitation, and (3) a field for portfolio managers to affirm that they are making vote recommendations in the best interest of client accounts and have disclosed to Compliance any potential conflicts of interest relevant to their vote recommendation.

Putnam may vote any referred items on securities held solely in accounts managed by the GAA team within Franklin Templeton Investment Solutions (and not held by any other investment product team) in accordance with the recommendation of Putnam's third-party proxy voting service provider. The Proxy Voting Team will first give the relevant portfolio manager(s) on the GAA team the opportunity to review the referred items and vote on them. If the portfolio manager(s) on the GAA team do not decide to make any active voting decision on any of the referred items, the items will be voted in accordance with the service provider's recommendation. If the security is also held by other investment teams at Putnam Equity, the items will be referred to the largest holder who is not a member of the GAA team.

The portfolio team leader or members who have been requested to provide a recommendation on a proxy referral item will complete the referral request. Upon receiving each completed referral request from the applicable Portfolio Manager or Analyst, the Proxy Voting Team will review the completed request for accuracy and completeness, and will follow up with investment personnel as appropriate.

*<u>Conflicts of Interest</u>*

A potential conflict of interest may arise when voting proxies of an issuer which has a significant business relationship with Putnam. For example, Putnam could manage a defined benefit or defined contribution pension plan for the issuer. Putnam's

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policy is to vote proxies based solely on the investment merits of the proposal. In order to guard against conflicts, the following procedures have been adopted:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Proxy Committee is composed of senior professionals, including Portfolio Managers in Putnam Equity and the
Putnam Equity Sustainability Strategy group. None of these individuals or groups reports to Franklin Templeton's marketing businesses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. No Franklin Templeton employee outside Putnam Equity may contact any portfolio manager about any proxy vote
without first contacting the Proxy Voting Team or a senior lawyer in the Legal and Compliance Department. There is no prohibition on employees seeking to communicate investment-related information to investment professionals except for Putnam's
restrictions on dissemination of material, non-public information. However, the Proxy Voting Team will coordinate the delivery of such information to investment professionals to avoid appearances of conflict.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Investment professionals responding to referral requests must disclose any contacts with third parties other
than normal contact with proxy solicitation firms and must affirm that they are making vote recommendations in the best interest of client accounts and have disclosed to the Proxy Voting Team any potential conflicts of interest relevant to their
vote recommendation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Proxy Voting Team will review the name of the issuer of each proxy that contains a referral item against
various sources of Putnam business relationships maintained by the Legal and Compliance Department or Client Service for potential material business relationships (i.e., conflicts of interest). For referrals, the Proxy Voting Team will complete the
Proxy Voting Conflict of Interest Disclosure Form (attached as Exhibit B and C) via the Proxy Referral Administration Database and will prepare a quarterly report for the Putnam Chief Compliance Officer identifying all completed Conflict of Interest
Disclosure forms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Putnam's Proxy Voting Guidelines may only be overridden with the written recommendation from a member of
the Investment Division and concurrence of the Proxy Committee (or, in cases with limited time, with the Chair of the Proxy Committee on the Proxy Committee's behalf).

*<u>Recordkeeping</u>*

The Putnam Equity Sustainability Strategy Group will retain copies of the following books and records:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A copy of the Proxy Voting Procedures and Guidelines as are from time to time in effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. A copy of each proxy statement received with respect to securities in client accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Records of each vote cast for each client;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Internal documents generated in connection with a proxy referral, such as emails, memoranda, etc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Written reports to clients on proxy voting and all client requests for information and Putnam's response.

All records will be maintained for seven years. A proxy vendor may on Putnam's behalf maintain the records noted in 2 and 3 above if it commits to providing copies promptly upon request.

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<u>Exhibit A to Proxy Procedures</u> 

**Putnam Investments Proxy Voting Guidelines** 

The proxy voting guidelines below summarize Putnam's positions on various issues of concern to investors and indicate how client portfolio securities will be voted on proposals dealing with a particular issue. The proxy voting service is instructed to vote all proxies relating to client portfolio securities in accordance with these guidelines, except as otherwise instructed by the Proxy Voting Team.

Putnam's voting policies are rooted in our views that (1) strong, independent corporate governance is important to long-term company financial performance, and (2) long-term investors' active engagement with company management, including through the proxy voting process, strengthens issuer accountability and overall market discipline, potentially reducing risk and improving returns over time. Our voting program is offered as a part of our investment management services, at no incremental fee to Putnam, and, while there can be no guarantees, it is intended to offer potential investment benefits over a long-term horizon. Our voting policies are designed with investment considerations in mind, not as a means to pursue particular political, social, or other goals. As a result, we may not support certain proposals whose costs to the issuer (including implementation costs, practicability, and other factors), in Putnam's view, outweigh their investment merits.

These proxy voting policies are intended to be decision-making guidelines. The guidelines are not exhaustive and do not include all potential voting issues. In addition, as contemplated by and subject to Putnam's Proxy Voting Procedures, because proxy issues and the circumstances of individual companies are so varied, portfolio teams may recommend votes that may vary from the general policy choices set forth in the guidelines.

The following guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals which have been approved and recommended by a company's board of directors. Part II deals with proposals submitted by shareholders for inclusion in proxy statements. Part III addresses unique considerations pertaining to non-US issuers.

**I. Board-Approved Proposals** 

Proxies will be voted **<u>for</u>** board-approved proposals, except as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.  **<u>Matters Relating to the Board of Directors</u>** 

***Uncontested Election of Directors***

The board of directors has the important role of overseeing management and its performance on behalf of shareholders. When evaluating a company's board, Putnam may consider the diversity of professional backgrounds and personal characteristics. Putnam believes that companies generally benefit from diversity on the board, including diversity with respect to gender, ethnicity, race, skills, perspectives and experience.

Proxies will be voted **<u>for</u>** the election of the company's nominees for directors (and/or subsidiary directors) and **<u>for</u>** board-approved proposals on other matters relating to the board of directors (provided that such nominees and other matters have been approved by an independent nominating committee), except as follows:

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have a majority of independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have nominating, audit and compensation committees composed solely of independent directors,
or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has more than <u>15</u> members or fewer than <u>five</u> members, absent special circumstances.

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|:---|:---|
| ⮚ | Putnam may refrain from withholding votes from the board due to insufficient key committee independence due to director resignation, change in board structure, or other specific circumstances, provided that the company has stated (for example in an 8-K), or it can otherwise be determined, that the board will address committee composition to ensure compliance with the applicable corporate governance code in a timely manner after the shareholder meeting and the company has a history of appropriate board independence.  |

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Unless otherwise indicated, for the purposes of determining whether a board has a majority of independent directors and independent nominating, audit, and compensation committees, an independent director is a director who (1) meets all requirements to serve as an independent director of a company under the final NYSE Corporate Governance Rules (e.g., no material business relationships with the company and no present or recent employment relationship with the company (including employment of an immediate family member as an executive officer)), and (2) has not accepted directly or indirectly any consulting, advisory, or other compensatory fee (excluding immaterial fees for transactional services as defined by the NYSE Corporate Governance rules) from the company other than in his or her capacity as a member of the board of directors or any board committee. Putnam believes that the receipt of such compensation for services other than service as a director raises significant independence issues.

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director who is considered an independent director by the company and who has received compensation within the last three years from the company for the provision of professional services (e.g., investment banking, consulting, legal or financial advisory fees).  |

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| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director who attends fewer than 75% of board and committee meetings. Putnam may refrain from withholding votes on a **<u>case-by-case</u>** basis if a valid reason for the absence exists, such as illness, personal emergency, potential conflict of interest, etc.  |

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| ⮚ | Putnam will **<u>withhold votes</u>** from any incumbent nominee for director who served on a board that has not acted to implement a policy requested in a shareholder proposal that received the support of a majority of the votes actually cast on the matter at its previous two annual meetings, or  |

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| ⮚ | Putnam will **<u>withhold votes</u>** from any incumbent nominee for director who served on a board that adopted, renewed, or made a material adverse modification to a shareholder rights plan (commonly referred to as a "poison pill") without shareholder approval during the current or prior calendar year. (This is applicable to any type of poison pill, for example, advance-warning type pill, EGM pill, and Trust Defense Plans in Japan.)  |

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Putnam will refrain from opposing the board members who served at the time of the adoption of the poison pill if the duration is one year or less, if the plan contains other suitable restrictions; or if the company publicly discloses convincing rationale for its adoption and seeks shareholder approval of future renewals of the poison pill. (Suitable restrictions could include but are not limited to, a higher threshold for passive investors. Convincing rationale could include circumstances such as, but not limited to, extreme market disruption or conditions, stock volatility, substantial merger, active investor interest, or takeover attempts.)

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| ⮚ | Putnam will vote on a **case-by-case** basis and may consider voting against the Nominating Committee Chair if there is a lack of evidence of board diversity.  |

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Putnam is concerned about over-committed directors. In some cases, directors may serve on too many boards to make a meaningful contribution. This may be particularly true for senior executives of public companies (or other directors with substantially full-time employment) who serve on more than a few outside boards.

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| ⮚ | Putnam will vote **<u>against</u>** any non-executive nominee for director who serves on more than four (4) public company boards, except where Putnam would otherwise be withholding votes for the entire board of directors. For the purpose of this guideline, boards of affiliated registered investment companies and other similar entities such as UCITS will count as one board. Generally, Putnam will withhold support from directors serving on more than four unaffiliated public company boards, although an exception may be made in the case of a director who represents an investing firm with the sole purpose of managing a portfolio of investments that includes the company.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold</u>** votes from any nominee for director who serves as an executive officer of any public company ("home company") while serving on more than two (2) public company board**s** other than the home company board. (Putnam will withhold votes from the nominee at each company where Putnam client portfolios own shares.) In addition, if Putnam client portfolios are shareholders of the executive's home company, Putnam will withhold votes from members of the company's governance committee. For the purpose of this guideline, boards of affiliated registered investment companies and other similar entities such as UCITS will count as one board.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director of a public company (Company A) who is employed as a senior executive of another public company (Company B) if a director of Company B serves as a senior executive of Company A (commonly referred to as an "interlocking directorate").  |

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Board independence depends not only on its members' individual relationships, but also the board's overall attitude toward management. Independent boards are committed to good corporate governance practices and, by providing objective independent judgment, enhancing shareholder value. Putnam may withhold votes on a case-by-case basis from some or all directors that, through their lack of independence, have failed to observe good corporate governance practices or, through specific corporate action, have demonstrated a disregard for the interest of shareholders.

Note: Designation of executive director is based on company disclosure.

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that provide that a director may be removed only for cause. Putnam will generally vote **<u>for</u>** proposals that permit the removal of directors with or without cause.  |

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| ⮚ | Putnam will vote **<u>against</u>** proposals authorizing a board to fill a director vacancy without shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on subsidiary director nominees if Putnam will be voting against the nominees of the parent company's board.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis for director nominees, including nominees for positions on Supervisory Boards or Supervisory Committees, or similar board entities (depending on board structure), for (re)election when cumulative voting applies.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to approve annual directors' fees, except that Putnam will vote on a **<u>case-by-case</u>** basis if Putnam's independent proxy voting service has recommended a vote against such proposal. Additionally, Putnam will vote **<u>for</u>** proposals to approve the grant of equity awards to directors, except that Putnam will consider these proposals on a **<u>case-by-case</u>** basis if Putnam's proxy service provider is recommending a vote against the proposal.  |

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| ***Classified*** | ***Boards***  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to classify a board, absent special circumstances indicating that shareholder interests would be better served by this structure.  |

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***Ratification of Auditors***

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to ratify the selection of independent auditors if there is evidence that the audit firm's independence or the integrity of an audit is compromised. (Otherwise, Putnam will vote **<u>for</u>**.)  |

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***Contested Elections of Directors***

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis in contested elections of directors.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. <u>Executive Compensation</u>**

Putnam will vote on a **<u>case-by-case</u>** basis on board-approved proposals relating to executive compensation, except as follows:

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| ⮚ | Putnam will vote **<u>for</u>** stock option and restricted stock plans that will result in an average annual dilution of 1.67% or less (based on the disclosed term of the plan and including all equity-based plans), except where Putnam would otherwise be withholding votes for the entire board of directors in which case Putnam will evaluate the plans on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option and restricted stock plans that will result in an average annual dilution of greater than 1.67% (based on the disclosed term of the plan and including all equity plans).  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** any stock option or restricted stock plan where the company's actual grants of stock options and restricted stock under all equity-based compensation plans during the prior three (3) fiscal years have resulted in an average annual dilution of greater than 1.67%.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Additionally, if the annualized dilution cannot be calculated, Putnam will vote  **<u>for</u>** plans
where the Total Potential Dilution is 5% or less. If the annualized dilution cannot be calculated and the Total Potential Dilution exceeds 5%, then Putnam will vote  **<u>against</u>** . Note: Such plans must first pass all of Putnam's other
screens.

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|:---|:---|
| ⮚ | Putnam will vote proposals to issue equity grants to executives on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans that permit replacing or repricing of underwater options (and **<u>against</u>** any proposal to authorize such replacement or repricing of underwater options).  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans that permit issuance of options with an exercise price below the stock's current market price.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans/ restricted stock plans with evergreen features providing for automatic share replenishment.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** bonus plans under which payments are treated as performance-based compensation that is deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended, except as follows:  |

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Vote on a **<u>case-by-case</u>** basis on such proposals if any of the following circumstances exist:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the amount per employee under the plan is unlimited, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the maximum award pool is undisclosed, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the incentive bonus plan's performance criteria are undisclosed, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the independent proxy voting service recommends a vote against.

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|:---|:---|
| ⮚ | Putnam will vote in favor of the annual presentation of advisory votes on executive compensation (Say-on-Pay).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** advisory votes on executive compensation (Say-on-Pay). However, Putnam will vote **<u>against</u>** an advisory vote if the company fails to effectively link executive compensation to company performance according to benchmarking performed by the independent proxy voting service.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will review the proposal on a  **<u>case-by-case</u>** basis if there is no recommendation of the independent proxy voting service.

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| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on severance agreements (e.g., golden and tin parachutes)  |

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| ⮚ | Putnam will **<u>withhold</u>** votes from members of a Board of Directors which has approved compensation arrangements Putnam's investment personnel have determined are grossly unreasonable at the next election at which such director is up for re-election.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** employee stock purchase plans that have the following features: (1) the shares purchased under the plan are acquired for no less than 85% of their market value, (2) the offering period under the plan is 27 months or less, and (3) dilution is 10% or less.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** Non-qualified Employee Stock Purchase Plans with all the following features:  |

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1) Broad-based participation (i.e., all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company). 

2) Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary. 

3) Company matching contribution up to 25 percent of employee's contribution, which is effectively a discount of 20 percent from market value. 

4) No discount on the stock price on the date of purchase since there is a company matching contribution.

Putnam will vote **<u>against</u>** Non-qualified Employee Stock Purchase Plans when any of the plan features do not meet the above criteria.

Putnam may vote against executive compensation proposals on a **<u>case-by-case</u>** basis where compensation is excessive by reasonable corporate standards, or where a company fails to provide transparent disclosure of executive compensation. In voting on proposals relating to executive compensation, Putnam will consider whether the proposal has been approved by an independent compensation committee of the board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C. <u>Capitalization</u>**

Putnam will vote on a case-by-case basis on board-approved proposals involving changes to a company's capitalization, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals relating to the authorization of additional common stock, except that Putnam will evaluate such proposals on a **<u>case-by-case</u>** basis if (i) they relate to a specific transaction or to common stock with special voting rights, (ii) the company has a non-shareholder approved poison pill in place, or (iii) the company has had sizeable stock placements to insiders within the past three years at prices substantially below market value without shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to effect stock splits (excluding reverse stock splits.)  |

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| ⮚ | Putnam will vote **<u>for</u>** proposals authorizing share repurchase programs, except that Putnam will vote on a **<u>case-by-</u> <u>case</u>** basis if there are concerns that there may be abusive practices related to the share repurchase programs.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D. <u>Acquisitions, Mergers, Reorganizations and</u>**<u> </u>

**<u>Other Transactions</u>**

Putnam will vote on a **<u>case-by-case</u>** basis on business transactions such as acquisitions, mergers, reorganizations involving business combinations, liquidations and sale of all or substantially all of a company's assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E. <u>Anti-Takeover Measures</u>**

Putnam will vote **<u>against</u>** board-approved proposals to adopt anti-takeover measures such as supermajority voting provisions, issuance of blank check preferred stock, the creation of a separate class of stock with disparate voting rights, control share acquisition provisions, targeted share placements, and ability to make greenmail payments, except as follows:

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| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to ratify or approve shareholder rights plans;  |

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| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to adopt fair price provisions.  |

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| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to issue blank check preferred stock in the case of REITs (only).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals that enable or expand shareholders' ability to take action by written consent.  |

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| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to <u>increase</u> shares of an existing class of stock with disparate voting rights from another share class.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on **shareholder or board-approved** proposals to eliminate supermajority voting provisions at controlled companies (companies in which an individual or a group voting collectively holds a majority of the voting interest).  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u> basis** on **board-approved** proposals to adopt supermajority voting provisions at controlled companies (companies in which an individual or a group voting collectively holds a majority of the voting interest).  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to issue blank check preferred stock if appropriate "*de-clawed"* language is present. Specifically, appropriate *de-clawed* language will include cases where the Company states (i.e., through 8-K, proxy statement or other public disclosure) it will not use the preferred stock for anti-takeover purposes, or in order to implement a shareholder rights plan, or discloses a commitment to submit any future issuances of preferred stock to be used in a shareholder rights plan/anti-takeover purpose to a shareholder vote prior to its adoption.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F. <u>Other Business Matters</u>**

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved proposals approving routine business matters such as changing the company's name and procedural matters relating to the shareholder meeting, except as follows:  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to amend a company's charter or bylaws (except for charter amendments necessary or to effect stock splits, to change a company's name, to authorize additional shares of common stock or other matters which are considered routine (for example, director age or term limits), technical in nature, fall within Putnam's guidelines (for example, regarding board size or virtual meetings), are required pursuant to regulatory and/or listing rules, have little or no economic impact or will not negatively impact shareholder rights).  |

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|:---|:---|
| ⮚ | Additionally, Putnam believes the bundling of items, whether the items are related or unrelated, is generally not in shareholders' best interest. We may vote **<u>against</u>** the entire bundled proposal if we would normally vote against any of the items if presented individually. In these cases, we will review the bundled proposal on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam generally supports quorum requirements if the level is set high enough to ensure a broad range of shareholders is represented in person or by proxy but low enough so that the Company can transact necessary business. Putnam will vote on a **<u>case-by-case</u>** basis on proposals seeking to change quorum requirements; however, Putnam will normally support proposals that seek to comply with market or exchange requirements.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals seeking to change a company's state of incorporation. However, Putnam will vote **<u>for</u>** mergers and reorganizations involving business combinations designed solely to reincorporate a company in Delaware.  |

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| ⮚ | Putnam will vote **<u>against</u>** authorization to transact other unidentified, substantive business at the meeting.  |

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| ⮚ | Putnam will vote **<u>against</u>** proposals where there is a lack of information to make an informed voting decision.  |

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|:---|:---|
| ⮚ | Putnam will vote as follows on proposals to adjourn shareholder meetings:  |

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If Putnam is withholding support for the board of the company at the meeting, any proposal to adjourn should be referred for **<u>case-by-case</u>** analysis.

If Putnam is not withholding support for the board, Putnam will vote in favor of adjourning, unless the vote concerns an issue that is being referred back to Putnam for case-by-case review. Under such circumstances, the proposal to adjourn should also be referred to Putnam for **<u>case-by-case</u>** analysis.

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| ⮚ | Putnam will vote **<u>against</u>** management proposals to adopt a specific state's courts, or a specific U.S. district court as the exclusive forum for certain disputes, except that Putnam will vote **<u>for</u>** proposals adopting the State of Delaware, or the Delaware Chancery Court, as the exclusive forum, for corporate law matters for issuers incorporated in Delaware. Requiring shareholders to bring actions solely in one state may discourage the pursuit of derivative claims by increasing their difficulty and cost. However, Putnam's guideline recognizes the expertise of the Delaware state court system in handling disputes involving Delaware corporations. In addition, Putnam will **<u>withhold votes</u>** from the chair of the Nominating/Governance committee if a company amends its Bylaws, or takes other actions, to adopt a specific state's courts (other than Delaware courts, for issuers incorporated in Delaware) or a specific U.S. district court as the exclusive forum for certain disputes <u>without</u> shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote on a case-by-case basis on management proposals seeking to adopt a bylaw amendment allowing the company to shift legal fees and costs to unsuccessful plaintiffs in intra-corporate litigation (fee-shifting bylaw). Additionally, Putnam will vote against the Chair of the Nominating/Governance committee if a company adopts a fee-shifting bylaw amendment without shareholder approval.  |

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⮚ Putnam will support management/shareholder proxy access proposals as long as the proposals align with the following principles for a shareholder (or up to 20 shareholders together as a group) to receive proxy access:

1) The required minimum aggregate ownership of the Company's outstanding common stock is no greater than 3%; 

2) The required minimum holding period for the shareholder proponent(s) is no greater than two years; and

3) The shareholder(s) are permitted to nominate at least 20% of director candidates for election to the board. 

Proposals requesting shares be held for 3 years will be reviewed on a **<u>case-by-case</u>** basis. Putnam will vote **<u>agains</u>**<u>t</u> proposals requesting shares be held for more than three years. Proposals that meet Putnam's stated criteria and include other requirements relating to issues such as, but not limited to, shares on loan or compensation agreements with nominees, will be reviewed on a **<u>case-by-case</u>** basis.

Additionally, shareholder proposals seeking an amendment to a company's proxy access policy which include any one of the supported criteria under Putnam's guidelines, for example, a 2-year holding period for shareholders, will be reviewed on a **<u>case-by-case</u>** basis.

Putnam supports management / shareholder proposals giving shareholders the right to call a special meeting as long as the ownership requirement in such proposals is at least **15%** of the company's outstanding common stock and not more than **25%**.

In general, Putnam will vote **<u>for</u>** management or shareholder proposals to reduce the ownership requirement below a company's existing threshold, as long as the new threshold is at least **15%** and not greater than **25%** of the company's outstanding common stock.

Putnam will vote **<u>against</u>** any proposal with an ownership requirement exceeding **25%** of the company's common stock or an ownership requirement that is less than **15%** of the company's outstanding common stock.

In cases where there are competing management and shareholder proposals giving shareholders the right to call a special meeting, Putnam will generally vote **<u>for</u>** the proposal which has the lower minimum shareholder ownership threshold, as long as that threshold is within Putnam's recommended minimum/maximum thresholds. If only one of the competing proposals has a threshold that falls within Putnam's threshold range, Putnam will normally support that proposal as long as

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it represents an improvement (reduction) from the previous requisite ownership level. Putnam will normally vote **<u>against</u>** both proposals if neither proposal has a requisite ownership level between **15%** and **25%** of the company's outstanding common stock**.**

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|:---|:---|
| ⮚ | Putnam will generally vote **fo**<u>r</u> management or shareholder proposals to allow a company to hold virtual-only or hybrid shareholder meetings or to amend its articles/charter/by-laws to allow for virtual-only or hybrid shareholder meetings, provided the proposal does not preclude in-person meetings (at any given time), and does not otherwise limit or impair shareholder participation; and if the company has provided clear disclosure to ensure that shareholders can effectively participate in virtual-only shareholder meetings and meaningfully communicate with company management and directors. Additionally, Putnam may consider the rationale of the proposal and whether there have been concerns about the company's previous meeting practices.  |

---

Disclosure should address the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the ability of shareholders to ask questions during the meeting

o including time guidelines for shareholder questions

o rules around what types of questions are allowed

o and rules for how questions and comments will be recognized and disclosed to meeting participants

o the manner in which appropriate questions received during the meeting will be addressed by the board

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● procedures, if any, for posting appropriate questions received during the meeting and the company's answers
on the investor page of their website as soon as is practical after the meeting

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● technical and logistical issues related to accessing the virtual meeting platform; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● procedures for accessing technical support to assist in the event of any difficulties accessing the virtual
meeting

Putnam may vote against proposals that do not meet these criteria.

Additionally, Putnam may vote **<u>agains</u>**t the Chair of the Governance Committee when the board is planning to hold a virtual- only shareholder meeting and the company has not provided sufficient disclosure (as noted above) or shareholder access to the meeting.

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to approve a company's board-approved climate transition action plan ("say on climate" proposals in which the company's board proposes that shareholders indicate their support for the company's plan), unless the proxy voting service has recommended a vote against the proposal, in which case Putnam will vote on a **<u>case-by-case</u>** basis on the proposal.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on board-approved proposals that conflict with shareholder proposals.  |

---

**II. Shareholder Proposals** 

Shareholder proposals are non-binding votes that are often opposed by management. Some proposals relate to matters that are financially immaterial to the company's business, while others may be impracticable or costly for a company to implement. At the same time, well-crafted shareholder proposals may serve the purpose of raising issues that are material to a company's business for management's consideration and response. Putnam seeks to weigh the costs of different types of proposals against their expected financial benefits. More specifically:

Putnam will vote **<u>in accordance with the recommendation of the company's board of directors</u>** on all shareholder proposals, except as follows:

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals that are consistent with Putnam's proxy voting guidelines for board-approved proposals.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals to declassify a board, absent special circumstances which would indicate that shareholder interests are better served by a classified board structure.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals to require shareholder approval of shareholder rights plans.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals asking that director nominees receive support from holders of a majority of votes cast or a majority of shares outstanding of the company in order to be (re) elected.  |

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| | |
|:---|:---|
| ⮚ | Putnam will review on a **<u>case-by-case</u>** basis, shareholder proposals requesting that the board adopt a policy whereby, in the event of a significant restatement of financial results or significant extraordinary write-off, the board will recoup, to the fullest extent practicable, for the benefit of the company, all performance-based bonuses or awards that were made to senior executives based on having met or exceeded specific performance targets to the extent that the specified performance targets were not met.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to seek shareholder approval of any future supplemental executive retirement plan ("SERP"), or individual retirement arrangement, for senior executives that provides credit for additional years of service not actually worked, preferential benefit formulas not provided under the company's tax-qualified retirement plans, accelerated vesting of retirement benefits or retirement perquisites and fringe benefits that are not generally offered to other company employees. (Implementation of this policy shall not breach any existing employment agreement or vested benefit.)  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to report on their executive retirement benefits. (Deferred compensation, split-dollar life insurance, SERPs and pension benefits)  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requesting that a company establish a pay-for-superior-performance standard whereby the company discloses defined financial and/or stock price performance criteria (along with the detailed list of comparative peer group) to allow shareholders to sufficiently determine the pay and performance correlation established in the company's performance-based equity program. In addition, no <u>multi-year</u> award should be paid out unless the company's performance exceeds, <u>during the current CEO's tenure (three or more years),</u> its peer median or mean performance on selected financial and stock price performance criteria.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to disclose in a separate report to shareholders, the Company's relationships with its executive compensation consultants or firms. Specifically, the report should identify the entity that retained each consultant (the company, the board or the compensation committee) and the types of services provided by the consultant in the past five years (non-compensation-related services to the company or to senior management and a list of all public company clients where the Company's executives serve as a director.)  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to accelerate vesting of equity awards under management severance agreements only if both of the following conditions are met:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the company undergoes a change in control, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the change in control results in the termination of employment for the person receiving the severance payment.

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring that the chair's position be filled by an independent director (separate chair/CEO). However, Putnam will vote on a **<u>case-by-case</u>** basis on such proposals when the company's board has a lead-independent director (or already has an independent or separate chair) <u>and</u> Putnam is supporting the nominees for the board of directors.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals seeking the submission of golden coffins to a shareholder vote or the elimination of the practice altogether.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals seeking a policy that forbids any director who receives more than 25% withhold votes cast (based on for and withhold votes) from serving on any key board committee for two years and asking the board to find replacement directors for the committees if need be.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to seek shareholder approval of severance agreements (e.g., golden and tin parachutes).  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● However, Putnam will vote  **<u>against</u>** such proposals when the company has a policy that
minimally requires shareholder approval of severance agreements for executives that provides for cash severance benefits exceeding 2.99 times the sum of the executive's base salary plus target annual non-equity incentive plan bonus opportunity.

Putnam will vote on a **<u>case-by-case</u>** basis on approving such compensation arrangements.

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to make cash payments under management severance agreements only if both of the following conditions are met: the company undergoes a change in control, and the change in control results in the termination of employment for the person receiving the severance payment.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on shareholder proposals to limit a company's ability to make excise tax gross-up payments under management severance agreements as well as proposals to limit income or other tax gross-up payments.  |

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---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>in accordance with the recommendation of the company's board of directors</u>** on shareholder proposals regarding corporate political spending, unless Putnam is voting against the directors, in which case the proposal would be reviewed on a **<u>case-by-case</u>** basis.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on shareholder proposals that conflict with board-approved proposals.  |

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**Environmental and Social** 

---

| | |
|:---|:---|
| ⮚ | Putnam believes that sustainable environmental practices and sustainable social policies are important components of long-term value creation. Companies should evaluate the potential risks to their business operations that are directly related to environmental and social factors (among others). In evaluating shareholder proposals relating to environmental and social initiatives, Putnam takes into account (1) the relevance and materiality of the proposal to the company's business, (2) whether the proposal is well crafted (e.g., whether it references science-based targets, or standard global protocols), and (3) the practicality or reasonableness of implementing the proposal.  |

---

Putnam may support well-crafted and well-targeted proposals that request additional reporting or disclosure on a company's plans to mitigate risk to the company related to the following issues and/or their strategies related to these issues: Environmental issues, including but not limited to, climate change, greenhouse gas emissions, renewable energy, and broader sustainability issues; and Social issues, including but not limited to, fair pay, employee diversity and development, safety, labor rights, supply chain management*,* privacy and data security.

In addition, Putnam will consider proposals related to Artificial Intelligence ("AI") on a case-by-case basis.

Putnam will consider factors such as (i) the industry in which the company operates, (ii) the company's current level of disclosure, (iii) the company's level of oversight, (iv) the company's management of risk arising out of these matters, (v) whether the company has suffered a material financial impact. Other factors may also be considered.

Putnam will consider the recommendation of its third-party proxy service provider and may consider other factors such as third-party evaluations of ESG performance.

Additionally, Putnam may vote on a **<u>case-by-case</u>** basis on proposals which ask a company to take action beyond reporting where our third-party proxy service provider has identified one or more reasons to warrant a vote FOR.

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**III. Voting Shares of Non-US Issuers** 

Many non-US jurisdictions impose material burdens on voting proxies. There are three primary types of limits as follows:

1) Share blocking. Shares must be frozen for certain periods of time to vote via proxy. 

2) Share re-registration. Shares must be re-registered out of the name of the local custodian or nominee into the name of the client for the meeting and, in many cases, then re-registered back. Shares are normally blocked in this period.

3) Powers of Attorney. Detailed documentation from a client must be given to the local sub-custodian. In many cases Putnam is not authorized to deliver this information or sign the relevant documents.

Putnam's policy is to weigh the benefits to clients from voting in these jurisdictions against the detriments of not doing so. For example, in a share blocking jurisdiction, it will normally not be in a client's interest to freeze shares simply to participate in a non-contested routine meeting. More specifically, Putnam will normally not vote shares in non-US jurisdictions imposing burdensome proxy voting requirements except in significant votes (such as contested elections and major corporate transactions) where directed by portfolio managers.

Putnam recognizes that the laws governing non**-**US issuers will vary significantly from US law and from jurisdiction to jurisdiction. Accordingly, it may not be possible or even advisable to apply these guidelines mechanically to non-US issuers. However, Putnam believes that shareholders of all companies are protected by the existence of a sound corporate governance and disclosure framework. Accordingly, Putnam will vote proxies of non**-**US issuers **<u>in accordance with the foregoing guidelines</u> <u>where applicable</u>**, except as follows:

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals calling for a majority of the directors to be independent of management.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals relating to (1) the issuance of common stock in excess of 20% of a company's outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of a company's outstanding common stock where shareholders have preemptive rights.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to authorize share repurchase programs that are recommended for approval by Putnam's proxy voting service provider, otherwise Putnam will vote **<u>against</u>** such proposals; except that Putnam will vote on a **<u>case-by-case basis</u>** if there are concerns that there may be abusive practices related to the share repurchase programs.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** authorizations to repurchase shares or issue shares or convertible debt instruments with or without preemptive rights when such authorization can be used as a takeover defense without shareholder approval. Putnam will not apply this policy to a company with a shareholder who controls more than 50% of its voting rights.  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **for** proposals that include debt issuances, however substantive/non-routine proposals, and proposals that fall outside of normal market practice or reasonable standards, will be reviewed on a **<u>case-by-case</u>** basis.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved routine, market-practice proposals. These proposals are limited to (1) those issues that will have little or no economic impact, such as technical, editorial, or mandatory regulatory compliance items, (2) those issues that will not adversely affect and/or which clearly improve shareholder rights/values, and which do not violate Putnam's proxy voting guidelines, or (3) those issues that do not seek to deviate from existing laws or regulations. Examples include but are not limited to, related party transactions (non-strategic), profit-and-loss transfer agreements (Germany), authority to increase paid-in capital (Taiwan). Should any unusual circumstances be identified concerning a normally routine issue, such proposals will be referred back to Putnam for internal review.  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals regarding amendments seeking to expand business lines or to amend the corporate purpose, provided the proposal would not include a significant or material departure from the company's current business, and/or will provide the company with greater flexibility in the performance of its activities.  |

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| | |
|:---|:---|
| ⮚ | Putnam will normally vote **<u>for</u>** management proposals concerning allocation of income and the distribution of dividends. However, Putnam portfolio teams will override this guideline when they conclude that the proposals are outside the market norms (i.e., those seen as consistently and unusually small or large compared to market practices).  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals seeking to adjust the par value of common stock. However, non-routine, substantive proposals will be reviewed on a **<u>case-by-case</u>** basis.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that would authorize the company to reduce the notice period for calling special or extraordinary general meetings to less than 21-Days.  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals relating to transfer of reserves/increase of reserves (i.e., France, Japan). However, Putnam will vote on a **<u>case-by-case</u>** basis if the proposal falls outside of normal market practice.  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to increase the maximum variable pay ratio. However, Putnam will vote on a **<u>case-by-case</u>** basis if we are voting against a company's remuneration report or if the proposal seeks an increase in excess of 200%.  |

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| | |
|:---|:---|
| ⮚ | Putnam will review stock option plans on a **<u>case-by-case</u>** basis which allow for the options exercise price to be reduced by dividend payments (if the plan would normally pass Putnam's Guidelines).  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** requests to provide loan guarantees however, Putnam will vote on a **<u>case-by-case</u>** basis if the total amount of guarantees is in excess of 100% of the company's audited net assets.  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally support remuneration report/policy proposals (i.e., advisory/binding) where a company's executive compensation is linked directly with the performance of the business and executive. Putnam will generally support compensation proposals which incorporate a mix of reasonable salary and performance based short- and long- term incentives. Companies should demonstrate that their remuneration policies are designed and managed to incentivize and retain executives while growing the company's long-term shareholder value.  |

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Generally, Putnam will vote **<u>against</u>** remuneration report/policy proposals (i.e., advisory/binding) in the following cases:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Disconnect between pay and performance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● No performance metrics disclosed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● No relative performance metrics utilized;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Single performance metric was used and it was an absolute measure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Performance goals were lowered when management failed or was unlikely to meet original goals;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Long Term Incentive Plan is subject to retesting (e.g., Australia);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Service contracts longer than 12 months (e.g., United Kingdom);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Allows vesting below median for relative performance metrics;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Ex-gratia / non-contractual payments have been made (e.g., United Kingdom and Australia);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Contains provisions to automatically vest upon change-of-control; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Other poor compensation practices or structures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Pension provisions for new executives is not at the same level as the majority of the wider workforce; pension
provisions for incumbent executives are not set to decrease over time (United Kingdom)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Proposed CEO salary increases are not justifiably appropriate in comparison to wider workforce or rationale for
exception increases is not fully disclosed (United Kingdom)

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case basis</u>** on bonus payments to executive directors or senior management; however, Putnam will vote **<u>against</u>** payments that include outsiders or independent statutory auditors.  |

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**<u>Matters Relating to Board of Directors</u>**

**<u>Uncontested Board Elections</u>**

***Asia: China, Hong Kong, India, Indonesia, Philippines, Taiwan and Thailand***

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| | |
|:---|:---|
| ⮚ | Putnam will **vote <u>against</u>** the entire board of directors if  |

---

<sup>○</sup> fewer than one-third of the directors are independent directors, or

◾ the board has not established <u>audit</u>, <u>compensation</u> and <u>nominating</u> committees each composed of a majority of independent directors, or

◾ the chair of the audit, compensation or nominating committee is not an independent director.

Commentary: Companies listed in China (or dual-listed in China and Hong Kong) often have a separate supervisory committee in addition to a standard board of directors containing audit, compensation, and nominating committees. The supervisory committee provides oversight of the financial affairs of the company and supervises members of the board and management, while the board of directors makes decisions related to the company's business and investment strategies. The supervisory committee normally comprises employee representatives and shareholder representatives. Shareholder representatives are elected by shareholders of the company while employee representatives are elected by the company's staff. Shareholder representatives may be independent or may be affiliated with the company or its substantial shareholders. Current laws and regulations neither provide a basis for evaluation of supervisor independence nor do they require a supervisor to be independent.

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote in favor of nominees to the Supervisory Committee  |

---

***Australia***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire board of directors if  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● fewer than a majority of the directors are independent, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed solely of non-executive directors, a majority of whom, including the chair of the committee (who should not be the board chair), should be independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established nominating and compensation committees each composed of a majority of independent, non-executive directors, with an independent chair.

***Brazil***

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| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> proposals requesting cumulative voting unless there are more candidates than number of seats available, in which case vote for.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals for the proportional allocation of cumulative votes if Putnam is supporting the entire slate of nominees. Putnam will vote **<u>against</u>** such proposals if Putnam is not supporting the entire slate.  |

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| | |
|:---|:---|
| ⮚ | Putnam will **<u>abstain</u>** on individual director allocation proposals if Putnam is voting for the proportional allocation of cumulative votes. Putnam will vote on a **<u>case-by-case</u>** basis on individual director allocation proposals if Putnam is voting against the proportional allocation of votes.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to cumulate votes of common and preferred shareholders if the nominees are known and Putnam is supporting the applicable nominees; Putnam will vote **<u>against</u>** such proposals if Putnam is not supporting the known nominees, or if the nominees are unknown.  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>against</u>** proposals seeking the recasting of votes for amended slate (as new candidates could be included in the amended slate without prior disclosure to shareholders).  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals regarding instructions if meeting is held on second call if election of directors is part of the recasting as the slate can be amended without (prior) disclosure to shareholders.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals regarding the casting of minority votes to the candidate with largest number of votes.  |

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***Canada***

Canadian corporate governance requirements mirror corporate governance reforms that have been adopted by the NYSE and other U.S. national securities exchanges and stock markets. As a result, Putnam will vote on matters relating to the board of directors of Canadian issuers **<u>in accordance with the guidelines applicable to U.S. issuers.</u>**

<u>Commentary:</u> Like the UK's Combined Code on Corporate Governance, the policies on corporate governance issued by Canadian securities regulators embody the "comply and explain" approach to corporate governance. Because Putnam believes that the board independence standards contained in the proxy voting guidelines are integral to the protection of investors in Canadian companies, these standards will be applied in a prescriptive manner.

***Continental Europe (ex-Germany)***

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire board of directors if  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● fewer than a majority of the directors are independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established <u>audit, nominating</u> and <u>compensation</u> committees each composed of a
majority of independent directors.

<u>Commentary:</u> An "independent director" under the European Commission's guidelines is one who is free of any business, family or other relationship, with the company, its controlling shareholder or the management of either, that creates a conflict of interest such as to impair his judgment. A "non-executive director" is one who is not engaged in the daily management of the company.

In France, Employee Representatives are employed by the company and represent rank and file employees. These representatives are elected by company employees. The law also provides for the appointment of employee shareholder representatives, if the employee shareholdings exceed 3% of the share capital. Employee shareholder representatives are elected by the company's shareholders (via general meeting).

***Germany***

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| | |
|:---|:---|
| ⮚ | For companies subject to "co-determination," Putnam will vote <u>for</u> the election of nominees to the supervisory board, except:  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the Supervisory Board if  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee comprising an Independent chair.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the audit committee chair serves as board chair.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board contains more than two former management board members.

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| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the election of a former member of the company's managerial board to chair of the supervisory board.  |

---

<u>Commentary:</u> German corporate governance is characterized by a two-tier board system - a managerial board composed of the company's executive officers, and a supervisory board. The supervisory board appoints the members of the managerial board. Shareholders elect members of the supervisory board, except that in the case of companies with a large number of employees, company employees are allowed to elect some of the supervisory board members (one-half of supervisory board members are elected by company employees at companies with more than 2,000 employees; one-third of the supervisory board members are elected by company employees at companies with more than 500 employees but fewer than 2,000). This practice is known as co-determination.

***Israel***

**<u>Non-Controlled Banks</u>**<u>:</u> Director elections at Non-Controlled banks are overseen by the Supervisor of the Banks and nominees for election as "other" (non-external) directors and external directors (under Companies Law and Directive 301) are put forward by an external and independent committee. As such,

⮚ Putnam's guidelines regarding board Nominating Committees will not apply

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** on nominees when there are more nominees than seats available.  |

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***Italy***

Election of directors and statutory auditors:

---

| | |
|:---|:---|
| ⮚ | Putnam will apply the director guidelines to the majority shareholder supported list and vote accordingly (**<u>for</u>** or **<u>against</u>**) if multiple lists of director candidates are presented. If there is no majority shareholder supported slate of nominees, Putnam will support the shareholder slate of nominees that is recommended for approval by Putnam's service provider.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire list of director nominees if the list is bundled as one proposal and if Putnam would otherwise be voting against any one director nominee.  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** the majority shareholder supported list of statutory auditor nominees.  |

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Note: Pursuant to Italian law, directors and statutory auditors are elected through a slate voting system whereby candidates are presented in lists submitted by shareholders representing a minimum percentage of share capital.

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| | |
|:---|:---|
| ⮚ | Putnam will withhold votes from any director not identified in the proxy materials. (Example: Co-opted director nominees.)  |

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***Japan***

---

| | |
|:---|:---|
| ⮚ | For companies that have established a U.S.-style corporate governance structure, Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have a majority of outside directors,

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established nominating and compensation committees composed of a majority of outside directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of a majority of independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder.

⮚ For companies that have established a statutory auditor board structure:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will  **<u>withhold votes</u>** from the appointment of members of a company's board of
statutory auditors if a majority of the members of the board of statutory auditors is not independent.

---

| | |
|:---|:---|
| ⮚ | For companies that have established a statutory auditor board structure, Putnam will **withhold votes** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two outside directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will vote  **<u>against</u>** any statutory auditor nominee who attends fewer than 75% of board
and committee meeting without valid reasons for the absences (i.e., illness, personal emergency, etc.) (Note that Corporate Law requires disclosure of outsiders' attendance but not that of insiders, who are presumed to have no more important
time commitments.)

---

| | |
|:---|:---|
| ⮚ | For companies that have established an audit committee board structure (one-tier / one committee), Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two outside directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of a majority of independent directors

**Election of Executive Director and Election of Supervisory Director - REIT** 

REITs have a unique two-tier board structure with generally one or more executive directors and two or more supervisory directors. The number of supervisory directors must be greater than, not equal to, the number of executive directors. Shareholders are asked to vote on both types of directors. Putnam will vote as follows, provided each board of executive / supervisory directors meets legal requirements.

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote <u>for</u> the election of Executive Director  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote <u>for</u> the election of Supervisory Directors  |

---

<u>Commentary:</u>

**Definition of outside director and independent director:** 

The Japanese Companies Act focuses on two director classifications: Insider or Outsider. An outside director is a director who is not a director, executive, executive director, or employee of the company or its parent company, subsidiaries or affiliates. Further, a director, executive, executive director or employee, who have executive responsibilities, of the company or subsidiaries can regain eligibility ten years after his or her resignation, provided certain other requirements are met. An outside director is designated as an "independent" director based on the Tokyo Stock Exchange listing rules. An outside director is "independent" if that person can make decisions completely independent from the managers of the company, its parent, subsidiaries, or affiliates

------

and does not have a material relationship with the company (i.e., major client, trading partner, or other business relationship; familial relationship with current director or executive; etc.).

The guidelines have incorporated these definitions in applying the board independence standards above.

***Korea***

Putnam will **<u>withhold votes</u>** from the entire board of directors if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● For large companies (i.e., those with assets of at least KRW 2 trillion); the board does not have at least three
independent directors or less than a majority of directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● For small companies (i.e., those with assets of less than KRW 2 trillion), fewer than one-fourth of the directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has not established a nominating committee with at least half of the members being outside directors,
or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of at least three members and in which at least two-thirds of its members are independent directors.

<u>Commentary:</u> For purposes of these guidelines, an "outside director" is a director who is independent from the management or controlling shareholders of the company and holds no interests that might impair performing his or her duties impartially from the company, management or controlling shareholder. In determining whether a director is an outside director, Putnam will also apply the standards included in Article 382 of the Korean Commercial Act*,* i.e., no employment relationship with the company for a period of two years before serving on the committee, no director or employment relationship with the company's largest shareholder, etc.) and may consider other business relationships that would affect the independence of an outside director.

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to amend the Executive Officer Retirement Allowance Policy unless the recipients of the grants include non-executives; the proposal would have a negative impact on shareholders, or the proposal appear to be outside of normal market practice, in which case Putnam will vote **<u>against</u>**.  |

---

**Malaysia** 

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● less than 50% of the directors are independent directors, or less than a majority of the directors are
independent directors for large companies,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee with all members being independent directors, including the
committee chair,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a nominating committee with all members being non-executive directors, a majority of whom are independent, including the committee chair; the board chair should not serve as a member of the nomination committee, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a compensation committee with all members being non-executive directors, a majority of whom are independent; the board chair should not serve as a member of the remuneration committee.

***Nordic Markets – Finland, Norway, Sweden***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the entire board of directors if:  |

---

**<u>Board Independence:</u>**

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have a majority of directors independent from the company and management. (Sweden, Finland,
Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have at least two directors independent from the company and its major shareholders holding
> 10% of the Company's share capital. (Sweden, Finland, Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive director is a member of the board. (Norway)

**<u>Audit Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee does not consist of a majority of directors independent from the company and management.
(Sweden, Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee does not have at least one director independent from the company and its major shareholders
holding > 10% of the Company's share capital. (Sweden, Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee is not majority independent. (Norway)

**<u>Remuneration Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not fully independent of the company, excluding the chair. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not majority independent of the company. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee does not consist fully of non-executive directors. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not fully independent of management (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not majority independent from the company and its major shareholders holding >
50% of the Company's share capital. (Sweden, Finland, Norway)

**<u>Board Nomination Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The nomination committee does not consist of a majority of directors independent from the company. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive is a member of the nomination committee. (Finland)

**<u>External Nomination Committee:</u>** Vote against the establishment of the nomination committee and its guidelines when:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee is not majority independent of the company and management. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee does not have at least one director not affiliated to largest shareholder on the
committee. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee does not meet best practice based on ISS analysis. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee is not majority independent of the board and management. (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee has more than one member of the board of the directors sitting on the committee. (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● There is insufficient disclosure provided for new nominees (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive is a member of the committee. (Norway)

------

***Russia***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a <u>case-by-case basis</u> for the election of nominees to the board of directors.  |

---

<u>Commentary:</u> In Russia, director elections are handled through a cumulative voting process. Cumulative voting allows shareholders to cast all of their votes for a single nominee for the board of directors, or to allocate their votes among nominees in any other way. In contrast, in "regular" voting, shareholders may not give more than one vote per share to any single nominee. Cumulative voting can help to strengthen the ability of minority shareholders to elect a director.

***Singapore***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** from the entire board of directors if  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● in the case of a board with an independent director serving as chair, fewer than one-third of the directors are independent directors; or, in the case of a board not chaired by an independent director, fewer than half of the directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established <u>audit</u> and <u>compensation</u> committees, each with an independent director
serving as chair, with at least a majority of the members being independent directors, and with all of the directors being non-executive directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a <u>nominating</u> committee, with an independent director serving as chair, and
with at least a majority of the members being independent directors.

***United Kingdom, Ireland***

<u>Commentary:</u>

**Application of guidelines**: Although the Combined Code has adopted the "comply and explain" approach to corporate governance, Putnam believes that the guidelines discussed above with respect to board independence standards are integral to the protection of investors in UK companies. As a result, these guidelines will be applied in a prescriptive manner.

**Definition of independence**: For the purposes of these guidelines, a non-executive director shall be considered independent if the director meets the independence standards in section A.3.1 of the Combined Code (i.e., no material business or employment relationships with the company, no remuneration from the company for non-board services, no close family ties with senior employees or directors of the company, etc.), except that Putnam does not view service on the board for more than nine years as affecting a director's independence.

**Smaller companies**: A smaller company is one that is below the FTSE 350 throughout the year immediately prior to the reporting year.

---

| | |
|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board, excluding the Non-Executive Chair, is not comprised of at
least half independent non-executive directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a Nomination committee composed of a majority of independent non-executive directors, excluding the Non-Executive Chair, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a Compensation committee composed of (1) at least three directors (in the case
of smaller companies, as defined by the Combined Code, two directors) and (2) solely of independent non-executive directors. The company chair may be a member of, but not chair, the Committee provided he
or she was considered independent on appointment as chair, or

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has not established an Audit Committee composed of, (1) at least three directors (in the case of
smaller companies as defined by the Combined Code, two directors) and (2) solely of independent non- executive directors. The board chair may not serve on the audit committee of large or small companies.

***All other jurisdictions***

---

| | |
|:---|:---|
| ⮚ | In the absence of jurisdiction specific guidelines, Putnam will vote as follows for boards/supervisory boards:  |

---

o Putnam will \vote **<u>against</u>** the entire board of directors if

◾ fewer than a majority of the directors are independent directors, or

◾ the board has not established audit, nominating and compensation committees each composed of a majority of independent directors.

**Additional Commentary regarding all Non-US jurisdictions:** 

Whether a director is considered "independent" or not will be determined by reference to local corporate law or listing standards.

Some jurisdictions may legally require or allow companies to have a certain number of employee representatives, employee shareholder representatives (e.g., France) and/or shareholder representatives on their board. Putnam generally does not consider these representatives independent. The presence of employee representatives or employee shareholder representatives on the board and key committees is generally legally mandated. In most markets, shareholders do not have the ability to vote on the election of employee representatives or employee shareholder representatives. In some markets, significant shareholders have a legal right to nominate shareholder representatives. Shareholders are required to approve the election of shareholder representatives to the board. Unlike employee representatives, there are no legal requirements regarding the presence of shareholder representatives on the board or its committees.

---

| | |
|:---|:---|
| ⮚ | Putnam will **not include** employee or employee shareholder representatives in the independence calculation of the board or key committees, nor in the calculation of the size of the board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will **include** shareholder representatives in the independence calculation of the board and key committees, and in the calculation of the size of the board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally support shareholder or employee representatives if included in the agenda Putnam will vote on a **<u>case-by-case</u>** basis when there are more candidates than seats. Additionally, Putnam will vote **<u>against</u>** such nominees when there is insufficient information disclosed.  |

---

⮚ Putnam Investments' policies regarding the provision of professional services and transactional relationship with regard to directors will apply.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **for** independent nominees for alternate director, unless such nominees do not meet Putnam's individual director standards.  |

---

**Shareholder nominated directors/self-nominated directors** 

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> shareholder nominees if Putnam supports the board of directors.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a <u>case-by case</u> basis if Putnam will be voting against the current board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a case-by-case basis if the proposal regarding a self-nominated/shareholder nominated director nominee would add an additional seat to the board if the nominee is approved.  |

---

**<u>Other Business Matters</u>**

------

***Japan***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;***<u>A. Article Amendments</u>***

---

| | |
|:---|:---|
| ⮚ | The Japanese Companies Act gives companies the option to adopt a U.S.-Style corporate structure (i.e., a board of directors and audit, nominating, and compensation committees). Putnam will vote **<u>for</u>** proposals to amend a company's articles of incorporation to adopt the U.S.-Style "Board with Committees" structure. However, the independence of the outside directors is critical to effective corporate governance under this new system. Putnam will, therefore, scrutinize the backgrounds of the outside director nominees at such companies, and will vote **<u>against</u>** the amendment where Putnam believes the board lacks the necessary level of independence from the company or a substantial shareholder.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on granting the board the authority to repurchase shares at its discretion.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** amendments to delete a requirement directing the company to reduce authorized capital by the number of treasury shares cancelled. If issued share capital decreases while authorized capital remains unchanged, then the company will have greater leeway to issue new shares (for example as a private placement or a takeover defense).  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to authorize appointment of special directors. Under the new Corporate Law, companies are allowed to appoint, from among their directors, "special directors" who will be authorized to make decisions regarding the purchase or sale of important assets and major borrowing or lending, on condition that the board has at least six directors, including at least one non-executive director. At least three special directors must participate in the decision-making process and decisions shall be made by a majority vote of the special directors. However, the law does not require any of the special directors to be non-executives, so in effect companies may use this mechanism to bypass outsiders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to create new class of shares or to conduct a share consolidation of outstanding shares to squeeze out minority shareholders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals seeking to enable companies to establish specific rules governing the exercise of shareholder rights. (Note: Such as, shareholders' right to submit shareholder proposals or call special meetings.)  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>B. Compensation Related Matters</u>** 

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** option plans which allow the grant of options to suppliers, customers, and other outsiders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option grants to independent internal statutory auditors. The granting of stock options to internal auditors, at the discretion of the directors, can compromise the independence of the auditors and provide incentives to ignore accounting problems, which could affect the stock price over the long term.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the payment of retirement bonuses to directors and statutory auditors when one or more of the individuals to whom the grants are being proposed has not served in an executive capacity for the company. Putnam will also vote **<u>against</u>** payment of retirement bonuses to any directors or statutory auditors who have been designated by the company as independent. Retirement bonus proposals are all-or-nothing, meaning that split votes against individual payments cannot be made. If any one individual does not meet Putnam's criteria, Putnam will vote **<u>against</u>** the entire bundled item.  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>C. Other Business Matters</u>** 

---

| | |
|:---|:---|
| ⮚ | Putnam votes **<u>for</u>** mergers by absorptions of wholly-owned subsidiaries by their parent companies. These deals do not require the issuance of shares, and do not result in any dilution or new obligations for shareholders of the parent company. These transactions are routine.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** the acquisition if it is between parent and wholly-owned subsidiary.  |

---

------

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** the formation of a holding company, if routine. Holding companies are once again legal in Japan and a number of companies, large and small, have sought approval to adopt a holding company structure. Most of the proposals are intended to help clarify operational authority for the different business areas in which the company is engaged and promote effective allocation of corporate resources. As most of the reorganization proposals do not entail any share issuances or any change in shareholders' ultimate ownership interest in the operating units, Putnam will treat most such proposals as routine.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that authorize the board to vary the AGM record date.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to abolish the retirement bonus system  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved director/officer indemnification proposals  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on private placements (Third-party share issuances). Where Putnam views the share issuance necessary to avoid bankruptcy or to put the company back on solid financial footing, Putnam will generally vote **<u>for</u>**. When a private placement allows a particular shareholder to obtain a controlling stake in the company at a discount to market prices, or where the private placement otherwise disadvantages ordinary shareholders, Putnam will vote **<u>against</u>**.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>against</u>** shareholder rights plans (poison pills). However, if all of the following criteria are met, Putnam will evaluate such poison pills on a **<u>case-by-case</u>** basis:  |

---

1) The poison pill must have a duration of no more than three years.

2) The trigger threshold must be no less than 20 percent of issued capital. 

3) The company must have no other types of takeover defenses in place.

4) The company must establish a committee to evaluate any takeover offers, and the members of that committee must all meet Putnam's' definition of independence.

5) At least 20 percent, and no fewer than two, of the directors must meet Putnam's definition of independence. These independent directors must also meet Putnam's guidelines on board meeting attendance. 

6) The directors must stand for reelection on an annual basis.

7) The company must release its proxy materials no less than three weeks before the meeting date.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to allow the board to decide on income allocation without shareholder vote.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to limit the liability of External Audit Firms ("Accounting Auditors")  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals seeking a reduction in board size that eliminates all vacant seats.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam may generally vote **<u>against</u>** proposals seeking an increase in authorized capital that leaves the company with as little as 25 percent of the authorized capital outstanding (general request). However, such proposals will be evaluated on a company specific basis, taking into consideration such factors as current authorization outstanding, existence (or lack thereof) of preemptive rights and rationale for the increase.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** corporate split agreement and transfer of sales operations to newly created wholly-owned subsidiaries where the transaction is a purely internal one which does not affect shareholders' ownership interests in the various operations. All other proposals will be referred back to Putnam for **<u>case-by-case</u>** review. These reorganizations usually accompany the switch to a holding company structure, but may be used in other contexts.  |

---

***United Kingdom***

------

---

| | |
|:---|:---|
| ⮚ | Putnam will not apply the U.S. standard 15% discount cap for employee share purchase schemes at U.K. companies. As such, Putnam will generally vote **<u>for</u>** 'Save-As-You-Earn' schemes in the U.K which allow for no more than a 20% purchase discount, and which otherwise comply with U.K. law and Putnam standards.  |

---

***France***

---

| | |
|:---|:---|
| ⮚ | Putnam will not apply the U.S. standard 15% discount cap for employee share purchase schemes at French companies. As such, Putnam will generally vote **<u>for</u>** employee share purchase schemes in France that allow for no greater than a 30% purchase discount, or 40% purchase discount if the vesting period is equal to or greater than ten years, and which otherwise comply with French law and Putnam standards.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** the Remuneration Report (established based on SRD II), however Putnam will vote on a **<u>case-by-case</u>** basis when Putnam is voting against both the ex-Post Remuneration Report (CEO) and ex-Ante Remuneration Policy (CEO, or proposal including CEO remuneration package) in the current year, and Putnam's third party service provider(s) is recommending a vote against.  |

---

***Canada***

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** Advance Notice provisions for submitting director nominations not less than 30 days prior to the date of the annual meeting. For Advance Notice provisions where the minimum number of days to submit a shareholder nominee is less than 30 days prior to the meeting date, Putnam will vote on a **<u>case-by-case</u>** basis. Putnam will also vote on a **<u>case-by-case</u>** basis if the company's policy expressly prohibits the commencement of a new notice period in the event the originally scheduled meeting is adjourned or postponed**.**  |

---

***Hong Kong***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>for</u> proposals to approve a general mandate permitting the company to engage in non-pro rata share issuances of up to 20% of total equity in a year if the company's board meets Putnam's independence standards; if the company's board does not meet Putnam's independence standards, then Putnam will vote against these proposals.  |

---

---

| | |
|:---|:---|
| ⮚ | Additionally, Putnam will vote <u>for</u> proposals to approve the reissuance of shares acquired by the company under a share repurchase program, provided that: (1) Putnam supported (or would have supported, in accordance with these guidelines) the share repurchase program, (2) the reissued shares represent no more than 10% of the company's outstanding shares (measured immediately before the reissuance), and (3) the reissued shares are sold for no less than 85% of current market value.  |

---

This policy supplements policies regarding share issuances as stated above under section

III. Voting Shares of Non-US Issuers.

***Taiwan***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to release the board of directors from the non-compete restrictions specified in Taiwanese Company Law. However, Putnam will vote **<u>for</u>** such proposals if the directors are engaged in activities with a wholly- owned subsidiary of the company.  |

---

***Australia***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to carve out, from the general cap on non-pro rata share issues of 15% of total equity in a rolling 12-month period, a particular proposed issue of shares or a particular issue of shares made previously within the 12-month period, if the company's board meets Putnam's independence standards; if the company's board does <u>not</u> meet Putnam's independence standards, then Putnam will vote **<u>against</u>** these proposals.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals renewing partial takeover provisions.  |

---

------

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on Board-Spill proposals.  |

---

***Turkey***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals involving related party transactions. However, Putnam will vote **<u>against</u>** when such proposals do not provide information on the specific transaction(s) to be entered into with the board members or executives.  |

---

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**<u>Exhibit B to Proxy Procedures</u>**

<u>PUTNAM INVESTMENTS</u> 

<u>PROXY VOTING CONFLICT</u> 

OF INTEREST DISCLOSURE FORM

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. *Company name*:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. *Date of Meeting:* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. *Referral Item(s):* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. *Description of Putnam's Business Relationship with Issuer of Proxy which may give rise to a conflict of interest: <u> </u>* 

**a**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5. Describe procedures used to address any conflict of interest:* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*6.* *Describe any contacts from parties outside Putnam Management (other than routine communications from proxy solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation:* 

CERTIFICATION

The undersigned officer of Putnam Investments certifies that, to the best of his or her knowledge, any recommendation of an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

Name:

Proxy Voting Team

------

**<u>Exhibit C to Proxy Procedures</u>**

<u>PUTNAM INVESTMENTS</u> 

<u>PROXY VOTING CONFLICT</u> 

OF INTEREST DISCLOSURE FORM

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. *Company name*:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. *Date of Meeting*:<u> </u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. *Referral Item(s)*:<u> </u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. *Description of Putnam's Business Relationship with Issuer of Proxy which may give rise to a conflict of interest:*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<u>None</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. *Describe procedures used to address any conflict of interest*: <u>N/A</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. *Describe any contacts from parties outside Putnam Management (other than routine communications from proxy solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation*:

None

CERTIFICATION

The undersigned officer of Putnam Investments certifies that, to the best of his or her knowledge, any recommendation of an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

Name:

Proxy Voting Team

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**APPENDIX A-4** 

**PUTNAM ETF TRUST** 

**STATEMENT OF ADDITIONAL INFORMATION ("SAI") OF FRANKLIN MASSACHUSETTS MUNICIPAL INCOME ETF, FRANKLIN MINNESOTA MUNICIPAL INCOME ETF, FRANKLIN NEW JERSEY MUNICIPAL INCOME ETF, FRANKLIN OHIO MUNICIPAL INCOME ETF AND FRANKLIN PENNSYLVANIA MUNICIPAL INCOME ETF** 

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**The information in this Statement of Additional Information is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This Statement of Additional Information is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. Subject to completion, May 30, 2025** 

[ ], 2025

Putnam ETF Trust

---

| | | |
|:---|:---|:---|
| **Fund** | **Symbol** | **Principal U.S. Listing Exchange** |
| &nbsp;&nbsp;&nbsp; Franklin Massachusetts Municipal Income ETF<br> ("Massachusetts Municipal Income ETF") | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp; Franklin Minnesota Municipal Income ETF<br> ("Minnesota Municipal Income ETF") | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp; Franklin New Jersey Municipal Income ETF<br> ("New Jersey Municipal Income ETF") | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp; Franklin Ohio Municipal Income ETF<br> ("Ohio Municipal Income ETF") | [ ] | [NYSE Arca, Inc.] |
| &nbsp;&nbsp;&nbsp; Franklin Pennsylvania Municipal Income ETF<br> ("Pennsylvania Municipal Income ETF") | [ ] | [NYSE Arca, Inc.] |

---

**STATEMENT OF ADDITIONAL INFORMATION** 

This Statement of Additional Information ("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.

Each Fund has not commenced operations as of the date of this prospectus. Simultaneous with each Fund's commencement of operations, which is anticipated to occur on or about [ ], Massachusetts Municipal Income ETF, Minnesota Municipal Income ETF, New Jersey Municipal Income ETF, Ohio Municipal Income ETF and Pennsylvania Municipal Income ETF will acquire the assets and assume the liabilities of the Putnam Massachusetts Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam New Jersey Tax Exempt Income Fund, Putnam Ohio Tax Exempt Income Fund and Putnam Pennsylvania Tax Exempt Income Fund (each, a "Predecessor Fund"), respectively, in a reorganization (the "Reorganization"). As a result of the Reorganization, each Fund will adopt the performance and financial history of the respective Predecessor Fund's class R6 shares. The audited financial statements and report of the respective Predecessor Fund's independent registered public accounting firm in the respective Predecessor Fund's Form N-CSR, for the fiscal year ended [ ], are incorporated by reference into this SAI, which means that they are part of this SAI for legal purposes

Part I of this SAI contains specific information about each Fund listed above (references to the "Fund" mean each Fund listed on this cover page, unless otherwise noted). Part II includes information about the Fund and other Putnam mutual funds and exchange-traded funds (collectively, the "Putnam funds").

For a free copy of the Fund's current prospectus and, when available, shareholder reports, and/or financial statements, call Putnam Investor Services at 1-800-225-1581, write P.O. Box 219697, Kansas City, MO 64121-9697 or visit www.franklintempleton.com.

A-422 [ -SAI] [ ]

------

**Table of Contents** 

---

| | |
|:---|:---|
|  **[PART I](#sai12516_3_1)** |  |
|  **[FUND ORGANIZATION AND CLASSIFICATION](#sai12516_3_2)** | **A-424** |
|  **[INVESTMENT RESTRICTIONS](#sai12516_3_3)** | **A-424** |
|  **[CHARGES AND EXPENSES](#sai12516_3_4)** | **A-426** |
|  **[PORTFOLIO MANAGERS](#sai12516_3_5)** | **A-428** |
|  **[STATE SPECIFIC INFORMATION](#sai12516_3_6)** | **A-435** |
|  **[FINANCIAL STATEMENTS](#sai12516_3_7)** | **A-443** |
|  **[PART II](#sai12516_3_8)** |  |
|  **[TAXES](#sai12516_3_9)** | **A-502** |
|  **[MANAGEMENT](#sai12516_3_10)** | **A-516** |
|  **[DISCLOSURE OF PORTFOLIO INFORMATION](#sai12516_3_11)** | **A-535** |
|  **[INFORMATION SECURITY RISKS](#sai12516_3_12)** | **A-536** |
|  **[PROXY VOTING GUIDELINES AND PROCEDURES](#sai12516_3_13)** | **A-537** |
|  **[SECURITIES RATINGS](#sai12516_3_14)** | **A-537** |
|  **[APPENDIX A - PROXY VOTING GUIDELINES OF THE PUTNAM FUNDS](#sai12516_3_15)** | **A-542** |

---

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**SAI** 

**PART I** 

**FUND ORGANIZATION AND CLASSIFICATION** 

The Fund (excluding New Jersey Municipal Income ETF) is a diversified series of Putnam ETF Trust (the "Trust"). The Trust is a Delaware statutory trust organized on December 22, 2020. New Jersey Municipal Income ETF is a "non-diversified" investment company under the Investment Company Act of 1940, as amended (although, as indicated below, the New Jersey Fund has adopted non-fundamental investment restrictions requiring the Fund to be managed as a "diversified" investment company).

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.

Each share has one vote per dollar of net asset value represented by such share.

Shares of all classes vote together as a single class except when otherwise required by law or as determined by the Trustees. The Trustees may take many actions affecting the fund without shareholder approval, including under certain circumstances merging the 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 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.

**Information about the Summary Prospectus, Prospectus, and SAI** 

The Fund has entered into contractual arrangements with an investment adviser, distributor, transfer 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 by a shareholder against or on behalf of the Trust (or its series), including claims against Trustees and Officers, must be brought in courts of the State of Delaware .

**INVESTMENT RESTRICTIONS** 

The Fund has adopted the fundamental investment restrictions below for the protection of shareholders. Fundamental investment restrictions may not be changed without a vote of a majority of the outstanding voting securities. The Investment Company Act of 1940, as amended, 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.

**As fundamental investment restrictions, the Fund may not and will not:** 

(1) Borrow money in excess of 33 1/3% of the value of its total assets (not including the amount borrowed) at the time the borrowing is made.

(2) Underwrite securities issued by other persons except to the extent that, in connection with the disposition of its portfolio investments, it may be deemed to be an underwriter under certain federal securities laws.

(3) Purchase or sell real estate, although it may purchase securities of issuers which deal in real estate, securities which are secured by interests in real estate, and securities 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.

(4) Purchase or sell commodities or commodity contracts, except that the Fund may purchase and sell financial futures contracts and options and may enter into foreign exchange contracts and other financial transactions not involving physical commodities.

(5) Make loans, except by purchase of debt obligations in which the Fund may invest consistent with its investment policies (including without limitation debt obligations issued by other Putnam funds), by entering into repurchase agreements, or by lending its portfolio securities.

(6)(a) (New Jersey Municipal Income ETF only). 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.

(6)(b) (Massachusetts Municipal Income ETF, Minnesota Municipal Income ETF, Ohio Municipal Income ETF and Pennsylvania Municipal Income ETF only). With respect to 75% of its total assets, invest in the securities of any issuer if, immediately after such investment, more than 5% of the total assets of the fund (taken at current value) would be invested in the securities of such issuer; provided that this limitation does not apply to obligations issued or guaranteed as to interest or principal by the U.S. government or its agencies or instrumentalities or to securities issued by other investment companies.

(7)(a) (New Jersey Municipal Income ETF only). With respect to 50% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer.

(7)(b) (Massachusetts Municipal Income ETF, Minnesota Municipal Income ETF, Ohio Municipal Income ETF and Pennsylvania Municipal Income ETF only). With respect to 75% of its total assets, acquire more than 10% of the outstanding voting securities of any issuer.

(8) Purchase securities (other than securities of the U.S. government, its agencies or instrumentalities or tax-exempt securities, except tax-exempt securities backed only by the assets and revenues of non-governmental issuers) 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.

For purposes of the Fund's fundamental policy on commodities and commodities contracts (#4 above), at the time of the establishment of the policy, swap contracts on financial instruments or rates were not within the understanding of the terms "commodities" or "commodity contracts," and notwithstanding any federal legislation or regulatory action by the Commodity Futures Trading Commission ("CFTC") that subject such swaps to regulation by the CFTC, the Fund will not consider such instruments to be commodities or commodity contracts for purposes of this policy.

For purposes of the Fund's fundamental policy on industry concentration (#8 above), 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 policies may be changed by the Trustees without shareholder approval:

(1) (New Jersey Municipal Income ETF only). With respect to 75% of its total assets, each fund may not and will not 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.

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(2) (New Jersey Municipal Income ETF only). With respect to 75% of its total assets, each fund may not and will not acquire more than 10% of the outstanding voting securities of any issuer.

The New Jersey Municipal Income ETF is currently operating as a diversified fund consistent with non-fundamental restrictions (1) and (2) above. The fund had previously operated as a non-diversified fund and may operate as a non-diversified fund in the future to the extent permitted by applicable law. Under current law, shareholder approval would be required for the fund to resume operating as non-diversified.

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.

**CHARGES AND EXPENSES** 

**Creation/Redemption Transaction Fees** 

The following table shows the standard transaction fees for creations and redemptions.

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| | |
|:---|:---|
| **Standard Creation/Redemption Transactions Fee (in kind)** | **Standard Creation/Redemption Transactions Fee (in cash)** |
| [ ] | [ ] |

---

**Management fees** 

Franklin Advisers, Inc. (the "Investment Manager") serves as the Fund's investment manager. Under the Fund's management agreement with the Investment Manager (the "Management Contract"), the Fund pays an annual all-inclusive management fee to the Investment Manager as shown below. The management fee is based on the Fund's average daily net assets and is calculated and accrued daily. In consideration of the management fee, the Investment Manager pays all expenses incurred by the Fund, or reimburses the Fund for, all of the Fund's organizational and other operating expenses, excluding only: (i) interest and taxes (including, but not limited to, income, excise, transfer and withholding taxes); (ii) expenses of the Fund incurred with respect to the acquisition and disposition of portfolio securities, commodities or other financial instruments and the execution of portfolio transactions, including brokerage commissions; (iii) expenses incurred in connection with any distribution plan adopted by the Fund in compliance with Rule 12b-1 under the Investment Company Act of 1940, as amended, including distribution fees; (iv) expenses of printing and mailing proxy materials to shareholders of the Fund; (v) all other expenses incidental to holding meetings of the Fund's shareholders, including proxy solicitations therefor; (vi) litigation expenses (including, but not limited to, any indemnification obligation, attorneys' fees, expenses, costs, judgments, amounts paid in settlement, fines, penalties, fees of expert witnesses, document production fees, and all other liabilities whatsoever incurred or paid by the Fund or a person indemnified by the Fund); (vii) the fee payable to the Investment Manager hereunder; (viii) any extraordinary expenses (which, for the avoidance of doubt, do not include expenses related to the organization of any subsidiary for a fund or the ongoing corporate expenses of maintaining such subsidiary) and (ix) acquired fund fees and expenses.

Management Fee:

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| | |
|:---|:---|
| Massachusetts Municipal Income ETF | 0.35% |
| Minnesota Municipal Income ETF | 0.35% |
| New Jersey Municipal Income ETF | 0.35% |
| Ohio Municipal Income ETF | 0.35% |
| Pennsylvania Municipal Income ETF | 0.35% |

---

**Brokerage commissions** 

Because the Fund has yet to commence investment operations as of the date of this SAI, the Fund has not paid any brokerage commissions.

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Because the Fund has yet to commence investment operations, the Fund does not hold securities of its regular broker-dealers (or affiliates of such broker-dealers).

**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, the Investment Manager furnishes a continuing investment program for the Fund and makes investment decisions on its behalf. Subject to the control of the Trustees, the Investment Manager also manages the Fund's other affairs and business.

The table below shows the value of each Trustee's holdings in all registered investment companies in the Franklin Templeton family of funds overseen by the Trustee as of December 31, [2024].

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| | |
|:---|:---|
| **Trustees** | **Aggregate Dollar Range of Equity<br>Securities in All Registered Investment<br>Companies in the Franklin Templeton<br>Fund Complex Overseen by Trustee ($)** |
|  **Independent Trustees** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Liaquat Ahamed | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Barbara M. Baumann | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Katinka Domotorffy | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Catharine Bond Hill | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Gregory G. McGreevey |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Jennifer Williams Murphy | $10001-$50000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Marie Pillai | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; George Putnam III | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Manoj P. Singh | over $100,000 |
| &nbsp;&nbsp;&nbsp;&nbsp; Mona K. Sutphen | over $100,000 |
|  **Interested Trustees** |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Jane E. Trust |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Robert L. Reynolds | over $100,000 |

---

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 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 Fund had not yet commenced investment operations as of the date of this SAI.

The following table shows the fees paid to each Trustee by all of the Putnam funds for services rendered during the calendar year ended December 31, [ ]. As the Fund has not yet commenced operations, no fees have been paid by the Fund. Certain Independent Trustees who serve in leadership positions of the Board of Trustees or Board committees receive additional compensation, which is included in the fees shown below.

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| | | | | |
|:---|:---|:---|:---|:---|
| **Trustees** | **Aggregate**<br>**compensation**<br>**from the Fund<sup>1</sup>** | **Pension or**<br>**retirement**<br>**benefits**<br>**accrued as**<br>**part of Fund**<br>**expenses** | **Estimated<br>annual benefits<br>from Franklin<br>Templeton<br>fund complex<br>upon<br>retirement<sup>2</sup>** | **Total<br>compensation<br>from Franklin<br>Templeton fund<br>complex** |
|  **Independent Trustees** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Liaquat Ahamed | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp; Barbara M. Baumann | N/A | N/A | N/A | $[464,500] |
| &nbsp;&nbsp;&nbsp;&nbsp; Katinka Domotorffy | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp; Catharine Bond Hill | N/A | N/A | N/A | $[368,660] |
| &nbsp;&nbsp;&nbsp;&nbsp; Kenneth R. Leibler<sup>3</sup> | N/A | N/A | N/A | $[295,160] |
| &nbsp;&nbsp;&nbsp;&nbsp; Gregory G. McGreevey<sup>4</sup> | N/A | N/A | N/A | $[189,590] |
| &nbsp;&nbsp;&nbsp;&nbsp; Jennifer Williams Murphy | N/A | N/A | N/A | $[382,000] |
| &nbsp;&nbsp;&nbsp;&nbsp; Marie Pillai | N/A | N/A | N/A | $[355,320] |
| &nbsp;&nbsp;&nbsp;&nbsp; George Putnam III | N/A | N/A | $[130,333] | $[407,000] |
| &nbsp;&nbsp;&nbsp;&nbsp; Manoj P. Singh | N/A | N/A | N/A | $[407,000] |
| &nbsp;&nbsp;&nbsp;&nbsp; Mona K. Sutphen | N/A | N/A | N/A | $[382,000] |
|  **Interested Trustees** |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp; Robert L. Reynolds<sup>5</sup> | N/A | N/A | N/A | N/A |
| &nbsp;&nbsp;&nbsp;&nbsp; Jane E. Trust<sup>5</sup> | N/A | N/A | N/A | N/A |

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<sup>1</sup> Certain Trustees are also owed compensation deferred pursuant to a Trustee Compensation Deferral Plan.

<sup>2</sup> Estimated benefits for each Trustee are based on Trustee fee rates for calendar years 2003, 2004 and 2005.

<sup>3</sup> Mr. Leibler retired from the Board of Trustees effective June 30, 2024.

<sup>4</sup> Mr. McGreevey was appointed to the Board of Trustees on May 17, 2024.

<sup>5</sup> Mr. Reynolds and Ms. Trust are not compensated by the Fund for their service as Trustees because of their affiliation with the Investment Manager.

Under a retirement plan for Trustees of 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** 

Because the Fund had not commenced operations prior to the date of this SAI, the Fund has not issued any shares.

**PORTFOLIO MANAGERS** 

**Other Accounts Managed by the Portfolio Managers** 

The table below identifies the portfolio managers, the number of accounts (other than the Fund) for which the portfolio managers have day-to-day management responsibilities and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles, and other accounts. For each category, the number of

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accounts and total assets in the accounts where fees are based on performance are also indicated, as applicable. Unless noted otherwise, all information is provided as of [ ].

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Portfolio Manager** | **Type of Account**<br>| **Number of<br>Accounts<br>Managed** | **Total Assets<br>Managed<br>(Millions) ($)** | **Number of Accounts<br>Managed for which<br>Advisory Fee is<br>Performance-Based** | **Assets Managed for<br>which Advisory Fee<br>is<br>Performance-Based<br>(Millions) ($)** |
|  **Massachusetts Municipal Income ETF** | **Massachusetts Municipal Income ETF** |  |  |  |  |
|  John Bonelli | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Michael Conn | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Garrett L. Hamilton | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Christopher Sperry | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  John Wiley | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  **Minnesota Municipal Income ETF** | **Minnesota Municipal Income ETF** |  |  |  |  |
|  John Bonelli | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Michael Conn | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Garrett L. Hamilton | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Christopher Sperry | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  John Wiley | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  **New Jersey Municipal Income ETF** | **New Jersey Municipal Income ETF** |  |  |  |  |
|  John Bonelli | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Michael Conn | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Garrett L. Hamilton | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

---

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---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  Christopher Sperry | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  John Wiley | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  **Ohio Municipal Income ETF** | **Ohio Municipal Income ETF** |  |  |  |  |
|  John Bonelli | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Michael Conn | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Garrett L. Hamilton | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

---

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  Christopher Sperry | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  John Wiley | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  **Pennsylvania Municipal Income ETF** | **Pennsylvania Municipal Income ETF** |  |  |  |  |
|  John Bonelli | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Michael Conn | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

---

------

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  Garrett L. Hamilton | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  Christopher Sperry | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |
|  John Wiley | Registered | [ ] | [ ] | [ ] | [ ] |
|  | Investment |  |  |  |  |
|  | Companies |  |  |  |  |
|  | Other Pooled | [ ] | [ ] | [ ] | [ ] |
|  | Investment Vehicles |  |  |  |  |
|  | Other Accounts | [ ] | [ ] | [ ] | [ ] |

---

**Compensation of portfolio managers** 

The Investment Manager seeks to maintain a compensation program that is competitively positioned to attract, retain and motivate top-quality investment professionals. Portfolio managers receive a base salary, a cash incentive bonus opportunity, an equity compensation opportunity, and a benefits package. Portfolio manager compensation is reviewed annually, and the level of compensation is based on individual performance, the salary range for a portfolio manager's level of responsibility and Franklin Templeton guidelines. Portfolio managers are provided no financial incentive to favor one fund or account over another. Each portfolio manager's compensation consists of the following three elements:

**Base salary** Each portfolio manager is paid a base salary.

**Annual bonus** Annual bonuses are structured to align the interests of the portfolio manager with those of the Fund's shareholders. Each portfolio manager is eligible to receive an annual bonus. Bonuses generally are split between cash (50% to 65%) and restricted shares of Franklin Resources, Inc. ("Resources") stock and mutual fund shares. The deferred equity-based compensation is intended to build a vested interest of the portfolio manager in the financial performance of both Resources and mutual funds advised by the Investment Manager. The bonus plan is intended to provide a competitive level of annual bonus compensation that is tied to the portfolio manager achieving consistently strong investment performance, which aligns the financial incentives of the portfolio manager and Fund shareholders. The Chief Investment Officer of the Investment Manager and/or other officers of the Investment Manager, with responsibility for the Fund, have discretion in the granting of annual bonuses to portfolio managers in accordance with Franklin Templeton guidelines. The following factors are generally used in determining bonuses under the plan:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Investment performance.* Primary consideration is given to the historic investment performance over the 1,
3 and 5 preceding years of all accounts managed by the portfolio manager. The pre-tax performance of each fund managed is measured relative to a relevant peer group and/or applicable benchmark as appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Non-investment performance.* The more qualitative contributions of
the portfolio manager to the Investment Manager's business and the investment management team, including professional knowledge, productivity, responsiveness to client needs and communication, are evaluated in determining the amount of any
bonus award.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• *Responsibilities.* The characteristics and complexity of funds managed by the portfolio manager are
factored in the Investment Manager's appraisal.

**Additional long-term equity-based compensation** Portfolio managers may also be awarded restricted shares or units of Resources stock or restricted shares or units of one or more mutual funds. Awards of such deferred equity-based compensation typically vest over time, so as to create incentives to retain key talent.

**Benefits** Portfolio managers also participate in benefit plans and programs available generally to all employees of the Investment Manager.

**Portfolio managers' securities ownership** 

Because the Fund has not commended operations prior to the date of this SAI, the portfolio managers did not own any shares of the Fund as of the date of this SAI.

See "Management—Portfolio Transactions—Potential conflicts of interest in managing multiple accounts" in Part II of this SAI for information on how the Investment Manager addresses potential conflicts of interest resulting from an individual's management of more than one account.

**STATE SPECIFIC INFORMATION** 

**Focus of investments** 

This section provides additional information as to certain state specific considerations, relevant to the funds because each fund invests mostly in tax-exempt investments of a single state. This focus of investments makes each fund more vulnerable to the relevant state's economy and factors affecting tax-exempt issuers in that state than would be a more geographically diversified fund.

**State taxes** 

The prospectus describes generally the tax treatment of distributions by the funds. This section of the SAI and the section entitled "Taxes" in Part II of this SAI include additional information concerning certain state and federal tax consequences of an investment in a fund.

This additional information is based on state laws, judicial decisions and other administrative materials interpreting state law, all of which are subject to changes that may or may not be retroactive. Prospective investors should be aware that an investment in a state tax-exempt fund may not be suitable for persons who do not otherwise receive income subject to income taxes of such state. You should consult your tax advisor to see how investing in a Fund will affect your own tax situation.

From time-to-time legislation may be introduced or litigation may arise that would change the tax treatment of exempt-interest dividends. Such litigation or legislation may have the effect of raising the state or other taxes payable by shareholders on such dividends. Shareholders, including in particular shareholders of states not specifically discussed hereunder, should consult their tax advisers for the current law on exempt-interest dividends.

**Massachusetts** 

<u>General information.</u> The Massachusetts Municipal Income ETF invests in tax-exempt securities, which are issued by or for the Commonwealth of Massachusetts (the "Commonwealth") or its municipalities, as well as general and special revenue obligations

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issued by the Commonwealth. The performance of the Massachusetts Municipal Income ETF is therefore heavily dependent on the financial situation of the Commonwealth. The following discussion was drawn from publicly available information and may be subject to change at any time.

The Commonwealth has a population of approximately 7.0 million people, a highly educated workforce, and a diversified economy among several industrial and non-industrial sectors. The key industries in the Commonwealth include, financial services, real estate, professional and business services, manufacturing, educational services, health care, and social services. The unemployment rate in the Commonwealth remained below the national average from June 2007 through February 2020. However, due largely to decreased business activity and closures as a result of the COVID-19 pandemic, the Commonwealth's unemployment rate dramatically increased in 2020 from a low of 2.8% in March 2020 to a peak of 17.8% in June 2020. The unemployment rate in the Commonwealth decreased to 3.3% in 2023. As of June 2024, the unemployment rate in the Commonwealth was 3.2% compared to the national average of 4.1%. Future employment growth could, however, be affected by additional cuts in federal spending on health care services, pandemics and epidemics, another economic downturn or other conditions, including increases in inflation and changes in interest rates. In addition, according to the U.S. Department of Commerce, Bureau of Economic Analysis, in 2023 the Commonwealth had a per capita income of $87,812, the highest among the 50 states. Over the past several years, real and nominal income levels in the Commonwealth have consistently been above the national averages.

<u>Budgetary information.</u> The Commonwealth's budget seeks to achieve statutory balance. In January of 2024, Governor Healey filed her budget recommendations for fiscal year 2025. The Governor's fiscal year 2025 budget recommendations provide for a total of $56.1 billion in state spending, a 2.9% increase from projected fiscal year 2024 spending.

The Commonwealth's tax revenues increased in each of fiscal years 2021 and 2022, but decreased in fiscal year 2023. Tax revenues for fiscal year 2021 were $34.16 billion and resulted in a surplus of $7.80 billion. Tax revenues for fiscal year 2022 were $41.15 billion and resulted in a surplus of $6.10 billion. Tax revenues for fiscal year 2023 were $36.52 billion and resulted in a deficit of approximately $2.86 billion. In fiscal year 2023, on a statutory basis, approximately 53.5% of the Commonwealth's budgeted operating revenues and other financing sources were derived from state taxes. In addition, in fiscal year 2023, the federal government provided approximately 24.2% of such revenues, with the remaining 22.3% provided from departmental revenues and transfers from non-budgeted funds. Tax revenue forecasts for fiscal year 2025 are $40.20 billion, an increase of 2.0% over tax revenue forecasts for fiscal year 2024 of $39.41 billion.

The Commonwealth has a statutory limit on direct debt. The statutory direct debt limit for fiscal year 2023 was $29.20 billion. As of March 31, 2024, the Commonwealth had approximately $27.2 billion in general obligation bonds outstanding, of which $26.9 billion, or approximately 99.1%, was fixed rate debt and $258.2 million, or 0.9%, was variable rate debt. General obligation bonds are supported by the full faith and credit of the Commonwealth.

COVID-19. In response to the outbreak of COVID-19 and the declaration by the World Health Organization on March 11, 2020 of a COVID-19 pandemic, then-Governor Baker declared a state of emergency in the Commonwealth in March 2020. Over the ensuing months, Governor Baker's administration undertook a myriad of mitigation measures to curtail the adverse effects of COVID-19 on the Commonwealth, including issuing emergency orders that closed certain education programs and non-essential businesses, social distancing mandates, travel advisories, eviction moratoriums, and certain tax relief measures, all of which resulted in widespread economic disruption throughout the Commonwealth. The Commonwealth began a phased reopening of the economy in May 2020, and in December 2020, the Commonwealth began phased vaccination efforts across Massachusetts.

As public health measures continued to trend in a positive direction, and the Commonwealth experienced significant declines in average daily COVID-19 cases and hospitalizations, and increasing rates of vaccination amongst its constituents, the Commonwealth continued to implement its reopening plan, and by the end of May 2021, nearly all COVID-19 restrictions were lifted and all industries were permitted to open. On June 15, 2021, the state of emergency in the Commonwealth related to COVID-19 was terminated, and the state public health emergency ended on May 11, 2023, corresponding with the end of the federal public health emergency.

The federal government enacted several laws related to the COVID-19 pandemic, which provided resources for emergency response and recovery efforts and economic assistance, including unemployment insurance to state and local governments, businesses and individuals. The Commonwealth estimates the total value of these federal measures within Massachusetts at approximately $116 billion. Among this assistance was receipt by the Commonwealth of $2.46 billion through the federal Coronavirus Relief Fund ("CRF") created under the Coronavirus Aid, Relief and Economic Security Act and $5.29 billion from the

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Coronavirus State Fiscal Recovery Fund ("CSFRF") created under the American Rescue Plan Act of 2021 (ARPA). The CRF funds have been fully expended. Approximately $3.3 billion of the CSFRF have been spent as of March 30, 2024. The Executive Office for Administration and Finance estimates that approximately $89.1 million of federal COVID-19 financial assistance remains to be allocated.

The ultimate impact of the COVID-19 pandemic on the financial condition of the Commonwealth is dependent on numerous and highly uncertain factors, many of which are beyond the Commonwealth's control.

<u>Issue ratings.</u> According to an Official Statement dated as of June 5, 2024, the Commonwealth of Massachusetts General Obligation Bonds have been assigned long-term credit ratings of AA+ by Fitch Ratings, Aa1 by Moody's Investors Service, Inc., and AA by S&P Global Ratings. From time to time, the rating agencies may change or adjust their ratings for different bond issues.

<u>Tax information.</u> For Massachusetts resident individual shareholders, distributions received from the Massachusetts Municipal Income ETF are generally exempt from Massachusetts personal income tax to the extent that they are exempt-interest dividends that are directly attributable to the interest received by the Massachusetts Municipal Income ETF from obligations issued by the Commonwealth of Massachusetts, any political subdivision thereof or any Massachusetts agency or instrumentality or obligations issued by or on behalf of the United States government and certain of its possessions and are properly designated as such. If, however, any portion of exempt-interest dividends from the Massachusetts Municipal Income ETF is attributable to income received by the Massachusetts Municipal Income ETF from municipal securities of any state other than Massachusetts, such income will be subject to Massachusetts personal income tax. The Massachusetts Municipal Income ETF has obtained a tax ruling which recognizes for Massachusetts personal income tax purposes the tax-exempt character of gains realized by the Massachusetts Municipal Income ETF on the sale of certain tax-exempt securities of Massachusetts issuers when those gains are distributed to shareholders and properly designated as such.

Distributions from investment income and capital gains, including exempt-interest dividends, are not exempt, however, from Massachusetts corporate excise tax.

**Minnesota** 

<u>General information.</u> The Minnesota Municipal Income ETF's investments in Minnesota securities may be vulnerable to events adversely affecting the Minnesota economy. While the Minnesota economy is relatively diverse, including the agriculture, forestry, mining, manufacturing, retail, financial services, healthcare, and biomedical industries, a downturn in any of these could hurt Minnesota economic conditions. Minnesota businesses generally face a high cost of doing business, which also may negatively affect economic conditions in the state.

Minnesota's budget and economic outlook is stable. In its February 2024 Budget and Economic Forecast (February 2024 Forecast), the Minnesota Office of Management and Budget (OMB) projected that the FY 2024-2025 biennium would end with a budget surplus of $3.715 billion, citing higher collections compared to spending estimates.

Minnesota expects its economic recovery from the COVID-19 pandemic to continue. This recovery is driven in part by a strong labor market. According to the state's February 2024 Forecast, as of December 2023, Minnesota had the tenth lowest unemployment rate and the fifth highest labor force participation rate in the U.S. With demographic realities of an aging Minnesota challenging employment growth, average wage growth (growth in wage and salary income per worker) is expected to be the primary driver of growth in total nominal wage income through the State's forecast horizon.

In its July 10, 2024 Revenue and Economic Update, the Office of Management and Budget (OMB) reported that its net general funds receipts for FY 2023 were estimated to total $30.238 billion, $421 million (1.4 percent) more than projected in the February 2024 Forecast.

<u>Tax information.</u> Minnesota generally uses federal taxable income as the starting point for the determination of state taxable income for trusts, estates, and corporations. Minnesota uses federal adjusted gross income as the starting point for determining state taxable income for individuals. Since Minnesota law adopts federal adjusted gross income as the starting point for computing Minnesota income tax, dividends reported as capital gains for federal income tax purposes are included in an individual shareholder's Minnesota taxable income. Unlike the federal income tax, Minnesota does not have a preferential tax rate for capital gains. (Minn. Stat. § 290.06, Subd. 2c). Minnesota excludes from the taxable income of individuals, estates and

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trusts the exempt-interest dividends as defined in Section 852(b)(5) of the Internal Revenue Code paid by a regulated investment company provided that the income is either exempt from state taxation under the laws of the United States, or the portion of the exempt-interest dividends is derived from interest income on obligations of the State of Minnesota or its political subdivisions, municipalities, governmental agencies or instrumentalities, but only if the portion of the exempt-interest dividend from such Minnesota sources paid to all shareholders represents 95 percent or more of the exempt-interest dividends. (Minn. Stat. § 290.0131, Subd. 2(b)). To the extent the exempt-interest dividends are taken into account as a preference item for purposes of determining federal alternative minimum taxable income, the exempt-interest dividends may be taxable for Minnesota alternative minimum tax purposes if the interest income relates to obligations of any state other than Minnesota or its political subdivisions. (Minn. Stat. § 290.091, Subd. 2(a)(5)).

Minnesota has enacted a statement of intent that interest on obligations of Minnesota and its political subdivisions and Indian tribes, of any particular character or type, be included in net income of individuals, estates and trusts for Minnesota income tax purposes if it is judicially determined that Minnesota's exemption of such interest and taxation of interest on comparable obligations of other states and their political subdivisions and Indian tribes unlawfully discriminates against interstate commerce. See Minn. Stat. § 289A.50, subd. 10. This provision applies to taxable years that begin during or after the calendar year in which any such determination becomes final.

On May 19, 2008, the U.S. Supreme Court decided the case of Department of Revenue of Kentucky v. Davis, in which a taxpayer had challenged Kentucky's scheme of taxation that exempted from taxation interest on the bonds of Kentucky and its political subdivisions while taxing interest on the bonds of other states and their political subdivisions. The Supreme Court held that Kentucky's taxing scheme did not violate the Commerce Clause. This decision, however, dealt with bonds that financed governmental projects, and the Court noted that the case did not present any question concerning the treatment of "private activity bonds" issued by states and their political subdivisions to finance projects for private entities. (The Court's opinion also did not address the issue of discriminatory treatment of Indian tribal bonds.) The Court's opinion left open the possibility that another party could challenge a state's discriminatory treatment of the interest on private activity bonds.

The management of the Minnesota Municipal Income ETF is not aware of any pending litigation involving private activity bonds. Nevertheless, a court in the future could hold that a state's discriminatory treatment of private activity bonds violates the Commerce Clause, and in that case the Minnesota statute could take effect and interest on Minnesota private activity obligations held by the Minnesota Municipal Income ETF would become taxable in Minnesota.

That percentage of interest on indebtedness incurred or continued to purchase or carry shares of an investment company paying exempt-interest dividends, such as the Minnesota Municipal Income ETF, that is equal to the percentage of the Minnesota Municipal Income ETF's distributions from investment income and short-term capital gains that is exempt from federal income tax, will not be deductible by the investor for Minnesota income tax purposes. Minn. Stat. § 290.0122, Subd 5; Schedule M1SA Instructions.

**New Jersey** 

<u>General information.</u> The following information provides only a brief summary of selected information relating to New Jersey's economic conditions, does not purport to be a complete description, and is based on information drawn from publicly available offering statements relating to New Jersey municipal debt offerings. This information has not been independently verified.

The following industries are the center of New Jersey's diverse economy: technology, transportation and logistics, health care, financial services, biopharmaceuticals, and advanced manufacturing. There is also a strong commercial agriculture sector in the rural areas. The Jersey Shore, part of the Atlantic Seaboard, is a focus of New Jersey's tourism sector and includes gambling in Atlantic City. New Jersey is part of a megalopolis which extends from Boston to Washington D.C. and includes about one-sixth of the country's population, making it an attractive location for businesses due to its central location and ability to access both regional and world markets.

In 2023, New Jersey's economy experienced stable growth. New Jersey's Gross Domestic Product ("GDP") – a broad measure of economic output – showed moderate growth overall and employment levels continued to rise, surpassing pre-pandemic levels in most industries. Price inflation continued to decline over the course of the year. Higher interest rates, intended to tame inflation and slow economic activity, have plateaued since the summer of 2023, but continue to restrict economic activity in some sectors, most notably the housing market.

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In 2023, New Jersey's economic growth was slower than the U.S. as a whole. New Jersey's real GDP growth in 2023 was 1.5 percent, and ranked 28<sup>th</sup> out of the fifty states.

New Jersey's unemployment rate increased a percentage point over the course of the year, rising to 4.8 percent in December 2023, as the number of unemployed persons rose quicker than the labor force. Despite a higher unemployment rate, New Jersey's labor market proved resilient. Following two consecutive years of record jobs growth, another 89,600 jobs were added in 2023. Employment rose in ten out of twelve months in 2023, with positive job growth in each of the final five months of the year.

New Jersey wages and salaries rose 5.1 percent in 2023, and personal income in New Jersey rose 4.9 percent. Overall, New Jersey's wage and salary growth ranked third lowest of the fifty states. Personal income growth overall ranked 27<sup>th</sup> amongst the fifty states, still behind regional peer and national rates.

U.S. personal saving as a percentage of disposable income has fluctuated sharply in recent years. From pre-pandemic level in the mid-seven percent, savings rose to a high of 24.5 percent in the second quarter of 2020 spurred by federal economic impact payments and limited spending options. The savings rate subsequently hovered around 3.0 percent in 2022, as households adjusted to high price inflation and increased to an average of 4.6 percent in 2023.

The housing market continued to slow from 2022 into 2023 amidst elevated mortgage interest rates and elevated home prices. The median sales price for a single-family home in New Jersey eclipsed $500,000 in 2023, rising 6.3 percent from 2022, when prices rose 8.7 percent. According to New Jersey Realtors data, existing-home sales started to weaken near the end of 2021 and total closed sales fell 17.8 percent in 2022, matching levels last seen in 2015. Sales continued to decline in 2023, matching levels not seen since 2012-2013, as both the inventory of homes for sale and the affordability index reached their lowest levels since at least 2010.

New Jersey's location on the eastern seaboard of the United States exposes it to a variety of climate risks such as severe storms and hurricanes, which can damage New Jersey's infrastructure. In addition, much of New Jersey's coastal and riverine areas may be vulnerable to sea level rise or flooding from increasing and extreme precipitation and other impacts of climate change. These climate-related phenomena may damage significant portions of New Jersey's assets and may require New Jersey to construct additional infrastructure. Further, a changing climate may negatively impact the economy of New Jersey. However, New Jersey cannot predict the impact that these climate events may have on New Jersey's financial condition. New Jersey's Department of Environmental Protection ("NJDEP") is responsible for developing studies and strategies to reduce and respond to the effects of climate change. The NJDEP has developed short- and long-term strategies to make New Jersey more resilient to the impacts of climate change, including through regulatory requirements aimed at better protecting public and private assets from risks associated with extreme weather, sea-level rise, and flooding.

The New Jersey Office of information Technology ("NJOIT") serves as New Jersey's centralized infrastructure technology provider. Over the past 24 months, NJOIT has implemented advanced technologies to modernize the Garden State Network infrastructure, which includes next-generation firewalls with advanced cyber threat intelligence features, to enhance New Jersey government's cybersecurity posture. These efforts are in collaboration with the New Jersey Office of Homeland Security and Preparedness' cybersecurity arm, the New Jersey Cybersecurity & Communications Integration Cell ("NJCCIC"). This separation of accountability for cyber protection has served to substantially increase effectiveness due to focused skillsets, budgets, and technology platforms. These measures are recognized as industry standard modern cyber protection mechanisms and serve to reduce the risk of successful cyber-attacks upon New Jersey's information technology assets. NJCCIC manages New Jersey's security operation center to monitor, detect, and respond to attacks in real-time. However, despite these measures, it is recognized in the cybersecurity industry that no amount of preventative countermeasures and security features successfully prevent 100% of all cyber attacks. To further manage risk, New Jersey maintains cyber liability insurance coverage.

<u>Tax information.</u> The New Jersey Municipal Income ETF intends to be a Qualified Investment Fund under the laws of New Jersey, except when investing for defensive purposes under certain circumstances. As long as the New Jersey Municipal Income ETF is a Qualified Investment Fund, to the extent its distributions are derived from interest or net gains on Tax-Exempt Obligations, such distributions will be exempt from the New Jersey Gross Income Tax. Gains resulting from the redemption or sale of shares of the New Jersey Municipal Income ETF will also be exempt from the New Jersey Gross Income Tax.

Under New Jersey law, the New Jersey Municipal Income ETF will be a "Qualified Investment Fund" for the calendar year in which the distribution is paid if it both (i) has no investments other than Interest-Bearing Obligations, Cash, and Certain Financial Instruments, and (ii) at the close of each quarter of the taxable year, has not less than 80 percent of the aggregate principal

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amount of all its investments-excluding Cash and Certain Financial Instruments-invested in Tax-Exempt Obligations. For this purpose: "Interest-Bearing Obligations" include interest-bearing obligations and obligations issued at a discount; "Cash" includes cash and cash items, including receivables; and "Certain Financial Instruments" means financial options, futures, forward contracts, and other similar financial instruments related to interest-bearing obligations, obligations issued at a discount, or bond indexes related thereto.

For purposes of this section, "Tax-Exempt Obligations" means obligations, the income of which is exempt from the New Jersey Gross Income Tax under New Jersey or federal law. Tax-Exempt Obligations generally include both (a) obligations issued by or on behalf of New Jersey or any county, municipality, school or other district, agency, authority, commission, instrumentality, public corporation (including one created or existing pursuant to an agreement or compact with New Jersey or any other state), body corporate, and politic or political subdivision of New Jersey, and (b) obligations issued by or on behalf of the United States Government or the territories of Puerto Rico, Guam, or the Virgin Islands.

Distributions by the New Jersey Municipal Income ETF derived from income or net gains on investments other than Tax-Exempt Obligations, whether paid in cash or reinvested in additional shares, will be taxable as gross income under the New Jersey Gross Income Tax Act. In addition, if the New Jersey Municipal Income ETF is below the 80 percent requirement at the end of any calendar quarter for any reason, then the New Jersey Municipal Income ETF will fail to qualify as a Qualified Investment Fund for the entire calendar year and all distributions derived from interest or gains from such year, whether or not attributable to Tax-Exempt Obligations, and all gains resulting from the redemption or sale of shares, will be taxable under the New Jersey Gross Income Tax Act.

The New Jersey Gross Income Tax is not applicable to corporations. For all corporations subject to the New Jersey Corporation Business Tax, distributions derived from interest or net gains on Tax-Exempt Obligations, as well as gains on the redemption or sale of shares, are included in the net income tax base for purposes of computing the Corporation Business Tax. Also, to the extent any distributions or gains on redemption or sale are considered to be a New Jersey gross receipt (that is, generally, a business receipt sourced to New Jersey), such distributions or gains may be included in a corporate shareholder's gross receipts base for purposes of computing the alternative minimum assessment component of the Corporation Business Tax.

The New Jersey Municipal Income ETF will notify shareholders by February 15 of each calendar year as to (i) the amounts of dividends and distributions made with respect to the preceding calendar year that are exempt from federal income taxes and the New Jersey Gross Income Tax, and (ii) the amounts, if any, which are subject to such taxes. The New Jersey Municipal Income ETF will also make appropriate certification of its status for the New Jersey tax authorities, if requested by the Division of Taxation.

**Ohio** 

<u>General information.</u> The Ohio Municipal Income ETF's investments in Ohio municipal securities may be vulnerable to events adversely affecting Ohio and its economy as a whole, or industry segments in that economy or geographic areas within the State, including events such as the global pandemic spread of COVID-19 (see below). Ohio ranks fourth among the states in the manufacturing sector ($131.0 billion) and fifth in the durable goods sector ($69.2 billion). Manufacturing was responsible for 15.0% of Ohio's preliminary 2023 gross state product (GSP), the goods-producing sectors were responsible for 21.8% of Ohio's preliminary 2023 GSP and the business services sectors, including finance, insurance and real estate responsible for 33.7% of Ohio's preliminary 2023 GSP. Ohio is the tenth largest exporting state with 2023 merchandise exports totaling $55.7 billion, with machinery (including electrical machinery), motor vehicles (including parts), aircraft/spacecraft and plastics accounting for more than half of that total. And, with 13.5 million acres (of a total land area of 26.4 million acres) in farmland and an estimated 77,800 individual farms, agriculture combined with related agricultural sectors remains an important segment of the State's economy.

Ohio's 2023 census population estimate (as of July 1, 2023) of 11,756,058 ranked it seventh among the states, and was a 0.35% decrease over the 2020 decennial census population of 11,797,517. Ohio's unemployment rate (seasonally adjusted) was 3.7% as of March 2024.

The continued spread of COVID-19 has had and may continue to have a material impact on Ohio's economy although the full impact of COVID-19 on Ohio's economy is unknown at this time. In response to the public health crisis, the Governor and the Director of the Ohio Department of Health took certain actions to limit the spread of the virus and its impact on the State's local communities and health care services, including the declaration of a state of emergency in the State on March 9, 2020, and rescinded the order thereby ending the state-declared public health emergency on June 17, 2021. During that period, the

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Governor and the General Assembly took certain actions to mitigate the economic effect of the COVID-19 outbreak on the State's financial position.

Under the Coronavirus Aid, Relief and Economic Security Act (CARES Act) the State was directly allocated a minimum of $2.49 billion of the total $4.53 billion granted by the Federal government to the State and its eligible local governments with the funds being used for costs that were necessary expenditures incurred due to COVID-19. Under the American Rescue Plan Act of 2021 (ARPA), Under ARPA, the Federal Government allocated approximately $10.7 billion to Ohio's state and local governments with an additional $268.6 million allocated specifically for use in state capital projects to continue efforts to mitigate the fiscal effects stemming from COVID-19.

In the initial months of the COVID-19 pandemic, unemployment insurance claims increased significantly from an average of 7,915 claims per week during the first 11 weeks of 2020 to 274,288 during the week ending March 28, 2020. Between January and June 2020, Ohio's Unemployment Trust Fund balance dropped from $1.26 billion to zero. On June 16, 2020, Ohio received an advance from the federal government to continue to pay the increased unemployment insurance claims. On September 3, 2021, Ohio paid off its $1.47 billion loan using ARPA funds.

<u>Tax information.</u> Distributions received from the Ohio Municipal Income ETF are exempt from Ohio personal income tax and municipal and school district income taxes in Ohio and will be excluded from the net income base of the Ohio corporation franchise tax to the extent they are properly attributable to interest on obligations issued by the State of Ohio, its political subdivisions, or its agencies or instrumentalities ("Ohio Obligations"), provided that the Ohio Municipal Income ETF continues to qualify as a regulated investment company for federal income tax purposes and that at all times at least 50% of the value of the total assets of the fund consists of Ohio Obligations or similar obligations of other states or their subdivisions. It is assumed for purposes of this discussion of Ohio taxation that these requirements are satisfied. The Ohio Municipal Income ETF's shares will be included in a shareholder's tax base for purposes of the Ohio financial institutions tax and in computing the Ohio corporation franchise tax on the net worth basis.

Distributions from the Ohio Municipal Income ETF of capital gains earned or received by the Ohio Municipal Income ETF are exempt from Ohio personal income tax and municipal and school district income taxes in Ohio and will be excluded from the net income base of the Ohio corporation franchise tax, in each case to the extent that such distributions are properly attributable to profit made on the sale, exchange or other disposition by the Ohio Municipal Income ETF of Ohio Obligations.

Distributions properly attributable to interest on obligations of the United States or of any authority, commission, or instrumentality of the United States ("Federal Obligations") are exempt from Ohio personal income tax, the net income base of the Ohio corporation franchise tax, and municipal and school district income taxes in Ohio, regardless of the amount of Federal Obligations or Ohio Obligations held by the Ohio Municipal Income ETF. Distributions properly attributable to interest on obligations of American Samoa, Guam, the Northern Mariana Islands, Puerto Rico, or the U.S. Virgin Islands, or their authorities or instrumentalities ("Possessions Obligations"), are exempt from Ohio personal income tax and municipal and school district income taxes in Ohio to the extent the interest on such Possessions Obligations is exempt under federal law from state and local income taxes, regardless of the amount of Ohio Obligations or Possessions Obligations held by the Ohio Municipal Income ETF. Distributions properly attributable to interest on Possessions Obligations are excluded from the net income base of the Ohio corporation franchise tax to the extent such interest is excluded from gross income for federal income tax purposes.

Distributions received from the Ohio Municipal Income ETF are exempt from the Ohio commercial activity tax regardless of whether the requirements described in the first paragraph of this discussion are satisfied. Except to the extent set forth below, distributions received from the Ohio Municipal Income ETF are also exempt from municipal income taxes and joint economic development district income taxes in Ohio regardless of whether the requirements described in the first paragraph of this discussion are satisfied. If those requirements are not satisfied, however, such distributions received by a resident of a "qualified municipal corporation" (within the meaning of Ohio revised Code Chapter 718) are subject to tax by that municipal corporation, and up to 5% of such distributions can be included in the computation of certain business net profits that are subject to municipal income taxes and joint economic development district income taxes in Ohio.

**Pennsylvania** 

<u>General information.</u> Because the Pennsylvania Municipal Income ETF invests in Pennsylvania municipal securities, it is susceptible to political, economic, regulatory or other factors affecting issuers of Pennsylvania municipal securities. Without intending to be complete, the information set forth below briefly summarizes some of the factors affecting the financial situation in

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the Commonwealth of Pennsylvania (the "Commonwealth" or "Pennsylvania"). Such information is generally derived from official statements utilized in connection with the issuance of Pennsylvania municipal securities, as well as from other publicly available documents. Such information has not been independently verified and the Pennsylvania Municipal Income ETF assumes no responsibility for the completeness or accuracy of such information. In addition, the information provided is updated only through the information available as of the date of this Statement of Additional Information. The information and risks set forth below could change quickly and without notice due to additional information available, market or economic changes or other unforeseen events, among other things.

Many factors affect the financial condition of Pennsylvania and its political subdivisions, such as social, environmental and economic conditions, many of which are not within the control of such entities. Such factors could have an adverse impact on the financial condition of issuers of securities in which the Pennsylvania Municipal Income ETF invests. The creditworthiness of obligations issued by local Pennsylvania issuers may be unrelated to the creditworthiness of obligations issued by Pennsylvania, and there is generally no obligation on the part of Pennsylvania to make payments on such local obligations. There may be specific factors that are applicable in connection with obligations of particular issuers located within Pennsylvania, and it is possible the Pennsylvania Municipal Income ETF will invest in obligations of particular issuers as to which such specific factors are applicable. There can be no assurance that Pennsylvania or a political subdivision thereof will not experience a decline in economic conditions, or that portions of the Pennsylvania municipal securities purchased by the Pennsylvania Municipal Income ETF will not be affected by such a decline.

The coronavirus ("COVID-19") outbreak in 2020 has impacted the global economy and public health, and federal, state, and local governments, including those in Pennsylvania, have enacted legislation and issued administrative orders, directives and guidance to mitigate the impact of COVID-19 on the general population and the economy.

According to information in an Official Statement, dated May 20, 2021, issued in connection with the sale of Pennsylvania general obligation bonds, Pennsylvania received $3.9 billion in CARES ACT funding from the federal government. As of the date of the Official Statement, the Commonwealth had expended, or the costs had been incurred for the majority of the $3.9 billion received in CARES Act funds. The Coronavirus State Fiscal Recovery Funds program, enacted as a part of the Federal American Rescue Plan Act of 2021 ("ARPA"), delivered $7.291 billion to Pennsylvania to support the response to and recovery from the COVID-19 pandemic. As of June 30, 2023, all ARPA dollars allocated to Pennsylvania have been appropriated to 30 specific uses via acts of the Pennsylvania General Assembly.

Pennsylvania is one of the most populous states, ranking fifth behind California, Texas, Florida, and New York. Pennsylvania stakes claim to a diverse economy and many thriving industries. At different times throughout its history, the Commonwealth has been the nation's principal producer of ships, iron, chemicals, lumber, oil, textiles, glass, coal and steel. This led Pennsylvania to be identified historically as a heavy industrial state. That reputation has changed over the last several decades as the coal, steel and railroad industries declined. Pennsylvania's business environment readjusted with a more diversified economic base. Currently, the major sources of growth in Pennsylvania are in the service sector, including healthcare, leisure-hospitality, transport and storage.

Development of natural gas continues to be one of the biggest factors in Pennsylvania's economic outlook. Although direct employment in natural resources and mining is a small part of total jobs in the state, its rapidly rising location quotient helps to illustrate the growth seen in the last few years. More important to the economy at all levels are the related jobs created in other sectors, such as construction, transportation, and professional services. State manufacturers have already benefitted from demand for steel and equipment being used to drill the wells and get them connected to demand centers via pipelines. Pennsylvania's competitiveness in manufacturing should be enhanced by the decreased costs of energy and petrochemical feedstocks coming from beneath the state.

Pennsylvania exported $49.8 billion in goods to foreign markets in 2022. Chemicals remain Pennsylvania's top export category. This category includes pharmaceuticals, a key output of the state economy. Canada remained the state's primary export destination. Technology firms are steadily gaining a significant presence in the Pittsburgh region due to the young and talented workforce emerging from schools like Carnegie Mellon and the University of Pittsburgh. Tech giants Google and eBay have moved into the area, while Westinghouse is in the process of expanding headquarters in the region. Investment by Westinghouse in nuclear engineering and research will propel this sector through the next several years.

Pennsylvania's geographic location makes it a prime corridor for the transportation of goods. From its extensive rail service and ports to its grid of interstate highways, Pennsylvania remains an integral part of the northeast region's economic activity.

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As of June 2023, Pennsylvania's unemployment rate is 3.8%, which is the lowest on record (dating back to January 1976). Pennsylvania's unemployment rate dropped significantly since 2020, when the unemployment rate was 9.1% due to the COVID-19 pandemic.

Pennsylvania operates on a fiscal year beginning July 1 and ending June 30. According to a July 3, 2023 Pennsylvania Department of Revenue press release, Pennsylvania ended the 2022-2023 fiscal year with $44.9 billion in General Fund collections. That total is $1.3 billion, or 3.1%, above estimate. This has been a trend in recent years as Pennsylvania's economy has rebounded from the impact of the COVID-19 pandemic.

On August 3, 2023, Pennsylvania Governor Joshua Shapiro signed the 2023-2024 budget into law. The total budget is approximately $45.55 billion, with little increase over the 2022-2023 budget.

Tax information. Distributions paid by the Pennsylvania Municipal Income ETF will not be subject to the Pennsylvania personal income tax or (in the case of residents of the City of Philadelphia) the Philadelphia school district investment net income tax to the extent that the distributions are properly attributable to interest on (i) obligations issued by the Commonwealth of Pennsylvania, its political subdivisions, or its agencies or instrumentalities ("Pennsylvania Obligations"), (ii) direct obligations of the United States or of any qualifying authority, commission, or instrumentality of the United States, or (iii) qualifying obligations of certain United States territories or possessions the interest on which is exempt from state income taxes under the laws of the United States ("Possessions Obligations"). Distributions by the Pennsylvania Municipal Income ETF that are attributable to other sources (including indirect obligations of the United States such as Ginnie Maes, Fannie Maes, etc.) are generally not exempt and are subject to the Pennsylvania personal income tax and (in the case of residents of Philadelphia) to the Philadelphia school district investment net income tax whether paid in cash or reinvested in additional shares. In addition, distributions designated as capital gain dividends for federal income tax purposes will also generally be exempt from the Philadelphia school district investment net income tax.

To the extent that distributions that are attributable to interest on Pennsylvania Obligations and Possessions Obligations are excluded from taxable income for federal income tax purposes (determined before net operating loss carryovers and special deductions), they will not be subject to the Pennsylvania corporate net income tax. In addition, a deduction is permitted in computing Pennsylvania taxable income (for purposes of the corporate net income tax) for the amount of distributions paid by the Pennsylvania Municipal Income ETF attributable to interest on (i) direct obligations of the United States or of any qualifying authority, commission or instrumentality of the United States, and (ii) Possessions Obligations, to the extent such amount is included in federal taxable income, but such a deduction is reduced by any interest on indebtedness incurred to carry such obligations and other expenses incurred in the production of such interest income (including expenses deducted on the federal income tax return that would not have been allowed under the Internal Revenue Code if the interest were exempt from federal income tax). Distributions by the Pennsylvania Municipal Income ETF that are attributable to other sources (including indirect obligations of the United States such as Ginnie Maes, Fannie Maes, etc.) are generally not exempt and are subject to the corporate net income tax.

**FINANCIAL STATEMENTS** 

The Fund has not yet commenced operations as of the date of this SAI and, therefore, financial statements for the Fund are not available.

Each Predecessor Fund's Form N-CSR for the fiscal year ended [ ] ([ ]) contains that Predecessor Fund's audited financial statements, accompanying notes and the report of [ ], an independent registered public accounting firm, all of which are incorporated by reference into this SAI. These audited financial statements are available free of charge upon request by calling 1-800-225-1581.

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Throughout this SAI, references to the fund's investment manager (the "Investment Manager") shall refer to the entity indicated for each fund in the table below:

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Investment**<br> **Manager** | Franklin Advisers, Inc.<br> ("Franklin Advisers") | Putnam Investment Management, LLC ("Putnam Management") |
| &nbsp;&nbsp;&nbsp;**Funds** | Franklin California Municipal Income ETF | Putnam BDC Income ETF |
|  | Franklin Massachusetts Municipal Income ETF | Putnam BioRevolution<sup>TM</sup> ETF |
|  | Franklin Minnesota Municipal Income ETF | Putnam Emerging Markets Ex-China ETF |
|  | Franklin Municipal High Yield ETF | Putnam Focused Large Cap Growth ETF |
|  | Franklin Municipal Income ETF | Putnam Focused Large Cap Value ETF |
|  | Franklin New Jersey Municipal Income ETF | Putnam PanAgora ESG Emerging Markets Equity |
|  | Franklin New York Municipal Income ETF | ETF |
|  | Franklin Ohio Municipal Income ETF | Putnam PanAgora ESG International Equity ETF |
|  | Franklin Pennsylvania Municipal Income ETF | Putnam Sustainable Future ETF |
|  | Franklin Short-Term Municipal Income ETF | Putnam Sustainable Leaders ETF |
|  | Putnam ESG Core Bond ETF |  |
|  | Putnam ESG High Yield ETF |  |
|  | Putnam ESG Ultra Short ETF |  |

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**THE PUTNAM ETFS** 

**STATEMENT OF ADDITIONAL INFORMATION ("SAI")** 

**PART II** 

**GENERAL DESCRIPTION OF THE FUNDS** 

Each fund is an actively managed exchange-traded fund ("ETF"). Each fund issues and redeems shares on a continuous basis at net asset value per share ("NAV") in aggregations of a specified number of shares called "Creation Units." Creation Units are generally issued in exchange for portfolio securities and/or cash. Shares are listed and traded on an exchange. Shares trade in the secondary market at market prices that may differ from the shares' NAV. Shares are not individually redeemable, but are redeemable only in Creation Unit aggregations, also in exchange for portfolio securities and/or cash. Shareholders who are not Authorized Participants (as defined herein), therefore, will not be able to purchase or redeem shares directly with or from a fund. Instead, most shareholders who are not Authorized Participants will buy and sell shares in the secondary market through a broker.

**BUYING AND SELLING SHARES** 

**Book-Entry Only System** 

The Depository Trust Company ("DTC") acts as securities depository for the shares. Shares of each fund are represented by securities registered in the name of DTC or its nominee and deposited with, or on behalf of, DTC. Certificates will not be issued for shares.

DTC, a limited-purpose trust company, was created to hold securities of its participants and to facilitate the clearance and settlement of securities transactions among DTC participants in such securities through electronic book-entry changes in accounts of the DTC participants, thereby eliminating the need for physical movement of securities certificates. DTC participants include securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations, some of whom (and/or their representatives) own DTC. Access to the DTC system is also available to others such as banks, brokers,

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dealers, and trust companies that clear through or maintain a custodial relationship with a DTC participant, either directly or indirectly.

Beneficial ownership of shares is limited to DTC participants and persons holding interests through DTC participants. Ownership of beneficial interests in shares (owners of beneficial interests are referred to herein as Beneficial Owners) is shown on, and the transfer of ownership is effected only through, records maintained by DTC (with respect to DTC participants) and on the records of DTC participants (with respect to indirect DTC participants and Beneficial Owners that are not DTC participants). Beneficial Owners will receive from or through a DTC participant a written confirmation relating to their purchase of shares.

Conveyance of all notices, statements and other communications to Beneficial Owners is effected as follows. Pursuant to the Depositary Agreement between the trust and DTC, DTC is required to make available to the trust upon request and for a fee to be charged to the trust a listing of the shares of each fund held by each DTC participant. The trust shall inquire of each such DTC participant as to the number of Beneficial Owners holding fund shares, directly or indirectly, through such DTC participant. The trust shall provide each such DTC participant with copies of such notice, statement or other communication, in such form, number and at such place as such DTC participant may reasonably request, in order that such notice, statement or communication may be transmitted by such DTC participant, directly or indirectly, to such Beneficial Owners. In addition, the trust shall pay to each such DTC participant a fair and reasonable amount as reimbursement for the expenses attendant to such transmittal, all subject to applicable statutory and regulatory requirements.

Share distributions shall be made to DTC or its nominee, Cede & Co., as the registered holder of all shares. DTC or its nominee, upon receipt of any such distributions, shall credit immediately DTC participants' accounts with payments in amounts proportionate to their respective beneficial interests in shares of each fund as shown on the records of DTC or its nominee. Payments by DTC participants to indirect DTC participants and Beneficial Owners of shares held through such DTC participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in a "street name," and will be the responsibility of such DTC participants.

The trust has no responsibility or liability for any aspect of the records relating to or notices to Beneficial Owners, or payments made on account of beneficial ownership interests in such shares, or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests, or for any other aspect of the relationship between DTC and the DTC participants or the relationship between such DTC participants and the indirect DTC participants and Beneficial Owners owning through such DTC participants.

DTC may decide to discontinue providing its service with respect to shares at any time by giving reasonable notice to the trust and discharging its responsibilities with respect thereto under applicable law. Under such circumstances, the trust shall take action either to find a replacement for DTC to perform its functions at a comparable cost or, if such a replacement is unavailable, to issue and deliver printed certificates representing ownership of shares, unless the trust makes other arrangements with respect thereto satisfactory to the listing exchange.

**Creation Units** 

The trust issues and redeems shares of each fund only in Creation Unit aggregations on a continuous basis through Franklin Distributors, LLC ("Franklin Distributors"), the Fund's distributor, without a sales load, at its NAV next determined after receipt, on any Business Day (as defined herein), of an order in proper form. An Authorized Participant that is not a "qualified institutional buyer," as such term is defined under Rule 144A of the 1933 Act, will not be able to receive, as part of a redemption, restricted securities eligible for resale under Rule 144A.

A "Business Day" with respect to each fund is any day on which the listing exchange or the NYSE is open for business. As of the date of the prospectus, the listing exchange and the NYSE observe the following holidays: New Year's Day, Martin Luther King, Jr. Day, President's Day (Washington's Birthday) (U.S.), Good Friday, Memorial Day, Juneteenth National Independence Day, Independence Day (U.S.), Labor Day (U.S.), Thanksgiving Day (U.S.), and Christmas Day.

To be eligible to place orders to purchase a Creation Unit of each fund, an entity must be an "Authorized Participant" which is a member or participant of a clearing agency registered with the SEC, which has a written agreement with Franklin Distributors, the fund's distributor, that allows the Authorized Participant to place orders for the purchase and redemption of Creation Units ("Participant Agreement"). All shares of each fund, however created, will be entered on the records of DTC in the name of Cede & Co. for the account of a DTC participant.

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Each fund reserves the right to adjust the prices of fund shares and the number of shares in a Creation Unit in the future to maintain convenient trading ranges for investors. Any adjustments would be accomplished through stock splits or reverse stock splits, which would have no effect on the net assets of each fund.

**Portfolio Deposit** 

The consideration for purchase of a Creation Unit generally consists of an in-kind deposit of a portfolio of securities ("Deposit Securities") designated by a fund (or in certain circumstances, cash in lieu of certain Deposit Securities) together with a deposit of a specified cash payment ("Cash Component") computed as described herein. Alternatively, each fund may issue and redeem Creation Units in exchange for a specified all-cash payment ("Cash Deposit"). Together, the Deposit Securities (including any cash in lieu amounts) and the Cash Component or, alternatively, the Cash Deposit, constitute the "Portfolio Deposit," which represents the minimum initial and subsequent investment amount for a Creation Unit. In the event each fund requires Deposit Securities (including any cash in lieu amounts) and a Cash Component in consideration for purchasing a Creation Unit, the function of the Cash Component is to compensate for any differences between the NAV per Creation Unit and the Deposit Amount (as defined below). The Cash Component would be an amount equal to the difference between the NAV of the shares (per Creation Unit) and the "Deposit Amount," which is an amount equal to the market value of the Deposit Securities. If the Cash Component is a positive number (the NAV per Creation Unit exceeds the Deposit Amount), the Authorized Participant will deliver the Cash Component. If the Cash Component is a negative number (the NAV per Creation Unit is less than the Deposit Amount), the Authorized Participant will receive the Cash Component. Computation of the Cash Component excludes any stamp duty or other similar fees and expenses payable upon transfer of beneficial ownership of the Deposit Securities, which shall be the sole responsibility of the Authorized Participant.

A fund may determine, upon receiving a purchase order from an Authorized Participant, to accept a basket of securities or cash that differs from Deposit Securities or to permit the substitution of an amount of cash (i.e., a "cash-in-lieu" amount) to be added to the Cash Component to replace any Deposit Security. In cases where a fund purchases portfolio securities with cash, the Authorized Participant will reimburse the fund for, among other things, any difference between the market value at which the securities were purchased by the fund and the cash in lieu amount (which amount, at the Investment Manager's discretion, may be capped), applicable registration fees and taxes. Brokerage commissions incurred in connection with a fund's acquisition of Deposit Securities will be at the expense of the fund and will affect the value of all shares of the fund; but the Investment Manager may adjust the transaction fee to the extent the composition of the Deposit Securities changes or cash in lieu is added to the Cash Component to protect ongoing shareholders.

**Procedures for Creation Unit Purchases** 

All purchase orders must be placed for one or more Creation Units. All orders to purchase Creation Units must be received by Franklin Distributors or its agent no later than the closing time of regular trading hours on the listing exchange or the NYSE (ordinarily 4:00 p.m. Eastern Time) (the Closing Time) or at an earlier time set forth in the Participant Agreement or otherwise provided to all Authorized Participants on the date such order is placed in order for the creation of Creation Units to be effected based on the NAV of shares of each fund as next determined on such date after receipt of the order in proper form. The date on which an order to purchase Creation Units (or an order to redeem Creation Units as discussed below) is placed is referred to as the "Transmittal Date." Orders must be transmitted by an Authorized Participant by telephone or other transmission method acceptable to Franklin Distributors pursuant to procedures set forth in the Participant Agreement. Severe economic or market disruptions or changes, or telephone or other communications failure may impede the ability to reach Franklin Distributors or an Authorized Participant.

All orders to purchase Creation Units shall be placed with an Authorized Participant, as applicable, in the form required by such Authorized Participant. In addition, in the event an Authorized Participant places an order on behalf of an investor, the Authorized Participant may request the investor to make certain representations or enter into agreements with respect to the order, including payments of cash to pay the Cash Component, when required. Investors should be aware that their particular broker may not have executed a Participant Agreement and that, therefore, orders to purchase Creation Units have to be placed by the investor's broker through an Authorized Participant that has executed a Participant Agreement. In such cases there may be additional charges to such investor. At any given time, there may be only a limited number of broker-dealers that have executed a Participant Agreement.

Those placing orders to purchase Creation Units should afford sufficient time to permit proper submission of the order to Franklin Distributors or its agent prior to the applicable deadlines on the Transmittal Date. Authorized participants may ascertain the

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deadlines applicable to DTC and the Federal Reserve Bank wire system by contacting the operations department of the broker or depository institution effecting such transfer of Deposit Securities and Cash Component.

Portfolio Deposits must be delivered through the Federal Reserve System (for cash and government securities) and through DTC (for corporate securities) by an Authorized Participant that has executed a Participant Agreement. The Portfolio Deposit transfer must be ordered by the Authorized Participant on the Transmittal Date in a timely fashion so as to ensure the delivery of the requisite number of Deposit Securities through DTC to the account of each fund by no later than 1:00 p.m. Eastern Time of the next Business Day immediately following the Transmittal Date. In certain cases, Authorized Participants will purchase and redeem Creation Units of each fund on the same Transmittal Date. In these instances, each fund reserves the right to settle these transactions on a net basis.

All questions as to the number of Deposit Securities to be delivered, and the validity, form and eligibility (including time of receipt) for the deposit of any tendered securities, will be determined by each fund, whose determination shall be final and binding. For purchase orders composed solely of a Cash Component, the amount of cash equal to the Cash Component must be transferred directly to each fund's custodian through the Federal Reserve Bank wire transfer system in a timely manner so as to be received by each fund's custodian no later than 10:00 a.m. Eastern Time on the next Business Day immediately following such Transmittal Date. An order to purchase Creation Units is deemed received by Franklin Distributors on the Transmittal Date if (i) such order is received by Franklin Distributors or its agent not later than the Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on such Transmittal Date; and (ii) all other procedures set forth in the Participant Agreement are properly followed. However, if each fund's custodian does not receive the required Deposit Securities together with the associated Cash Component by 1:00 p.m. or, with respect to purchase orders composed solely of a Cash Component, the Cash Component by 10:00 a.m. on the next Business Day immediately following the Transmittal Date, such order will be deemed not in proper form and canceled. Upon written notice to Franklin Distributors, such canceled order may be resubmitted the following Business Day using a Portfolio Deposit as newly constituted to reflect the next calculated NAV of each fund. The delivery of Creation Units so purchased will occur not later than the second (2nd) Business Day following the day on which the purchase order is deemed received by Franklin Distributors.

Franklin Distributors or its agent will inform the transfer agent, the Investment Manager and each fund's custodian upon receipt of a purchase order. The custodian will then provide such information to the appropriate sub-custodian. The custodian will cause the sub-custodian to maintain an account into which the Deposit Securities (or the cash value of all or part of such securities, in the case of a cash purchase or "cash in lieu" amount) will be delivered. Deposit Securities must be delivered to an account maintained at the applicable local custodian. The trust must also receive, on or before the contractual settlement date, immediately available or same day funds estimated by the custodian to be sufficient to pay the Cash Component next determined after receipt in proper form of the purchase order, together with the purchase transaction fee described in Part I of this SAI.

Once the Trust has accepted a purchase order, the trust will confirm the issuance of a Creation Unit of a fund against receipt of payment, at such NAV as will have been calculated after receipt in proper form of such order. Franklin Distributors or its agent will then transmit a confirmation of acceptance of such order.

Creation Units will not be issued until the transfer of good title to the trust of the Deposit Securities and the payment of the Cash Component have been completed. When the sub-custodian has confirmed to the custodian that the required Deposit Securities (or the cash value thereof) have been delivered to the account of the relevant sub-custodian, Franklin Distributors and the Investment Manager will be notified of such delivery and the trust will issue and cause the delivery of the Creation Units.

Creation Units may be created in advance of receipt by each fund of all or a portion of the applicable Deposit Securities as described below. In these circumstances, the initial deposit will have a value greater than the NAV of the shares on the date the order is placed in proper form since, in addition to available Deposit Securities, cash must be deposited in an amount equal to the sum of (i) the Cash Component (including any transaction fees), plus (ii) 105% of the market value of the undelivered Deposit Securities ("Additional Cash Deposit"). The order shall be deemed to be received on the Business Day on which the order is placed provided that the order is placed in proper form prior to 3:00 p.m. Eastern Time on such date and federal funds in the appropriate amount are deposited with each fund's custodian by 10:00 a.m. Eastern Time the following Business Day. If the order is not placed in proper form by 3:00 p.m. or federal funds in the appropriate amount are not received by 10:00 a.m. the next Business Day, then the order may be deemed to be rejected and the Authorized Participant shall be liable to each fund for losses, if any, resulting therefrom. An additional amount of cash shall be required to be deposited with each fund, pending delivery of the missing Deposit Securities to the extent necessary to maintain the Additional Cash Deposit with each fund in an

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amount at least equal to 105% of the daily marked to market value of the missing Deposit Securities. In the sole discretion of each fund following the Business Day on which the order was received a fund may use the cash on deposit to purchase the missing Deposit Securities. Authorized Participants will be liable to each fund for the costs incurred by each fund in connection with any such purchases. These costs will be deemed to include the amount by which the actual purchase price of the Deposit Securities exceeds the market value of such Deposit Securities on the day the purchase order was deemed received by Franklin Distributors plus the brokerage and related transaction costs associated with such purchases and the Authorized Participant shall be liable to the fund for any shortfall between the cost to the fund of purchasing any missing Deposit Securities and the value of the collateral. Each fund will return any unused portion of the Additional Cash Deposit once all of the missing Deposit Securities have been properly received by Franklin Distributors or purchased by each fund and deposited into each fund.

**Acceptance of Purchase Orders** 

Each fund and Franklin Distributors reserve the right to reject or revoke acceptance of a creation order transmitted to it in respect to the fund, if, including but not limited to, the following conditions are present(i) the order is not in proper form; (ii) the investor(s), upon obtaining the shares ordered, would own 80% or more of the currently outstanding shares of each fund; (iii) acceptance of the Deposit Securities would have certain adverse tax consequences to each fund; (iv) acceptance of the Portfolio Deposit would, in the opinion of the fund, be unlawful; or (v) in the event that circumstances outside the control of each fund, make it impossible to process creation orders for all practical purposes. Examples of such circumstances include, without limitation, acts of God; public service or utility problems such as earthquakes, fires, floods, extreme weather conditions, and power outages resulting in telephone, telecopy, and computer failures; wars; civil or military disturbances, including acts of civil or military authority or governmental actions; terrorism; sabotage; epidemics; riots; labor disputes; market conditions or activities causing trading halts; systems failures involving computer or other information systems affecting each fund, the Investment Manager, Franklin Distributors, DTC, NSCC, the transfer agent, or any other participant in the purchase process, and similar extraordinary events. Each fund and Franklin Distributors have the right to require information to determine beneficial share ownership for purposes of (ii) above should it so choose or to rely on a certification from a broker-dealer who is a member of the Financial Industry Regulatory Authority, Inc. as to the cost basis of Deposit Securities. Franklin Distributors or the fund shall notify a prospective purchaser of a Creation Unit and/or the Authorized Participant acting on the purchaser's behalf, of its rejection of the purchaser's order. Each fund, the transfer agent, and Franklin Distributors are under no duty, however, to verify or give notification of any defects or irregularities in any written order or in the delivery of a Portfolio Deposit, nor shall any of them incur any liability for the failure to give any such notification.

**Redemption of Creation Units** 

Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by each fund through the transfer agent and only on a Business Day through an Authorized Participant that has entered into a Participant Agreement. Each fund generally will not redeem shares in amounts less than Creation Unit-size aggregations. Beneficial Owners must accumulate enough shares to constitute a Creation Unit in order to have such shares redeemed by each fund. There can be no assurance, however, that there will be sufficient liquidity in the public trading market at any time to permit assembly of a Creation Unit. Investors should expect to incur brokerage and other costs in connection with assembling a sufficient number of shares to constitute a redeemable Creation Unit.

The redemption proceeds for a Creation Unit may consist of a portfolio of securities (Fund Securities) – as announced by the Investment Manager, or its agent, on the Business Day of the request for redemption received in proper form – plus cash in an amount equal to the difference between the NAV of the shares being redeemed, as next determined after a receipt of the request in proper form, and the value of the Fund Securities ("Cash Redemption Amount"), less a redemption transaction fee and any variable fee as listed in Part I of this SAI. In the event that the Fund Securities have a value greater than the NAV of the shares being redeemed, a compensating cash payment to a fund equal to the differential plus the applicable redemption transaction fee is required to be made by or through an Authorized Participant by the redeeming shareholder. Notwithstanding the foregoing, each fund will substitute a cash-in-lieu amount to replace any Fund Security that is a non-deliverable instrument. The amount of the cash paid out in such cases will be equivalent to the value of the instrument listed as a Fund Security.

The right of redemption may be suspended or the date of payment postponed with respect to each fund (i) for any period during which the NYSE is closed (other than customary weekend and holiday closings); (ii) for any period during which trading on the NYSE is suspended or restricted; (iii) for any period during which an emergency exists as a result of which disposal of the shares or determination of each fund's NAV is not reasonably practicable; or (iv) in such other circumstances as is permitted by the SEC.

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Orders to redeem Creation Units must be delivered through an Authorized Participant. An order to redeem Creation Units is deemed received by each fund on the Transmittal Date if (i) such order is received in proper form by the transfer agent not later than the Closing Time (or one hour prior to the Closing Time (ordinarily 3:00 p.m. Eastern Time) for nonconforming orders) on such Transmittal Date; (ii) such order is accompanied or followed by the requisite number of shares of each fund and the Cash Redemption Amount specified in such order, which delivery must be made through DTC to each fund's custodian no later than 1:00 p.m., for the shares, and 3:00 p.m., for the Cash Redemption Amount, Eastern Time on the next Business Day following such Transmittal Date (the "DTC Cut-Off-Time"); and (iii) all other procedures set forth in the Participant Agreement are properly followed. The requisite Fund Securities and the Cash Redemption Amount will generally be transferred by the second (2nd) Business Day following the date on which such request for redemption is deemed received, which will generally be no more than seven (7) days after such request for redemption but may be up to fifteen days for funds that invest in foreign securities. In certain cases, Authorized Participants will redeem and purchase Creation Units of each fund on the same Transmittal Date. In these instances, each fund reserves the right to settle these transactions on a net basis.

If each fund determines, based on information available to each fund when a redemption request is submitted by an Authorized Participant, that: (i) the short interest of each fund in the marketplace (*i.e.,* the number of shares of the fund that have been sold short but have not yet been covered or closed out) is greater than or equal to 100%; and (ii) the orders in the aggregate from all Authorized Participants redeeming shares on a Business Day represent 25% or more of the outstanding shares of each fund, such Authorized Participant will be required to verify to each fund the accuracy of its representations that are deemed to have been made by submitting a request for redemption. If, after receiving notice of the verification requirement, the Authorized Participant does not verify the accuracy of its representations that are deemed to have been made by submitting a request for redemption in accordance with this requirement, its redemption request will be considered not to have been received in proper form.

To the extent contemplated by an Authorized Participant's agreement, in the event the Authorized Participant has submitted a redemption request in proper form but is unable to transfer all or part of the Creation Units to be redeemed to Franklin Distributors, on behalf of each fund, at or prior to the closing time of regular trading on the listing exchange on the date such redemption request is submitted, Franklin Distributors will nonetheless accept the redemption request in reliance on the undertaking by the Authorized Participant to deliver the missing fund shares as soon as possible, which undertaking shall be secured by the Authorized Participant's delivery and maintenance of collateral consisting of cash having a value (marked to market daily) at least equal to 105% of the value of the missing fund shares. The current procedures for collateralization of missing shares require, among other things, that any cash collateral shall be in the form of U.S. dollars in immediately-available funds and shall be held by each fund and marked to market daily, and that the fees of each fund and any sub-custodians in respect of the delivery, maintenance, and redelivery of the cash collateral shall be payable by the Authorized Participant. The Participant Agreement will permit each fund to purchase the missing fund shares or acquire the Deposit Securities underlying such shares at any time and will subject the Authorized Participant to liability for any shortfall between the cost to each fund of purchasing such shares or Deposit Securities and the value of the collateral.

The calculation of the value of the Fund Securities and the Cash Redemption Amount to be delivered upon redemption will be made by the Investment Manager according to the procedures set forth in the section entitled "Determination of Net Asset Value" computed on the Business Day on which a redemption order is deemed received by the transfer agent. Therefore, if a conforming redemption order in proper form is submitted to the transfer agent by an Authorized Participant not later than Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on the Transmittal Date, and the requisite number of shares of each fund are delivered to each fund's custodian prior to the DTC Cut-Off-Time, then the value of the Fund Securities and the Cash Redemption Amount to be delivered will be determined by State Street Bank and Trust Company on such Transmittal Date. If, however, a conforming redemption order is submitted to the transfer agent by an Authorized Participant not later than the Closing Time, or 3:00 p.m. Eastern Time in the case of nonconforming orders, on the Transmittal Date but either (i) the requisite number of shares of each fund and the Cash Redemption Amount are not delivered by the DTC Cut-Off-Time as described above on the next Business Day following the Transmittal Date, or (ii) the redemption order is not submitted in proper form, then the redemption order will not be deemed received as of the Transmittal Date. In such case, the value of the Fund Securities and the Cash Redemption Amount to be delivered will be computed as of the Closing Time on the Business Day that such order is deemed received by the transfer agent, i.e., the Business Day on which the shares of each fund are delivered through DTC to Franklin Distributors by the DTC Cut-Off-Time on such Business Day pursuant to a properly submitted redemption order.

A fund may in its discretion exercise its option to redeem shares in cash, and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash that each fund may, in its

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sole discretion, permit. In either case, the investor will receive a cash payment equal to the NAV of its shares based on the NAV of shares of each fund next determined after the redemption request is received in proper from (minus a redemption transaction fee and additional charge for requested cash redemptions specified above, to offset each fund's brokerage and other transaction costs associated with the disposition of Fund Securities). In addition, each fund reserves the right to honor a redemption request by delivering a basket of securities or cash that differs from the Fund Securities.

Redemption of shares for Fund Securities will be subject to compliance with applicable federal and state securities laws and each fund (whether or not it otherwise permits cash redemptions) reserves the right to redeem Creation Units for cash to the extent that each fund could not lawfully deliver specific Fund Securities upon redemptions or could not do so without first registering the Fund Securities under such laws. An Authorized Participant or a Beneficial Owner for which it is acting subject to a legal restriction with respect to a particular stock included in the Fund Securities applicable to the redemption of a Creation Unit may be paid an equivalent amount of cash. The Authorized Participant may request the redeeming Beneficial Owner of the shares to complete an order form or to enter into agreements with respect to such matters as compensating cash payment.

In connection with taking delivery of shares for Fund Securities upon redemption of Creation Units, a redeeming shareholder or entity acting on behalf of a redeeming shareholder must maintain appropriate custody arrangements with a qualified broker-dealer, bank or other custody providers in each jurisdiction in which any of the Fund Securities are customarily traded, to which account such Fund Securities will be delivered. If neither the redeeming shareholder nor the entity acting on behalf of a redeeming shareholder has appropriate arrangements to take delivery of the Fund Securities in the applicable foreign jurisdiction and it is not possible to make other such arrangements, or if it is not possible to effect deliveries of the Fund Securities in such jurisdictions, the trust may, in its discretion, exercise its option to redeem such shares in cash, and the redeeming shareholder will be required to receive its redemption proceeds in cash.

Deliveries of redemption proceeds generally will be made within two Business Days. Due to the schedule of holidays in certain countries, however, the delivery of redemption proceeds may take longer than two Business Days after the day on which the redemption request is received in proper form. In such cases, the local market settlement procedures will not commence until the end of the local holiday periods.

**Creation/Redemption Transaction Fees** 

The funds generally impose a "Transaction Fee" on investors purchasing or redeeming Creation Units. The Transaction Fee will be limited to amounts that have been determined by the Investment Manager to be appropriate. The purpose of the Transaction Fee is to protect the existing shareholders of the funds from the dilutive costs associated with the purchase and redemption of Creation Units. Where a fund permits cash creations (or redemptions) or cash in lieu of depositing one or more Deposit Securities, the purchaser (or redeemer) may be assessed a higher Transaction Fee to offset the transaction cost to a fund of buying (or selling) those particular Deposit Securities. To the extent a purchase/redemption transaction consists of cash and/or in-kind securities, the standard Transaction Fee applies to in-kind purchases and redemptions of creation units and an additional Transaction Fee may also be imposed. Each fund reserves the right to not impose the additional Transaction Fee or to vary the amount of the additional Transaction Fee, depending on the materiality of the fund's actual transaction costs incurred or where the Adviser believes that not imposing or varying the additional Transaction Fee would be in the fund's interest. Transaction Fees associated with the redemption of Creation Units will not exceed 2% of the value of shares redeemed. To the extent the fund cannot recoup the amount of transaction costs incurred in connection with a redemption from the redeeming shareholder because of the 2% cap or otherwise, those transaction costs will be borne by the fund's remaining shareholders (including, potentially, increased taxable income in respect of the fund, particularly if the redemption consists solely or partially of cash) and negatively affect the fund's performance. Actual transaction costs may vary depending on the time of day an order is received or the nature of the securities. Investors bear the costs of transferring Deposit Securities or Fund Securities to/from each fund to/from their account or on their order. See "Creation/Redemption Transaction Fees" in Part I of this SAI for information on standard Transaction Fees and maximum additional Transaction Fees.

**Additional Intermediary Payments** 

For purposes of this section the term "intermediary" includes any broker, dealer, bank, bank trust department, registered investment advisor, financial planner, retirement plan administrator and any other institution that offers shares of the funds to its customers.

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The Investment Manager and/or its affiliates pay additional compensation to selected intermediaries under the categories described below. These categories are not mutually exclusive, and a single intermediary may receive payments under all categories. These payments may create an incentive for an intermediary 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 intermediaries 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, if any, and the expenses paid by the fund as shown under the heading "Fees and Expenses" in the prospectus.

**Marketing Support Payments.** The Investment Manager and/or its affiliates make payments to certain intermediaries for marketing support services. These payments are individually negotiated with each intermediary firm, taking into account the marketing support services provided by the intermediary, including business planning assistance, educating intermediary personnel about the Putnam funds and shareholder financial planning needs, placement on the intermediary's preferred or recommended fund company list, access to sales meetings, sales representatives and management representatives of the intermediary, market data, as well as the size of the intermediary's relationship with the Investment Manager.

No intermediaries received marketing support payments from the Investment Manager and its affiliates during the calendar year ended December 31, [2024]. Intermediaries may receive marketing support payments in [2025] and in future years from the Investment Manager and/or its affiliates. You can ask your intermediary about any payments it receives from the Investment Manager and/or its affiliates.

**Program Servicing Payments.** The Investment Manager and/or its affiliates also make payments to certain intermediaries that sell shares of the Putnam funds through intermediary platforms and other investment programs to compensate intermediaries for a variety of services they provide. An intermediary may perform program services itself or may arrange with a third party to perform program services. In addition to shareholder recordkeeping, reporting, or transaction processing, program services may include services rendered in connection with intermediary platform development and maintenance, fund/investment selection and monitoring, or other similar services.

The following intermediaries (and such intermediaries' respective affiliates) received program servicing payments from the Investment Manager and its affiliates during the calendar year ended December 31, [2024]:

Charles Schwab & Co., Inc.

Cetera Financial Group, Inc.

Fidelity Brokerage Services, LLC

National Financial Services LLC, and

UBS Financial Services Inc.

Additional or different intermediaries may also receive program servicing payments in [2025] and in future years from the Investment Manager and/or its affiliates. Any additions, modifications or deletions to the list of intermediaries identified above that have occurred since December 31, [2024] are not reflected. You can ask your intermediary about any payments it receives from the Investment Manager and/or its affiliates.

**Other Payments**. From time to time, the Investment Manager and/or its affiliate, at its expense, may provide additional compensation to intermediaries that 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 compensation provided by the Investment Manager and/or its affiliate may include financial assistance to intermediaries that enables the Investment Manager and/or its affiliate to participate in and/or present at intermediary-sponsored conferences or seminars, sales or training programs for invited registered representatives and other intermediary employees, intermediary entertainment, and other intermediary-sponsored events, and travel expenses, including lodging incurred by registered representatives and other employees in connection with prospecting, retention and due diligence trips. The Investment Manager and/or its affiliates make payments for entertainment events it deems appropriate, subject to internal guidelines and applicable law. These payments may vary upon the nature of the event.

**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 series of Putnam ETF Trust that disclose their holdings daily,

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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 Franklin Templeton Investment Management Limited ("FTIML"), Franklin Advisers, Putnam Management, and/or PanAgora Asset Management, Inc. ("PanAgora") serve as sub-adviser (as described in the fund's prospectus), references to the Investment Manager in this section include FTIML, Franklin Advisers, Putnam Management, and/or PanAgora, as appropriate.

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| | |
|:---|:---|
| &nbsp;&nbsp;&nbsp;Bank Loans, Loan Participations, and Assignments | Market Risk |
| &nbsp;&nbsp;&nbsp;Benchmark Reference Rate Risk | Master Limited Partnerships (MLPs) |
| &nbsp;&nbsp;&nbsp;Borrowing and Other Forms of Leverage | Money Market Instruments |
| &nbsp;&nbsp;&nbsp;Collateralized Debt and Loan Obligations | Mortgage-backed and Asset-backed Securities |
| &nbsp;&nbsp;&nbsp;Commodities and Commodity-Related Investments | Options on Securities |
| &nbsp;&nbsp;&nbsp;Derivatives | Preferred Stocks and Convertible Securities |
| &nbsp;&nbsp;&nbsp;ESG Considerations | Private Placements and Restricted Securities |
| &nbsp;&nbsp;&nbsp;Exchange-Traded Notes | Real Estate Investment Trusts (REITs) |
| &nbsp;&nbsp;&nbsp;Floating Rate and Variable Rate Demand Notes | Redeemable Securities |
| &nbsp;&nbsp;&nbsp;Foreign Currency Transactions | Repurchase Agreements |
| &nbsp;&nbsp;&nbsp;Foreign Investments and Related Risks | Securities of Other Investment Companies |
| &nbsp;&nbsp;&nbsp;Forward Commitments and Dollar Rolls | Short Sales |
| &nbsp;&nbsp;&nbsp;Futures Contracts and Related Options | Short-Term Trading |
| &nbsp;&nbsp;&nbsp;Hybrid Instruments | Special Purpose Acquisition Companies |
| &nbsp;&nbsp;&nbsp;Illiquid Investments | Structured Investments |
| &nbsp;&nbsp;&nbsp;Inflation-Protected Securities | Swap Agreements |
| &nbsp;&nbsp;&nbsp;Initial Public Offerings (IPOs) | Tax-exempt Securities |
| &nbsp;&nbsp;&nbsp;Inverse Floaters | Temporary Defensive Strategies |
| &nbsp;&nbsp;&nbsp;Large Shareholder Risk | Trade Policy |
| &nbsp;&nbsp;&nbsp;Legal and Regulatory Risks Relating to Investment Strategy | Warrants |
| &nbsp;&nbsp;&nbsp;Lower-rated Securities | Zero-coupon and Payment-in-kind Bonds |

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**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 the Investment Manager, 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 some impose restrictive covenants which must be met by the borrower, although these covenants have become less common, and the terms of covenants have eroded, in recent years. 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

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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, the Investment Manager will not rely solely on that credit analysis, but will perform its own investment analysis of the borrowers. The Investment Manager'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. The Investment Manager 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 the Investment Manager'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 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, the Investment Manager 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

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fair market value. The fund may hold investments in loans for a very short period of time when opportunities to resell the investments that the Investment Manager 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, the Investment Manager 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. The Investment Manager's decision not to receive Confidential Information may place the Investment Manager 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, the Investment Manager's ability to assess their significance or desirability may be adversely affected. For these and other reasons, it is possible that the Investment Manager's decision not to receive Confidential Information under normal circumstances could adversely affect the fund's investment performance.

Notwithstanding its intention generally not to receive material, non-public information with respect to its management of investments in loans, the Investment Manager 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 the Investment Manager's efforts to avoid such possession, but in other instances the Investment Manager 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, the Investment Manager'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 the Investment Manager'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 the Investment Manager 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, the Investment Manager may owe conflicting fiduciary duties to the fund and other client accounts. The Investment Manager 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 the Investment Manager'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.

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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.

**Benchmark Reference Rate Risk** 

Many debt securities, derivatives, and other financial instruments utilize benchmark or reference rates for variable interest rate calculations, including the Euro Interbank Offer Rate, Sterling Overnight Index Average Rate, and the Secured Overnight Financing Rate (each a "Reference Rate"). Instruments in which the fund invests may pay interest at floating rates based on such Reference Rates or may be subject to interest caps or floors based on such Reference Rates. The fund and issuers of instruments in which the fund invests may also obtain financing at floating rates based on such Reference Rates. The elimination of a Reference Rate or any other changes to or reforms of the determination or supervision of Reference Rates could have an adverse impact on the market for, or value of, any instruments or payments linked to those Reference Rates.

For example, some Reference Rates, as well as other types of rates and indices, are described as "benchmarks" and have been the subject of ongoing national and international regulatory reform, including under the European Union regulation on indices used as benchmarks in financial instruments and financial contracts (known as the "Benchmarks Regulation"). The Benchmarks Regulation has been enacted into United Kingdom law by virtue of the European Union (Withdrawal) Act 2018 (as amended), subject to amendments made by the Benchmarks (Amendment and Transitional Provision) (EU Exit) Regulations 2019 (SI 2019/657) and other statutory instruments. Following the implementation of these reforms, the manner of administration of benchmarks has changed and may further change in the future, with the result that relevant benchmarks may perform differently than in the past, the use of benchmarks that are not compliant with the new standards by certain supervised entities may be restricted, and certain benchmarks may be eliminated entirely. Such changes could cause increased market volatility and disruptions in liquidity for instruments that rely on or are impacted by such benchmarks. Additionally, there could be other consequences which cannot be predicted.

**Borrowing and Other Forms of Leverage** 

The fund may borrow money to the extent permitted by its investment policies and restrictions and by Section 18 of the 1940 Act. 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.

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. 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.

**Collateralized Debt and Loan Obligations** 

The fund may invest in collateralized debt obligations ("CDOs"). CDOs are types of asset-backed securitized instruments and include collateralized loan obligations ("CLOs") and other similarly structured securities. Although certain CDOs may benefit from credit enhancement in the form of a senior-subordinate structure, overcollateralization or bond insurance, such enhancement may not always be present, and may fail to protect a fund against the risk of loss on default of the collateral. CDOs may charge management and administrative fees, which are in addition to those of a fund. CDOs may be less liquid than other types of securities.

The risks of an investment in a CDO largely depend on the type of underlying collateral securities and the tranche in which a fund invests. CDOs are subject to the typical risks associated with debt instruments and fixed income and/or asset-backed securities discussed elsewhere in the prospectus and in this SAI, including interest rate risk (which may be exacerbated if the

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interest rate payable on a structured financing changes based on multiples of changes in interest rates or inversely to changes in interest rates), prepayment risk, credit risk (including adverse credit spread moves), liquidity risk and market risk. CDOs carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments and one or more tranches may be subject to up to 100% loss of invested capital; (ii) the possibility that the quality of the collateral may decline in value or default, due to factors such as the availability of any credit enhancement, the level and timing of payments and recoveries on and the characteristics of the underlying receivables, loans, or other assets that are being securitized, remoteness of those assets from the originator or transferor, the adequacy of and ability to realize upon any related collateral, and the capability of the servicer of the securitized assets (particularly where the underlying collateral in a loan portfolio is not individually assessed prior to purchase); (iii) market and illiquidity risks affecting the price of a structured finance investment, if required to be sold, at the time of sale; and (iv) if the particular structured product is invested in a security in which a fund is also invested, this would tend to increase the fund's overall exposure to the credit of the issuer of such securities, at least on an absolute, if not on a relative basis. In addition, due to the complex nature of a CDO, an investment in a CDO may not perform as expected. An investment in a CDO also is subject to the risk that the issuer and the investors may interpret the terms of the instrument differently, giving rise to disputes.

A CLO is an obligation of a trust or other special purpose vehicle typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. CLOs may charge management and other administrative fees. Payments of principal and interest are passed through to investors in a CLO and divided into several tranches of rated debt securities, which vary in risk and yield, and typically at least one tranche of unrated subordinated securities, which may be debt or equity ("CLO Securities"). CLO Securities generally receive some variation of principal and/or interest installments and, with the exception of certain subordinated securities, bear different interest rates. If there are defaults or if a CLO's collateral otherwise underperforms, scheduled payments to senior tranches typically take priority over less senior tranches.

CLO Securities may be privately placed and thus subject to restrictions on transfer to meet securities law and other legal requirements. In the event that any fund does not satisfy certain of the applicable transfer restrictions at any time that it holds CLO Securities, it may be forced to sell the related CLO Securities and may suffer a loss on sale. CLO Securities may be considered illiquid investments in the event there is no secondary market for the CLO Securities. CLOs are also subject to the same risks associated with CDOs, as described above.

**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, war, and factors affecting a particular industry or commodity, such as drought, floods, or other weather conditions or natural disasters, livestock disease, trade embargoes, economic sanctions, competition from substitute products, transportation bottlenecks or shortages, insufficient storage capacity, 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. Certain commodities (and related derivatives) are also susceptible to price declines due to factors such as supply surpluses caused by global events.

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

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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 result in gains or losses greater than the amount invested in the instrument. See "Derivatives," "Forward Commitments and Dollar Rolls," "Futures Contracts and Related Options," "Hybrid Instruments," "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.

**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 (including credit default swaps and credit default swap indexes) 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 derivative instrument and the reference asset, or other factors, especially in unusual market conditions, and volatility in the value of derivatives could adversely impact the fund's returns, obligations and exposures. 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 will enable the fund to achieve its investment objective or that the Investment Manager 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 Internal Revenue Code of 1986, as amended (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.

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 derivative transactions are required to be centrally cleared and others are available for voluntary clearing. A party to a cleared derivative transaction is subject to the credit and counterparty 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 derivative 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

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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 margin requirements at a time when it may be disadvantageous to do so.

Other risks arise from the potential inability to terminate or sell derivative positions. Derivatives may be subject to liquidity risk due to the fund's obligation to make payments of margin, collateral, or settlement payments to counterparties. A liquid secondary market may not always exist for the fund's derivative positions. In fact, certain 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 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.

The funds are required to comply with the derivatives rule when they engage in derivatives transactions. See "Legal and Regulatory Risks Relating to Investment Strategy" below. Further information about these instruments and the risks involved in their use is included elsewhere in the prospectus and in this SAI.

<u>Combined Positions</u> 

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.

**ESG Considerations** 

A fund may integrate environmental, social, or governance ("ESG") considerations into its research process and/or investment decision-making. The Investment Manager believes that ESG considerations, like other, more traditional subjects of investment analysis such as market position, growth prospects, and business strategy, have the potential to impact risk and returns. The relevance and materiality of ESG considerations in a fund's process will differ from strategy to strategy, from sector to sector, and from portfolio manager to portfolio manager, and, in some cases (such as where the Investment Manager lacks relevant ESG data), ESG considerations may not represent a material component of a fund's investment process. The consideration of ESG factors as part of a fund's investment process does not mean that a fund pursues a specific "ESG" or "sustainable" investment strategy, and, depending on the fund, the Investment Manager may sometimes make investment decisions other than on the basis of relevant ESG considerations.

**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.

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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.

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

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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.

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" (e.g., 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 Chicago 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 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.

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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 otherwise settle 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 market in such contracts; a clearing corporation associated with the exchange assumes responsibility for closing out such contracts.

Positions in foreign currency futures contracts and related options may be closed out only on an exchange or board of trade that provides a market in such contracts or options. Although the fund intends to purchase or sell foreign currency futures contracts and related options only on exchanges or boards of trade where there appears to be an active market, there is no assurance that a 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 or related option 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 or at 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 or at 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 or at 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 or at 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 the Investment Manager 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. The Investment Manager will engage in such "cross hedging" activities when it believes that such transactions provide significant hedging opportunities for the fund. Cross hedging transactions by the fund involve the risk of imperfect correlation between changes in the values of the currencies to which such transactions relate and changes in the value of the currency or other asset or liability which is the subject of the hedge.

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, the Investment Manager 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.

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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 and related options) 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 and related options, 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 or related option 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, additional foreign currency transactions may be 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 the Investment Manager'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 the Investment Manager anticipates. There is no assurance that the Investment Manager'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

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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.

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. The Investment Manager 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

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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 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 the Investment Manager and its affiliates 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 non-local 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

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ownership registration being completely lost. The fund would absorb any loss resulting from such registration problems and may have no successful claim for compensation.

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 the Investment Manager 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.

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

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("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 CDCC 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.

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"). 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 the Investment Manager deems it appropriate to do so. The fund may realize short-term profits or losses upon the sale of forward commitments.

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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. 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.

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 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. See also "Legal and Regulatory Risks Relating to Investment Strategy" below.

**Futures Contracts and Related Options** 

Subject to applicable law, the fund may invest 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 sell the type of financial instrument or other asset called for in the contract in a specified month for a stated price. A futures contract purchase creates an obligation by the purchaser to buy the type of financial instrument or other asset called for in the contract in a specified month at a stated price. The specific assets bought or sold, respectively, at settlement date may not be 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 (brokerage firm) which is a member of the relevant contract market. Examples of futures contracts that the fund may use include, without limitation, U.S. Treasury 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 asset. Therefore, purchasing futures contracts will tend to increase the fund's exposure to positive and negative price fluctuations in the underlying asset, much as if it had purchased the underlying asset 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 asset. Selling futures contracts, therefore, will tend to offset both positive and negative market price changes, much as if the underlying asset 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 by the fund's broker 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

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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 by their terms may 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. Many futures contracts, such as 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 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 settlement 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.

With respect to each fund, the Investment Manager has claimed an exclusion from the definition of the term "commodity pool operator" under the Commodity Exchange Act ("CEA") pursuant to Rule 4.5 under the CEA (the "exclusion") promulgated by the CFTC. Accordingly, the Investment Manager (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, options on futures and certain swaps. In the event that the Investment Manager believes that a fund's investments in commodity interests exceed the thresholds set forth in the exclusion, the Investment Manager may be required to register as a "commodity pool operator" with the CFTC with respect to that fund. The Investment Manager'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 fund's ability to invest in commodity interests is limited by the Investment Manager's intention to operate the fund in a manner that would permit the Investment Manager 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 the Investment Manager 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, and the commodity pool operators ("CPOs") of any shareholders that are pooled investment vehicles may be unable to rely on certain CPO registration exemptions.

**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. 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

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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 selling 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).

The fund may use options on futures contracts in lieu of purchasing or writing options directly on the underlying assets 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 (or would result in a smaller loss), 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 purchase or 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 the Investment Manager's ability to predict movements in various factors affecting securities markets (or markets for other assets), 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, the Investment Manager'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.

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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 futures contracts and options themselves, and, in the case of hedging transactions, of the securities which are the subject of a hedge. To attempt to compensate for imperfect correlations, the fund may purchase or sell futures contracts in a greater amount than the hedged investments if the volatility of the price of the hedged investments is historically greater than the volatility of the futures contracts. Conversely, the fund may purchase or sell fewer futures contracts if the volatility of the price of the hedged investments is historically less than that of the futures contract. 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 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 the Investment Manager 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 transactions, 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 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, result in the institution by exchanges of special procedures that may interfere with the timely execution of customer orders, for example, by rendering certain market clearing facilities inadequate. 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 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 and 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. In addition, exchanges may cancel trades in limited circumstances, for example, if the exchange believes that allowing such trades to stand as executed could have an adverse impact on the stability or integrity of the market. Any such cancellation may adversely affect the performance of the fund. The fund's futures broker may also limit the fund's ability to invest in certain futures contracts. Such restrictions may adversely affect the fund's performance and its ability to achieve its investment objective.

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 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 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)

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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 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 settled or 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 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. The funds are required to comply with the derivatives rule when they engage in transactions involving futures and options thereon. See "Legal and Regulatory Risks Relating to Investment Strategy" below.

**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.

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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 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 any governmental regulatory authority, including the regulators typically associated with the derivatives and securities markets such as the CFTC and the SEC.

**Illiquid Investments** 

An illiquid investment 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 the Investment Manager 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.

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

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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.

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.

**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.

**Large Shareholder Risk** 

The fund may be an investment option for mutual funds that are managed by the Investment Manager and its affiliates as "funds of funds." Additionally, other investors from time to time may make substantial investments in the fund. Such shareholders may at times be considered to control the fund. Dispositions of a large number of shares by these shareholders may adversely affect the fund's liquidity and net assets to the extent such transactions are executed directly with the fund in the form of redemptions through an authorized participant, rather than executed in the secondary market. In addition, a large number of shareholders

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collectively may purchase or redeem fund shares in large amounts rapidly or unexpectedly (collectively, such transactions are referred to as "large shareholder transactions"). Large shareholder redemptions may also force the fund to sell securities to satisfy redemption requests or purchase securities for the portfolio in connection with the investment of subscription proceeds when the fund would otherwise not do so, and at unfavorable prices, which may increase the fund's brokerage costs and accelerate the realization of taxable income and/or gains to shareholders. The effects of taxable income and/or gains resulting from large shareholder transactions would particularly impact non-redeeming shareholders who do not hold their fund shares in an IRA, 401(k) plan or other tax-advantaged plan. To the extent that such transactions result in short-term capital gains, such gains will generally be taxed at the ordinary income tax rate for shareholders who hold fund shares in a taxable account. In addition, fund returns may be adversely affected if the fund holds a portion of its assets in liquid, cash-like investments in connection with or in anticipation of shareholder redemptions. To the extent these large shareholders transact in shares of the fund on the secondary market, such transactions may account for a large percentage of the trading volume on the exchange and may, therefore, have a material effect (upward or downward) on the market price of the fund's shares. A number of circumstances may cause the fund to experience large redemptions, such as changes in the eligibility criteria for the fund or share class of the fund; liquidations, reorganizations, repositionings, or other announced fund events; or changes in investment objectives, strategies, policies, risks, or investment personnel.

**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. 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 or otherwise execute its investment strategy could have a material adverse impact on the fund's performance.

The regulatory environment for funds is evolving, and changes in regulation 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 derivatives (including 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 event of market emergencies. The regulation of securitization and derivative transactions and funds that engage in such transactions is an evolving area of law and is subject to modification by government, self-regulatory organization and judicial action.

Since 2021, the SEC has proposed and, in some cases, finalized several new rules regarding a wide range of topics related to the fund. For example, the SEC has proposed new rules requiring the reporting and public disclosure of a manager's positions in security-based swaps, including CDS, equity total return swaps and related positions. The SEC has also finalized new rules restricting activities that could be considered to be manipulative in connection with security-based swaps, new rules regarding beneficial ownership and public reporting by managers under Section 13 of the Exchange Act, and new rules requiring the central clearing of certain cash and repurchase transactions involving U.S. Treasuries. These and other proposed new rules, whether assessed on an individual or collective basis, could fundamentally change the current regulatory framework for relevant markets and market participants, including having a material impact on activities of private fund advisers and their funds. While it is currently difficult to predict the full impact of these new rules, these rules could make it more difficult for the fund to execute certain investment strategies and may have a material adverse effect on the fund's ability to generate returns.

In October 2016, the SEC adopted a liquidity risk management rule, Rule 22e-4 under the 1940 Act (the "Liquidity Rule") that requires each fund to establish a liquidity risk management program. The funds have implemented a liquidity risk management program, and the fund's trustees (such trustees, as referenced in the table below under the heading "Management- Trustees," shall hereinafter be referred to as the "Trustees," the "Board," or the "Board of Trustees") has appointed the Investment Manager to administer the program. Under the liquidity risk management program, the liquidity risk of each fund is assessed, managed, and periodically reviewed and each portfolio investment held by each fund is classified as a "highly liquid investment," "moderately liquid investment," "less liquid investment" or "illiquid investment." The Liquidity Rule defines "liquidity risk" as the risk that a fund could not meet requests to redeem shares issued by the fund without significant dilution of the remaining investors' interest in the fund. The liquidity of a fund's portfolio investments is determined based on relevant market, trading and investment-specific considerations under the fund's liquidity risk management program. The impact the Liquidity Rule will have

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on the funds, and on the open-end mutual 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 regulation of the derivatives market, including clearing, margin, reporting and registration requirements. The CFTC, SEC, and other federal regulators have adopted and continue to develop 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"), the United Kingdom ("UK"), and some other countries have implemented and are in the process of implementing similar requirements that affect the fund when it enters into derivative transactions with a counterparty organized in that country or otherwise subject to that country's derivatives regulations. For example, the U.S. government, the EU, the UK and certain other jurisdictions have adopted mandatory minimum variation (and in some cases initial) margin requirements for bilateral derivatives. Such requirements could increase the amount of margin the fund needs to provide in connection with its derivative transactions and, therefore, make derivative transactions more expensive. The regulation of the derivatives markets may make derivatives more costly, may limit the availability or reduce the liquidity of derivatives, or may otherwise adversely affect the value or performance of derivatives. Because these requirements are evolving, their ultimate impact on the fund and the financial system is not yet known. While the rules and regulations like those imposing requirements for margin and central clearing of some derivative transactions are designed to reduce systemic risk (e.g., the risk that the interdependence of large derivatives dealers could cause them to suffer liquidity, solvency or other challenges simultaneously), there is no assurance that they will achieve that result, and, as noted, the requirements can expose the fund to new kinds of costs and risks.

In addition, in October 2020, the SEC adopted Rule 18f-4 under the 1940 Act (the "Derivatives Rule"), regulating the use by registered investment companies of derivatives and many related instruments (e.g. reverse repurchase agreements). The Derivatives Rule requires, among other things, that certain entities adopt a derivatives risk management program, comply with limitations on leverage-related risk based on a "value-at-risk" test and update reporting and disclosure procedures. Funds that use derivative instruments in a limited amount are not subject to the full requirements of the Derivatives Rule. In connection with the adoption of the Derivatives Rule, funds are no longer required to comply with the asset segregation framework arising from prior SEC guidance for covering certain derivative instruments and related transactions.

Regulatory changes also may affect counterparty risk. For example, regulatory requirements may limit the ability of the fund to protect its interests in the event of an insolvency of a derivatives counterparty. In the event of a counterparty's (or its affiliate's) insolvency, the fund's ability to exercise remedies, such as the termination of transactions, netting of obligations and realization on collateral, could be stayed or eliminated under special resolution regimes adopted in the United States, the EU, the UK, and various other jurisdictions. Such regimes provide government authorities with broad authority to intervene when a financial institution is experiencing financial difficulty. In particular, with respect to counterparties who are subject to such proceedings in the EU and the UK, the liabilities of such counterparties to the fund could be reduced, eliminated, or converted to equity in such counterparties (sometimes referred to as a "bail in").

The CFTC and domestic exchanges have established (and continue to evaluate and revise) speculative position limits, referred to as "position limits," on the maximum speculative positions which any person, or group of persons acting in concert, may hold or control in particular futures and options on futures contracts. In addition, federal position limits apply to swaps on agricultural, energy and metals commodities that are "economically equivalent," as defined by the CFTC, to certain futures contracts.

Uncertainty surrounding which swaps qualify as "economically equivalent" may result in compliance challenges. An overly broad application of the definition could result in unnecessary restrictions in position sizes, whereas an overly narrow application could risk position limit overages. All positions owned or controlled by the same person or entity, even if in different accounts, must be aggregated for purposes of determining whether the applicable position limits have been exceeded unless an exemption applies. Thus, even if the fund does not intend to exceed applicable position limits, it is possible that positions of different clients managed by the Investment Manager and its affiliates or by any sub-adviser 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. Position limits may adversely affect the fund's ability to hold positions in certain futures contracts and related options and swaps. A violation of position limits could also lead to regulatory action materially adverse to the fund's investment strategy.

The SEC has adopted new rules that require managers to file monthly confidential reports with the SEC regarding equity short sales and related activity. Under the new rules, the SEC will publicly disclose aggregated short position information on a monthly basis. The SEC also adopted a rule that will require reporting and public disclosure of securities loan transaction information (not including party names); this may include, but is not limited to, information about securities loans entered into in connection with

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short sales. 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 new or increases in short sales of certain securities, including short positions on such securities acquired through swaps, in response to market events. Bans on short selling and such short positions 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.

In October 2020, the SEC adopted certain regulatory changes and took other actions related to the ability of an investment company to invest in another investment company. These changes include, among other things, amendments to Rule 12d1-1, the rescission of Rule 12d1-2, the adoption of Rule 12d1-4, and the rescission of certain exemptive relief issued by the SEC permitting such investments in excess of statutory limits. These regulatory changes may adversely impact each fund's investment strategies and operations.

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

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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 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, the Investment Manager 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 the Investment Manager or its affiliates, holds all or a major portion. Although the Investment Manager 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 the Investment Manager 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 the Investment Manager'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

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the financial markets or other regulation, and changes in fiscal, monetary or tax policies), geopolitical events or changes (including natural disasters, epidemics or pandemics, 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). 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 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. In addition, trade disputes (such as the "trade war" between the United States and China that intensified in 2018 and 2019) may affect investor and consumer confidence and may adversely impact financial markets and the broader economy, perhaps suddenly and to a significant degree. Events such as these and their impact on the fund are difficult to predict. For example, Russia's military invasion of Ukraine in February 2022 resulted in the United States, other countries, and certain international organizations levying broad economic sanctions against Russia and Russian individuals. These sanctions and any additional sanctions or other intergovernmental actions that may be undertaken against Russia in the future may result in the devaluation of the ruble, a downgrade in the country's credit rating, and a decline in the value and liquidity of Russian securities. Such actions could result in a freeze of Russian securities, impairing the ability of a fund to buy, sell, receive, or deliver those securities. Retaliatory action by the Russian government could involve the seizure of U.S. and/or European residents' assets, and any such actions are likely to impair the value and liquidity of such assets. Any or all of these potential results could have an adverse/recessionary effect on Russia's economy. All of these factors could have a negative effect on the performance of funds that have significant exposure to Russia.

In addition, the extent and duration of the military action associated with Russia's invasion of Ukraine, resulting sanctions and resulting future market disruptions, including declines in Russian stock markets and the value of the ruble against the U.S. dollar, are impossible to predict, but could be significant. Any disruptions caused by such military action or other actions (including cyberattacks and espionage) or resulting actual and threatened responses to such activity, including purchasing and financing restrictions, boycotts or changes in consumer or purchaser preferences, sanctions, tariffs or cyberattacks on the Russian government, Russian companies, or Russian individuals, including politicians, may negatively impact Russia's economy and Russian issuers of securities in which the fund invests. Actual and threatened responses to such military action may also impact the markets for certain Russian commodities, such as oil and natural gas, as well as other sectors of the Russian economy, and may likely have collateral impacts on such sectors globally. These and any related events could have a significant impact on fund performance and the value of an investment in the fund.

Likewise, natural and environmental disasters, epidemics or pandemics, and systemic market dislocations may be highly disruptive to economies and markets, and may result in significant market volatility, exchange trading suspensions or closures, or a substantial economic downturn or recession. Those events, as well as other changes in foreign and domestic economic and political conditions, also could disrupt the operations of the fund or its service providers or adversely affect individual issuers or related groups of issuers, interest rates, credit ratings, default rates, inflation, supply chains, consumer demand, investor sentiment, and other factors affecting the value or liquidity of the fund's investments.

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An outbreak of respiratory disease caused by a novel coronavirus designated as COVID-19 was first detected in China in December 2019 and subsequently spread internationally. The transmission of COVID-19 and efforts to contain its spread have resulted in, among other things, border closings and other significant travel restrictions and disruptions; significant disruptions to business operations, supply chains and customer activity; lower consumer demand for goods and services; higher levels of unemployment; event cancellations and restrictions; service cancellations, reductions and other changes; significant challenges in healthcare service preparation and delivery; prolonged quarantines; and general concern and uncertainty. These impacts have negatively affected, and may continue to negatively affect, the global economy, the economies of individual countries, and the financial performance of individual issuers, sectors, industries, asset classes, and markets in significant and unforeseen ways. The COVID-19 pandemic also has resulted in significant market volatility, exchange trading suspensions and closures, declines in global financial markets, higher default rates, and economic downturns and recessions, and may continue to have similar effects in the future. In addition, actions taken by government and quasi-governmental authorities and regulators throughout the world in response to the COVID-19 pandemic, including significant fiscal and monetary policies changes, may affect the value, volatility, and liquidity of some securities and other assets. Health crises caused by the COVID-19 pandemic may also exacerbate other pre-existing political, social, economic, market and financial risks. The effects of the outbreak in developing or emerging market countries may be greater due to less established health care systems. The foregoing could impair the fund's ability to maintain operational standards (such as with respect to creations and redemptions of fund shares), disrupt the operations of the fund's service providers, adversely affect the value and liquidity of the fund's investments, and negatively impact the fund's performance and your investment in the fund. Given the significant uncertainty surrounding the magnitude, duration, reach, costs and effects of the COVID-19 pandemic, as well as actions that have been or could be taken by governmental authorities or other third parties, it is difficult to predict its potential impacts on a fund's investments.

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. On January 31, 2020, the United Kingdom formally withdrew from the European Union (commonly known as "Brexit"). An agreement between the United Kingdom and the European Union governing their future trade relationship became effective January 1, 2021. While the full impact of Brexit is unknown, Brexit has already resulted in volatility in European and global markets. Potential negative long-term effects could include, among others, greater market volatility and illiquidity, disruptions to world securities markets, currency fluctuations, deterioration in economic activity, a decrease in business confidence, and an increased likelihood of a recession in the United Kingdom. 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)** 

An 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 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.

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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 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

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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.

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 assets, including any cash balances in money market and/or short-term bond funds advised by the Investment Manager or its affiliates. In connection with such investments, the Investment Manager 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 the Investment Manager in connection with such investments.

**Mortgage-backed and Asset-backed Securities** 

Mortgage-backed securities, including collateralized mortgage obligations ("CMOs"), stripped mortgage-backed securities and securities that reflect an interest in reverse mortgages, represent a participation in, or are secured by, mortgage loans or otherwise are secured by real estate related collateral. Mortgage-backed securities may be issued by agencies or instrumentalities of the U.S. government (and may not be guaranteed or insured by the U.S. government, such as those issued by 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 typically pass through to the holders of the mortgage-backed securities or serve as the source for payments on 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 (and may or may not be guaranteed or insured by the U.S. government), foreign governments (or their agencies or instrumentalities), or non-governmental issuers.

Mortgage-backed securities may 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 or refinancing of the underlying mortgage loans or the foreclosure of collateral securing the underlying mortgage loans. If property owners make unscheduled prepayments on 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 those 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.

The fund may invest in mortgage-backed securities that represent pools of mortgage loans with variable rates of interest (such loans, "ARMs"). Adjustable-rate mortgage-backed securities, like traditional mortgage-backed securities, are interests in pools of

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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, adjustable-rate mortgage-backed securities are collateralized by or represent interests in ARMs. Interest rates for ARMs 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 ARMs 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 adjustable-rate mortgage-backed security may be adversely affected if interest rates increase faster than the rates of interest payable on the ARMs underlying the security. Also, some ARMs 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 ARM. As a result, changes in the interest rate on an ARM may not fully reflect changes in prevailing market interest rates during certain periods.

The fund may also invest in mortgage-backed securities that represent pools of "hybrid" ARMs, underlying mortgages that 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-rate mortgage loans. All hybrid ARMs have a reset date, the date on which 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 a security backed by that 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 greater losses on securities purchased at a premium than securities that are not purchased at a premium.

Mortgage-backed and asset-backed securities are subject to varying degrees of credit risk, depending on whether they are issued, or are guaranteed or insured, by agencies or instrumentalities of 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., 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.

Mortgage-related securities include, among other things, securities that reflect an interest in a pool of reverse mortgages. In a reverse mortgage, a lender makes a loan to a homeowner based on the homeowner's equity in his or her home. A homeowner must be age 62 or older to qualify for a reverse mortgage but is not necessarily required to have any minimum income. Generally, the homeowner is not required to pay interest or repay principal on the loan until the homeowner dies, sells the home, or ceases to use the home as his or her primary residence. There are three general types of reverse mortgages: (1) single-purpose reverse mortgages, which are offered by certain state and local government agencies and nonprofit organizations; (2) federally-insured reverse mortgages (known as home equity conversion mortgages), which are backed by the U. S. Department

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of Housing and Urban Development; and (3) proprietary reverse mortgages, which are privately offered loans. A mortgage-related security may be backed by a single type of reverse mortgage or by a combination of types of reverse mortgages. Reverse mortgage-related securities include agency and privately issued mortgage-related securities. The principal government guarantor of reverse mortgage-related securities is Ginnie Mae.

Reverse mortgage-related securities may be subject to risks different than other types of mortgage-related securities due to the unique nature of the underlying loans. The date of repayment for these loans is uncertain and may occur sooner or later than anticipated. The timing of payments for the corresponding mortgage-related security may also be uncertain. Because reverse mortgages are offered only to persons 62 and older and there may be no income restrictions, the loans may react differently than traditional home loans to market events. As a result, investors (which may include the fund) in notes issued by reverse mortgage trusts ("RMTs") may be deprived of payments to which they are entitled. This could result in losses to the fund. Investors, including the fund, may determine to pursue negotiations or legal claims or otherwise seek compensation from RMT service providers in certain instances. This may involve the fund incurring costs and expenses associated with such actions.

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.

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 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 stripped mortgage-backed security'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.

The value of asset-backed securities may be substantially dependent on the servicing of the underlying assets, and asset-backed securities are therefore subject to risks associated with negligence by, or defalcation of, the servicers of those assets.

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These risks may be heightened in the case of an asset-backed security collateralized by the fees earned by the servicer, as the servicer may have a reduced financial incentive to provide appropriate servicing. 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 (i.e., determination as to the amount of underlying assets or other support needed to produce the cash flows necessary to service interest and make principal payments), the quality of the underlying assets, the level of credit support, if any, provided for the securities, and the credit quality of the credit-support provider, if any. In recent years, a significant number of asset-backed security insurers have defaulted on their obligations.

Consistent with the fund's investment objective and policies, the fund may invest in other types of mortgage- and asset-backed securities offered currently or in the future, including certain yet-to-be-developed types of mortgage- and asset-backed securities which may be created as the market evolves.

***Additional Information Related to Freddie Mac and Fannie Mae****.* The extreme and unprecedented volatility and disruption that impacted the capital and credit markets beginning in 2008 led to market concerns regarding the ability of Freddie Mac and Fannie Mae to withstand future credit losses associated with securities held in their investment portfolios, and on which they provide guarantees, without the direct support of the federal government. On September 7, 2008, Freddie Mac and Fannie Mae were placed under the conservatorship of the Federal Housing Finance Agency (FHFA). Under the plan of conservatorship, the FHFA assumed control of, and generally has the power to direct, the operations of Freddie Mac and Fannie Mae, and is empowered to exercise all powers collectively held by their respective shareholders, directors and officers, including the power to: (1) take over the assets of and operate Freddie Mac and Fannie Mae with all the powers of the shareholders, the directors and the officers of Freddie Mac and Fannie Mae and conduct all business of Freddie Mac and Fannie Mae; (2) collect all obligations and money due to Freddie Mac and Fannie Mae; (3) perform all functions of Freddie Mac and Fannie Mae which are consistent with the conservator's appointment; (4) preserve and conserve the assets and property of Freddie Mac and Fannie Mae; and (5) contract for assistance in fulfilling any function, activity, action or duty of the conservator.

In connection with the actions taken by the FHFA, the Treasury has entered into certain preferred stock purchase agreements (SPAs) with each of Freddie Mac and Fannie Mae which establish the Treasury as the holder of a new class of senior preferred stock in each of Freddie Mac and Fannie Mae. The senior preferred stock was issued in connection with financial contributions from the Treasury to Freddie Mac and Fannie Mae. Although the SPAs are subject to amendment from time to time, currently the Treasury is obligated to provide such financial contributions up to an aggregate maximum amount determined by a formula set forth in the SPAs, and until such aggregate maximum amount is reached, there is not a specific end date to the Treasury's obligations.

The future status and role of Freddie Mac and Fannie Mae could be impacted by (among other things) the actions taken and restrictions placed on Freddie Mac and Fannie Mae by the FHFA in its role as conservator, the restrictions placed on Freddie Mac's and Fannie Mae's operations and activities under the SPAs, market responses to developments at Freddie Mac and Fannie Mae, downgrades or upgrades in the credit ratings assigned to Freddie Mac and Fannie Mae by nationally recognized statistical rating organizations (NRSROs) or ratings services, and future legislative and regulatory action that alters the operations, ownership, structure and/or mission of these institutions, each of which may, in turn, impact the value of, and cash flows on, any securities guaranteed by Freddie Mac and Fannie Mae.

In addition, the future of Freddie Mac and Fannie Mae, and other U.S. government-sponsored enterprises that are not backed by the full faith and credit of the U.S. government (GSEs), remains in question as the U.S. government continues to consider options ranging from structural reform, nationalization, privatization, or consolidation, to outright elimination. The issues that have led to significant U.S. government support for Freddie Mac and Fannie Mae have sparked serious debate regarding the continued role of the U.S. government in providing mortgage loan liquidity.

**Options on Securities** 

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**Writing covered options**. The fund may write (*i.e.*, sell) covered call options and covered put options on optionable securities held in its portfolio or that it has an absolute and immediate right to acquire without additional cash consideration (or, if additional cash consideration is required, cash or other assets determined to be liquid by the Investment Manager in accordance with procedures established by the Trustees, in such amount as are set aside on the fund's books), when in the opinion of the Investment Manager such transactions are consistent with the fund's goal(s) and policies. Call options written by the fund give the purchaser the right to buy the underlying securities from the fund at a stated exercise price, regardless of the security's market price; put options written by the fund give the purchaser the right to sell the underlying securities to the fund at a stated exercise price, regardless of the security's market price.

The fund will receive a premium from writing a put or call option, which increases the fund's return on the underlying security in the event the option expires unexercised or is closed out at a profit. The amount of the premium reflects, among other things, the relationship between the exercise price and the current market value of the underlying security, the volatility of the underlying security, the amount of time remaining until expiration, current interest rates, and the effect of supply and demand in the options market and in the market for the underlying security. By writing a call option, if the fund holds the security, the fund limits its opportunity to profit from any increase in the market value of the underlying security above the exercise price of the option but continues to bear the risk of a decline in the value of the underlying security. If the fund does not hold the underlying security, the fund bears the risk that, if the market price exceeds the option strike price, the fund will suffer a loss equal to the difference at the time of exercise. By writing a put option, the fund assumes the risk that it may be required to purchase the underlying security for an exercise price higher than its then-current market value, resulting in a potential capital loss unless the security subsequently appreciates in value.

The fund may terminate an option that it has written prior to its expiration by entering into a closing purchase transaction, in which it purchases an offsetting option. A closing purchase transaction will ordinarily be effected in order to realize a profit on an outstanding option, to prevent an underlying instrument from being called, to permit the sale of the underlying instrument or to permit the writing of a new option containing different terms on such underlying instrument. The fund realizes a profit or loss from a closing transaction if the cost of the transaction (option premium plus transaction costs) is less or more than the premium received from writing the option. Because increases in the market price of a call option generally reflect increases in the market price of the security underlying the option, any loss resulting from a closing purchase transaction may be offset in whole or in part by unrealized appreciation of the underlying security.

If the fund writes a call option but does not own the underlying security, and when it writes a put option, the fund may be required to deposit cash or securities with its broker as "margin," or collateral, for its obligation to buy or sell the underlying security. As the value of the underlying security varies, the fund may have to deposit additional margin with the broker. Margin requirements are complex and are fixed by individual brokers, subject to minimum requirements currently imposed by the Federal Reserve Board and by stock exchanges and other self-regulatory organizations.

**Purchasing put options**. The fund may purchase put options to protect its portfolio holdings in an underlying security against a decline in market value. Such protection is provided during the life of the put option since the fund, as holder of the option, is able to sell the underlying security at the put exercise price regardless of any decline in the underlying security's market price. If such a price decline occurs, the put option will permit the fund to sell the security at the higher exercise price or to close out the option at a profit. In order for a put option to be profitable, the market price of the underlying security must decline sufficiently below the exercise price to cover the premium and transaction costs. By using put options in this manner, the fund will reduce any profit it might otherwise have realized from appreciation of the underlying security by the premium paid for the put option and by transaction costs. The fund may also purchase put options for other investment purposes, including to take a short position in the security underlying the put option.

**Purchasing call options**. The fund may purchase call options to hedge against an increase in the price of securities that the fund wants ultimately to buy. Such protection is provided during the life of the call option since the fund, as holder of the call option, is able to buy the underlying security at the exercise price regardless of any increase in the underlying security's market price. If such a price increase occurs, a call option will permit the fund to purchase the securities at the exercise price or to close out the option at a profit. In order for a call option to be profitable, the market price of the underlying security must rise sufficiently above the exercise price to cover the premium and transaction costs. The fund may also purchase call options for other investment purposes.

**Risk factors in options transactions**. The successful use of the fund's options strategies depends on the ability of the Investment Manager to forecast correctly interest rate and market movements. For example, if the fund were to write a call option

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based on the Investment Manager's expectation that the price of the underlying security would fall, but the price were to rise instead, the fund could be required to sell the security upon exercise at a price below the current market price. Similarly, if the fund were to write a put option based on the Investment Manager's expectation that the price of the underlying security would rise, but the price were to fall instead, the fund could be required to purchase the security upon exercise at a price higher than the current market price.

When the fund purchases an option, it runs the risk that it will lose its entire investment in the option in a relatively short period of time, unless the fund exercises the option or enters into a closing sale transaction before the option's expiration. If the price of the underlying security does not rise (in the case of a call) or fall (in the case of a put) to an extent sufficient to cover the option premium and transaction costs, the fund will lose part or all of its investment in the option. This contrasts with an investment by the fund in the underlying security, since the fund will not realize a loss if the security's price does not change.

The effective use of options also depends on the fund's ability to terminate option positions at times when the Investment Manager deems it desirable to do so. There is no assurance that the fund will be able to effect closing transactions at any particular time or at an acceptable price. If a secondary market in options were to become unavailable, the fund could no longer engage in closing transactions. Lack of investor interest might adversely affect the liquidity of the market for particular options or series of options. A market may discontinue trading of a particular option or options generally. In addition, a market could become temporarily unavailable if unusual events – such as volume in excess of trading or clearing capability – were to interrupt its normal operations. Although the fund may be able to offset to some extent any adverse effects of being unable to terminate an option position, the fund may experience losses in some cases as a result of such inability.

A market may at times find it necessary to impose restrictions on particular types of exchange-traded options transactions, such as opening transactions. For example, if an underlying security ceases to meet qualifications imposed by the market or the Options Clearing Corporation, new series of options on that security will no longer be opened to replace expiring series, and opening transactions in existing series may be prohibited. If an options market were to become unavailable, the fund as a holder of an option would be able to realize profits or limit losses only by exercising the option, and the fund, as option writer, would remain obligated under the option until expiration or exercise.

Disruptions in the markets for the securities underlying options purchased or sold by the fund could result in losses on the options. For example, if a fund is unable to purchase a security underlying a put option it had purchased, the fund may be unable to exercise the put option. If trading is interrupted in an underlying security, the trading of options on that security is normally halted as well. As a result, the fund as purchaser or writer of an option will be unable to close out its positions until options trading resumes, and it may be faced with considerable losses if trading in the security reopens at a substantially different price. In addition, the Options Clearing Corporation or other options markets may impose exercise restrictions in respect of exchange-traded options. If a prohibition on exercise is imposed at the time when trading in the option has also been halted, the fund as purchaser or writer of an option will be locked into its position until one of the two restrictions has been lifted. If the Options Clearing Corporation were to determine that the available supply of an underlying security appears insufficient to permit delivery by the writers of all outstanding calls in the event of exercise, it may prohibit indefinitely the exercise of put options. The fund, as holder of such a put option, could lose its entire investment if it is unable to exercise the put option prior to its expiration.

The fund may use both European-style options, which are only exercisable at a specific expiration time on the expiration date, and American-style options, which are exercisable at any time prior to the expiration date. Since an American-style option allows the holder to exercise its rights any time before the option's expiration, the writer of an American-style option has no control over when it will be required to fulfill its obligations as a writer of the option. (The writer of a European-style option is not subject to this risk because the holder may only exercise the option on its expiration date.)

Options can be traded either through established exchanges ("exchange traded options") or privately negotiated transactions (over-the-counter or "OTC" options). Exchange traded options are standardized with respect to, among other things, the underlying interest, expiration date, contract size and strike price. The terms of OTC options are generally negotiated by the parties to the option contract which allows the parties greater flexibility in customizing the agreement, but OTC options are generally less liquid than exchange traded options. OTC options purchased by the fund and assets held to cover OTC options written by the fund may, under certain circumstances, be considered illiquid securities for purposes of any limitation on the fund's ability to invest in illiquid securities. All option contracts involve credit risk if the counterparty to the option contract (*e.g.*, the clearing house or OTC counterparty) or the third party effecting the transaction in the case of cleared options (*e.g.*, futures commission merchant or broker/dealer) fails to perform. The credit risk in OTC options that are not cleared is dependent on the

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credit worthiness of the individual counterparty to the contract and may be greater than the credit risk associated with cleared options.

Foreign-traded options are subject to many of the same risks presented by internationally-traded securities. In addition, because of time differences between the United States and other countries, and because different holidays are observed in different countries, foreign options markets may be open for trading during hours or on days when U.S. markets are closed. As a result, option premiums may not reflect the current prices of the underlying interest in the United States.

There are significant differences between the securities and options markets that could result in an imperfect correlation between these markets, causing a given transaction not to achieve its objectives. In addition, many options, in particular OTC options, are complex and often valued based on subjective factors. Improper valuations can result in increased cash payment requirements to counterparties or a loss of value to the fund.

The market price of an option is affected by many factors, including changes in the market prices or dividend rates of underlying securities (or in the case of indices, the securities in such indices); the time remaining before expiration; changes in interest rates or exchange rates; and changes in the actual or perceived volatility of the relevant stock market and underlying securities. The market price of an option also may be adversely affected if the market for the option becomes less liquid.

In addition to options on securities and futures, the fund may also enter into options on futures, swaps, or other instruments as described elsewhere in this SAI.

**Preferred Stocks and Convertible Securities** 

The fund may invest in preferred stocks or convertible securities. A preferred stock is a class of stock that generally pays dividends at a specified rate and has preference over common stock in the payment of dividends and the liquidation of an issuer's assets but is junior to the debt securities of the issuer in those same respects. Under ordinary circumstances, preferred stock does not carry voting rights. As with all equity securities, the value of preferred stock fluctuates based on changes in a company's financial condition and on overall market and economic conditions. The value of preferred stocks is particularly sensitive to changes in interest rates and is more sensitive to changes in an issuer's creditworthiness than is the value of debt securities. In addition, many preferred stocks may be called or redeemed prior to their maturity by the issuer under certain conditions, which can limit the benefit to investors of a decline in interest rates. Shareholders of preferred stock may suffer a loss of value if dividends are not paid. Additionally, if the issuer of preferred stock experiences economic or financial difficulties, its preferred stock may lose value due to the reduced likelihood that its board of directors will declare a dividend. Certain preferred stocks contain provisions that allow an issuer under certain conditions to skip or defer distributions. If the fund owns a preferred stock that is deferring its distribution, it may be required to report income for tax purposes despite the fact that it is not receiving current income on this position. Preferred stocks often are subject to legal provisions that allow for redemption in the event of certain tax or legal changes or at the issuer's call. In the event of redemption, the fund may not be able to reinvest the proceeds at comparable rates of return. Preferred stocks are subordinated to bonds and other debt securities in an issuer's capital structure in terms of priority for corporate income and liquidation payments, and therefore will be subject to greater credit risk than those debt securities. Preferred stocks may trade less frequently and in a more limited volume and may be subject to more abrupt or erratic price movements than many other securities, such as common stocks, corporate debt securities, and U.S. government securities.

Convertible securities include bonds, debentures, notes, preferred stocks and other securities that may be converted into or exchanged for, at a specific price or formula within a particular period of time, a prescribed amount of common stock or other equity securities of the same or a different issuer. The conversion may occur automatically upon the occurrence of a predetermined event or at the option of either the issuer or the security holder. The holder of a convertible security is generally entitled to participate in the capital appreciation resulting from a market price increase in the issuer's common stock and to receive interest paid or accrued on debt or dividends paid or accrued until the convertible security matures or is redeemed, converted or exchanged. Before conversion, convertible securities have characteristics similar to non-convertible debt or preferred securities, as applicable. Convertible securities rank senior to common stock in an issuer's capital structure and, therefore, normally entail less risk than the issuer's common stock. However, convertible securities may also be subordinate to any senior debt obligations of the issuer, and, therefore, an issuer's convertible securities may entail more risk than such senior debt obligations. Convertible securities usually offer lower interest or dividend yields than non-convertible debt securities of similar credit quality because of the potential for capital appreciation. In addition, convertible securities are often lower-rated securities.

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The market value of a convertible security is a function of its "investment value" and its "conversion value." A security's "investment value" represents the value of the security without its conversion feature (*i.e.*, a nonconvertible fixed income security). The investment value may be determined by reference to its credit quality and the current value of its yield to maturity or probable call date. At any given time, investment value may be dependent upon such factors as the general level of interest rates, the yield of similar nonconvertible securities, the financial strength of the issuer and the seniority of the security in the issuer's capital structure. A security's "conversion value" is determined by multiplying the number of shares the holder is entitled to receive upon conversion or exchange by the current market price of the underlying security. Because of the conversion feature, the market value of a convertible security will normally fluctuate in some proportion to changes in the market value of the underlying security, and, accordingly, convertible securities are subject to risks relating to the activities of the issuer and/or general market and economic conditions.

A convertible security generally will sell at a premium over its conversion value by the extent to which investors place value on the right to acquire the underlying common stock while holding a fixed income security. If the conversion value of a convertible security is significantly below its investment value, the convertible security generally trades like nonconvertible debt or preferred stock and its market value will not be influenced greatly by fluctuations in the market price of the underlying security. Conversely, if the conversion value of a convertible security is near or above its investment value, the market value of the convertible security is typically more heavily influenced by fluctuations in the market price of the underlying security. Generally, the amount of the premium decreases as the convertible security approaches maturity. Convertible securities generally have less potential for gain than common stocks.

The fund's investments in convertible securities may at times include securities that have a mandatory conversion feature, pursuant to which the securities convert automatically into common stock or other equity securities at a specified date and a specified conversion ratio, or that are convertible at the option of the issuer. Because conversion of the security is not at the option of the holder, the fund may be required to convert the security into the underlying common stock even at times when the value of the underlying common stock or other equity security has declined substantially.

The fund's investments in preferred stocks and convertible securities, particularly securities that are convertible into securities of an issuer other than the issuer of the convertible security, may be illiquid. The fund may not be able to dispose of such securities in a timely fashion or for a fair price, which could result in losses to the fund.

**Private Placements and Restricted Securities** 

The fund may invest in securities that are purchased in private placements and, accordingly, are subject to restrictions on resale as a matter of contract or under federal securities laws. Because there may be relatively few potential purchasers for such investments, especially under adverse market or economic conditions or in the event of adverse changes in the financial condition of the issuer, the fund could find it more difficult to sell such securities when the Investment Manager believes it advisable to do so or may be able to sell such securities only at prices lower than if such securities were more widely held. There can be no assurance that a liquid market will exist for any such security at any particular time, and a security which when purchased was liquid in the institutional markets may subsequently become illiquid.

Many private placement securities are issued by companies that are not required to file periodic financial reports, leading to challenges in evaluating the company's overall business prospects and gauging how the investment is likely to perform over time. In addition, market quotations for these securities are less readily available. Due to the more limited financial information and lack of publicly available prices, it may be more difficult to determine the fair value of these securities for purposes of computing the fund's net asset value. As a result, the judgment of the Investment Manager may at times play a greater role in valuing these securities than in the case of publicly traded securities, and the fair value prices determined for the fund could differ from those of other market participants.

While such private placements may offer attractive opportunities for investment not otherwise available on the open market, the securities so purchased are often "restricted securities," i.e., securities which cannot be sold to the public without registration under the Securities Act of 1933 (the "Securities Act") or the availability of an exemption from registration (such as Rules 144, 144A or Regulation S), or which are "not readily marketable" because they are subject to other legal or contractual delays in or restrictions on resale. In addition, the issuer typically does not have an obligation to provide liquidity to investors by buying the securities back when the investor wants to sell. Disposing of these securities may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the fund to sell them promptly at an acceptable price. The fund may have to bear the extra expense of registering these securities for resale and the risk of substantial delay in effecting the registration.

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Since the offering is not registered with the SEC, investors in a private placement have less protection under the federal securities laws against improper practices than investors in registered securities.

Generally speaking, restricted securities may be sold only to qualified institutional buyers, or in a privately negotiated transaction to a limited number of purchasers, or in limited quantities after they have been held for a specified period of time and other conditions are met pursuant to an exemption from registration, or in a public offering for which a registration statement is in effect under the Securities Act. The fund may be deemed to be an "underwriter" for purposes of the Securities Act when selling restricted securities to the public, and in such event the fund may be liable to purchasers of such securities if the registration statement prepared by the issuer, or the prospectus forming a part of it, is materially inaccurate or misleading. The SEC Staff currently takes the view that any delegation by the Trustees of the authority to determine that a restricted security is readily marketable (as described in the investment restrictions of the funds) must be pursuant to written procedures established by the Trustees and the Trustees have delegated such authority to the Investment Manager.

**Real Estate Investment Trusts (REITs)** 

The fund may invest in REITs. REITs are pooled investment vehicles that invest primarily in income-producing real estate or real estate related loans or interests. REITs may concentrate their investments in specific geographic areas or in specific property types (i.e., hotels, shopping malls, residential complexes and office buildings). Like regulated investment companies such as the fund, REITs are not taxed on income distributed to shareholders provided that they comply with certain requirements under the Code. The fund will indirectly bear its proportionate share of any expenses (such as operating expenses and advisory fees) paid by REITs in which it invests in addition to the fund's own expenses.

Investing in REITs may involve certain unique risks in addition to those risks associated with investing in the real estate industry in general (such as possible declines in the value of real estate, lack of availability of mortgage funds, or extended vacancies of property). The market value of REIT shares and the ability of the REITs to distribute income may be adversely affected by several factors, including rising interest rates, changes in the national, state and local economic climate and real estate conditions, perceptions of prospective tenants of the safety, convenience and attractiveness of the properties, the ability of the owners to provide adequate management, maintenance and insurance, the cost of complying with the Americans with Disabilities Act, increased competition from new properties, the impact of present or future environmental legislation and compliance with environmental laws, failing to maintain their exemptions from registration under the Investment Company Act, changes in real estate taxes and other operating expenses, adverse changes in governmental rules and fiscal policies, adverse changes in zoning laws, and other factors beyond the control of the issuers of the REITs.

REITs are generally classified as equity REITs, mortgage REITs or a combination of equity and mortgage REITs ("hybrid REITs"). Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of interest payments. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the risk of borrower default, the likelihood of which is increased for mortgage REITs that invest in sub-prime mortgages. REITs, and mortgage REITs in particular, are also subject to interest rate risk. Rising interest rates may cause REIT investors to demand a higher annual yield, which may, in turn, cause a decline in the market price of the equity securities issued by a REIT. Rising interest rates also generally increase the costs of obtaining financing, which could cause the value of the fund's REIT investments to decline. During periods when interest rates are declining, mortgages are often refinanced. Refinancing may reduce the yield on investments in mortgage REITs. In addition, since REITs depend on payment under their mortgage loans and leases to generate cash to make distributions to their shareholders, investments in REITs may be adversely affected by defaults on such mortgage loans or leases. A hybrid REIT combines the characteristics of equity REITs and mortgage REITs, generally by holding both ownership interests and mortgage interests in real estate, and thus may be subject to risks associated with both real estate ownership and investments in mortgage-related securities.

Investing in certain REITs, which often have small market capitalizations, may also involve the same risks as investing in other small capitalization companies. REITs may have limited financial resources and their securities may trade less frequently and in limited volume and may be subject to more abrupt or erratic price movements than larger company securities. Historically, small capitalization stocks, such as REITs, have been more volatile in price than the larger capitalization stocks such as those included in the S&P 500 Index. The management of a REIT may be subject to conflicts of interest with respect to the operation of the business of the REIT and may be involved in real estate activities competitive with the REIT. REITs may own properties through

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joint ventures or in other circumstances in which the REIT may not have control over its investments. REITs may incur significant amounts of leverage.

REITs are dependent upon their operators' management skills, are generally not diversified (except to the extent the Code requires), and are subject to heavy cash flow dependency, borrower default or self-liquidation. REITs are also subject to the possibility of failing to qualify for the tax-advantaged treatment available to REITs under the Code or failing to maintain their exemptions from registration under the 1940 Act. In addition, REITs may be adversely affected by changes in federal tax law, for example, by limiting their permissible businesses or investments. REITs may have limited financial resources, may trade less frequently and in a limited volume, and may be subject to more abrupt or erratic price movements than more widely held securities.

The fund's investment in a REIT may result in the fund making distributions that constitute a return of capital to fund shareholders for federal income tax purposes or may require the fund to accrue and distribute income not yet received. In addition, distributions by a fund from REITs will not qualify for the corporate dividends-received deduction, or, generally, for treatment as qualified dividend income.

**Redeemable Securities** 

Certain securities held by the fund may permit the issuer at its option to "call" or redeem its securities. Issuers of redeemable securities are generally more likely to exercise a "call" option in periods when interest rates are below the rate at which the original security was issued. If an issuer were to redeem securities held by the fund during a time of declining interest rates, the fund may not be able to reinvest the proceeds in securities providing the same investment return as the securities redeemed. The fund also may fail to recover additional amounts (i.e., premiums) paid for securities with higher interest rates, resulting in an unexpected capital loss.

**Repurchase Agreements** 

A repurchase agreement is a contract under which the fund, the buyer under the contract, acquires a security for a relatively short period (usually not more than one week) subject to the obligation of the seller (or repurchase agreement counterparty) to repurchase, and the fund to resell, the security at a fixed time and price, which represents the fund's cost plus interest (or, for repurchase agreements under which the fund acquires a security and then sells it short, the fund's cost of "borrowing" the security). A repurchase agreement with a stated maturity of longer than one week is generally considered an illiquid investment. It is the fund's present intention to enter into repurchase agreements only with banks and registered broker-dealers. The fund may enter into repurchase agreements, including with respect to securities it wishes to sell short. See "Short Sales" in this SAI. Certain of the repurchase agreements related to securities sold short may provide that, at the option of the fund, settlement may be made by delivery of cash equal to the difference between (a) the sum of (i) the market value of the securities sold short at the time the repurchase agreement is closed out and (ii) transaction costs associated with the acquisition in the market by the repurchase agreement counterparty of the securities sold short and (b) the repurchase price specified in the repurchase agreement.

The fund may be exposed to the credit risk of the repurchase agreement counterparty (or seller) in the event that the counterparty is unable or unwilling to close out the repurchase agreement in accordance with its terms or the parties disagree as to the meaning or application of those terms. In such an event, the fund may be subject to expenses, delays, and risk of loss, including: (i) possible declines in the value of the underlying security while the fund seeks to enforce its rights under the agreement; (ii) possible reduced levels of income and lack of access to income during this period; and (iii) the inability to enforce its rights and the expenses involved in attempted enforcement. If the seller defaults, the fund could realize a loss on the sale of the underlying security to the extent that the proceeds of the sale including accrued interest are less than the resale price provided in the agreement including interest. In addition, if the seller should be involved in bankruptcy or insolvency proceedings, the fund may incur delay and costs in selling the underlying security or may suffer a loss of principal and interest if the fund is treated as an unsecured creditor and required to return the underlying collateral to the seller's estate. The fund is also subject to the risk that the repurchase agreement instrument may not perform as expected.

Pursuant to no-action relief granted by the SEC, the fund may transfer uninvested cash balances into a joint account, along with cash of other Putnam funds and certain other accounts. These balances may be invested in one or more repurchase agreements and/or short-term money market instruments.

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The fund may also enter into reverse repurchase agreements. Under a reverse repurchase agreement, the fund sells portfolio assets to another party subject to an agreement by the fund to repurchase the same assets from that party at an agreed upon price and date. During the reverse repurchase agreement period, the fund continues to receive principal and interest payments on the assets and also has the opportunity to earn a return on the collateral furnished by the counterparty to secure its obligation to redeliver the assets. The fund can use the proceeds received from entering into a reverse repurchase agreement to make additional investments, which generally causes the fund's portfolio to behave as if it were leveraged.

When entering into a reverse repurchase agreement, the fund bears the risk of delay and costs involved in recovery of securities if the initial purchaser of the securities fails to return the securities upon repurchase or fails financially. These delays and costs could be greater with respect to foreign securities. Although securities repurchase transactions are generally marked to market daily, the fund also faces the risk that securities subject to a reverse repurchase transaction will decline quickly in value, and the fund will remain obligated to repurchase those securities at a higher price, potentially resulting in a loss. If the buyer in a reverse repurchase agreement files for bankruptcy or becomes insolvent, the fund may be unable to recover the securities it sold and as a result would realize a loss equal to the difference between the value of those securities and the payment it received for them. The size of this loss will depend upon the difference between what the buyer paid for the securities the fund sold to it and the value of those securities (*e.g.*, a buyer may pay $95 for a bond with a market value of $100). In the event of a buyer's bankruptcy or insolvency, the fund's use of proceeds from the sale of its securities may be restricted while the other party or its trustee or receiver determines whether to honor the fund's right to repurchase the securities. The fund's use of reverse repurchase agreements also subjects the fund to interest costs based on the difference between the sale and repurchase price of a security involved in such a transaction. Additionally, reverse repurchase agreements entail the same risks as over-the-counter derivatives. These include the risk that the counterparty to the reverse repurchase agreement may not be able to fulfill its obligations, as discussed above, that the parties may disagree as to the meaning or application of contractual terms, or that the instrument may not perform as expected.

**Securities of Other Investment Companies** 

Securities of other investment companies, including shares of open- and closed-end investment companies and unit investment trusts (which may include ETFs), 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 the Investment Manager believes is advisable, when there is a shortage of direct investments available, or when the Investment Manager believes that investment companies offer attractive values.

Investment companies may be structured to perform in a similar fashion to a broad-based securities index or may focus on a particular strategy or class of assets. Passive ETFs typically seek to track the performance or dividend yield of specific indexes or companies in related industries, though unlike the index, an ETF incurs administrative expenses and transaction costs in trading securities. These indexes may be broad-based, sector-based or international. 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 duplication of expenses while the fund owns another investment company's shares. In addition, investing in investment companies involves the risk that they will not perform in exactly the same fashion, or in response to the same factors, as the underlying instruments or index. To the extent the fund invests in other investment companies that are professionally managed, its performance will also depend on the investment and research abilities of investment managers other than the Investment Manager.

Open-end investment companies typically offer their shares continuously at net asset value plus any applicable sales charge and stand ready to redeem shares upon shareholder request. The shares of certain other types of investment companies, such as ETFs and closed-end investment companies, typically trade on a stock exchange or over-the-counter at a premium or a discount to their net asset value. In the case of closed-end investment companies, the number of shares is typically fixed. The securities of closed-end investment companies and ETFs carry the risk that the price the fund pays or receives may be higher or lower than the investment company's net asset value. ETFs also are subject to the risk that the timing and magnitude of cash inflows and outflows from and to investors buying and redeeming shares in the ETF could create cash balances that cause the ETF's performance to deviate from the index (which remains "fully invested" at all times). Performance of an ETF and the index it is designed to track also may diverge because the composition of the index and the securities held by the ETF may occasionally differ. ETFs and closed-end investment companies are also subject to certain additional risks, including the risks of illiquidity and of possible trading halts or interruptions due to policies of the relevant exchange, unusual market conditions or other reasons. There can be no assurance that shares of a closed-end investment company or ETF will continue to be listed on an active

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exchange. The shares of investment companies, particularly closed-end investment companies, may also be leveraged, which would increase the volatility of the fund's net asset value.

**Business development companies ("BDCs").** BDCs are a type of closed-end fund regulated under the 1940 Act, which typically invest in and lend to small-and medium-sized private companies that may lack access to public equity markets for capital raising. Under the 1940 Act, BDCs must invest at least 70% of the value of their total assets in certain asset types, which are typically the securities of private U.S. businesses. Additionally, BDCs must make available significant managerial assistance to the issuers of such securities. BDCs are not taxed on income distributed to shareholders provided they qualify as a regulated investment company under the Code. The funds will indirectly bear their proportionate share of any management and other expenses charged by the BDCs in which they invest.

Because BDCs typically invest in small and medium-sized companies, a BDC's portfolio is subject to the risks inherent in investing in smaller companies, including that portfolio companies may be dependent on a small number of products or services and may be more adversely affected by poor economic or market conditions. Some BDCs invest substantially, or even exclusively, in one sector or industry group and therefore the BDC may be susceptible to adverse conditions and economic or regulatory occurrences affecting the sector or industry group, which tends to increase volatility and result in higher risk. Investments in BDCs are also subject to management risk, including management's ability to meet the BDC's investment objective, and management's ability to manage the BDC's portfolio during periods of market turmoil and as investors' perceptions regarding a BDC or its underlying investments change.

The extent to which the fund can invest in securities of other investment companies, including ETFs, is generally limited by federal securities laws. For more information regarding the tax treatment of ETFs, please see "Taxes" below.

**Short Sales** 

The fund may engage in short sales of securities and/or currencies either as a hedge against potential declines in value of a portfolio security or currency or to realize appreciation when a security or currency that the fund does not own declines in value. Short sales are transactions in which the fund sells a security or currency it does not own to a third party by borrowing the security or currency in anticipation of purchasing the same security or currency at the market price on a later date to close out the short position. The fund may also engage in short sales by entering into a repurchase agreement with respect to the security it wishes to sell short. See "Repurchase Agreements" in this SAI. The fund will incur a gain if the price of the security or currency declines between the date of the short sale and the date on which the fund replaces the borrowed security or currency; and the fund will incur a loss if the price of the security or currency increases between those dates. Such a loss is theoretically unlimited since the potential increase in the market price of the security or currency sold short is not limited. Until the security is replaced, the fund must pay the lender (or repurchase agreement counterparty) any dividends or interest that accrues during the period of the loan (or repurchase agreement). To borrow (or enter into a repurchase agreement with respect to) the security, the fund also may be required to pay a premium, which would increase the cost of the security sold. The fund's successful use of short sales is subject to the Investment Manager's ability to accurately predict movements in the market price of the security or currency sold short. Short selling may involve financial leverage because the fund is exposed both to changes in the market price of the security or currency sold short and to changes in the value of securities or currencies purchased with the proceeds of the short sale, effectively leveraging its assets. Under adverse market conditions, a fund may have difficulty purchasing securities to meet its short sale delivery obligations, and may be required to close out its short position at a time when the fund would not choose to do so, and may therefore have to sell portfolio securities to raise the capital necessary to meet its short sale obligations at a time when fundamental investment considerations may not favor such sales. There is also a risk that a borrowed security will need to be returned to the lender on short notice. If a request for return of borrowed securities occurs at a time when other short sellers of the securities are receiving similar requests, a "short squeeze" can occur, and the fund may be compelled to replace borrowed securities previously sold short with purchases on the open market at the most disadvantageous time, possibly at prices significantly in excess of the proceeds received in originally selling the securities short. In addition, the fund may have difficulty purchasing securities to meet its delivery obligations in the case of less liquid securities sold short by the fund, such as certain emerging market country securities or securities of companies with smaller market capitalizations. In connection with short sale transactions, the fund may be required to pledge certain additional assets for the benefit of the securities lender (or repurchase agreement counterparty) and the fund may, while such assets remain pledged, be limited in its ability to invest those assets in accordance with the fund's investment strategies.

Short selling is a technique that may be considered speculative and involves risks beyond the initial capital necessary to secure each transaction. It should be noted that possible losses from short sales differ from those losses that could arise from a cash

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investment in a security because losses from a short sale may be limitless, while the losses from a cash investment in a security cannot exceed the total amount of the investment in the security.

Certain of the repurchase agreements related to securities sold short may provide that, at the option of the fund, in lieu of delivering the securities sold short, settlement may be made by delivery of cash equal to the difference between (a) the sum of (i) the market value of the securities sold short at the time the repurchase agreement is closed out and (ii) transaction costs associated with the acquisition in the market by the repurchase agreement counterparty of the securities sold short and (b) the repurchase price specified in the repurchase agreement. Because that cash amount represents the fund's maximum loss in the event of the insolvency of the counterparty, the fund will, except where the local market practice for foreign securities to be sold short requires payment prior to delivery of such securities, treat such amount, rather than the full notional amount of the repurchase agreement, as its "investment" in securities of the counterparty for purposes of all applicable investment restrictions, including its fundamental policy with respect to diversification.

See "Legal and Regulatory Risks Relating to Investment Strategy" in this SAI.

**Short-Term Trading** 

In seeking the fund's objective(s), the Investment Manager will buy or sell portfolio securities whenever the Investment Manager believes it appropriate to do so. From time to time the fund will buy securities intending to seek short-term trading profits. A change in the securities held by the fund is known as "portfolio turnover" and generally involves some expense to the fund. This expense may include brokerage commissions or dealer markups and other transaction costs on both the sale of securities and the reinvestment of the proceeds in other securities. If sales of portfolio securities cause the fund to realize net short-term capital gains, such gains will be taxable as ordinary income when distributed to taxable individual shareholders. As a result of the fund's investment policies, under certain market conditions the fund's portfolio turnover rate may be higher than that of other ETFs. Portfolio turnover rate for a fiscal year is the ratio of the lesser of purchases or sales of portfolio securities to the monthly average of the value of portfolio securities — excluding securities whose maturities at acquisition were one year or less. The fund's portfolio turnover rate is not a limiting factor when the Investment Manager considers a change in the fund's portfolio.

**Special Purpose Acquisition Companies** 

The fund may invest in stock, rights, warrants, and other securities of special purpose acquisition companies ("SPACs") or similar special purpose entities. A SPAC is a publicly traded company that raises investment capital in the form of a blind pool via an IPO for the purpose of acquiring an existing company. The shares of a SPAC are typically issued in "units" that include one share of common stock and one right or warrant (or partial right or warrant) conveying the right to purchase additional shares or partial shares. At a specified time following the SPAC's IPO (generally 1-2 months), the rights and warrants may be separated from the common stock at the election of the holder, after which they become freely tradeable. After going public and until an acquisition is completed, a SPAC generally invests the proceeds of its IPO (less a portion retained to cover expenses), which are held in trust, in U.S. government securities, money market securities and cash. To the extent the SPAC is invested in cash or similar securities, this may impact a fund's ability to meet its investment objective. If a SPAC does not complete an acquisition within a specified period of time after going public, the SPAC is dissolved, at which point the invested funds are returned to the SPAC's shareholders (less certain permitted expenses) and any rights or warrants issued by the SPAC expire worthless.

Because SPACs and similar entities are in essence blank check companies without an operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the entity's management to identify and complete a profitable acquisition. Some SPACs may pursue acquisitions only within certain industries or regions, which may increase the volatility of their prices. In addition, the securities issued by a SPAC, which are typically traded in the over-the-counter market, may be considered illiquid and/or be subject to restrictions on resale.

**Structured Investments** 

A structured investment is a security having a return tied to an underlying index or other security or asset class. Structured investments generally are individually negotiated agreements and may be traded over-the-counter. Structured investments are organized and operated to restructure the investment characteristics of the underlying security. This restructuring involves the deposit with or purchase by an entity, such as a corporation or trust, or specified instruments (such as commercial bank loans) and the issuance by that entity or one or more classes of securities ("structured securities") backed by, or representing interests in, the underlying instruments. The cash flow on the underlying instruments may be apportioned among the newly issued

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structured securities to create securities with different investment characteristics, such as varying maturities, payment priorities and interest rate provisions, and the extent of such payments made with respect to structured securities is dependent on the extent of the cash flow on the underlying instruments. Because structured securities typically involve no credit enhancement, their credit risk generally will be equivalent to that of the underlying instruments. Investments in structured securities are generally of a class of structured securities that is either subordinated or unsubordinated to the right of payment of another class. Subordinated structured securities typically have higher yields and present greater risks than unsubordinated structured securities. Structured securities are typically sold in private placement transactions, and there currently is no active trading market for structured securities. Investments in government and government-related and restructured debt instruments are subject to special risks, including the inability or unwillingness to repay principal and interest, requests to reschedule or restructure outstanding debt and requests to extend additional loan amounts.

**Swap Agreements** 

The fund may enter into swap agreements and other types of over-the-counter transactions such as caps, floors and collars with broker-dealers or other financial institutions for hedging or investment purposes. A swap involves the exchange by the fund with another party of their respective commitments to pay or receive cash flows, e.g., an exchange of floating rate payments for fixed-rate payments. The purchase of a cap entitles the purchaser, to the extent that a specified index or other underlying financial measure exceeds a predetermined value on a predetermined date or dates, to receive payments on a notional principal amount from the party selling the cap. The purchase of a floor entitles the purchaser, to the extent that a specified index or other underlying financial measure falls or other underlying measure below a predetermined value on a predetermined date or dates, to receive payments on a notional principal amount from the party selling the floor. A collar combines elements of a cap and a floor.

Swap agreements and similar transactions can be individually negotiated and structured to include exposure to a variety of different types of investments or market factors. A swap agreement may be structured with reference to an index of securities that is created and maintained by the swap counterparty. Depending on their structures, swap agreements may increase or decrease the fund's exposure to long-or short-term interest rates (in the United States or abroad), foreign currency values, mortgage securities, mortgage rates, corporate borrowing rates, or other factors such as security prices, inflation rates or the volatility of an index or one or more securities. For example, if the fund agrees to exchange payments in U.S. dollars for payments in a non-U.S. currency, the swap agreement would tend to decrease the fund's exposure to U.S. interest rates and increase its exposure to that non-U.S. currency and interest rates.

The fund may also engage in total return swaps, in which payments made by the fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity or fixed-income security, a combination of such securities, or an index). Total return swap agreements may be used to obtain exposure to a security, commodity, or market without owning or taking physical custody of such security or investing directly in such market. The fund may also enter into swap agreements on futures contracts including, but not limited to, index futures contracts. Swap agreements on futures contracts are generally subject to the same risks involved in the fund's use of futures contracts, in addition to the risks involved in the fund's use of swap agreements. See "Futures Contracts and Related Options." A total return swap, or a swap on a futures contract, may add leverage to a portfolio by providing investment exposure to an underlying asset or market where the fund does not own or take physical custody of such asset or invest directly in such market.

The value of the fund's swap positions would increase or decrease depending on the changes in value of the underlying rates, currency values, volatility or other indices or measures. Caps and floors have an effect similar to buying or writing options. Depending on how they are used, swap agreements may increase or decrease the overall volatility of the fund's investments and its share price. The fund's ability to engage in certain swap transactions may be limited by tax considerations.

The fund's ability to realize a profit from such transactions will depend on the ability of the financial institutions with which it enters into the transactions to meet their obligations to the fund. If a counterparty's creditworthiness declines, the value of the agreement would be likely to decline, potentially resulting in losses. If a default occurs by the other party to such transaction, the fund will have contractual remedies pursuant to the agreements related to the transaction, which may be limited by applicable law in the case of a counterparty's insolvency. If the returns of an index upon which a swap is based are unavailable or cannot be calculated (including where the index is created and maintained by the swap counterparty), the fund may experience difficulty in valuing the swap or in determining the amounts owed to or by the counterparty, regardless of whether the counterparty has defaulted. Under certain circumstances, suitable transactions may not be available to the fund, or the fund may be unable to close out its position under such transactions at the same time, or at the same price, as if it had purchased comparable publicly

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traded securities. Swaps carry counterparty risks that cannot be fully anticipated. Also, because swap transactions typically involve a contract between the two parties, such swap investments can be extremely illiquid, as it is uncertain as to whether another counterparty would wish to take assignment of the rights under the swap contract at a price acceptable to the fund.

The fund's investments in swaps will generate ordinary income and losses for federal income tax purposes and 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. The fund 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.

A credit default swap is an agreement between the fund and a counterparty that enables the fund to buy or sell protection against a credit event related to a particular issuer. One party, acting as a "protection buyer," makes periodic payments to the other party, a "protection seller," in exchange for a promise by the protection seller to make a payment to the protection buyer if a negative credit event (such as a delinquent payment or default) occurs with respect to a referenced bond or group of bonds. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors (for example, the Nth default within a basket, or defaults by a particular combination of issuers within the basket, may trigger a payment obligation). The fund may enter into credit default swap contracts for investment purposes. As a credit protection seller in a credit default swap contract, the fund would be required to pay the par (or other agreed-upon) value of a referenced debt obligation to the counterparty in the event of a default by a third party, such as a U.S. or non-U.S. corporate issuer, on the debt obligation. In return for its obligation, the fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the fund would keep the stream of payments and would have no payment obligations to the counterparty. As the seller, the fund would be subject to investment exposure on the notional amount of the swap.

The fund may also invest in credit default swap contracts to hedge against the risk of default of the debt of a particular issuer or basket of issuers or to attempt to profit from changes or perceived changes in the creditworthiness of the particular issuer(s) (also known as "buying credit protection"). In these cases, the fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment may expire worthless and would only generate income in the event of an actual default by the issuer(s) of the underlying obligation(s) (or, as applicable, a credit downgrade or other indication of financial instability). It would also involve the risk that the seller may fail to satisfy its payment obligations to the fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce the fund's return.

Credit default swaps involve a number of special risks. A protection seller may have to pay out amounts following a negative credit event greater than the value of the reference obligation delivered to it by its counterparty and the amount of periodic payments previously received by it from the counterparty. When the fund acts as a seller of a credit default swap, it is exposed to, among other things, leverage risk because if an event of default occurs the seller must pay the buyer the full notional value of the reference obligation. Each party to a credit default swap is subject to the credit risk of its counterparty (the risk that its counterparty may be unwilling or unable to perform its obligations on the swap as they come due). The value of the credit default swap to each party will change based on changes in the actual or perceived creditworthiness of the underlying issuer.

A protection buyer may lose its investment and recover nothing should an event of default not occur. The fund may seek to realize gains on its credit default swap positions, or limit losses on its positions, by selling those positions in the secondary market. There can be no assurance that a liquid secondary market will exist at any given time for any particular credit default swap or for credit default swaps generally.

The market for credit default swaps has at times become more volatile as the creditworthiness of certain counterparties has been questioned and/or downgraded. The parties to a credit default swap are generally required to post collateral to each other. If the fund posts initial or periodic collateral to its counterparty, it may not be able to recover that collateral from the counterparty in accordance with the terms of the swap. In addition, if the fund receives collateral from its counterparty, it may be delayed or prevented from realizing on the collateral in the event of the insolvency or bankruptcy of the counterparty. The fund may exit its obligations under a credit default swap by terminating the contract and paying applicable breakage fees, by selling its position in the secondary market, or by entering into an offsetting credit default swap position, which may cause the fund to incur more losses.

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The fund may also enter into options on swap agreements ("swaptions"). A swaption is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. The fund may purchase and write (sell) put and call swaptions to the same extent it may make use of standard options on securities or other instruments. Swaptions are generally subject to the same risks involved in the fund's use of options. See "Options on Securities."

Many over-the-counter derivatives (including many swaps) are complex and their valuation often requires subjective modeling and judgment, which increases the risk of mispricing or incorrect valuation. The pricing models used may not produce valuations that are consistent with the values the fund realizes when it closes or sells an over-the-counter derivative. Valuation risk is more pronounced when the fund enters into over-the-counter derivatives with specialized terms because the market value of those derivatives in some cases is determined in part by reference to similar derivatives with more standardized terms. Incorrect valuations may result in increased cash payment requirements to counterparties, undercollateralization and/or errors in calculation of the fund's NAV.

**Tax-exempt Securities** 

**General description**. As used in this SAI, the term "Tax-exempt Securities" includes debt obligations issued by a state, a territory or possession of the United States, the District of Columbia, Puerto Rico, Guam and their political subdivisions (for example, counties, cities, towns, villages, districts and authorities), agencies, instrumentalities or other governmental units, the interest from which is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) the corresponding state's personal income tax. Such obligations are issued to obtain funds for various public purposes, including the construction of a wide range of public facilities, such as airports, bridges, highways, housing, hospitals, mass transportation, schools, streets and water and sewer works. Other public purposes for which Tax-exempt Securities may be issued include to refund of outstanding obligations, to obtain funds for general operating expenses, or to obtain funds to lend to other public institutions and facilities in anticipation of the receipt of revenue or the issuance of other obligations.

Tax-exempt Securities can be classified into two principal categories, including "general obligation" bonds and other securities and "revenue" bonds and other securities. General obligation bonds are secured by the issuer's full faith, credit and taxing power for the payment of principal and interest. Revenue securities are payable only from the revenues derived from a particular facility or class of facilities or, in some cases, from the proceeds of a special excise tax or other specific revenue source, such as the user of the facility being financed. Tax-exempt Securities may be structured as fixed-, variable- or floating-rate obligations or as zero-coupon, payment-in-kind and step-coupon securities and may be privately placed or publicly offered.

Short-term Tax-exempt Securities are generally issued by state and local governments and public authorities as interim financing in anticipation of tax collections, revenue receipts or bond sales to finance such public purposes.

In addition, certain types of "private activity" bonds may be issued by public authorities to finance projects of privately-owned entities, such as privately - operated housing facilities; certain local facilities for supplying water, gas or electricity; sewage or solid waste disposal facilities; student loans; or public or private institutions for the construction of educational, hospital, housing and other facilities. Such obligations are included within the term Tax-exempt Securities if the interest paid thereon is, in the opinion of bond counsel, exempt from federal income tax and (if applicable) state personal income tax (such interest may, however, be subject to federal alternative minimum tax). Other types of private activity bonds, the proceeds of which are used for the construction, repair or improvement of, or to obtain equipment for, privately operated industrial or commercial facilities, may also constitute Tax-exempt Securities, although the current federal tax laws place substantial limitations on the size of such issues. The credit quality of private activity bonds is usually directly related to the credit standing of the corporate user of the facility involved.

Tax-exempt Securities share many of the structural features and risks of other bonds, as described elsewhere in this SAI. For example, the fund may purchase callable Tax-exempt Securities, zero-coupon Tax-exempt Securities, or "stripped" Tax-exempt Securities, which entail additional risks. The fund may also purchase structured or asset-backed Tax-exempt Securities, such as the securities (including preferred stock) of special purpose entities that hold interests in the Tax-exempt Securities of one or more issuers and issue "tranched" securities that are entitled to receive payments based on the cash flows from those underlying securities. See "Redeemable securities," "-Zero-coupon and Payment-in-kind Bonds," "-Structured investments," and "Mortgage-backed and Asset-backed Securities" in this SAI. Structured Tax-exempt Securities may involve increased risk that the interest received by the fund may not be exempt from federal or state income tax, or that such interest may result in liability for the alternative minimum tax for shareholders of the fund. For example, in certain cases, the issuers of certain securities held by a

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special purpose entity may not have received an unqualified opinion of bond counsel that the interest from the securities will be exempt from federal income tax and (if applicable) the corresponding state's personal income tax.

Even though Tax-exempt Securities are interest-bearing investments that promise a stable flow of income, their prices are generally inversely affected by changes in interest rates and, therefore, are subject to the risk of market price fluctuations. The values of Tax-exempt Securities with longer remaining maturities typically fluctuate more than those of similarly rated Tax-exempt Securities with shorter remaining maturities. The values of Tax-exempt Securities also may be affected by changes in their actual or perceived credit quality. The credit quality of Tax-exempt Securities can be affected by, among other things, the financial condition of the issuer or guarantor, the issuer's future borrowing plans and sources of revenue, the economic feasibility of the revenue bond project or general borrowing purpose, political or economic developments in the state or region where the security is issued, and the liquidity of the security. The amount of information about the financial condition of an issuer of Tax-exempt Securities may not be as extensive as that which is made available by corporations whose securities are publicly traded. As a result, the achievement of the fund's goals is more dependent on the Investment Manager's investment analysis than would be the case if the fund were investing in securities of better-known issuers. In addition, Tax-exempt Securities may be harder to value than securities issued by corporations that are publicly traded.

The secondary market for some Tax-exempt Securities issued within a state (including issues that are privately placed with the fund) is less liquid than that for taxable debt obligations or other more widely traded municipal obligations. No established resale market exists for certain of the Tax-exempt Securities in which the fund may invest. The market for Tax-exempt Securities rated below investment grade is also likely to be less liquid than the market for higher rated obligations. As a result, the fund may be unable to dispose of these municipal obligations at times when it would otherwise wish to do so at the prices at which they are valued.

Tax-exempt Securities Issued by the Commonwealth of Puerto Rico. Tax-exempt Securities issued by the Commonwealth of Puerto Rico or its political subdivisions, agencies, instrumentalities, or public corporations may be affected by economic, market, political, and social conditions in Puerto Rico. Puerto Rico has recently experienced (and may in the future experience) significant fiscal and economic challenges, including substantial debt service obligations, high levels of unemployment, underfunded public retirement systems, and persistent government budget deficits. These challenges may negatively affect the value of the fund's investments in Puerto Rico Tax-Exempt Securities. Major ratings agencies have downgraded the general obligation debt of Puerto Rico to below investment grade and continue to maintain a negative outlook for this debt, which increases the likelihood that the rating will be lowered further. In both August 2015 and January 2016, Puerto Rico defaulted on its debt by failing to make full payment due on its outstanding bonds, and there can be no assurance that Puerto Rico will be able to satisfy its future debt obligations. Further downgrades or defaults may place additional strain on the Puerto Rico economy and may negatively affect the value, liquidity, and volatility of the fund's investments in Puerto Rico Tax-exempt Securities. In 2016, the Puerto Rico Oversight, Management, and Economic Stability Act, known as "PROMESA," was signed into law. Among other things, PROMESA established a federally-appointed Oversight Board to oversee Puerto Rico's financial operations and provides Puerto Rico a path to restructuring its debts, thus increasing the risk that Puerto Rico may never pay off municipal indebtedness, or may pay only a small fraction of the amount owed. Proceedings under PROMESA remain ongoing, and it is unclear at this time how those proceedings will be resolved or what impact they will have on the value of a fund's investments in Puerto Rico municipal securities.

These challenges and uncertainties have been exacerbated by Hurricane Maria and the resulting natural disaster in Puerto Rico. In September 2017, Hurricane Maria struck Puerto Rico, causing major damage across the Commonwealth, including damage to its water, power, and telecommunications infrastructure. The length of time needed to rebuild Puerto Rico's infrastructure is unclear, but could amount to years, during which the Commonwealth is likely to be in an uncertain economic state. The full extent of the natural disaster's impact on Puerto Rico's economy and foreign investment in Puerto Rico is difficult to estimate.

**Escrow-secured or pre-refunded bonds**. These securities are created when an issuer uses the proceeds from a new bond issue to buy high grade, interest-bearing debt securities, generally direct obligations of the U.S. government, in order to redeem (or "pre-refund"), before maturity, an outstanding bond issue that is not immediately callable. These securities are then deposited in an irrevocable escrow account held by a trustee bank to secure all future payments of principal and interest on the pre-refunded bond until that bond's call date. Pre-refunded bonds often receive an 'AAA' or equivalent rating. Because pre-refunded bonds still bear the same interest rate, and have a very high credit quality, their price may increase. However, as the original bond approaches its call date, the bond's price will fall to its call price. The escrow account securities pledged to pay the principal and interest of the pre-refunded municipal bonds held by the fund nonetheless still subject the fund to interest rate risk and market risk. In addition, while a secondary market exists for pre-refunded municipal bonds, if the fund sells pre-refunded

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municipal bonds prior to maturity, the price received may be more or less than the original cost, depending on market conditions at the time of sale. The interest on pre-refunded bonds issued on or before December 31, 2017 is exempt from federal income tax; the interest on such bonds issued after December 31, 2017 is not exempt from federal income tax.

**Low Income Housing Tax Credits.** The fund may invest in loans and other instruments tied to the Low Income Housing Tax Credit ("LIHTC") program, which seeks to increase the supply of affordable housing by offering tax credits to projects that rehabilitate or create new affordable rental properties. LIHTCs offer investors a dollar-for-dollar reduction in their federal tax liability to incentivize the construction and rehabilitation of affordable housing properties. Certain of these investments may be issued, or are guaranteed or insured, by agencies or instrumentalities of the U.S. government, such as Fannie Mae or Freddie Mac, while other such investments may be issued by non-governmental entities and therefore not guaranteed or insured.

The LIHTC program requires ongoing compliance with numerous eligibility requirements. Failure to comply with these requirements, including failures by persons other than the fund or which are outside the fund's control, may result in recapture of some or all of the related tax credits as well as the possibility of the loss of future credits. In addition to a recapture of credits and the potential loss of future credits, failure to comply with such eligibility requirements may trigger a default event on the underlying bonds. The fund's investments in loans or other instruments tied to LIHTCs are subject to many of the risks facing other fixed income investments, including interest rate, credit, and prepayment risk.

**Tobacco Settlement Revenue Bonds**. The fund may invest in tobacco settlement revenue bonds, which are secured by an issuing state's proportionate share of periodic payments by tobacco companies made under the Master Settlement Agreement ("MSA"). The MSA is an agreement that was reached out of court in November 1998 between 46 states and six U.S. jurisdictions and tobacco manufacturers representing an overwhelming majority of U.S. market share in settlement of certain smoking-related litigation. The MSA provides for annual payments by the manufacturers to the states and jurisdictions in perpetuity in exchange for releasing all claims against the manufacturers and a pledge of no further litigation. The MSA established a base payment schedule and a formula for adjusting payments each year. Tobacco manufacturers pay into a master escrow trust based on their market share, and each state receives a fixed percentage of the payment as set forth in the MSA. Within some states, certain localities may in turn be allocated a specific portion of the state's MSA payment pursuant to an arrangement with the state.

A number of state and local governments have securitized the future flow of payments under the MSA by selling bonds pursuant to indentures, some through distinct governmental entities created for such purpose. The bonds are backed by the future revenue flow that is used for principal and interest payments on the bonds. Annual payments on the bonds, and thus risk to the fund, are dependent on the receipt of future settlement payments by the state or its instrumentality. The actual amount of future settlement payments may vary based on, among other things, annual domestic cigarette shipments, inflation, the financial capability of participating tobacco companies, and certain offsets for disputed payments. Payments made by tobacco manufacturers could be reduced if cigarette shipments continue to decline below the base levels used in establishing manufacturers' payment obligations under the MSA. Demand for cigarettes in the U.S. could continue to decline based on many factors, including, without limitation, anti-smoking campaigns, tax increases, price increases implemented to recoup the cost of payments by tobacco companies under the MSA, reduced ability to advertise, enforcement of laws prohibiting sales to minors, elimination of certain sales venues such as vending machines, the spread of local ordinances restricting smoking in public places, and increases in the use of other nicotine delivery devices (such as electronic cigarettes, smoking cessation products, and smokeless tobacco).

Because tobacco settlement bonds are backed by payments from the tobacco manufacturers, and generally not by the credit of the state or local government issuing the bonds, their creditworthiness depends on the ability of tobacco manufacturers to meet

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their obligations. The bankruptcy of an MSA-participating manufacturer could cause delays or reductions in bond payments, which would affect the fund's net asset value. Under the MSA, a market share loss by MSA-participating tobacco manufacturers to non-MSA participating manufacturers would also cause a downward adjustment in the payment amounts under some circumstances.

The MSA and tobacco manufacturers have been and continue to be subject to various legal claims, including, among others, claims that the MSA violates federal antitrust law. In addition, the United States Department of Justice has alleged in a civil lawsuit that the major tobacco companies defrauded and misled the American public about the health risks associated with smoking cigarettes. An adverse outcome to this lawsuit or to any other litigation matters or regulatory actions relating to the MSA or affecting tobacco manufacturers could adversely affect the payment streams associated with the MSA or cause delays or reductions in bond payments by tobacco manufacturers.

In addition to the risks described above, tobacco settlement revenue bonds are subject to other risks described in this SAI, including the risks of asset-backed securities discussed under "Mortgage-backed and Asset-backed Securities."

**Stand-by commitments**. When the fund purchases Tax-exempt Securities, it has the authority to acquire stand-by commitments from banks and broker-dealers with respect to those Tax-exempt Securities. A stand-by commitment is a right acquired by the fund to sell up to the principal amount of such Tax-exempt Securities back to the seller or a third party (typically an institution such as a bank or broker-dealer) at an agreed-upon price or yield within specified periods prior to their maturity dates. A stand-by commitment may be considered a security independent of the Tax-exempt security to which it relates. The amount payable by a bank or dealer during the time a stand-by commitment is exercisable, absent unusual circumstances, would be substantially the same as the market value of the underlying Tax-exempt security to a third party at any time. The fund expects that stand-by commitments generally will be available without the payment of direct or indirect consideration. The fund does not expect to assign any value to stand-by commitments when determining the fund's net asset value. The fund will be subject to credit risk with respect to an institution providing a stand-by commitment and a decline in the credit quality of the institution could cause losses to the fund.

**Yields**. The yields on Tax-exempt Securities depend on a variety of factors, including general money market conditions, effective marginal tax rates, the financial condition of the issuer, general conditions of the Tax-exempt security market, the size of a particular offering, the maturity of the obligation and the rating of the issue. The ratings of nationally recognized securities rating agencies represent their opinions as to the credit quality of the Tax-exempt Securities which they undertake to rate. It should be emphasized, however, that ratings are general and are not absolute standards of quality. Consequently, Tax-exempt Securities with the same maturity, interest rate and rating may have different yields while Tax-exempt Securities of the same maturity and interest rate but with different ratings may have the same yield. Yield disparities may occur for reasons not directly related to the investment quality of particular issues or the general movement of interest rates and may be due to such factors as changes in the overall demand or supply of various types of Tax-exempt Securities or changes in the investment objectives of investors. Subsequent to purchase by the fund, an issue of Tax-exempt Securities or other investments may cease to be rated, or its rating may be reduced below the minimum rating required for purchase by the fund. The Investment Manager will consider such an event in its determination of whether the fund should continue to hold an investment in its portfolio. Downgrades of Tax-exempt Securities held by a money market fund may require the fund to sell such securities, potentially at a loss.

**"Moral obligation" bonds**. The fund may invest in so-called "moral obligation" bonds, where repayment of the bond is backed by a moral (but not legally binding) commitment of an entity other than the issuer, such as a state legislature, to pay. Such a commitment may be in addition to the legal commitment of the issuer to repay the bond or may represent the only payment obligation with respect to the bond (where, for example, no amount has yet been specifically appropriated to pay the bond. See "-Municipal leases" below.)

**Municipal leases**. The fund may acquire participations in lease obligations or installment purchase contract obligations (collectively, "lease obligations") of municipal authorities or entities. A lease obligation is an obligation in the form of a lease or installment purchase that is issued by a state or local government to acquire equipment and facilities. Income from such obligations generally is exempt from state and local tax in the state of issuance. Lease obligations may be secured or unsecured. Lease obligations do not constitute general obligations of the municipality for which the municipality's taxing power is pledged.

Municipal leases may be subject to greater risks than general obligation or revenue bonds. Although lease obligations do not constitute general obligations of the municipality, a lease obligation ordinarily is backed by the municipality's covenant to budget for, appropriate, and make the payments due under the lease obligation. However, certain of these lease obligations contain

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"non-appropriation" clauses, which provide that the municipality has no obligation to make lease or installment purchase payments in future years unless money is appropriated for such purpose on a yearly basis. In the case of a "non-appropriation" lease, the fund's ability to recover under the lease in the event of non-appropriation or default will be limited solely to the repossession of the leased property, and in any event, foreclosure of that property might prove difficult. If a municipality does not fulfill its payment obligation, it may be difficult to sell the lease obligation and the proceeds of a sale may not cover the fund's loss.

In addition to the "non-appropriation" risk, many municipal lease obligations have not yet developed the depth of marketability associated with municipal bonds. Moreover, such leases may be subject to the temporary abatement of payments in the event the issuer is prevented from maintaining occupancy of the leased premises or utilizing the leased equipment or facilities. Although the obligations may be secured by the leased equipment or facilities, the disposition of the property in the event of non-appropriation or foreclosure might prove difficult, time consuming and costly, and result in a delay in recovering, or the failure to recover fully, the fund's original investment.

**Additional risks**. Securities in which the fund may invest, including Tax-exempt Securities, are subject to the provisions of bankruptcy, insolvency and other laws affecting the rights and remedies of creditors, such as the federal Bankruptcy Code (including special provisions related to municipalities and other public entities), and laws, if any, that may be enacted by Congress or state legislatures extending the time for payment of principal or interest, or both, or imposing other constraints upon enforcement of such obligations. There is also the possibility that, as a result of litigation or other conditions, such as the recent bankruptcy-type proceedings by the Commonwealth of Puerto Rico the power, ability or willingness of issuers to meet their obligations for the payment of interest and principal on their Tax-exempt Securities may be materially affected or their obligations may be found to be invalid or unenforceable. Such litigation or conditions may from time to time have the effect of introducing uncertainties in the market for municipal bonds or certain segments thereof, or of materially affecting the credit risk with respect to particular bonds. Adverse economic, business, legal or political developments might affect all or a substantial portion of the fund's municipal bonds in the same manner.

From time to time, legislation may be introduced or litigation may arise that may restrict or eliminate the federal income tax exemption for interest on debt obligations issued by states and their political subdivisions. Federal tax laws limit the types and amounts of tax-exempt bonds issuable for certain purposes, especially industrial development bonds and private activity bonds. Such limits may affect the future supply and yields of these types of Tax-exempt Securities. Further proposals limiting the issuance of Tax-exempt Securities may well be introduced in the future. Shareholders should consult their tax advisors for the current law on tax-exempt bonds and securities.

**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 the Investment Manager 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.

**Trade Policy** 

In 2025, the U.S. government indicated its intent to alter its approach to international trade policy and, in some cases, to renegotiate or potentially terminate certain existing bilateral or multilateral trade agreements and treaties with foreign countries and has made proposals and taken actions related thereto. In addition, the U.S. government has recently imposed tariffs on certain foreign goods and has indicated a willingness to impose tariffs on imports of other products. Some foreign governments, including China, have instituted retaliatory tariffs on certain U.S. goods and have indicated a willingness to impose additional tariffs on U.S. products. Other countries, including Mexico, have threatened retaliatory tariffs on certain U.S. products.

Global trade disruption, significant introductions of trade barriers, and bilateral trade frictions, together with any future downturns in the global economy resulting therefrom, could adversely affect the financial performance of the fund and its investments.

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Trade policy may be an ongoing source of instability, potentially resulting in significant currency fluctuations and/or having other adverse effects on international markets, international trade agreements, and/or other existing cross-border cooperation arrangements (whether economic, tax, fiscal, legal, regulatory, or otherwise). To the extent trade disputes escalate globally, there could be additional significant impacts on the sectors or industries in which the fund invests and other adverse impacts on the fund's overall performance.

**Warrants** 

The fund may invest in or acquire warrants, which are instruments that give the fund the right (but not the obligation) to purchase certain securities from an issuer at a specific price (the "strike price") until a stated expiration date. The purchase of warrants involves the risk that the effective price paid for the warrant added to the strike price of the underlying security may exceed the value of the security's market price, such as when there is no movement in the level of the underlying security. Also, the strike price of warrants typically is much lower than the current market price of the underlying securities, yet they are subject to similar price fluctuations. As a result, warrants may be more volatile investments than the underlying securities and may offer greater potential for capital appreciation as well as capital loss. Warrants do not entitle a holder to dividends or voting rights with respect to the underlying securities and do not represent any rights in the assets of the issuing company. Also, the value of the warrant does not necessarily change with the value of the underlying securities and a warrant ceases to have value if it is not exercised prior to the expiration date. These factors can make warrants more speculative than other types of investments.

In addition to warrants on securities, the fund may purchase put warrants and call warrants whose values vary depending on the change in the value of one or more specified securities indices ("index warrants"). Index warrants are generally issued by banks or other financial institutions and give the holder the right, at any time during the term of the warrant, to receive upon exercise of the warrant a cash payment from the issuer based on the value of the underlying index at the time of exercise. In general, if the value of the underlying index rises above the exercise price of the index warrant, the holder of a call warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the value of the index and the exercise price of the warrant; if the value of the underlying index falls, the holder of a put warrant will be entitled to receive a cash payment from the issuer upon exercise based on the difference between the exercise price of the warrant and the value of the index. The holder of a warrant would not be entitled to any payments from the issuer at any time when, in the case of a call warrant, the exercise price is greater than the value of the underlying index, or, in the case of a put warrant, the exercise price is less than the value of the underlying index. If the fund were not to exercise an index warrant prior to its expiration, then the fund would lose the amount of the purchase price paid by it for the warrant.

The fund will normally use index warrants in a manner similar to its use of options on securities indices. The risks of the fund's use of index warrants are generally similar to those relating to its use of index options. Unlike most index options, however, index warrants are issued in limited amounts and are not obligations of a regulated clearing agency, but are backed only by the credit of the bank or other institution which issues the warrant. Also, index warrants generally have longer terms than index options. Index warrants are not likely to be as liquid as certain index options backed by a recognized clearing agency. In addition, the terms of index warrants may limit the fund's ability to exercise the warrants at such time, or in such quantities, as the fund would otherwise wish to do.

**Zero-coupon and Payment-in-kind Bonds** 

The fund may invest without limit in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued at a significant discount from their principal amount in lieu of paying interest periodically. Payment-in-kind bonds allow the issuer, at its option, to make current interest payments on the bonds either in cash or in additional bonds. Because zero-coupon and payment-in-kind bonds do not pay current interest in cash, their value is subject to greater fluctuation in response to changes in market interest rates than bonds that pay interest currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the need to generate cash to meet current interest payments. Accordingly, such bonds may involve greater credit risks than bonds paying interest currently in cash. The fund is required to accrue interest income on such investments and to distribute such amounts at least annually to shareholders even though such bonds do not pay current interest in cash. Thus, it may be necessary at times for the fund to liquidate investments, including when it is not advantageous to do so, in order to satisfy its distribution requirements under the Code. The market for zero-coupon and payment-in-kind bonds may be limited, making it difficult for the fund to value them or dispose of its holdings quickly at an acceptable price.

**EXCHANGE TRADED FUND RISKS** 

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**Continuous Offering** 

The method by which Creation Units of shares are created and traded may raise certain issues under applicable securities laws. Because new Creation Units of shares are issued and sold by a fund on an ongoing basis, at any point a "distribution," as such term is used in the 1933 Act, may occur. Broker-dealers and other persons are cautioned that some activities on their part may, depending on the circumstances, result in their being deemed participants in a distribution in a manner which could render them statutory underwriters and subject them to the prospectus delivery and liability provisions of the 1933 Act.

For example, a broker-dealer firm or its client may be deemed a statutory underwriter if it takes Creation Units after placing an order with Franklin Distributors, each fund's distributor, breaks them down into constituent shares, and sells such shares directly to customers, or if it chooses to couple the creation of a supply of new shares with an active selling effort involving solicitation of secondary market demand for shares. A determination of whether one is an underwriter for purposes of the 1933 Act must take into account all the facts and circumstances pertaining to the activities of the broker-dealer or its client in the particular case, and the examples mentioned above should not be considered a complete description of all the activities that 12 could lead to a categorization as an underwriter.

Broker-dealer firms should also note that dealers who are not "underwriters," but are effecting transactions in shares of a fund, whether or not participating in the distribution of shares, are generally required to deliver a prospectus. This is because the prospectus delivery exemption in Section 4(a)(3) of the 1933 Act is not available in respect of such transactions as a result of Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that dealers who are not underwriters but are participating in a distribution (as opposed to engaging in ordinary secondary market transactions) and thus dealing with the shares that are part of an overallotment within the meaning of Section 4(a)(3)(A) of the 1933 Act would be unable to take advantage of the prospectus delivery exemption provided by Section 4(a)(3) of the 1933 Act. Firms that incur a prospectus-delivery obligation with respect to shares of each fund are reminded that, under Rule 153 under the 1933 Act, a prospectus-delivery obligation under Section 5(b)(2) of the 1933 Act owed to an exchange member in connection with a sale on an exchange is satisfied by the fact that the prospectus is available from the exchange upon request. The prospectus delivery mechanism provided in Rule 153 is only available with respect to transactions on an exchange.

**Listing and Trading** 

Shares of each fund have been approved for listing and trading on an exchange. Each fund's shares trade on an exchange at prices that may differ to some degree from their NAV. The listing exchange may remove a fund's shares from listing if, among other things (i) following the initial 12-month period beginning upon the commencement of trading of the fund, there are fewer than 50 beneficial owners of the fund's shares ; (ii) the listing exchange becomes aware that the fund is no longer eligible to operate in reliance on Rule 6c-11 under the 1940 Act; (iii) the fund no longer complies with certain listing exchange rules; or (iv) such other event shall occur or condition exists that, in the opinion of the listing exchange, makes further dealings on the exchange inadvisable.

The listing exchange will remove a fund's shares from listing and trading upon termination of the trust. There can be no assurance that the requirements of the listing exchange necessary to maintain the listing of the fund's shares will continue to be met. As in the case of other publicly-traded securities, brokers' commissions on transactions will be based on negotiated commission rates at customary levels. The existence of a liquid trading market for certain securities may depend on whether dealers will make a market in such securities. There can be no assurance that such a market will be made or maintained or that any such market will be or remain liquid. The price at which securities may be sold and the value of the fund's shares will be adversely affected if trading markets for the fund's portfolio securities are limited or absent, or if bid/ask spreads are wide.

**TAXES** 

The following discussion of U.S. federal income tax consequences is based on the Code, existing U.S. Treasury regulations, and other applicable authority, as of the date of this SAI. These authorities are subject to change by legislative or administrative action, possibly with retroactive effect. The following discussion is only a summary of some of the important U.S. federal income tax considerations generally applicable to investments in the fund. There may be other tax considerations applicable to particular shareholders. Shareholders should consult their own tax advisors regarding their particular situation and the possible application of foreign, state and local tax laws.

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**Taxation of the fund.** The fund has elected and intends to qualify each year as a regulated investment company under Subchapter M of the Code. In order to qualify for the special tax treatment accorded regulated investment companies and their shareholders, the fund must, among other things:

(a) derive at least 90% of its gross income for each taxable year from (i) dividends, interest, payments with respect to certain securities loans, and gains from the sale or other disposition of stock, securities or foreign currencies, or other income (including but not limited to gains from options, futures, or forward contracts) derived with respect to its business of investing in such stock, securities or currencies, and (ii) net income from interests in "qualified publicly traded partnerships" (as defined below);

(b) diversify its holdings so that, at the end of each quarter of the fund's taxable year, (i) at least 50% of the market value of the fund's total assets is represented by cash and cash items (including receivables), U.S. government securities, securities of other regulated investment companies, and other securities limited in respect of any one issuer to a value not greater than 5% of the value of the fund's total assets and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of the fund's total assets is invested, including through corporations in which the fund owns a 20% or more voting stock interest, (x) in the securities (other than those of the U.S. government or other regulated investment companies) of any one issuer or of two or more issuers which the fund controls and which are engaged in the same, similar, or related trades or businesses, or (y) in the securities of one or more qualified publicly traded partnerships (as defined below); and

(c) distribute with respect to each taxable year at least 90% of the sum of its investment company taxable income (as that term is defined in the Code without regard to the deduction for dividends paid—generally, taxable ordinary income and the excess, if any, of net short-term capital gains over net long-term capital losses) and net tax-exempt interest income, for such year.

In general, for purposes of the 90% gross income requirement described in paragraph (a) above, income derived from a partnership will be treated as qualifying income only to the extent such income is attributable to items of income of the partnership which would be qualifying income if realized by the regulated investment company. However, 100% of the net income of a regulated investment company derived from an interest in a "qualified publicly traded partnership" (defined as a partnership (i) interests in which are traded on an established securities market or readily tradable on a secondary market or the substantial equivalent thereof, and (ii) that derives less than 90% of its income from the qualifying income described in paragraph (a)(i) above) will be treated as qualifying income. In general, such entities will be treated as partnerships for federal income tax purposes because they meet the passive income requirement under Code section 7704(c)(2). In addition, although in general the passive loss rules of the Code do not apply to regulated investment companies, such rules do apply to a regulated investment company with respect to items attributable to an interest in a qualified publicly traded partnership.

For purposes of the diversification test in paragraph (b) above, identification of the issuer (or, in some cases, issuers) of a particular fund investment will depend on the terms and conditions of that investment. In some cases, identification of the issuer (or issuers) is uncertain under current law, and an adverse determination or future guidance by the IRS with respect to issuer identification for a particular type of investment may adversely affect the fund's ability to meet the diversification test in (b) above. Also, for the purposes of the diversification test in paragraph (b) above, the term "outstanding voting securities of such issuer" will include the equity securities of a qualified publicly traded partnership.

If the fund qualifies as a regulated investment company that is accorded special tax treatment, the fund will not be subject to U. S. federal income tax on income or gains distributed in a timely manner to its shareholders in the form of dividends (including Capital Gain Dividends, as defined below).

If the fund were to fail to meet the income, diversification or distribution test described above, the fund could in some cases cure such failure, including by paying a fund-level tax, paying interest, making additional distributions, or disposing of certain assets. If the fund were ineligible to or otherwise did not cure such failure for any year, or were otherwise to fail to qualify as a regulated investment company accorded special tax treatment in any taxable year, the fund would be subject to tax on its taxable income at corporate rates, and all distributions from earnings and profits, including any distributions of net tax-exempt income and net long-term capital gains, would be taxable to shareholders as ordinary income. Some portions of such distributions may be eligible for the dividends received deduction in the case of corporate shareholders, and may be eligible to be treated as "qualified dividend income" in the case of shareholders taxed as individuals, provided, in both cases, that the shareholder meets certain holding period and other requirements in respect of the fund's shares (as described below). In addition, the fund could be required to recognize unrealized gains, pay substantial taxes and interest and make substantial distributions before requalifying as a regulated investment company that is accorded special tax treatment.

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The fund intends to distribute at least annually to its shareholders all or substantially all of its investment company taxable income (computed without regard to the dividends-paid deduction) and its net tax-exempt income (if any). The fund may distribute its net capital gain (that is, the excess of net long-term capital gain over net short-term capital loss, in each case determined with reference to any loss carryforwards). Investment company taxable income (which is retained by the fund) will be subject to tax at regular corporate rates. The fund may also retain for investment its net capital gain. If the fund retains any net capital gain, it will be subject to tax at regular corporate rates on the amount retained, but may designate the retained amount as undistributed capital gains in a notice to its shareholders who will be (i) required to include in income for U.S. federal income tax purposes, as long-term capital gain, their shares of such undistributed amount, and (ii) entitled to credit their proportionate shares of the tax paid by the fund on such undistributed amount against their U.S. federal income tax liabilities, if any, and to claim refunds on a properly-filed U.S. tax return to the extent the credit exceeds such liabilities. If the fund makes this designation, for U.S. federal income tax purposes, the tax basis of shares owned by a shareholder of the fund will be increased by an amount equal to the difference between the amount of undistributed capital gains included in the shareholder's gross income under clause (i) of the preceding sentence and the tax deemed paid by the shareholder under clause (ii) of the preceding sentence. The fund is not required to, and there can be no assurance the fund will, make this designation if it retains all or a portion of its net capital gain in a taxable year.

In determining its net capital gain, including in connection with determining the amount available to support a Capital Gain Dividend (as defined below), its taxable income and its earnings and profits, a regulated investment company generally may also elect to treat part or all of any post-October capital loss (defined as any net capital loss attributable to the portion, if any, of the taxable year after October 31 or, if there is no such loss, the net long-term capital loss or net short-term capital loss attributable to any such portion of the taxable year) or late-year ordinary loss (generally, the sum of its (i) net ordinary loss, if any, from the sale, exchange or other taxable disposition of property, attributable to the portion, if any, of the taxable year after October 31, and its (ii) other net ordinary loss, if any, attributable to the portion, if any, of the taxable year after December 31) as if incurred in the succeeding taxable year.

If the fund fails to distribute in a calendar year at least an amount equal to the sum of 98% of its ordinary income for such year and 98.2% of its capital gain net income for the one-year period ending October 31 of such year, plus any retained amount from the prior year, the fund will be subject to a nondeductible 4% excise tax on the undistributed amounts. For these purposes, ordinary gains and losses from the sale, exchange, or other taxable disposition of property that would otherwise be properly taken into account after October 31 are treated as arising on January 1 of the following calendar year. For purposes of the excise tax, the fund will be treated as having distributed any amount on which it has been subject to corporate income tax in the taxable year ending within the calendar year. A dividend paid to shareholders in January of a year generally is deemed to have been paid by the fund on December 31 of the preceding year, if the dividend was declared and payable to shareholders of record on a date in October, November or December of that preceding year. The fund intends generally to make distributions sufficient to avoid imposition of the 4% excise tax, although there can be no assurance that it will be able to do so.

The fund distributes its net investment income and capital gains to shareholders as dividends at least annually to the extent required to qualify as a regulated investment company under the Code and generally to avoid U.S. federal income or excise tax. Provided it is not treated as a "personal holding company" for U.S. federal income tax purposes, the fund is permitted to treat the portion of redemption proceeds paid to redeeming shareholders that represents the redeeming shareholders' portion of the fund's accumulated earnings and profits as a dividend on the fund's tax return. This practice, which involves the use of tax equalization, will have the effect of reducing the amount of income and gains that the fund is required to distribute as dividends to shareholders in order for the fund to avoid U. S. federal income tax and excise tax. This practice may also reduce the amount of distributions required to be made to non-redeeming shareholders and the amount of any undistributed income will be reflected in the value of the shares of the fund; the total return on a shareholder's investment will not be reduced as a result of this distribution policy.

**Fund distributions.** Distributions from the fund (other than exempt-interest dividends, as discussed below) generally are taxable to shareholders as ordinary income to the extent derived from the fund's investment income and net short-term capital gains. Distributions are taxable whether shareholders receive them in cash or reinvest them in additional shares of the fund or other Putnam funds.

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 how long a shareholder has owned his or her shares. In general, the fund will recognize long-term capital gain or loss on investments it has owned for more than one year, and short-term capital gain or loss on investments it has owned for one year or less. Tax rules can alter the fund's holding period in investments and thereby affect

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the tax treatment of gain or loss on such investments. Distributions of net capital gain that are properly reported by the fund as capital gain dividends ("Capital Gain Dividends") will be treated as long-term capital gains includible in net capital gain and taxed to individuals at reduced rates. The IRS and the Department of the Treasury have issued regulations that impose special rules in respect of Capital Gain Dividends received through partnership interests constituting "applicable partnership interests" under Section 1061 of the Code. Distributions from capital gains generally are made after applying any available capital loss carryforwards. Distributions of net short-term capital gain (as reduced by any net long-term capital loss for the taxable year) will be taxable to shareholders as ordinary income.

The Code generally imposes a 3.8% Medicare contribution tax on the net investment income of certain individuals, trusts and estates to the extent their income exceeds certain threshold amounts. For these purposes, "net investment income" generally includes, among other things, (i) distributions paid by the fund of net investment income and capital gains (other than exempt-interest dividends) as described herein, and (ii) any net gain from the sale, redemption, exchange or other taxable disposition of fund shares. Shareholders are advised to consult their tax advisers regarding the possible implications of this additional tax on their investment in the fund.

Distributions of investment income reported by the fund as "qualified dividend income" received by an individual will be taxed at the reduced rates applicable to net capital gain. In order for some portion of the dividends received by a fund shareholder to be qualified dividend income, the fund must meet holding period and other requirements with respect to some portion of the dividend-paying stocks in its portfolio and the shareholder must meet holding period and other requirements with respect to the fund's shares. In general, a dividend will not be treated as qualified dividend income (at either the fund or shareholder level) (1) if the dividend is received with respect to any share of stock held for fewer than 61 days during the 121-day period beginning on the date which is 60 days before the date on which such share becomes ex-dividend with respect to such dividend (or, in the case of certain preferred stock, 91 days during the 181-day period beginning 90 days before such date), (2) to the extent that the recipient is under an obligation (whether pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property, (3) if the recipient elects to have the dividend income treated as investment interest, or (4) if the dividend is received from a foreign corporation that is (a) not eligible for the benefits of a comprehensive income tax treaty with the United States (with the exception of dividends paid on stock of such a foreign corporation readily tradable on an established securities market in the United States) or (b) treated as a passive foreign investment company. Each fund, other than fixed-income and money market funds, generally expects to report eligible dividends as qualified dividend income.

In general, distributions of investment income reported by the fund as derived from qualified dividend income will be treated as qualified dividend income by a shareholder taxed as an individual provided the shareholder meets the holding period and other requirements described above with respect to such fund's shares. In any event, if the aggregate qualified dividends received by the fund during any taxable year are 95% or more of its gross income (excluding net long-term capital gain over net short-term capital loss), then 100% of the fund's dividends (other than dividends properly reported as Capital Gain Dividends) will be eligible to be treated as qualified dividend income.

Individuals (and certain other non-corporate entities) are generally eligible with respect to tax years beginning after December 31, 2017 and ending on or before December 31, 2025 for a 20% deduction with respect to taxable ordinary dividends from REITs and certain taxable income from publicly traded partnerships. Currently, regulated investment companies may pass through the 20% deduction to shareholders for REIT dividends, but not for income from publicly traded partnerships. Distributions by the fund to its shareholders that the fund properly reports as "section 199A dividends," as defined and subject to certain conditions described below, are treated as qualified REIT dividends in the hands of non-corporate shareholders.

Subject to future regulatory guidance to the contrary, distributions attributable to qualified publicly traded partnership income from a fund's investments in MLPs will ostensibly not qualify for the deduction available to non-corporate taxpayers in respect of such amounts received directly from an MLP.

In general, fixed-income and money market funds receive interest, rather than dividends, from their portfolio securities. As a result, it is not currently expected that any significant portion of such funds' distributions to shareholders will be derived from qualified dividend income. For information regarding qualified dividend income received from underlying funds, see "Funds of funds" below.

Certain distributions reported by a Fund as section 163(j) interest dividends may be treated as interest income by shareholders for purposes of the tax rules applicable to interest expense limitations under Code section 163(j). Such treatment by the

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shareholder is generally subject to holding period requirements and other potential limitations, although the holding period requirements are generally not applicable to dividends declared by money market funds and certain other funds that declare dividends daily and pay such dividends on a monthly or more frequent basis. The amount that a Fund is eligible to report as a Section 163(j) dividend for a tax year is generally limited to the excess of the Fund's business interest income over the sum of the Fund's (i) business interest expense and (ii) other deductions properly allocable to the Fund's business interest income.

In general, dividends of net investment income received by corporate shareholders of the fund will qualify for the dividends-received deduction generally available to corporations only to the extent of the amount of eligible dividends received by the fund from domestic corporations for the taxable year. A dividend received by the fund will not be treated as a dividend eligible for the dividends-received deduction (1) if it has been received with respect to any share of stock that the fund has held for less than 46 days (91 days in the case of certain preferred stock) during the 91-day period beginning on the date which is 45 days before the date on which such share becomes ex-dividend with respect to such dividend (during the 181-day period beginning 90 days before such date in the case of certain preferred stock) or (2) to the extent that the fund is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. Moreover, the dividends received deduction may otherwise be disallowed or reduced (1) if the corporate shareholder fails to satisfy the foregoing requirements with respect to its shares of the fund or (2) by application of various provisions of the Code (for instance, the dividends-received deduction is reduced in the case of a dividend received on debt-financed portfolio stock (generally, stock acquired with borrowed funds)). For information regarding eligibility for the dividends-received deduction of dividend income derived from an underlying fund, see "Funds of funds" below.

**Exempt-interest dividends.** A fund will be qualified to pay exempt-interest dividends to its shareholders if, at the close of each quarter of the fund's taxable year, at least 50% of the total value of the fund's assets consists of obligations the interest on which is exempt from federal income tax under Section 103(a) of the Code. In some cases, the fund may also pass through to its shareholders the tax-exempt character of any exempt-interest dividends it receives from underlying funds in which it invests (see "Funds of funds," below). Distributions that the fund reports as exempt-interest dividends are treated as interest excludable from shareholders' gross income for federal income tax purposes but may be taxable for federal alternative minimum tax ("AMT") purposes and for state and local purposes. If the fund intends to qualify to pay exempt-interest dividends, the fund may be limited in its ability to enter into taxable transactions involving forward commitments, repurchase agreements, financial futures and options contracts on financial futures, tax-exempt bond indices and other assets.

Part or all of the interest on indebtedness, if any, incurred or continued by a shareholder to purchase or carry shares of the fund paying exempt-interest dividends is not deductible. The portion of interest that is not deductible is equal to the total interest paid or accrued on the indebtedness, multiplied by the percentage of the fund's total distributions (not including distributions from net long-term capital gains) paid to the shareholder that are exempt-interest dividends. Under rules used by the IRS to determine when borrowed funds are considered used for the purpose of purchasing or carrying particular assets, the purchase of shares may be considered to have been made with borrowed funds even though such funds are not directly traceable to the purchase of shares.

In general, exempt-interest dividends, if any, attributable to interest received on certain private activity obligations and certain industrial development bonds will not be tax-exempt to any shareholders who are "substantial users" of the facilities financed by such obligations or bonds or who are "related persons" of such substantial users.

A fund that is qualified to pay exempt-interest dividends will notify its shareholders in a written statement of the portion of distributions for the taxable year that constitutes exempt-interest dividends.

Exempt-interest dividends may be taxable for purposes of the federal AMT. For individual shareholders, exempt-interest dividends that are derived from interest on private activity bonds that are issued after August 7, 1986 (other than a "qualified 501(c)(3) bond," as such term is defined in the Code) generally must be included in an individual's tax base for purposes of calculating the shareholder's liability for U.S. federal AMT. For taxable years beginning after December 31, 2017, corporations are no longer subject to the federal AMT.

**Funds of funds.** If the fund invests in shares of underlying funds, a portion of its distributable income and gains will consist of distributions from the underlying funds and gains and losses on the disposition of shares of the underlying funds. To the extent that an underlying fund realizes net losses on its investments for a given taxable year, the fund will not be able to recognize its share of those losses (so as to offset distributions of net income or capital gains from other underlying funds) until and only to the extent that it disposes of shares of the underlying fund in a transaction qualifying for sale or exchange treatment or those losses

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reduce distributions required to be made by the underlying fund. Moreover, even when the fund does make such a disposition, a portion of its loss may be recognized as a long-term capital loss, which will not be treated as favorably for U.S. federal income tax purposes as a short-term capital loss or an ordinary deduction. In particular, the fund will not be able to offset any capital losses from its dispositions of underlying fund shares against its ordinary income (including distributions of any net short-term capital gains realized by an underlying fund).

In addition, in certain circumstances, the "wash sale" rules under Section 1091 of the Code may apply to the fund's sales of underlying fund shares that have generated losses. A wash sale occurs if shares of an underlying fund are sold by the fund at a loss and the fund acquires additional shares of that same underlying fund 30 days before or after the date of the sale. The wash-sale rules could defer losses in the fund's hands on sales of underlying fund shares (to the extent such sales are wash sales) for extended (and, in certain cases, potentially indefinite) periods of time.

As a result of the foregoing rules, and certain other special rules, the amounts of net investment income and net capital gains that the fund will be required to distribute to shareholders may be greater than such amounts would have been had the fund invested directly in the securities held by the underlying funds, rather than investing in shares of the underlying funds. For similar reasons, the amount or timing of distributions from the fund qualifying for treatment as being of a particular character (e.g., as long-term capital gain, exempt interest, eligible for dividends-received deduction, etc.) will not necessarily be the same as it would have been had the fund invested directly in the securities held by the underlying funds.

If the fund receives dividends from an underlying fund that qualifies as a regulated investment company, and the underlying fund reports such dividends as "qualified dividend income," then the fund may, in turn, report a portion of its distributions as "qualified dividend income" as well, provided the fund meets the holding period and other requirements with respect to shares of the underlying fund.

If the fund receives dividends from an underlying fund and the underlying fund reports such dividends as eligible for the dividends-received deduction, then the fund is permitted, in turn, to designate a portion of its distributions as eligible for the dividends-received deduction, provided the fund meets the holding period and other requirements with respect to shares of the underlying fund.

If the fund were to own 20% or more of the voting interests of an underlying fund, subject to a safe harbor in respect of certain fund of funds arrangements, the fund would be required to "look through" the underlying fund to its holdings and combine the appropriate percentage (as determined pursuant to the applicable Treasury Regulations) of the underlying fund's assets with the fund's assets for purposes of satisfying the 25% diversification test described above.

If, at the close of each quarter of the fund's taxable year, at least 50% of its total assets consists of interests in other regulated investment companies (such fund, a "qualified fund of funds"), the fund will be permitted to distribute exempt-interest dividends and thereby pass through to its shareholders the tax-exempt character of any exempt-interest dividends it receives from underlying funds in which it invests, or interest on any tax-exempt obligations in which it directly invests, if any. For further information regarding exempt-interest dividends, see "Exempt-interest dividends," above.

If the fund is a qualified fund of funds, the fund will be entitled to elect to pass through to its shareholders a credit or deduction for foreign taxes (if any) borne in respect of foreign securities income earned by the fund, or by any underlying funds and passed through to the fund. If the fund so elects, shareholders will include in gross income from foreign sources their pro rata shares of such taxes, if any, treated as paid by the fund. Even if the fund is eligible to make such an election for a given year, it may determine not to do so. If the fund elects to pass through to its shareholders foreign tax credits or deductions, tax-exempt shareholders and those who invest in the fund through tax-advantaged accounts such as IRAs will not benefit from any such tax credit or deduction. See "Foreign taxes" below for more information.

**Derivatives, hedging and related transactions; certain exposure to commodities.** In general, option premiums received by the fund are not immediately included in the income of the fund. Instead, the premiums are recognized when the option contract expires, the option is exercised by the holder, or the fund transfers or otherwise terminates the option (*e.g.*, through a closing transaction). If a call option written by the fund is exercised and the fund sells or delivers the underlying stock, the fund generally will recognize capital gain or loss equal to (a) the sum of the strike price and the option premium received by the fund minus (b) the fund's basis in the stock. Such gain or loss generally will be short-term or long-term depending upon the holding period of the underlying stock. If securities are purchased by the fund pursuant to the exercise of a put option written by it, the fund generally will subtract the premium received for purposes of computing its cost basis in the securities purchased. Gain or loss arising in

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respect of a termination of the fund's obligation under an option other than through the exercise of the option will be short-term gain or loss depending on whether the premium income received by the fund is greater or less than the amount paid by the fund (if any) in terminating the transaction. Thus, for example, if an option written by the fund expires unexercised, the fund generally will recognize short-term gain equal to the premium received.

Certain covered call writing activities of the fund may trigger the U.S. federal income tax straddle rules contained primarily in Section 1092 of the Code. Very generally, where applicable, Section 1092 requires (i) that losses be deferred on positions deemed to be offsetting positions with respect to "substantially similar or related property," to the extent of unrealized gain in the latter, and (ii) that the holding period of such a straddle position that has not already been held for the long-term holding period be terminated and begin anew once the position is no longer part of a straddle. Options on single stocks that are not "deep in the money" may constitute qualified covered calls, which generally are not subject to the straddle rules; the holding period on stock underlying qualified covered calls that are "in the money" although not "deep in the money" will be suspended during the period that such calls are outstanding. Thus, the straddle rules and the rules governing qualified covered calls could cause gains that would otherwise constitute long-term capital gains to be treated as short-term capital gains, and distributions that would otherwise constitute "qualified dividend income" or qualify for the dividends-received deduction to fail to satisfy the holding period requirements and therefore to be taxed as ordinary income or to fail to qualify for the dividends-received deduction, as the case may be.

In general, 40% of the gain or loss arising from the closing out of a futures contract traded on an exchange approved by the Commodities Futures Trading Commission is treated as short-term gain or loss, and 60% is treated as long-term gain or loss, although certain foreign currency gains and losses from such contracts may be treated as ordinary in character. Also, such contracts held by the fund at the end of each taxable year (and, for purposes of the 4% excise tax, on certain other dates as prescribed under the Code) are "marked to market" with the result that unrealized gains or losses are treated as though they were realized and the resulting gain or loss is treated as ordinary or 60/40 gain or loss, as applicable.

The fund's investment in swaps, if any, will generate ordinary income and losses for federal income tax purposes. The fund's investments in futures and swaps 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. The fund 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.

In addition to the special rules described above in respect of options, futures transactions and swaps, the fund's derivative transactions, including transactions in options, futures contracts, straddles, securities loan and other similar transactions, including for hedging purposes, will be subject to special tax rules (including constructive sale, mark-to-market, straddle, wash sale, and short sale rules), the effect of which may be to accelerate income to the fund, defer losses to the fund, cause adjustments in the holding periods of the fund's securities, convert long-term capital gains into short-term capital gains, short-term capital losses into long-term capital losses, or capital gains into ordinary income. These rules could therefore affect the amount, timing and character of distributions to shareholders. The fund may make any applicable elections pertaining to such transactions consistent with the interests of the fund.

Because these and other tax rules applicable to these types of transactions are in some cases uncertain under current law, an adverse determination or future guidance by the IRS with respect to these rules (which determination or guidance could be retroactive) may affect whether the fund has made sufficient distributions, and otherwise satisfied the relevant requirements, to maintain its qualification as a regulated investment company and avoid a fund-level tax.

A fund's use of commodity-linked derivatives can be limited by the fund's intention to qualify as a regulated investment company and can bear on its ability to so qualify. Income and gains from certain commodity-linked derivatives do not constitute qualifying income to a regulated investment company for purposes of the 90% gross income test described above. The tax treatment of certain other commodity-linked derivative instruments in which the fund might invest is not certain, in particular with respect to whether income or gains from such instruments constitute qualifying income to a regulated investment company. If the fund were to treat income or gain from a particular instrument as qualifying income and the income or gain were later determined not to constitute qualifying income and, together with any other nonqualifying income, caused the fund's nonqualifying income to exceed 10% of its gross income in any taxable year, the fund would fail to qualify as a regulated investment company unless it is eligible to and does pay a tax at the fund level.

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The tax rules are uncertain with respect to the treatment of income or gains arising in respect of commodity-linked exchange-traded notes ("ETNs") and certain commodity-linked structured notes; also, the timing and character of income or gains arising from ETNs can be uncertain. An adverse determination or future guidance by the IRS (which determination or guidance could be retroactive) may affect the fund's ability to qualify for treatment as a regulated investment company and to avoid a fund-level tax.

To the extent that, in order to achieve exposure to commodities, the fund invests in entities that are treated as pass-through vehicles for U.S. federal income tax purposes, including, for instance, certain ETFs (e.g., ETFs investing in gold bullion) and partnerships other than qualified publicly traded partnerships (as defined earlier), all or a portion of any income and gains from such entities could constitute non-qualifying income to the fund for purposes of the 90% gross income requirement described above. In such a case, the fund's investments in such entities could be limited by its intention to qualify as a regulated investment company and could bear on its ability to so qualify. Certain commodities-related ETFs may qualify as qualified publicly traded partnerships. In such cases, the net income derived from such investments will constitute qualifying income for purposes of the 90% gross income requirement. If, however, such a vehicle were to fail to qualify as a qualified publicly traded partnership in a particular year, a portion of the gross income derived from it in such year could constitute non-qualifying income to the fund for purposes of the 90% gross income requirement and thus could adversely affect the fund's ability to qualify as a regulated investment company for a particular year. In addition, the diversification requirement described above for regulated investment company qualification will limit the fund's investments in one or more vehicles that are qualified publicly traded partnerships to 25% of the fund's total assets as of the close of each quarter of the fund's taxable year.

Certain of the fund's investments in derivative instruments and foreign currency-denominated instruments, and any of the fund's transactions in foreign currencies and hedging activities, are likely to produce a difference between its book income and its taxable income. If such a difference arises, and the fund's book income is less than its taxable income (or, for tax-exempt funds, the sum of its net tax-exempt and taxable income), the fund could be required to make distributions exceeding book income to qualify as a regulated investment company that is accorded special tax treatment and to eliminate fund-level income tax. In the alternative, if the fund's book income exceeds the sum of its taxable income and tax-exempt income, the distribution (if any) of such excess will be treated as (i) a dividend to the extent of the fund's remaining earnings and profits (including earnings and profits arising from tax-exempt income), (ii) thereafter as a return of capital to the extent of the recipient's basis in the shares, and (iii) thereafter as gain from the sale or exchange of a capital asset.

**Investments in REITs.** The fund's investment in REIT equity securities may result in the fund's receipt of cash in excess of the REIT's earnings. If the fund distributes such amounts, such distribution could constitute a return of capital to the fund shareholders for U.S. federal income tax purposes. Dividends received by the fund from a REIT generally will not constitute qualified dividend income and will not qualify for the corporate dividends-received deduction.

Distributions by the fund to its shareholders that the fund properly reports as "section 199A dividends," as defined and subject to certain conditions described below, are treated as qualified REIT dividends in the hands of non-corporate shareholders. Non-corporate shareholders are permitted a federal income tax deduction equal to 20% of qualified REIT dividends received by them, subject to certain limitations. Currently, eligible non-corporate shareholders can claim the deduction for tax years beginning after December 31, 2017 and ending on or before December 31, 2025. Very generally, a "section 199A dividend" is any dividend or portion thereof that is attributable to certain dividends received by a regulated investment company from REITs, to the extent such dividends are properly reported as such by the regulated investment company in a written notice to its shareholders. A section 199A dividend is treated as a qualified REIT dividend only if the shareholder receiving such dividend holds the dividend-paying regulated investment company shares for at least 46 days of the 91-day period beginning 45 days before the shares become ex-dividend, and is not under an obligation to make related payments with respect to a position in substantially similar or related property. A fund is permitted to report such part of its dividends as section 199A dividends as are eligible, but is not required to do so.

**Mortgage-related securities.** The fund may invest in REITs, including REITs that hold residual interests in real estate mortgage investment conduits ("REMICs") (including by investing in residual interests in collateralized mortgage obligations ("CMOs") with respect to which an election to be treated as a REMIC is in effect), REITs that are themselves taxable mortgage pools ("TMPs") or REITs that invest in TMPs. Under a notice issued by the IRS in October 2006 and Treasury regulations that have not yet been issued, but apply retroactively, a portion of the fund's income from a REIT that is attributable to the REIT's residual interest in a REMIC or TMP (referred to in the Code as an "excess inclusion") will be subject to U.S. federal income tax in all events. This notice also provides, and the regulations are expected to provide, that excess inclusion income of a regulated investment company, such as the fund, will be allocated to shareholders of the regulated investment company in proportion to the dividends received by such shareholders, with the same consequences as if the shareholders held the related REMIC or TMP residual

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interest directly. As a result, a fund investing in such interests may not be a suitable investment for charitable remainder trusts, as noted below.

In general, excess inclusion income allocated to shareholders (i) cannot be offset by net operating losses (subject to a limited exception for certain thrift institutions), (ii) will constitute unrelated business taxable income ("UBTI") to entities (including a qualified pension plan, an individual retirement account, a 401(k) plan, a Keogh plan or other tax-exempt entity) subject to tax on UBTI, thereby potentially requiring such an entity that is allocated excess inclusion income, and otherwise might not be required to file a tax return, to file a tax return and pay tax on such income, and (iii) in the case of a non-U.S. shareholder, will not qualify for any reduction in U.S. federal withholding tax. A shareholder will be subject to U.S. federal income tax on such inclusions notwithstanding any exemption from such income tax otherwise available under the Code. Any investment in residual interests of CMO that has elected to be treated as a REMIC can create complex tax problems, especially if the fund has state or local governments or other tax-exempt organizations as shareholders.

Income of a fund that would be UBTI if earned directly by a tax-exempt entity generally will not constitute UBTI when distributed to a tax-exempt shareholder of the fund. Notwithstanding the foregoing, a tax-exempt shareholder will recognize UBTI by virtue of its investment in the fund if shares in the fund constitute debt-financed property in the hands of the tax-exempt shareholder within the meaning of Code Section 514(b). Furthermore, a tax-exempt shareholder may recognize UBTI if the fund recognizes excess inclusion income derived from direct or indirect investments in REMIC residual interests or TMPs if the amount of such income recognized by the fund exceeds the fund's investment company taxable income (after taking into account deductions for dividends paid by the fund).

Under legislation enacted in December 2006, a charitable remainder trust ("CRT"), as defined in Section 664 of the Code, that realizes UBTI for a taxable year must pay an excise tax annually of an amount equal to such UBTI. Under IRS guidance issued in October 2006, a CRT will not recognize UBTI solely as a result of investing in a fund that recognizes excess inclusion income. Rather, if at any time during any taxable year a CRT (or one of certain other tax-exempt shareholders, such as the United States, a state or political subdivision, or an agency or instrumentality thereof, and certain energy cooperatives) is a record holder of a share in a fund that recognizes excess inclusion income, then the fund will be subject to a tax on that portion of its excess inclusion income for the taxable year that is allocable to such shareholders at the highest federal corporate income tax rate. The extent to which this IRS guidance remains applicable in light of the December 2006 legislation is unclear. To the extent permitted under the 1940 Act, the fund may elect to specially allocate any such tax to the applicable CRT, or other shareholder, and thus reduce such shareholder's distributions for the year by the amount of the tax that relates to such shareholder's interest in the fund. CRTs and other tax-exempt investors are urged to consult their tax advisors concerning the consequences of investing in the fund.

**Return of capital distributions**. If the fund makes a distribution in and with respect to any taxable year to a shareholder in excess of the fund's current and accumulated earnings and profits, the excess distribution will be treated as a return of capital to the extent of such shareholder's tax basis in its shares, and thereafter as capital gain. A return of capital is not taxable, but it reduces a shareholder's tax basis in its shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the shareholder of its shares. Dividends and distributions on the fund's shares generally are subject to federal income tax as described herein to the extent they do not exceed the fund's realized income and gains, even though such dividends and distributions may economically represent a return of a particular shareholder's investment. Such distributions are likely to occur in respect of shares purchased at a time when the fund's net asset value reflects gains that are either unrealized, or realized but not distributed. Such realized income and gains may be required to be distributed even when the fund's net asset value also reflects unrealized losses. Distributions are taxable to a shareholder even if they are paid from income or gains earned by the fund prior to the shareholder's investment (and thus included in the price paid by the shareholder).

**Securities issued or purchased at a discount.** Some debt obligations with a fixed maturity date of more than one year from the date of issuance (and zero-coupon debt obligations with a fixed maturity date of more than one year from the date of issuance) that are acquired by the fund will be treated as debt obligations that are issued originally at a discount. Generally, the amount of the original issue discount ("OID") is treated as interest income and is included in the fund's income (and required to be distributed by the fund) over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. In addition, payment-in-kind securities will give rise to income which is required to be distributed and is taxable even though the fund holding the security receives no interest payment in cash on the security during the year.

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Some debt obligations with a fixed maturity date of more than one year from the date of issuance that are acquired by the fund in the secondary market may be treated as having "market discount." Very generally, market discount is the excess of the stated redemption price of a debt obligation (or in the case of an obligation issued with OID, its "revised issue price") over the purchase price of such obligation. Generally any gain recognized on the disposition of, and any partial payment of principal on, a debt security having market discount is treated as ordinary income to the extent the gain, or principal payment, does not exceed the "accrued market discount" on such debt security. Alternatively, the fund may elect to accrue market discount currently, in which case the fund will be required to include the accrued market discount in the fund's income (as ordinary income) and thus distribute it over the term of the debt security, even though payment of that amount is not received until a later time, upon partial or full repayment or disposition of the debt security. The rate at which the market discount accrues, and thus is included in the fund's income, will depend upon which of the permitted accrual methods the fund elects.

Some debt obligations with a fixed maturity date of one year or less from the date of issuance that are acquired by the fund may be treated as having "acquisition discount" (very generally, the excess of the stated redemption price over the purchase price) or OID. The fund will be required to include the acquisition discount or OID in income over the term of the debt security, even though payment of that amount is not received until a later time, usually when the debt security matures. The fund may make one or more of the elections applicable to debt obligations having acquisition discount or OID, which could affect the character and timing of recognition of income.

If the fund holds the foregoing kinds of obligations, or other obligations subject to special rules under the Code, it may be required to pay out as an income distribution each year an amount which is greater than the total amount of cash interest the fund actually received. Such distributions may be made from the cash assets of the fund or, if necessary, by disposition of portfolio securities including at a time when it may not be advantageous to do so. These dispositions may cause the fund to realize higher amounts of short-term capital gains (generally taxed to shareholders at ordinary income tax rates) and, in the event the fund realizes net capital gains from such transactions, its shareholders may receive a larger capital gain distribution than if the fund had not held such obligations.

**Securities purchased at a premium.** Very generally, where the fund purchases a bond at a price that exceeds the redemption price at maturity (*i*.*e*., a premium), the premium is amortizable over the remaining term of the bond. In the case of a taxable bond, if the fund makes an election applicable to all such bonds it purchases, which election is irrevocable without consent of the IRS, the fund reduces the current taxable income from the bond by the amortized premium and reduces its tax basis in the bond by the amount of such offset; upon the disposition or maturity of such bonds acquired on or after January 4, 2013, the fund is permitted to deduct any remaining premium allocable to a prior period. In the case of a tax-exempt bond, tax rules require the fund to reduce its tax basis by the amount of amortized premium.

**Higher-Risk obligations.** Investments in debt obligations that are at risk of or in default present special tax issues for the fund. Tax rules are not entirely clear about issues such as whether the fund should recognize market discount on a debt obligation and, if so, the amount of market discount the fund should recognize; when the fund may cease to accrue interest, OID or market discount, when and to what extent deductions may be taken for bad debts or worthless securities and how payments received on obligations in default should be allocated between principal and income. These and other related issues will be addressed by the fund when, as and if it invests in such obligations, in order to seek to ensure that it distributes sufficient income to preserve its status as a regulated investment company and does not become subject to U.S. federal income or excise tax.

**Capital loss carryforward.** Distributions from capital gains generally are made after applying any available capital loss carryforwards. Capital loss carryforwards are reduced to the extent they offset current-year net realized capital gains, whether the fund retains or distributes such gains. If a fund incurs or has incurred capital losses in excess of capital gains ("net capital losses"), those losses will be carried forward to one or more subsequent taxable years; any such carryforward losses will retain their character as short-term or long-term.

**Foreign taxes.** If more than 50% of the fund's assets at taxable year end consists of the securities of foreign corporations, the fund may elect to permit shareholders to claim a credit or deduction on their income tax returns for their pro rata portion of qualified taxes paid by the fund to foreign countries in respect of foreign securities the fund has held for at least the minimum period specified in the Code. A qualified fund of funds also may elect to pass through to its shareholders foreign taxes it has paid or foreign taxes passed through to it by any underlying fund that itself elected to pass through such taxes to shareholders (see "Funds of funds" above). In such a case, shareholders will include in gross income from foreign sources their pro rata shares of such taxes. A shareholder's ability to claim a foreign tax credit or deduction in respect of foreign taxes paid by the fund may be subject to certain limitations imposed by the Code, as a result of which a shareholder may not get a full credit or deduction for the

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amount of such taxes. In particular, shareholders must hold their fund shares (without protection from risk of loss) on the ex-dividend date and for at least 15 additional days during the 30-day period surrounding the ex-dividend date to be eligible to claim a foreign tax credit with respect to a given dividend. Shareholders who do not itemize on their U.S. federal income tax returns may claim a credit (but no deduction) for such foreign taxes. Even if the fund is eligible to make such an election for a given year, it may determine not to do so. However, even if the fund elects to pass through to its shareholders foreign tax credits or deductions, tax-exempt shareholders and those who invest in the fund through tax-advantaged accounts such as IRAs will not benefit from any such tax credit or deduction.

**Passive foreign investment companies.** Investments treated as equity for federal income tax purposes in certain "passive foreign investment companies" ("PFICs", as defined below) could subject the fund to a U.S. federal income tax (including interest charges) on distributions received from the company or on the proceeds from the disposition of its investment in such a company. This tax cannot be eliminated by making distributions to fund shareholders; however, this tax can be avoided by making an election to mark such investments to market annually or to treat the passive foreign investment company as a "qualified electing fund." The QEF and mark-to-market elections may have the effect of accelerating the recognition of income (without the receipt of cash) and increasing the amount required to be distributed by the fund to avoid taxation. Making either of these elections therefore may require the fund to liquidate other investments to meet its distribution requirement, which may also accelerate the recognition of gain and affect the fund's total return. Dividends paid by PFICs will not be eligible to be treated as "qualified dividend income." If the fund indirectly invests in PFICs by virtue of the fund's investments in other funds, it may not make such PFIC elections; rather, the underlying funds directly investing in the PFICs would decide whether to make such elections.

Because it is not always possible to identify a foreign corporation as a PFIC, the fund may incur the tax and interest charges described above in some instances.

A PFIC is any foreign corporation: (i) 75 percent or more of the income of which for the taxable year is passive income, or (ii) the average percentage of the assets of which (generally by value, but by adjusted tax basis in certain cases) that produce or are held for the production of passive income is at least 50 percent. Generally, passive income for this purpose means dividends, interest (including income equivalent to interest), royalties, rents, annuities, the excess of gains over losses from certain property transactions and commodities transactions, and foreign currency gains. Passive income for this purpose does not include rents and royalties received by the foreign corporation from active business and certain income received from related persons.

**Foreign currency-denominated transactions and related hedging transactions.** The fund's transactions in foreign currencies, foreign currency-denominated debt obligations and certain foreign currency options, futures contracts and forward contracts (and similar instruments) may give rise to ordinary income or loss to the extent such income or loss results from fluctuations in the value of the foreign currency concerned. Any such net gains could require a larger dividend toward the end of the calendar year. Any such net losses generally will reduce and potentially require the recharacterization of prior ordinary income distributions. Such ordinary income treatment may accelerate fund distributions to shareholders and increase the distributions taxed to shareholders as ordinary income. Any net ordinary losses so created cannot be carried forward by the fund to offset income or gains earned in subsequent taxable years.

**Sale or exchange of shares.** The sale or exchange of fund shares may give rise to a gain or loss. In general, any gain or loss realized upon a taxable disposition of shares will be treated as long-term capital gain or loss if the shares have been held for more than 12 months. Otherwise the gain or loss on the sale or exchange of fund shares will be treated as short-term capital gain or loss. However, if a shareholder sells shares at a loss within six months of purchase, any loss generally will be disallowed for federal income tax purposes to the extent of any exempt-interest dividends received on such shares. This loss disallowance, however, does not apply with respect to dispositions of fund shares held for six months or less with respect to a regular exempt-interest dividend paid by the fund if such fund declares substantially all of its net tax-exempt income as exempt-interest dividends on a daily basis, and pays such dividends at least on a monthly basis. In addition, any loss (not already disallowed as provided in the preceding sentences) realized upon a taxable disposition of shares held for six months or less will be treated as long-term, rather than short-term, to the extent of any Capital Gain Dividends received (or deemed received) by the shareholder with respect to the shares. All or a portion of any loss realized upon a taxable disposition of fund shares will be disallowed if other shares of the same fund are purchased within 30 days before or after the disposition. In such a case, the basis of the newly purchased shares will be adjusted to reflect the disallowed loss.

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**Taxes on purchase and redemption of creation units**. Authorized Participants that are "dealers in securities" for U.S. federal income tax purposes are subject to different rules with respect to holding, acquiring and disposing of securities, including Creation Units. Authorized Participants should consult their own tax advisor with respect to transactions with a fund.

An Authorized Participant who exchanges securities for Creation Units generally will recognize a gain or a loss equal to the difference between the market value of the Creation Units at the time of the exchange and the sum of the exchanger's aggregate basis in the securities surrendered plus any Cash Component it pays. An Authorized Participant who exchanges Creation Units for securities will generally recognize a gain or loss equal to the difference between the exchanger's basis in the Creation Units and the sum of the aggregate market value of the securities received plus any cash equal to the difference between the NAV of the shares being redeemed and the value of the securities. The IRS, however, may assert that a loss realized upon an exchange of securities for Creation Units cannot be deducted currently under the rules governing "wash sales" (for a person who does not mark-to-market its portfolio) or on the basis that there has been no significant change in economic position. Persons exchanging securities should consult their own tax advisor with respect to whether wash sale rules apply and when a loss might be deductible.

Any capital gain or loss realized upon the creation of Creation Units will generally be treated as long-term capital gain or loss if the securities exchanged for such Creation Units have been held for more than one year. Any capital gain or loss realized upon redemption of Creation Units is generally treated as long-term capital gain or loss if the shares have been held for more than one year and as short-term capital gain or loss if the shares have been held for one year or less. Any loss upon a redemption of Creation Units held for six months or less will be treated as a long-term capital loss to the extent of any amounts treated as distributions to the applicable Authorized Participant of long-term capital gain with respect to the Creation Units (including any amounts credited to the Authorized Participant as undistributed capital gains). In addition, any loss realized upon a redemption of fund shares held by an Authorized Participant for six months or less generally will be disallowed, to the extent of any exempt-interest dividends received by the Authorized Participant with respect to the shares.

The fund has the right to reject an order for a purchase of shares of the fund if the purchaser (or group of purchasers) would, upon obtaining the shares so ordered, own 80% or more of the outstanding shares of the fund and if, pursuant to Section 351 of the Code, the fund would have a basis in the securities contributed by such purchaser different from the market value of such securities on the date of deposit. The fund also has the right to require information necessary to determine beneficial share ownership for purposes of the 80% determination.

**Cost basis reporting.** Upon the redemption or exchange of a shareholder's shares in the fund, the fund, or, if such shareholder's shares are then held through a financial intermediary, the financial intermediary, will be required to provide the shareholder and the IRS with cost basis and certain other related tax information about the fund shares the shareholder redeemed or exchanged. This cost basis reporting requirement is effective for shares purchased, including through dividend reinvestment, on or after January 1, 2012. Shareholders should consult their financial representatives for more information regarding available methods for cost basis reporting and how to select a particular method. Shareholders should consult their tax advisors to determine which available cost basis method is best for them.

**Shares purchased through tax-qualified plans.** Special tax rules apply to investments through employer-sponsored retirement plans and other tax-qualified plans or tax-advantaged arrangements. Shareholders should consult their tax advisors to determine the suitability of shares of the fund as an investment through such plans and arrangements and the precise effect of an investment on their particular tax situation.

**Backup withholding.** The fund generally is required to withhold and remit to the U.S. Treasury a percentage of the taxable dividends and other distributions paid to any individual shareholder who fails to furnish the fund with a correct taxpayer identification number (TIN), who has under-reported dividends or interest income, or who fails to certify to the fund that he or she is not subject to such withholding. The backup withholding rules may also apply to distributions that are properly reported as exempt-interest dividends. Backup withholding is not an additional tax. Any amounts withheld may be credited against the shareholder's U.S. federal income tax liability, provided the appropriate information is furnished to the IRS.

In order for a foreign investor to qualify for exemption from the backup withholding tax rates and for reduced withholding tax rates under income tax treaties, the foreign investor must comply with special certification and filing requirements. Foreign investors in a fund should consult their tax advisors in this regard.

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**Tax shelter reporting regulations.** Under U.S. Treasury regulations, if a shareholder recognizes a loss on disposition of fund shares of at least $2 million in any single taxable year or $4 million in any combination of taxable years for an individual shareholder or $10 million in any single taxable year or $20 million in any combination of taxable years for a corporate shareholder, the shareholder must file with the IRS a disclosure statement on Form 8886. Direct shareholders of portfolio securities are in many cases excepted from this reporting requirement, but under current guidance, shareholders of a regulated investment company are not excepted. Future guidance may extend the current exception from this reporting requirement to shareholders of most or all regulated investment companies. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer's treatment of the loss is proper. Shareholders should consult their tax advisers to determine the applicability of these regulations in light of their individual circumstances.

**Non-U.S. shareholders.** Distributions by the fund to shareholders that are not "U.S. persons" within the meaning of the Code ("foreign shareholders") properly reported by the fund as (1) Capital Gain Dividends, (2) interest-related dividends, (3) short-term capital gain dividends, each as defined below and subject to certain conditions described below, and (4) exempt-interest dividends generally are not subject to withholding of U.S. federal income tax.

In general, the Code defines (1) "short-term capital gain dividends" as distributions of net short-term capital gains in excess of net long-term capital losses and (2) "interest-related dividends" as distributions from U.S. source interest income of types similar to those not subject to U.S. federal income tax if earned directly by an individual foreign shareholder, in each case to the extent such distributions are properly reported as such by the fund in a written notice to shareholders. The exceptions to withholding for Capital Gain Dividends and short-term capital gain dividends do not apply to (A) distributions to an individual foreign shareholder who is present in the United States for a period or periods aggregating 183 days or more during the year of the distribution and (B) distributions attributable to gain that is treated as effectively connected with the conduct by the foreign shareholder of a trade or business within the United States under special rules regarding the disposition of U.S. real property interests as described below. The exception to withholding for interest-related dividends does not apply to distributions to a foreign shareholder (A) that has not provided a satisfactory statement that the beneficial owner is not a U.S. person, (B) to the extent that the dividend is attributable to certain interest on an obligation if the foreign shareholder is the issuer or is a 10% shareholder of the issuer, (C) that is within certain foreign countries that have inadequate information exchange with the United States, or (D) to the extent the dividend is attributable to interest paid by a person that is a related person of the foreign shareholder and the foreign shareholder is a controlled foreign corporation. If the fund invests in other regulated investment companies that pay Capital Gain Dividends, short-term capital gain dividends or interest-related dividends to the fund, such distributions retain their character as not subject to withholding if properly reported when paid by the fund to foreign shareholders. The fund is permitted to report such part of its dividends as interest-related and/or short-term capital gain dividends as are eligible, but is not required to do so. In the case of shares held through an intermediary, the intermediary may withhold even if the fund reports all or a portion of a payment as an interest-related or short-term capital gain dividend to shareholders.

The fact that a fund achieves its goals by investing in underlying funds generally does not adversely affect the fund's ability to pass on to foreign shareholders the full benefit of the interest-related dividends and short-term capital gain dividends that it receives from its investments in underlying funds, except possibly to the extent that (1) interest-related dividends received by the fund are offset by deductions allocable to the fund's qualified interest income or (2) short-term capital gain dividends received by the fund are offset by the fund's net short- or long-term capital losses, in which case the amount of a distribution from the fund to a foreign shareholder that is properly reported as either an interest-related dividend or a short-term capital gain dividend, respectively, may be less than the amount that such shareholder would have received had they invested directly in the underlying funds.

Distributions by the fund to foreign shareholders other than Capital Gain Dividends, interest-related dividends, and short-term capital gain dividends and exempt-interest dividends (*e.g.*, dividends attributable to dividend and foreign-source interest income or to short-term capital gains or U.S.-source interest income to which the exception from withholding described above does not apply) are generally subject to withholding of U.S. federal income tax at a rate of 30% (or lower applicable treaty rate).

Under U.S. federal tax law, a beneficial holder of shares who is a foreign shareholder is not, in general, subject to U.S. federal income tax on gains (and is not allowed a deduction for losses) realized on the sale of shares of the fund, unless (i) such gain is effectively connected with the conduct of a trade or business carried on by such holder within the United States; (ii) in the case of an individual holder, the holder is present in the United States for a period or periods aggregating 183 days or more during the year of the sale and certain other conditions are met; or (iii) the special rules relating to gain attributable to the sale or exchange of "U.S. real property interests" ("USRPIs") apply to the foreign shareholder's sale of shares of the fund (as described below).

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If a beneficial holder who is a foreign shareholder has a trade or business in the United States, and the dividends are effectively connected with the conduct by the beneficial holder of a trade or business in the United States, the dividend will be subject to U.S. federal net income taxation at regular income tax rates and, in the case of a foreign corporation, may also be subject to a branch profits tax. If a foreign shareholder is eligible for the benefits of a tax treaty, any effectively connected income or gain will generally be subject to U.S. federal income tax on a net basis only if it is also attributable to a permanent establishment maintained by the shareholder in the United States. More generally, foreign shareholders who are residents in a country with an income tax treaty with the United States may obtain different tax results than those described herein, and are urged to consult their tax advisors.

Special rules would apply if the fund were a qualified investment entity ("QIE") because it is either a "U.S. real property holding corporation" ("USRPHC") or would be a USRPHC but for the operation of certain exceptions to the definition of USRPIs described below. Very generally, a USRPHC is a domestic corporation that holds USRPIs the fair market value of which equals or exceeds 50% of the sum of the fair market values of the corporation's USRPIs, interests in real property located outside the United States, and other trade or business assets. USRPIs generally are defined as any interest in U.S. real property and any interest (other than solely as a creditor) in a USRPHC or, very generally, an entity that has been a USRPHC in the last five years. A fund that holds, directly or indirectly, significant interests in REITs may be a USRPHC. Interests in domestically controlled QIEs, including regulated investment companies and REITs that are QIEs, not-greater-than-10% interests in publicly traded classes of stock in REITs and not-greater-than-5% interests in publicly traded classes of stock in regulated investment companies generally are not USRPIs, but these exceptions do not apply for purposes of determining whether a fund is a QIE.

If an interest in the fund were a USRPI, the fund would be required to withhold U.S. tax on the proceeds of a share redemption by a greater-than-5% foreign shareholder, in which case such foreign shareholder generally would also be required to file U.S. tax returns and pay any additional taxes due in connection with the redemption.

If the fund were a QIE under a special "look-through" rule, any distributions by the fund to a foreign shareholder (including, in certain cases, distributions made by the fund in redemption of its shares) attributable directly or indirectly to (i) distributions received by the fund from a lower-tier regulated investment company or REIT that the fund is required to treat as USRPI gain in its hands and (ii) gains realized on the disposition of USRPIs by the fund would retain their character as gains realized from USRPIs in the hands of the fund's foreign shareholders and would be subject to U.S. tax withholding. In addition, such distributions could result in the foreign shareholder being required to file a U.S. tax return and pay tax on the distributions at regular U.S. federal income tax rates. The consequences to a foreign shareholder, including the rate of such withholding and character of such distributions (*e.g.*, as ordinary income or USRPI gain), would vary depending upon the extent of the foreign shareholder's current and past ownership of the fund.

Foreign shareholders of the fund also may be subject to "wash sale" rules to prevent the avoidance of the tax-filing and -payment obligations discussed above through the sale and repurchase of fund shares.

Foreign shareholders should consult their tax advisers and, if holding shares through intermediaries, their intermediaries, concerning the application of these rules to their investment in the fund.

**Other reporting and withholding requirements**. Sections 1471-1474 of the Code and the U.S. Treasury and IRS guidance issued thereunder (collectively, "FATCA") generally require a fund to obtain information sufficient to identify the status of each of its shareholders under FATCA or under an applicable intergovernmental agreement (an "IGA") between the United States and a foreign government. If a shareholder fails to provide the requested information or otherwise fails to comply with FATCA or an IGA, the fund may be required to withhold under FATCA at a rate of 30% with respect to that shareholder on ordinary dividends it pays. The IRS and the Department of Treasury have issued proposed regulations providing that these withholding rules will not be applicable to the gross proceeds of share redemptions or Capital Gain Dividends the fund pays. If a payment by the fund is subject to FATCA withholding, the fund is required to withhold even if such payment would otherwise be exempt from withholding under the rules applicable to foreign shareholders described above (*e.g.*, short-term capital gain dividends and interest-related dividends).

Each prospective investor is urged to consult its tax advisor regarding the applicability of FATCA and any other reporting requirements with respect to the prospective investor's own situation, including investments through an intermediary.

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**General Considerations.** The U.S. federal income tax discussion set forth above is for general information only. Prospective investors should consult their tax advisers regarding the specific federal tax consequences of purchasing, holding, and disposing of shares of the fund, as well as the effects of state, local and foreign tax law and any proposed tax law changes.

**MANAGEMENT** 

**Trustees** 

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>** | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin**<br> **Templeton Funds<br>Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>** | **Other Directorships Held by Trustee** |
| &nbsp;&nbsp;&nbsp;**Liaquat Ahamed** (Born 1952), Trustee since 2012 | Author; won Pulitzer Prize for<br> *Lords of Finance: The Bankers Who Broke the World.* | 101 | Chair of the Sun Valley Writers Conference, a literary not-for-profit organization; and a Trustee of the Journal of Philosophy.<br>|
| &nbsp;&nbsp;&nbsp; **Barbara M. Baumann**<br> (Born 1955), Trustee since 2010, Vice Chair from 2022 to 2024, Chair since 2024 | President of Cross Creek Energy Corporation, a strategic consultant to domestic energy firms and direct investor in energy projects. | 101 | Director of Devon Energy Corporation, a publicly traded independent natural gas and oil exploration and production company; Director of National Fuel Gas Company, a publicly traded energy company that engages in the production, gathering, transportation, distribution and marketing of natural gas; Senior Advisor to the energy private equity firm First Reserve; member of the Finance Committee of the Children's Hospital of Colorado; member of the Investment Committee of the Board of The Denver Foundation; and previously a Director of publicly traded companies Buckeye Partners LP, UNS Energy Corporation, CVR Energy Company, and SM Energy Corporation.<br>|
| &nbsp;&nbsp;&nbsp; **Katinka Domotorffy**<br> (Born 1975), Trustee since 2012 | Voting member of the Investment Committees of the Anne Ray Foundation and Margaret A. Cargill Foundation, part of the Margaret A. Cargill Philanthropies.<br>| 101 | Director of the Great Lakes Science Center and of College Now Greater Cleveland. |
| &nbsp;&nbsp;&nbsp; **Catharine Bond Hill**<br> (Born 1954), Trustee since 2017 | Managing Director of Ithaka S+R, a not-for-profit service that helps the academic community navigate economic and technological change. From 2006 to 2016, Dr. Hill served as the 10th president of Vassar College.<br>| 101 | Director of Yale-NUS College; and Trustee of Yale University. |
| &nbsp;&nbsp;&nbsp; **Gregory G. McGreevey**<br> (Born 1962), Trustee | Until 2023, Senior Managing Director, Investments, Invesco | 101 | Previously, a Director of Invesco Mortgage Capital, Inc., a publicly traded |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>** | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin**<br> **Templeton Funds<br>Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>** | **Other Directorships Held by Trustee** |
| &nbsp;&nbsp;&nbsp; since 2024<br>| Ltd., a global investment firm.<br>|  | real estate investment trust.<br>|
| &nbsp;&nbsp;&nbsp; \***Jennifer Williams Murphy**<br> (Born 1964), Trustee since 2022 | Chief Executive Officer and Founder of Runa Digital Assets, LLC, an institutional investment advisory firm specializing in active management of digital assets. Until 2021, Chief Operating Officer of Western Asset Management, LLC, a global investment adviser, and Chief Executive Officer and President of Western Asset Mortgage Capital Corporation, a mortgage finance real estate investment trust.<br>| 101 | Previously, a Director of Western Asset Mortgage Capital Corporation. |
| &nbsp;&nbsp;&nbsp; **Marie Pillai**<br> (Born 1954), Trustee since 2022 | Senior Advisor, Hunter Street Partners, LP, an asset-oriented private investment firm; Director of Choice Bank, a private, community bank based in North Dakota. Until 2019, Vice President, Chief Investment Officer and Treasurer of General Mills, Inc., a global food company. | 101 | Member of the Investment Committee of the Bush Foundation, a nonprofit organization supporting community problem-solving in Minnesota, North Dakota and South Dakota; Member of the Finance Council and Corporate Board of the Archdiocese of Saint Paul and Minneapolis; Member of the Curriculum Committee of the Center for Board Certified Fiduciaries, a public benefit corporation providing coursework for developing fiduciaries; previously a Board Member of Catholic Charities of St. Paul and Minneapolis; former Director of the Catholic Community Foundation of Minnesota; and former Investment Advisory Board Member of the University of Minnesota.<br>|
| &nbsp;&nbsp;&nbsp; **George Putnam III**<br> (Born 1951), Trustee since 1984 | Chair of New Generation Research, Inc., a publisher of financial advisory and other research services, and President of New Generation Advisors, LLC, a registered investment adviser to private funds. | 101 | Director of The Boston Family Office, LLC, a registered investment adviser; a Director of the Gloucester Marine Genomics Institute; a Trustee of the Lowell Observatory Foundation; and previously a Trustee of the Marine Biological Laboratory.<br>|
| &nbsp;&nbsp;&nbsp; **Manoj P. Singh**<br> (Born 1952), Trustee since 2017 | Until 2015, Chief Operating Officer and Global Managing Director at Deloitte Touche Tohmatsu, Ltd., a global professional services organization, serving on the Deloitte U.S. Board of Directors and the boards of Deloitte member | 101 | Director of ReNew Energy Global Plc, a publicly traded renewable energy company; Director of Abt Associates, a global research firm working in the fields of health, social and environmental policy, and international development; Trustee of Carnegie Mellon University; |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>** | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin**<br> **Templeton Funds<br>Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>** | **Other Directorships Held by Trustee** |
|  | firms in China, Mexico and Southeast Asia. |  | Director of Pratham USA, an organization dedicated to children's education in India; member of the advisory board of Altimetrik, a business transformation and technology solutions firm; and Director of DXC Technology, a global IT services and consulting company.<br>|
| &nbsp;&nbsp;&nbsp; **Mona K. Sutphen**<br> (Born 1967), Trustee since 2020 | Partner, Investment Strategies at The Vistria Group, a private investment firm focused on middle-market companies in the healthcare, education, and financial services industries. From 2014 to 2018, Partner at Macro Advisory Partners, a global consulting firm. | 101 | Director of Spotify Technology S.A., a publicly traded audio content streaming service; Director of Unitek Learning, a private nursing and medical services education provider in the United States; Board Member, International Rescue Committee; Co-Chair of the Board of Human Rights First; Trustee of Mount Holyoke College; member of the Advisory Board for the Center on Global Energy Policy at Columbia University's School of International and Public Affairs; previously Director of Pattern Energy and Pioneer Natural Resources, publicly traded energy companies; and previously Managing Director of UBS AG.<br>|
| &nbsp;&nbsp;&nbsp;**Interested Trustees** |  |  |  |
| &nbsp;&nbsp;&nbsp; **\*\*Robert L. Reynolds**<br> (Born 1952), Trustee since 2008 | Chair of Great-West Lifeco U.S. LLC. Prior to 2019, also President and Chief Executive Officer of Great-West Financial, a financial services company that provides retirement savings plans, life insurance, and annuity and executive benefits products, and of Great-West Lifeco U.S. LLC, a holding company that owns Putnam Investments, LLC and Great-West Financial, and a member of Great-West Financial's Board of Directors. Until 2023, President and Chief Executive Officer of Putnam Investments, LLC, President and Chief Executive Officer of Putnam Management, and member of Putnam Investments' Board of Directors. | 101 | Director of the Concord Museum; Director of Dana-Farber Cancer Institute; Director of the U.S. Ski & Snowboard Foundation; Chair of the Boston Advisory Board of the American Ireland Fund; Council Co-Chair of the American Enterprise Institute; Member of U.S. Chamber of Commerce, Center for Capital Markets Competitiveness; Chair of Massachusetts High Technology Council; Member of the Chief Executives Club of Boston; Member of the Massachusetts General Hospital President's Council; Chairman of the Board of Directors of the Ron Burton Training Village; Director and former Chair of the Massachusetts Competitive Partnership; former Chair of the West Virginia University Foundation; and former Executive Committee Member of the Greater Boston Chamber of Commerce. |

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| | | | |
|:---|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year**<br> **of Birth, Position(s)**<br> **Held with Fund and**<br> **Length of Service as a**<br> **Fund Trustee<sup>2</sup>** | **Principal Occupation(s) During**<br> **Past 5 Years** | **Number of Funds**<br> **in the Franklin**<br> **Templeton Funds<br>Complex**<br> **Overseen by**<br> **Trustee<sup>3</sup>** | **Other Directorships Held by Trustee** |
| &nbsp;&nbsp;&nbsp; **\*\*\* Jane E. Trust**<br> (Born 1962), Trustee since 2024 | Since 2020, Senior Vice President, Fund Board Management, Franklin Templeton. Since 2015, Officer and/or Trustee/Director of 123 funds associated with Franklin Templeton Fund Advisor, LLC ("FTFA") or its affiliates, and President and Chief Executive Officer of FTFA. From 2018 to 2020, Senior Managing Director of Legg Mason & Co., LLC ("Legg Mason & Co."). From 2016 to 2018, Managing Director of Legg Mason & Co. In 2015, Senior Vice President of FTFA.<br>| 224 | None. |

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<sup>1</sup> The address of each Trustee is 100 Federal Street, Boston, MA 02110.

<sup>2</sup> Each Trustee serves for an indefinite term, until his or her resignation, retirement during the year he or she reaches age 75, death or removal.

<sup>3</sup> The Franklin Templeton funds complex is composed of the registered investment companies advised by the Investment Manager or by its affiliates.

\* Ms. Murphy is the founder, controlling member, and Chief Executive Officer of Runa Digital Assets, LLC ("RDA"), the investment manager of Runa Digital Partners, LP ("RDP"), a private investment fund. Ms. Murphy also holds a controlling interest in RDP's general partner and is a limited partner in RDP. A subsidiary of Franklin Resources, Inc. ("Franklin Templeton") and certain individuals employed by Franklin Templeton or its affiliates have made passive investments as limited partners in RDP (one of whom serves on the advisory board for RDA, which has no governance or oversight authority over RDA), representing in the aggregate approximately 33% of RDP as of October 31, 2024. In addition, if certain conditions are met, Franklin Templeton will be entitled to receive a portion of any incentive compensation allocable to RDP's general partner. For so long as Franklin Templeton maintains its investment in RDP, Ms. Murphy also has agreed upon request to advise and consult with Franklin Templeton and its affiliates on the market for digital assets. Ms. Murphy provides similar service to other limited partners in RDP that request her advice. Ms. Murphy also is entitled to receive deferred cash compensation in connection with her prior employment by an affiliate of Franklin Templeton, which employment ended at the end of 2021. With regard to Ms. Murphy, the relationships described above may give rise to a potential conflict of interest with respect to the funds.

\*\* Trustee who is an "interested person" (as defined in the 1940 Act) of the fund and the Investment Manager. Mr. Reynolds is deemed an "interested person" by virtue of his position as an officer of the fund and his direct beneficial interest in shares of Franklin Templeton, of which the Investment Manager is an indirect wholly-owned subsidiary. Mr. Reynolds is the President of your fund and each of the other Putnam funds, and prior to January 1, 2024, Mr. Reynolds was President and Chief Executive Officer of Putnam Management and Putnam Investments, LLC ("Putnam Investments"), the previous parent company to Putnam Management.

\*\*\* Trustee who is an "interested person" (as defined in the 1940 Act) of the fund and the Investment Manager. Ms. Trust is deemed an "interested person" by virtue of her positions with certain affiliates of the Investment Manager.

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**Trustee Qualifications** 

Each of the fund's Trustees, with the exception of Ms. Trust and Mr. McGreevey, was most recently elected by shareholders of the fund during 2022, although most of the Trustees have served on the Board for many years. The Board Policy and Nominating Committee is responsible for recommending proposed nominees for election to the full Board of Trustees for its approval. As part of its deliberative process, the Committee considers the experience, qualifications, skills and attributes, including diversity of background, experience, and views, that it determines would most benefit the funds overseen by the Board of Trustees at the time.

In recommending the election of the board members as Trustees, the Committee generally considered the educational, business and professional experience of each Trustee in determining his or her qualifications to serve as a Trustee of the fund, including the Trustee's record of service as a director or trustee of public and private organizations. (This included, but was not limited to, consideration of the specific experience noted in the preceding table.) In the case of most members of the Board, the Committee considered his or her previous service as a member of the Board of Trustees, which demonstrated a high level of diligence and commitment to the interests of fund shareholders and an ability to work effectively and collegially with other members of the Board.

The Committee also considered, among other factors, the particular attributes described below with respect to the various individual Trustees and considered the attributes as indicative of the person's ability to deal effectively with the types of financial, regulatory, and/or investment matters that typically arise in the course of a Trustee's work:

<u>Independent Trustees</u> 

Liaquat Ahamed -- Mr. Ahamed's experience as Chief Executive Officer of a major investment management organization and as head of the investment division at the World Bank, as well as his experience as an author of economic literature.

Barbara M. Baumann -- Ms. Baumann's experience in the energy industry as a consultant, an investor, and in both financial and operational management positions at a global energy company, and her service as a director of multiple NYSE companies.

Katinka Domotorffy -- Ms. Domotorffy's experience as Chief Investment Officer and Global Head of Quantitative Investment Strategies at a major asset management organization.

Catharine Bond Hill -- Dr. Hill's education and experience as an economist and as president and provost of colleges in the United States.

Gregory G. McGreevey -- Mr. McGreevey's experience as a Senior Managing Director of a global investment firm and as a director of a publicly traded real estate investment trust.

Jennifer Williams Murphy -- Ms. Murphy's experience as Chief Operating Officer of a major global investment management organization and as Chief Executive Officer of an investment advisory firm specializing in digital assets.

Marie Pillai -- Ms. Pillai's experience as Vice President, Chief Investment Officer, and Treasurer of a global food company, her experience in similar positions at a global engineering company, and her experience in corporate and operational finance roles at a global consumer products company.

George Putnam III -- Mr. Putnam's training and experience as an attorney, his experience as the founder and Chief Executive Officer of an investment management firm and his experience as an author of various publications on the subject of investments.

Manoj P. Singh -- Mr. Singh's experience as chief operating officer and global managing director of a global professional services organization that provided accounting, consulting, tax, risk management, and financial advisory services.

Mona K. Sutphen -- Ms. Sutphen's extensive experience advising corporate, philanthropic and institutional investors on the intersection of geopolitics, policy and markets, as well as her prior service as White House Deputy Chief of Staff for Policy and as a US Foreign Service Officer, her work advising financial services companies on macro risks, and her service as director of public companies.

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<u>Interested Trustees</u> 

Robert L. Reynolds -- Mr. Reynolds's extensive experience as a senior executive of a major mutual fund organization in the United States and his previous role as President and Chief Executive Officer of Putnam Management and Putnam Investments, LLC, the previous parent company to Putnam Management and PAC.

Jane E. Trust -- Ms. Trust's investment management and risk oversight experience as an executive and portfolio manager and leadership roles within Franklin Templeton and affiliated entities.

**Officers** 

The other officers of the fund, in addition to Robert L. Reynolds, the fund's President, are shown below. All of the officers of your fund listed below are employees of the Investment Manager or its affiliates or are members of the Trustees' independent administrative staff.

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year of Birth, Position(s)**<br> **Held with Fund**<br>| **Length of Service**<br> **with the Putnam**<br> **Funds<sup>2</sup>**<br>| **Principal Occupation(s) During Past 5 Years and**<br> **Position(s) with Fund's Investment Adviser and**<br> **Distributor<sup>3</sup>**<br>|
| &nbsp;&nbsp;&nbsp; **Jonathan S. Horwitz<sup>4</sup>** (Born 1955)<br>Executive Vice President, Principal Executive Officer, and Compliance Liaison<br>| Since 2004 | Executive Vice President, Principal Executive Officer, and Compliance Liaison, The Putnam Funds. |
| &nbsp;&nbsp;&nbsp; **Stephen J. Tate** (Born 1974)<br>Vice President and Chief Legal Officer | Since 2021 | Deputy General Counsel, Franklin Templeton, and Secretary, Putnam U.S. Holdings I, LLC ("Putnam Holdings") and Putnam Management (2024 – Present). General Counsel and related positions, Putnam Investments, Putnam Management and Putnam Retail Management (2004-2023).<br>|
| &nbsp;&nbsp;&nbsp; **James F. Clark<sup>3</sup>** (Born 1974)<br>Vice President and Chief Compliance Officer | Since 2016 | Chief Compliance Officer, Putnam Holdings and Putnam Management (2016 – Present). Associate General Counsel, Putnam Investments, Putnam Management and Putnam Retail Management (2003- 2015).<br>|
| &nbsp;&nbsp;&nbsp; **Michael J. Higgins<sup>4</sup>** (Born 1976)<br>Vice President, Treasurer, and Clerk<br>| Since 2010 | Vice President, Treasurer, and Clerk, The Putnam Funds.<br>|
| &nbsp;&nbsp;&nbsp; **Kevin R. Blatchford** (Born 1967)<br>Vice President and Assistant Treasurer<br>| Since 2024 | Director, Financial Reporting, Putnam Holdings. |
| &nbsp;&nbsp;&nbsp; **Graham Cole** (Born 1984)<br>Vice President and Assistant Treasurer<br>| Since 2024 | Director, Global Fund Tax, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Lindsey Hicks** (Born 1979)<br>Vice President and Assistant Treasurer<br>| Since 2024 | Controller, Fund Administration and Oversight, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Monica Krogh** (Born 1981)<br>Vice President and Assistant Treasurer<br>| Since 2024 | Assistant Treasurer, Fund Administration and Oversight, Franklin Templeton.<br>|

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp; **Name, Address<sup>1</sup>, Year of Birth, Position(s)**<br> **Held with Fund**<br>| **Length of Service**<br> **with the Putnam**<br> **Funds<sup>2</sup>**<br>| **Principal Occupation(s) During Past 5 Years and**<br> **Position(s) with Fund's Investment Adviser and**<br> **Distributor<sup>3</sup>**<br>|
| &nbsp;&nbsp;&nbsp; **Kelley Hunt** (Born 1984)<br>AML Compliance Officer | Since 2024 | Manager, U.S. Financial Crime Compliance, Franklin Templeton.<br>|
| &nbsp;&nbsp;&nbsp; **Jeffrey White** (Born 1971)<br>Vice President, Principal Financial Officer, Principal Accounting Officer, and Assistant Treasurer<br>| Since 2024 | Vice President, Fund Administration and Reporting, Franklin Templeton. |
| &nbsp;&nbsp;&nbsp; **Denere P. Poulack<sup>4</sup>** (Born 1968)<br>Assistant Vice President, Assistant Clerk, and Assistant Treasurer<br>| Since 2004 | Assistant Vice President, Assistant Clerk, and Assistant Treasurer, The Putnam Funds. |

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<sup>1</sup> The address of each Officer, other than as noted below, is 100 Federal Street, Boston, MA 02110. Mr. Cole's address is 5000 Yonge St, Toronto, ON, Canada M2N0A7. Ms. Hicks address is 3355 Data Drive, Rancho Cordova, CA 95670. Ms. Krogh and Mr. Wheeler's address is 300 S.E. 2nd Street, Ft. Lauderdale, FL 33301. Ms. Hunt's address is 100 Fountain Parkway, St. Petersburg, FL 33716. Mr. White's address is One Franklin Parkway, San Mateo, CA 94403.

<sup>2</sup> Each officer serves for an indefinite term, until his or her resignation, retirement, death or removal.

<sup>3</sup> Prior positions and/or officer appointments with the fund or the fund's investment adviser and distributor have been omitted.

<sup>4</sup> Officers of the fund indicated are members of the Trustees' independent administrative staff. Compensation for these individuals is fixed by the Trustees and reimbursed to the Investment Manager by the funds, except in certain cases where a fund has a unitary fee and/or expense limitation arrangement whereby the Investment Manager is responsible for all or a portion of these individuals' compensation.

Except as stated above, the principal occupations of the officers and Trustees for the last five years have been with the employers as shown above, although in some cases they have held different positions with such employers.

**Leadership Structure and Standing Committees of the Board of Trustees** 

**For details regarding the number of times the standing committees of the Board of Trustees met during a fund's last fiscal year, see "Trustee responsibilities and fees" in Part I of this SAI.** 

**Board Leadership Structure**. Currently, 10 of the 12 Trustees of your fund are Independent Trustees, meaning that they are not considered "interested persons" of your fund or the Investment Manager. These Independent Trustees must vote separately to approve all financial arrangements and other agreements with the Investment Manager and other affiliated parties. The role of independent trustees has been characterized as that of a "watchdog" charged with oversight to protect shareholders' interests against overreaching and abuse by those who are in a position to control or influence a fund. Your fund's Independent Trustees meet regularly as a group in executive session (*i.e*., without representatives of the Investment Manager or its affiliates present). An Independent Trustee currently serves as chair of the Board.

Taking into account the number, the diversity and the complexity of the funds overseen by the Board and the aggregate amount of assets under management, your fund's Trustees have determined that the efficient conduct of the Board's affairs makes it desirable to delegate responsibility for certain specific matters to committees of the Board. The Executive Committee, Audit, Compliance and Risk Committee, and Board Policy and Nominating Committee are authorized to take action on certain matters as specified in their charters or in policies and procedures relating to the governance of the funds; with respect to other matters, these committees review and evaluate and make recommendations to the Trustees as they deem appropriate. The other committees also review and evaluate matters specified in their charters and make recommendations to the Trustees as they deem appropriate. Each committee may utilize the resources of your fund's independent staff, counsel and independent

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registered public accountants as well as other experts. The committees meet as often as appropriate, either in conjunction with regular meetings of the Trustees or otherwise. The membership and chair of each committee are appointed by the Trustees upon recommendation of the Board Policy and Nominating Committee. Each committee is chaired by an Independent Trustee and, except as noted below, the membership and chairs of each committee consist exclusively of Independent Trustees.

The Trustees have determined that this committee structure also allows the Board to focus more effectively on the oversight of risk as part of its broader oversight of the fund's affairs. While risk management is the primary responsibility of the Investment Manager, the Trustees receive reports regarding investment risks, compliance risks and other risks. The Board and certain committees also meet periodically with the funds' Chief Compliance Officer to receive compliance reports. In addition, the Board and its Investment Oversight Committees meet periodically with the portfolio managers of the funds to receive reports regarding the management of the funds. The Board's committee structure allows separate committees to focus on different aspects of these risks and their potential impact on some or all of the funds and to discuss with the Investment Manager how it monitors and controls risks.

The Board recognizes that the reports it receives concerning risk management matters are, by their nature, typically summaries of the relevant information. Moreover, the Board recognizes that not all risks that may affect your fund can be identified in advance; that it may not be practical or cost effective to eliminate or to mitigate certain risks; that it may be necessary to bear certain risks (such as investment-related risks) in seeking to achieve your fund's investment objectives; and that the processes, procedures and controls employed to address certain risks may be limited in their effectiveness. As a result of the foregoing and for other reasons, the Board's risk management oversight is subject to substantial limitations.

**Audit, Compliance and Risk Committee**. The Audit, Compliance and Risk Committee provides oversight on matters relating to the integrity of the funds' financial statements, compliance with legal and regulatory requirements, the performance of each fund's internal audit function, Codes of Ethics issues, and certain aspects of overseeing the Investment Manager's risk assessment and risk management. This oversight is discharged by regularly meeting with management and the funds' independent registered public accountants and remaining current with respect to industry developments. Duties of this Committee also include the review and evaluation of all matters and relationships pertaining to the funds' independent registered public accountants, including their independence, and the review of the Investment Manager's oversight of the funds' significant other service providers (unless another committee, or the Board, has this responsibility). The Committee also oversees all dividends and distributions by the funds by making recommendations to the Trustees regarding the amount and timing of dividends and distributions paid by the funds, and determining such matters when the Trustees are not in session. The Committee also oversees the policies and procedures pursuant to which the Investment Manager prepares recommendations for dividends and distributions, and meets regularly with representatives of the Investment Manager to review the implementation of these policies and procedures. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The members of the Committee include only Independent Trustees. Each member of the Committee also is "independent," as that term is interpreted for purposes of Rule 10A-3(b)(1) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the listing standards of the NYSE. The Board has adopted a written charter for the Committee. The current members are Messrs. Singh (Chair) and McGreevey and Mses. Pillai and Sutphen.

**Board Policy and Nominating Committee.** The Board Policy and Nominating Committee reviews matters pertaining to the operations of the Board of Trustees and its Committees, the compensation of the Trustees and their staff, and the conduct of legal affairs for the funds. The Committee evaluates and recommends all candidates for election as Trustees and recommends the appointment of members and chairs of each board committee. The Committee will consider nominees for Trustee recommended by shareholders of a fund provided that such recommendations are submitted by the date disclosed in the fund's proxy statement and otherwise comply with applicable securities laws, including Rule 14a-8 under the Exchange Act. The Committee also reviews policy matters affecting the operation of the Board and its independent staff. In addition, the Committee oversees the voting of proxies associated with portfolio investments of the funds with the goal of ensuring that these proxies are voted in the best interest of the funds' shareholders. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee generally believes that the Board benefits from diversity of background, experience and views among its members, and considers this as a factor in evaluating the composition of the Board, but has not adopted any specific policy in this regard. The Committee is composed entirely of Independent Trustees. The current members are Dr. Hill (Chair), Mses. Baumann and Sutphen, and Mr. Putnam.

**Brokerage Committee**. The Brokerage Committee reviews the funds' policies regarding the execution of portfolio trades and the Investment Manager's (and its affiliates') practices and procedures relating to the implementation of those policies. The Committee reviews periodic reports on the cost and quality of execution of portfolio transactions and the extent to which

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brokerage commissions have been used (i) by the Investment Manager (or its affiliates) to obtain brokerage and research services generally useful to it (or its affiliates) in managing the portfolios of the funds and of its other clients, and (ii) by the funds to pay for certain fund expenses. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The Committee is composed entirely of Independent Trustees. The current members are Messrs. Ahamed (Chair) and Putnam, Mses. Baumann and Domotorffy, and Dr. Hill.

**Contract Committee**. The Contract Committee reviews and evaluates at least annually arrangements pertaining to (i) the engagement of the Investment Manager and its affiliates to provide services to the funds, (ii) the expenditure of the funds' assets for distribution purposes pursuant to Distribution Plans of the funds, and (iii) the engagement of other persons to provide material services to the funds, including in particular those instances where the cost of services is shared between the funds and the Investment Manager and its affiliates or where the Investment Manager or its affiliates have a material interest. The Committee also reviews the proposed organization of new fund products and proposed structural changes to existing funds. In addition, the Committee also reviews communications with, and the quality of services provided to, shareholders and oversees the marketing and sale of fund shares by Franklin Distributors. The Committee reports and makes recommendations to the Trustees regarding these matters. The Committee is composed entirely of Independent Trustees. The current members are Messrs. Putnam (Chair) and Ahamed, Mses. Baumann and Domotorffy, and Dr. Hill.

**Exchange-Traded Fund Committee.** The Exchange-Traded Fund Committee is responsible for assisting the Trustees in their oversight of the funds that are ETFs. The Committee reviews matters arising from time to time relating to the ETFs that are not otherwise within the general subject matter purview of another committee, including, but not limited to: (i) service provider relationships that are specific to the ETFs, (ii) business, industry, legal, and regulatory matters that are specific to the ETFs, (iii) proposals relating to new ETFs, and (iii) transactions involving ETFs. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The current members are Messrs. Ahamed (Chair), McGreevey, and Reynolds, Dr. Hill, and Mses. Domotorffy, Murphy, Sutphen and Trust.

**Executive Committee**. The functions of the Executive Committee are twofold. The first is to ensure that the funds' business may be conducted at times when it is not feasible to convene a meeting of the Trustees or for the Trustees to act by written consent. The Committee may exercise any or all of the power and authority of the Trustees when the Trustees are not in session. The second is to review annual and ongoing goals, objectives and priorities for the Board and to facilitate coordination of all efforts between the Trustees and the Investment Manager on behalf of the shareholders of the funds. The Committee currently consists of Ms. Baumann (Chair) and Messrs. Putnam and Singh.

**Investment Oversight Committees.** The Investment Oversight Committees regularly meet with investment personnel of the Investment Manager and its affiliates to review the investment performance and strategies of the funds in light of their stated goals and policies. The Committees seek to identify any compliance issues that are unique to the applicable categories of funds and work with the appropriate board committees to ensure that any such issues are properly addressed. The Committees review the proposed investment objectives, policies and restrictions of new fund products and proposed changes to investment objectives, policies and restrictions of existing funds. The current members of Investment Oversight Committee A are Mses. Domotorffy (Chair), Murphy and Sutphen, and Messrs. Ahamed, Reynolds, and Singh, and the current members of Investment Oversight Committee B are Mses. Pillai (Chair), Baumann, and Trust, Dr. Hill, and Messrs. McGreevey and Putnam.

**Pricing Committee.** The Pricing Committee oversees the valuation of assets of the funds overseen by the Board of Trustees and reviews the funds' policies and procedures for achieving accurate and timely pricing of fund shares. The Committee oversees implementation of these policies, including fair value determinations of individual securities made by the Investment Manager or other designated agents of the funds. The Committee also reviews (i) compliance by money market funds with Rule 2a-7 under the 1940 Act, (ii) in-kind redemptions by the fund affiliates, (iii) the correction of occasional pricing errors, and (iv) the Investment Manager's oversight of pricing vendors. The Committee reports to the Trustees and makes recommendations to the Trustees regarding these matters. The current members are Messrs. Singh (Chair), McGreevey, and Reynolds and Mses. Murphy, Pillai, Sutphen, and Trust.

**Indemnification** 

Subject to certain exceptions specified therein, the Trust's Amended and Restated Agreement and Declaration of Trust provides that the Trust and each fund will indemnify its Trustees and officers to the fullest extent permitted by law against liability and against all expenses reasonably incurred or paid by him or her in connection with any claim, action, suit or proceeding in which he or she becomes involved as a party or otherwise by virtue of his or her being or having been a trustee or officer of the Trust

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and against amounts paid or incurred by him or her in the settlement thereof. Each fund, at its expense, provides liability insurance for the benefit of its Trustees and officers.

**For details of Trustees' fees paid by the fund and information concerning retirement guidelines for the Trustees, see "Charges and expenses" in Part I of this SAI.** 

**The Investment Manager and its Affiliates** 

*Putnam Investment Management, LLC* 

If so disclosed in the fund's prospectus, Putnam Management serves as Investment Manager to the fund. Putnam Management is one of America's oldest money management firms. Putnam Management has been managing mutual funds since 1937.

*Franklin Advisers, Inc.* 

If so disclosed in the fund's prospectus, Franklin Advisers serves as Investment Manager to the fund. Franklin Advisers, Inc., a global investment organization, is a California corporation formed on October 31, 1985.

**Additional information about Putnam Management and Franklin Advisers** 

Putnam Management and Franklin Advisers are indirect, wholly-owned subsidiaries of Franklin Templeton, a Delaware corporation. Franklin Templeton, whose principal executive offices are at One Franklin Parkway, San Mateo, California 94403, is a global investment management organization.

Trustees and officers of the fund who are also officers of Putnam Management, Franklin Advisers or their affiliates or who are stockholders of Franklin Templeton or its affiliates will benefit from the advisory fees, sales commissions, distribution fees and transfer agency fees paid or allowed by the fund.

**The Management Contract** 

Under a management contract between the fund and the Investment Manager (the "Management Contract"), subject to such policies as the Trustees may determine, the Investment Manager, at its expense, furnishes continuously an investment program for the fund and makes investment decisions on behalf of the fund. Subject to the control of the Trustees, the Investment Manager also manages, supervises and conducts the other affairs and business of the fund, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully, furnishes office space and equipment, provides bookkeeping and clerical services (including determination of the fund's net asset value, but excluding shareholder accounting services) and typically places orders for the purchase and sale of the fund's portfolio securities (in some cases, Putnam Management and Franklin Advisers, in their capacities as sub-advisers to a fund, may place orders for the purchase and sale of the fund's portfolio securities, and references elsewhere in this SAI to the Investment Manager placing orders for the purchase and sale of portfolio securities shall be deemed to include Putnam Management and Franklin Advisers in their capacities as sub-advisers, as appropriate in the context). The Investment Manager may place fund portfolio transactions with broker-dealers that furnish the Investment Manager, without cost to it, certain research services of value to the Investment Manager and its affiliates in advising the fund and other clients. In so doing, the Investment Manager may cause the fund to pay greater brokerage commissions than it might otherwise pay.

Franklin Templeton Services, LLC ("FT Services") has entered into an agreement with the Investment Manager to provide certain administrative services and facilities for the fund. FT Services is an indirect, wholly-owned subsidiary of Franklin Templeton and is an affiliate of the Investment Manager, the fund's investment manager. The administrative services FT Services provides include preparing and maintaining books, records, and tax and financial reports, and monitoring compliance with regulatory requirements. The Investment Manager pays FT Services a monthly fee equal to 105% of the internal costs incurred by FTS for providing administrative services to the Putnam ETFs. The Investment Manager will also reimburse FT Services for fees paid by FT Services to any third-party service provider for sub-administration and other services for the fund.

**For details of the Investment Manager's compensation under the Management Contract, see "Charges and expenses" in Part I of this SAI.** 

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The Management Contract provides that the Investment Manager shall not be subject to any liability to the fund or to any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its duties on the part of the Investment Manager.

The Management Contract may be terminated without penalty by vote of the Trustees or the shareholders of the fund, or by the Investment Manager, on not less than 60 days' written notice. Subject to certain exceptions, it may be amended only by a vote of the shareholders of the fund. The Management Contract also terminates without payment of any penalty in the event of its assignment. The Management Contract provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

**The Sub-Advisers** 

*<u>Putnam Investment Management, LLC</u>*

If so disclosed in the fund's prospectus, Putnam Management, an affiliate of Franklin Advisers, has been retained as a sub-adviser by Franklin Advisers, at Franklin Advisers' own expense, to make investment decisions for such fund assets as may be designated from time to time for its management by Franklin Advisers and to provide certain other advisory and related services pursuant to a subadvisory agreement between Franklin Advisers and Putnam Management. The other advisory and related services may include the facilitation of derivative transactions, sharing of investment research if so requested by Franklin Advisers, and proxy voting, and these services are subject to change over time.

The subadvisory agreement provides that Putnam Management shall not be subject to any liability to Franklin Advisers, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of Putnam Management.

The subadvisory agreement may be terminated with respect to the fund without penalty by vote of the Trustees or shareholders of the fund, or by Franklin Advisers or Putnam Management upon 60 days' written notice. The subadvisory agreement also terminates without payment of any penalty in the event of its assignment or upon any termination of the management contract between Franklin Advisers and the fund. The subadvisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not parties to the subadvisory agreement or "interested persons" thereof. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

For additional information about Putnam Management, see "Putnam Investment Management, LLC" under "The Investment Manager and its Affiliates" above.

*<u>Franklin Advisers, Inc.</u>*

If so disclosed in the fund's prospectus, Franklin Advisers, an affiliate of Putnam Management, has been retained as a sub-adviser to provide by Putnam Management, at Putnam Management's own expense, to make investment decisions for such fund assets as may be designated from time to time for its management by Putnam Management and to provide certain other advisory and related services pursuant to a subadvisory agreement between Putnam Management and Franklin Advisers. The other advisory and related services may include the facilitation of foreign exchange transactions, sharing of investment research if so requested by Putnam Management, and managing the fund's investments in cash or cash equivalents, and these services are subject to change over time.

The subadvisory agreement provides that Franklin Advisers shall not be subject to any liability to Putnam Management, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of Franklin Advisers.

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The subadvisory agreement may be terminated with respect to the fund without penalty by vote of the Trustees or shareholders of the fund, or by Putnam Management or Franklin Advisers or upon 60 days' written notice. The subadvisory agreement also terminates without payment of any penalty in the event of its assignment or upon any termination of the management contract between Putnam Management and the fund. The subadvisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not parties to the subadvisory agreement or "interested persons" thereof. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

For additional information about Franklin Advisers, see "Franklin Advisers, Inc." under "The Investment Manager and its Affiliates" above.

*<u>Franklin Templeton Investment Management Limited</u>*

If so disclosed in the fund's prospectus, FTIML, an affiliate of the Investment Manager, has been retained as a sub-adviser for a portion of the assets of the fund, as determined from time to time by the Investment Manager pursuant to a sub-advisory agreement between the Investment Manager and FTIML. Under the terms of the sub-advisory agreement, FTIML, at its own expense, manages the investment and reinvestment of that portion of each such fund's portfolio that is allocated to FTIML from time to time by the Investment Manager, with FTIML determining what securities and other property will be purchased, retained or sold with respect to such portion, and placing all purchase and sale orders with respect to such portion, subject to the supervision of the Investment Manager. The Investment Manager may also, at its discretion, request FTIML to provide assistance with purchasing and selling securities for the fund, including placement of orders with certain broker-dealers, and to perform research and obtain and evaluate data relevant to the fund's investment strategies and policies.

Pursuant to the terms of the sub-advisory agreement, FTIML will pay all expenses incurred by it in connection with its activities under this agreement other than the cost of securities (including brokerage commissions, if any) purchased for the fund. The sub-advisory agreement provides that, in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of FTIML, neither FTIML, nor any of its directors, officers, employees or affiliates, shall be subject to liability to the Investment Manager, the fund or any shareholder of the fund for any error of judgment or mistake of law or any other act or omission in the course of, or connected with, rendering services to the fund or for any losses that may be sustained in the purchase, holding or sale of any security by the fund.

The sub-advisory agreement may be terminated at any time with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund upon not more than sixty days' written notice to the Investment Manager and FTIML, and by FTIML or the Investment Manager on not more than 60 days' written notice to the other party. The sub-advisory agreement also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. The sub-advisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of the Investment Manager or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

*<u>PanAgora Asset Management, Inc.</u>*

If so disclosed in the fund's prospectus, PanAgora, an affiliate of Putnam Management, has been retained as the sub-adviser for a portion of the assets of the fund, as determined from time to time by Putnam Management, by Putnam Management pursuant to a sub-advisory agreement between Putnam Management and PanAgora.

PanAgora, a Delaware corporation organized in 1985 and incorporated in 1989, is located at One International Place, 24th Floor, Boston, Massachusetts 02110. In addition, certain PanAgora employees own non-voting interests in PanAgora. Assuming all employee stock and options are issued and exercised, up to 20% of the economic interest in PanAgora would be owned by PanAgora employees.

Under certain terms of the sub-advisory agreement, PanAgora, at its own expense, furnishes continuously an investment program for that portion of each such fund that is allocated to PanAgora from time to time by Putnam Management, and makes

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investment decisions on behalf of such portion of the fund, subject to the supervision of the Board of Trustees and Putnam Management.

PanAgora, at its expense, furnishes all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties. The sub-advisory agreement provides that PanAgora shall not be subject to any liability to Putnam Management, the fund or any shareholder of the fund for any act or omission in the course of or connected with rendering services to the fund in the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of its obligations and duties on the part of PanAgora.

The sub-advisory agreement may be terminated with respect to a fund without penalty by vote of the Trustees or the shareholders of the fund, or by PanAgora or Putnam Management, on not more than 60 days' nor less than 30 days' written notice. The sub-advisory agreement also terminates without payment of any penalty in the event of its assignment. Subject to applicable law, it may be amended by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. The sub-advisory agreement provides that it will continue in effect only so long as such continuance is approved at least annually by vote of either the Trustees or the shareholders, and, in either case, by a majority of the Trustees who are not "interested persons" of Putnam Management or the fund. In each of the foregoing cases, the vote of the shareholders is the affirmative vote of a "majority of the outstanding voting securities" as defined in the 1940 Act.

**Portfolio Transactions** 

**Potential conflicts of interest in managing multiple accounts.** 

*Investment Manager* 

Like other investment professionals with multiple clients, the fund's Portfolio Manager(s) may face certain potential conflicts of interest in connection with managing both the fund and the other accounts listed under **"PORTFOLIO MANAGER(S)" "Other accounts managed"** at the same time. The paragraphs below describe some of these potential conflicts, which the Investment Manager believes are faced by investment professionals at most major financial firms. As described below, the Investment Manager and the Trustees have adopted compliance policies and procedures that attempt to address certain of these potential conflicts.

The management of accounts with different advisory fee rates and/or fee structures, including accounts that pay advisory fees based on account performance ("performance fee accounts"), may raise potential conflicts of interest by creating an incentive to favor higher-fee accounts. These potential conflicts may include, among others:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The most attractive investments could be allocated to higher-fee accounts or performance fee accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The trading of higher-fee accounts could be favored as to timing and/or execution price. For example, higher-fee accounts could be permitted to sell securities earlier than other accounts when a prompt sale is desirable or to buy securities at an earlier and more opportune time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The trading of other accounts could be used to benefit higher-fee accounts (front-running).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The investment management team could focus their time and efforts primarily on higher-fee accounts due to a personal stake in compensation.

The Investment Manager attempts to address these potential conflicts of interest relating to higher-fee accounts through various compliance policies that are generally intended to place all accounts, regardless of fee structure, on the same footing for investment management purposes. For example, under the Investment Manager's policies:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Performance fee accounts must be included in all standard trading and allocation procedures with all other accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• All accounts must be allocated to a specific category of account and trade in parallel with allocations of similar accounts based on the procedures generally applicable to all accounts in those groups (e.g., based on relative risk budgets of accounts).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• All trading must be effected through Putnam's trading desks and normal queues and procedures must be followed (i.e., no special treatment is permitted for performance fee accounts or higher-fee accounts based on account fee structure).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Front running is strictly prohibited.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Except as provided in Part I of this SAI, the fund's Portfolio Manager(s) may not be guaranteed or specifically allocated any portion of a performance fee.

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As part of these policies, the Investment Manager has also implemented trade oversight and review procedures in order to monitor whether particular accounts (including higher-fee accounts or performance fee accounts) are being favored over time.

Potential conflicts of interest may also arise when the Portfolio Manager(s) have personal investments in other accounts that may create an incentive to favor those accounts. As a general matter and subject to limited exceptions, the Investment Manager's investment professionals do not have the opportunity to invest in client accounts, other than Putnam funds. However, in the ordinary course of business, the Investment Manager or related persons may from time to time establish "pilot" or "incubator" accounts for the purpose of testing proposed investment strategies and products before offering them to clients. These pilot accounts may be in the form of registered investment companies, private funds such as partnerships or separate accounts established by the Investment Manager or an affiliate. The Investment Manager or an affiliate supplies the funding for these accounts. Putnam employees, including the fund's Portfolio Manager(s), may also invest in certain pilot accounts. The Investment Manager, and to the extent applicable, the Portfolio Manager(s) will benefit from the favorable investment performance of pilot accounts. Pilot funds and accounts may, and frequently do, invest in the same securities as the client accounts. The Investment Manager's policy is to treat pilot accounts in the same manner as client accounts for purposes of trading allocation – neither favoring nor disfavoring them except as is legally required. For example, pilot accounts are normally included in the Investment Manager's daily block trades to the same extent as client accounts (except that pilot accounts do not participate in initial public offerings).

A potential conflict of interest may arise when the fund and other accounts purchase or sell the same securities. On occasions when the Portfolio Manager(s) consider the purchase or sale of a security to be in the best interests of the fund as well as other accounts, the Investment Manager's trading desk may, to the extent permitted by applicable laws and regulations and where practicable, aggregate the securities to be sold or purchased in order to obtain the best execution and lower brokerage commissions, if any. Aggregation of trades may create the potential for unfairness to the fund or another account if one account is favored over another in allocating the securities purchased or sold – for example, by allocating a disproportionate amount of a security that is likely to increase in value to a favored account. The Investment Manager's trade allocation policies generally provide that each day's transactions in securities that are purchased or sold by multiple accounts are, insofar as possible, averaged as to price and allocated between such accounts (including the fund) in a manner which in the Investment Manager's opinion is equitable to each account and in accordance with the amount being purchased or sold by each account. However, accounts advised or sub-advised by FTIML will only place trades at an execution-only commission rate, whereas other Putnam accounts may pay an additional amount for research and other products and services (a "bundled" or "full service" rate). The Investment Manager may aggregate trades in FTIML accounts with other Putnam accounts that pay a bundled rate as long as all participating accounts pay the same execution rate. To the extent that non- FTIML accounts pay a bundled rate, the FTIML and other the Investment Manager accounts would not be paying the same total commission rate. Certain other exceptions exist for specialty, regional or sector accounts. Trade allocations are reviewed on a periodic basis as part of the Investment Manager's trade oversight procedures in an attempt to ensure fairness over time across accounts.

"Cross trades," in which one Putnam account sells a particular security to another account (potentially saving transaction costs for both accounts), may also pose a potential conflict of interest. Cross trades may be seen to involve a potential conflict of interest if, for example, one account is permitted to sell a security to another account at a higher price than an independent third party would pay, or if such trades result in more attractive investments being allocated to higher-fee accounts. The Investment Manager and the fund's Trustees have adopted compliance procedures that provide that any transactions between the fund and another Putnam-advised account are to be made at an independent current market price, as required by law.

Another potential conflict of interest may arise based on the different goals and strategies of the fund and other accounts. For example, another account may have a shorter-term investment horizon or different goals, policies or restrictions than the fund. Depending on goals or other factors, the Portfolio Manager(s) may give advice and make decisions for another account that may differ from advice given, or the timing or nature of decisions made, with respect to the fund. In addition, investment decisions are the product of many factors in addition to basic suitability for the particular account involved. Thus, a particular security may be bought or sold for certain accounts even though it could have been bought or sold for other accounts at the same time. More rarely, a particular security may be bought for one or more accounts managed by the Portfolio Manager(s) when one or more other accounts are selling the security (including short sales). There may be circumstances when purchases or sales of portfolio securities for one or more accounts may have an adverse effect on other accounts. As noted above, the Investment Manager has implemented trade oversight and review procedures to monitor whether any account is systematically favored over time.

Under federal securities laws, a short sale of a security by another client of the Investment Manager or its affiliates (other than another registered investment company) within five business days prior to a public offering of the same securities (the timing of

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which is generally not known to Putnam in advance) may prohibit the fund from participating in the public offering, which could cause the fund to miss an otherwise favorable investment opportunity or to pay a higher price for the securities in the secondary markets.

The fund's Portfolio Manager(s) may also face other potential conflicts of interest in managing the fund, and the description above is not a complete description of every conflict that could be deemed to exist in managing both the fund and other accounts. For information on restrictions imposed on personal securities transactions of the fund's Portfolio Manager(s), please see "Personal Investments by Employees of the Investment Manager and Franklin Distributors and Officers and Trustees of the Fund."

*PanAgora* 

The portfolio managers' management of other accounts may give rise to potential conflicts of interest in connection with their management of the fund's investments, on the one hand, and the investments of the other accounts, on the other. The other accounts include retirement plans and separately managed accounts ("SMA's"), as well as incubated accounts. The other accounts might have similar investment objectives as the fund, or hold, purchase or sell securities that are eligible to be held, purchased or sold by the fund. While the portfolio managers' management of other accounts may give rise to the following potential conflicts of interest, PanAgora does not believe that the conflicts, if any, are material or, to the extent any such conflicts are material, PanAgora believes that it has designed policies and procedures to manage those conflicts in an appropriate way.

A potential conflict of interest may arise as a result of the portfolio managers' day-to-day management of the fund. Because of their positions with the fund, the portfolio managers know the size, timing and possible market impact of the fund's trades. It is theoretically possible that the portfolio managers could use this information to the advantage of other accounts they manage and to the possible detriment of the fund. However, PanAgora has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time.

A potential conflict of interest may arise as a result of the portfolio managers' management of the fund, and other accounts, which, in theory, may allow them to allocate investment opportunities in a way that favors other accounts over the fund. This conflict of interest may be exacerbated to the extent that PanAgora or the portfolio managers receive, or expect to receive, greater compensation from their management of the other accounts than the fund. Notwithstanding this theoretical conflict of interest, it is PanAgora's policy to manage each account based on its investment objectives and related restrictions and, as discussed above, PanAgora has adopted policies and procedures reasonably designed to allocate investment opportunities on a fair and equitable basis over time and in a manner consistent with each account's investment objectives and related restrictions. For example, while the portfolio managers may buy for other accounts securities that differ in identity or quantity from securities bought for the fund, such securities might not be suitable for the fund given its investment objective and related restrictions.

For information about other funds and accounts managed by the fund's Portfolio Manager(s), please refer to "Who oversees and manages the fund(s)?" in the prospectus and **"PORTFOLIO MANAGER(S)" "Other accounts managed"** in Part I of the SAI.

**Brokerage and research services.** 

Transactions on stock exchanges, commodities markets and futures markets and other agency transactions involve the payment by the fund of negotiated brokerage commissions. Such commissions may vary among different brokers. A particular broker may charge different commissions according to such factors as execution venue and exchange. Although the fund does not typically pay commissions for principal transactions in the over-the-counter markets, such as the markets for most fixed income securities and certain derivatives, an undisclosed amount of profit or "mark-up" is included in the price the fund pays. In underwritten offerings, the price paid by the fund includes a disclosed, fixed commission or discount retained by the underwriter or dealer. **See "Charges and expenses" in Part I of this SAI for information concerning commissions paid by the fund**.

It has for many years been a common practice in the investment advisory business for broker-dealers that execute portfolio transactions for the clients of advisers of investment companies and other institutional investors to provide those advisers with brokerage and research services, as defined in Section 28(e) of the Exchange Act. Consistent with this practice, the Investment Manager receives brokerage and research services from broker-dealers with which the Investment Manager places the fund's portfolio transactions. The products and services that broker-dealers may provide to the Investment Manager's managers and analysts include, among others, trading systems and other brokerage services, economic and political analysis, fundamental and macro investment research, industry and company reviews, statistical information, market data, evaluations of investments,

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strategies, markets and trading venues, recommendations as to the purchase and sale of investments, performance measurement services and meetings with management of current or prospective portfolio companies or with industry experts. Some of these services are of value to the Investment Manager and its affiliates in advising various of their clients (including the fund), although not all of these services are necessarily useful and of value in managing the fund. Research services provided by broker-dealers are supplemental to the Investment Manager's own research efforts and relieve the Investment Manager of expenses it might otherwise have borne in generating such research. The management fee paid by the fund is not reduced because the Investment Manager and its affiliates receive brokerage and research services even though the Investment Manager might otherwise be required to purchase some of these services for cash. The Investment Manager may also use portfolio transactions to generate "soft dollar" credits to pay for "mixed-use" services (i.e., products or services that may be used both for investment/brokerage- and non-investment/brokerage-related purposes), but in such instances the Investment Manager uses its own resources to pay for that portion of the mixed-use product or service that in its good-faith judgment does not relate to investment or brokerage purposes. The Investment Manager may also allocate trades to generate soft dollar credits for third-party investment research reports and related fundamental research.

The Investment Manager places all orders for the purchase and sale of portfolio investments for the funds, and buys and sells investments for the funds, through a substantial number of brokers and dealers. In selecting broker-dealers to execute the funds' portfolio transactions, the Investment Manager uses its best efforts to obtain for each fund the most favorable price and execution reasonably available under the circumstances, except to the extent it may be permitted to pay higher brokerage commissions as described below. In seeking the most favorable price and execution and in considering the overall reasonableness of the brokerage commissions paid, the Investment Manager, having in mind the fund's best interests, considers all factors it deems relevant, including, in no particular order of importance, and by way of illustration, the price, size and type of the transaction, the nature of the market for the security or other investment, the amount of the commission, research and brokerage services provided by a broker-dealer, the timing of the transaction taking into account market prices and trends, the reputation, experience and financial stability of the broker-dealer involved, the benefit of any capital committed by a broker-dealer to facilitate the efficient execution of the transaction and the quality of service rendered by the broker-dealer in other transactions.

The Investment Manager may cause the fund to pay a broker-dealer that provides "brokerage and research services" (as defined in the Exchange Act and as described above) to the Investment Manager an amount of disclosed commission for effecting securities transactions on stock exchanges and other transactions for the fund on an agency basis in excess of the commission another broker-dealer would have charged for effecting that transaction. The Investment Manager may also instruct an executing broker to "step out" a portion of the trades placed with a broker to other brokers that provide brokerage and research services to the Investment Manager. The Investment Manager's authority to cause the fund to pay any such greater commissions or to instruct a broker to "step out" a portion of a trade is subject to the requirements of applicable law and such policies as the Trustees may adopt from time to time. It is the position of the staff of the SEC that Section 28(e) of the Exchange Act does not apply to the payment of such greater commissions in "principal" transactions. Accordingly, the Investment Manager will use its best effort to obtain the most favorable price and execution available with respect to such transactions, as described above.

The Management Contract provides that commissions, fees, brokerage or similar payments received by the Investment Manager or an affiliate in connection with the purchase and sale of portfolio investments of the fund, less any direct expenses approved by the Trustees, shall be recaptured by the fund through a reduction of the fee payable by the fund under the Management Contract. The Investment Manager seeks to recapture for the fund soliciting dealer fees on the tender of the fund's portfolio securities in tender or exchange offers. Any such fees which may be recaptured are likely to be minor in amount.

For those funds sub-advised by FTIML and where FTIML places trades on behalf of those funds, the rules of the United Kingdom's Financial Conduct Authority (the "FCA Rules") apply with respect to the receipt of investment research. Under the FCA Rules, FTIML may not obtain research using brokerage commissions paid by funds sub-advised by FTIML. FTIML will use only "hard dollars" (i.e., from its own resources) to acquire external research used by London-based personnel, including fixed income personnel, except with respect to Minor Non-Monetary Benefits.

Minor Non-Monetary Benefits include, among other categories:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research from independent research providers who are not engaged in execution services and are not part of a financial services group that offers execution or brokerage services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research on listed and unlisted small and medium-sized enterprises with a market capitalization below £200 million;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Research focusing on fixed income, currency, and commodity investment strategies; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Written research that is openly available to other firms or to the general public.

FTIML may use soft dollar commissions generated by trades of the Investment Manager and other Putnam affiliates other than FTIML to obtain research received by employees of FTIML that qualify as a Minor Non-Monetary Benefit.

**Principal Underwriter** 

Franklin Distributors, located at One Franklin Parkway, San Mateo, CA 94403-1906, is the principal underwriter of shares of the fund and the other continuously offered Putnam Funds. Franklin Distributors is a registered broker-dealer, a member of the Financial Industry Regulatory Authority, and an indirect, wholly-owned subsidiary of Franklin Templeton. See "Charges and expenses" in Part I of this SAI for information on payments received by Franklin Distributors or Foreside Fund Services, LLC, the principal underwriter for the certain of the funds prior to August 2, 2024.

**Personal Investments by Employees of Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and Officers and Trustees of the Fund** 

Employees of Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and officers and Trustees of the fund are subject to significant restrictions on engaging in personal securities transactions. These restrictions are set forth in the Codes of Ethics adopted by Putnam Management, Franklin Advisers, FTIML and Franklin Distributors and by the fund (the "Code of Ethics"). The Code of Ethics, in accordance with Rule 17j-1 under the 1940 Act, contains provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the fund.

The Code of Ethics does not prohibit personnel from investing in securities that may be purchased or held by the fund. However, the Code of Ethics, consistent with standards recommended by the Investment Company Institute's Advisory Group on Personal Investing and requirements established by Rule 17j-1 and rules adopted under the Investment Advisers Act of 1940, among other things, prohibits personal securities investments without pre-clearance, imposes time periods during which personal transactions may not be made in certain securities by employees with access to investment information, and requires the timely submission of broker confirmations and quarterly reporting of personal securities transactions. Additional restrictions apply to portfolio managers, traders, research analysts and others involved in the investment advisory process.

The Code of Ethics does not prohibit unaffiliated officers and Trustees from investing in securities that may be held by the fund; however, the Putnam Funds Code of Ethics regulates the personal securities transactions of unaffiliated Trustees of the fund, including limiting the time periods during which they may personally buy and sell certain securities and requiring them to submit reports of personal securities transactions under certain circumstances.

The fund's Trustees, in compliance with Rule 17j-1, approved the Code of Ethics and are required to approve any material changes to the Code of Ethics. The Trustees also provide continued oversight of personal investment policies and annually evaluate the implementation and effectiveness of the Code of Ethics.

**Transfer Agent** 

State Street Bank and Trust Company, located at One Congress Street, Suite 1, Boston, Massachusetts 02114-2016, is the fund's transfer agent. The Investment Manager, and not the fund, bears the cost of these services under the terms of its management contract with the fund.

**Custodian** 

[State Street Bank and Trust Company, located at One Congress Street, Suite 1, Boston, Massachusetts 02114-2016, is the fund's custodian. State Street is responsible for safeguarding and controlling the fund's cash and securities, handling the receipt and delivery of securities, collecting interest and dividends on the fund's investments, serving as the fund's foreign custody manager, providing reports on foreign securities depositaries, making payments covering the expenses of the fund and performing other administrative duties. State Street does not determine the investment policies of the fund or decide which securities the fund will buy or sell. State Street has a lien on the fund's assets to secure charges and advances made by it. The fund may from time to time enter into brokerage arrangements that reduce or recapture fund expenses, including custody

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expenses. The fund also has an offset arrangement that may reduce the fund's custody fee based on the amount of cash maintained by its custodian.]

**Auditor** 

[ ], 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.

**Counsel to the Fund** 

Ropes & Gray LLP serves as counsel to the fund, and is located at Prudential Tower, 800 Boylston Street, Boston, Massachusetts 02199.

**DETERMINATION OF NET ASSET VALUE** 

The fund determines the net asset value per share once each day the NYSE is open. Currently, the NYSE is closed Saturdays, Sundays and the following holidays: New Year's Day, Rev. Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Juneteenth, the Fourth of July, Labor Day, Thanksgiving Day and Christmas Day. The fund determines net asset value as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern Time. The net asset value per share equals the total value of its assets, less its liabilities, divided by the number of its outstanding shares.

Securities and other assets ("Securities") for which market quotations are readily available, as defined by Rule 2a-5 under the 1940 Act, are valued at prices which, in the opinion of the Investment Manager, most nearly represent the market values of such Securities. Currently, prices for these Securities are determined using the last reported sale price (or official closing price for Securities listed on certain markets) or, if no sales are reported (as in the case of some Securities traded over-the-counter), the mean between the last reported bid and ask prices, the "mid price" (prior to July 22, 2024, the last reported bid price was used). All other Securities are valued by the Investment Manager or other parties at their fair value following procedures approved by the Trustees.

Reliable market quotations are not considered to be readily available for, among other Securities, long-term corporate bonds and notes, certain preferred stocks, tax-exempt securities, and certain foreign securities. These investments are valued at fair value, generally on the basis of valuations furnished by approved pricing services, which determine valuations for normal, institutional-size trading units of such securities using methods based on market transactions for comparable securities and various relationships between securities that are generally recognized by institutional traders. Other Securities, such as various types of options, are valued at fair value on the basis of valuations furnished by broker-dealers or other market intermediaries.

The Investment Manager values all other Securities at fair value using its internal resources. The valuation procedures applied in any specific instance are likely to vary from case to case. However, consideration is generally given to the financial position of the issuer and other fundamental analytical data relating to the investment and to the nature of the restrictions on disposition of the Securities (including any registration expenses that might be borne by the fund in connection with such disposition). In addition, specific factors are also generally considered, such as the cost of the investment, the market value of any unrestricted Securities of the same class, the size of the holding, the prices of any recent transactions or offers with respect to such Securities and any available analysts' reports regarding the issuer. In the case of Securities that are restricted as to resale, the Investment Manager determines fair value based on the inherent worth of the Security without regard to the restrictive feature, adjusted for any diminution in value resulting from the restrictive feature.

Generally, trading in certain Securities (such as foreign securities) is substantially completed each day at various times before the close of the NYSE. The closing prices for these Securities in markets or on exchanges outside the U.S. that close before the close of the NYSE may not fully reflect events that occur after such close but before the close of 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 fair value prices will be used will vary, it is possible that fair value prices will be used by the fund to a significant extent. In addition, Securities held by some of the funds may be traded in foreign markets that are open for business on days that the fund is not, and the trading of such Securities on those days may have an impact on the value of a shareholder's investment at a time when the shareholder cannot buy and sell shares of the fund.

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Currency exchange rates used in valuing Securities are normally determined as of 4:00 p.m. Eastern Time. Occasionally, events affecting such exchange rates may occur between the time of the determination of exchange rates and the close of the NYSE, which, in the absence of fair valuation, would not be reflected in the computation of the fund's net asset value. If events materially affecting the currency exchange rates occur during such period, then the exchange rates used in valuing affected Securities will be valued by the Investment Manager at their fair value following procedures approved by the Trustees.

In addition, because of the amount of time required to collect and process trading information as to large numbers of securities issues, the values of certain Securities (such as convertible bonds, U.S. government securities and tax-exempt securities) are determined based on market quotations collected before the close of the NYSE. Occasionally, events affecting the value of such Securities may occur between the time of the determination of value and the close of the NYSE, which, in the absence of fair value prices, would not be reflected in the computation of the fund's net asset value. If events materially affecting the value of such Securities occur during such period, then these Securities will be valued by the Investment Manager at their fair value following procedures approved by the Trustees. It is expected that any such instance would be very rare.

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 at a given point in time and does not reflect an actual market price.

The fund may also value its Securities at fair value under other circumstances pursuant to procedures approved by the Trustees. **Money Market Funds**

"Retail money market funds" and "government money market funds" each as defined by Rule 2a-7 under the 1940 Act generally value their portfolio securities at amortized cost according to Rule 2a-7 under the 1940 Act.

Since the net income of a money market fund is declared as a dividend each time it is determined, the net asset value per share of a retail money market fund and government money market fund typically remains at $1.00 per share immediately after such determination and dividend declaration. Any increase in the value of a shareholder's investment in a money market fund representing the reinvestment of dividend income is reflected by an increase in the number of shares of that fund in the shareholder's account on the last business day of each month. It is expected that a money market fund's net income will normally be positive each time it is determined. However, if because of realized losses on sales of portfolio investments, a sudden rise in interest rates, or for any other reason the net income of a fund determined at any time is a negative amount, a money market fund may offset such amount allocable to each then shareholder's account from dividends accrued during the month with respect to such account. If, at the time of payment of a dividend, such negative amount exceeds a shareholder's accrued dividends, a money market fund may reduce the number of outstanding shares by treating the shareholder as having contributed to the capital of the fund that number of full and fractional shares which represent the amount of the excess. Each shareholder is deemed to have agreed to such contribution in these circumstances by his or her investment in a money market fund.

**SHAREHOLDER LIABILITY** 

The Trust is a statutory trust organized under Delaware law. Delaware law provides that, except to the extent otherwise provided in the Amended and Restated Agreement and Declaration of Trust, shareholders shall be entitled to the same limitations of personal liability extended to stockholders of private corporations for profit organized under the general corporation law of Delaware. The courts of some states, however, may decline to apply Delaware law on this point. The Amended and Restated Agreement and Declaration of Trust contains an express disclaimer of shareholder liability for the debts, liabilities, obligations, and expenses incurred by, contracted for, or otherwise existing with respect to, the Trust or the funds.

The Amended and Restated Agreement and Declaration of Trust provides that the Trust shall not have any claim against shareholders except for the payment of the purchase price of shares and requires that each agreement, obligation, or instrument entered into or executed by the Trust or the Trustees relating to the Trust or to a fund shall include a provision limiting the obligations created thereby to the Trust or to one or more funds and its or their assets. The Amended and Restated Agreement and Declaration of Trust further provides that shareholders of a fund shall not have a claim on or right to any assets belonging to any other fund.

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**DISCLOSURE OF PORTFOLIO INFORMATION** 

The Trustees of the Putnam funds have adopted policies with respect to the disclosure of the fund's portfolio holdings by the fund, the Investment Manager, or their affiliates. These policies provide that information about the fund's portfolio generally may not be released to any party prior to (i) the day after the posting of such information on franklintempleton.com, (ii) the filing of the information with the SEC in a required filing, or (iii) the dissemination of such information to all shareholders simultaneously. Certain limited exceptions pursuant to the fund's policies are described below. In addition, these policies do not apply to the sharing of fund portfolio holdings information with investment personnel involved in the management of other funds that invest in such fund and that are managed by the Investment Manager or its affiliates. The Trustees will periodically receive reports from the fund's Chief Compliance Officer regarding the operation of these policies and procedures, including any arrangements to make non-public disclosures of the fund's portfolio information to third parties. The Investment Manager and its affiliates are not permitted to receive compensation or other consideration in connection with disclosing information about the fund's portfolio holdings to third parties.

**Public Disclosures** 

On each Business Day, before commencement of trading in shares on the listing exchange, each fund will disclose its complete portfolio holdings on its website. The fund will disclose its top 10 holdings and related portfolio information monthly beginning on or after 5 business days after the end of each month on franklintempleton.com. The find will also disclose on its website its complete holdings as of the end of the prior month on a monthly basis beginning on or before the 15th calendar day after the end of each month..

The fund will also file its portfolio holdings with the SEC twice each year on Form N-CSR (with respect to each annual period and semi-annual period). In addition, the fund will file reports of portfolio holdings on Form N-PORT 60 days after each fiscal quarter (for the respective fiscal quarter), with the schedule of portfolio holdings filed on Form N-PORT for the third month of the first and third fiscal quarter made publicly available. Shareholders may obtain the Form N-CSR filings and the publicly available portions of Form N-PORT filings on the SEC's website at http://www.sec.gov. Form N-CSR filings are available upon filing and information reported on Form N-PORT filings for the third month of a fiscal quarter is available 60 days after the end of the fiscal quarter. You may call the SEC at 1-800-SEC-0330 for information about the SEC's website.

The Investment Manager or its affiliates may include fund portfolio information that has already been made public through a Web posting or SEC filing in marketing literature and other communications to shareholders, advisors or other parties, provided that, in the case of information made public through the Web, the information is disclosed no earlier than the day after the date of posting to the website.

**Other Disclosures** 

In order to address potential conflicts between the interest of fund shareholders, on the one hand, and those of the Investment Manager, Franklin Distributors or any affiliated person of those entities or of the fund, on the other hand, the fund's policies require that non-public disclosures of information regarding the fund's portfolio may be made only if there is a legitimate business purpose consistent with fiduciary duties to all shareholders of the fund. In addition, the party receiving the non-public information must sign a non-disclosure agreement unless otherwise approved by the Chief Compliance Officer of the fund. Arrangements to make non-public disclosures of the fund's portfolio information must be approved by the Chief Compliance Officer of the fund. The Chief Compliance Officer will report on an ongoing basis to a committee of the fund's Board of Trustees consisting only of Trustees who are not "interested persons" of the fund or the Investment Manager regarding any such arrangement that the fund may enter into with third parties other than service providers to the fund.

Daily portfolio composition files ("PCFs") that identify a basket of specified securities that may overlap with the actual or expected portfolio holdings of a fund will be provided as frequently as daily to each fund's service providers to facilitate the provision of services to each fund and to certain other entities in connection with the dissemination of information necessary for transactions in Creation Units. Each business day prior to the opening of the listing exchange, a PCF containing a list of the names and the required number of shares of each Deposit Security for each fund will be provided for dissemination through the facilities of the NSCC; through other fee-based services to NSCC members; subscribers to the fee-based services, including Authorized Participants; and to entities that publish and/or analyze such information in connection with the process of purchasing or

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redeeming Creation Units or trading fund shares in the secondary market. In addition to making PCFs available to the NSCC, each fund will disclose the PCF or portions thereof as frequently as daily on franklintempleton.com.

The fund may also periodically provide non-public information about its portfolio holdings to rating and ranking organizations and other providers of industry data, such as Lipper Inc., Morningstar Inc., Bloomberg and Thomson Reuters, in connection with those firms' research on and classification of the fund and in order to gather information about how the fund's attributes (such as volatility, turnover, and expenses) compare with those of peer funds. The fund may also periodically provide non-public information about its portfolio holdings to consultants that provide portfolio analysis services or other investment research or trading analytics. Such recipients of portfolio holdings include Barclays, FactSet, ITG, Trade Informatics, ConsenSys, ENSO Financial Analytics, Bloomberg and Credit Suisse. Any such rating, ranking, or consulting or other firm would be required to keep the fund's portfolio information confidential and would be prohibited from trading based on the information or otherwise using the information except as necessary in providing services to the fund. Such firms may receive portfolio holdings information only from certain funds and such information may be provided in greater or lesser detail depending on the nature of the services provided by the relevant firm.

In addition, the Investment Manager offers model separately managed account portfolios to sponsoring broker-dealers ("Program Sponsors") that in turn offer those portfolios to their customers. The Investment Manager also provides investment advisory services to retail separately managed account clients through managed account programs sponsored by broker-dealers and other financial intermediaries (together, "SMAs"). The model SMA portfolios may follow investment programs that are similar or identical in material respects to those of specific Putnam funds or other client accounts and, as a result, there may be substantial overlap between the securities holdings and transactions of an model SMA portfolio and those of any similarly managed funds or accounts. If such model portfolios are substantially similar to those of a U.S. registered fund, such model portfolios may be provided to Program Sponsors so long as: (1) the recipient Program Sponsors has executed a non-disclosure agreement or other agreement containing or incorporating confidentiality provisions that restrict the use and dissemination of confidential portfolio holdings information received by the Program Sponsor as described in the following sentence, or other provisions that impose similar restrictions on such use and dissemination and*,* (2) the model SMA portfolio has been deemed sufficiently liquid by the Investment Manager's liquidity committee or the Investment Manager, as determined in their reasonable judgment. Such agreement must provide that the Program Sponsor agrees that: (1) it is subject to a duty of confidentiality; (2) it will use confidential model portfolio information only to the extent necessary to perform its obligations under the agreement; and (3) it will not disclose confidential model portfolio information except to personnel or parties who have a need to know such confidential information in connection with, or in order to fulfill the purposes contemplated by, the agreement.

**INFORMATION SECURITY RISKS** 

*Cyber security risk.* With the increased use of interconnected technologies such as the Internet and the dependence on computer systems to perform necessary business functions, investment companies such as the fund and its service providers may be prone to operational, information security and related risks resulting from third-party cyber-attacks and/or other technological malfunctions. Cyber-attacks may include stealing or corrupting data maintained online or digitally, preventing legitimate users from accessing information or services on a website, releasing confidential information without authorization, and causing operational disruption. Successful cyber-attacks against, or security or technology breakdowns of, the fund or its adviser, custodian, transfer agent, or other affiliated or third-party service providers may adversely affect the fund and its shareholders. For example, cyber-attacks may interfere with the processing of shareholder transactions, impact the fund's ability to calculate its net asset value, cause the release of private shareholder information or confidential fund information, impede trading, cause reputational damage, and subject the fund or others to regulatory fines, penalties or financial losses, reimbursement or other compensation costs, and additional compliance costs. Similar types of cyber security risks also are present for issuers of securities in which the fund invests, which could result in material adverse consequences for such issuers, and may cause the fund's investment in such securities to lose value. The fund and the Investment Manager or sub-advisor (as applicable) may have limited ability to prevent or mitigate cyber-attacks or security or technology breakdowns affecting the fund's third-party service providers. While the Investment Manager and sub-advisor (as applicable) have established business continuity plans and systems designed to prevent or reduce the impact of cyber-attacks, such plans and systems are subject to inherent limitations.

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**PROXY VOTING GUIDELINES AND PROCEDURES** 

The Board of Trustees have delegated proxy voting authority for the securities held in the funds' portfolios to Putnam Management and have approved Putnam Management's current proxy voting guidelines and procedures. Putnam Management retained an independent proxy voting service to assist in vote analysis, implementation, recordkeeping and reporting services. The proxy voting guidelines summarize Putnam Management's positions on various issues of concern to investors and provide direction to the proxy voting service as to how fund portfolio securities should be voted on proposals dealing with particular issues. The proxy voting procedures explain the role of Putnam Management personnel and the proxy voting service in the proxy voting process, describe the procedures for referring matters involving investment considerations to the investment personnel of Putnam Management, and describe the procedures for handling potential conflicts of interest. Putnam Management's proxy voting guidelines and procedures are included in this SAI as Appendix A. The Trustees will review the funds' proxy voting from time to time and will review annually Putnam Management's proxy voting guidelines and procedures. Information regarding how the funds' proxies relating to portfolio securities were voted during the 12-month period ended June 30, 2024 is available on www.franklintempleton.com, and on the SEC's website at www.sec.gov. If you have questions about finding forms on the SEC's website, you may call the SEC at 1-800-SEC-0330. You may also obtain Putnam Management's proxy voting guidelines and procedures by calling Putnam's Shareholder Services at 1-800-225-1581.

**SECURITIES RATINGS** 

The ratings of securities in which the fund may invest will be measured at the time of purchase and, to the extent a security is assigned a different rating by one or more of the various rating agencies, the Investment Manager may use the highest rating assigned by any agency. The Investment Manager will not necessarily sell an investment if its rating is reduced. Below are descriptions of ratings, as provided by the rating agencies, which represent opinions as to the quality of various debt instruments.

**<u>Moody's Investors Service, Inc.</u>**

**Global Long-Term Rating Scale** (original maturity of 1 year or more)

**Aaa** – Obligations rated Aaa are judged to be of the highest quality, subject to the lowest level of credit risk.

**Aa** – Obligations rated Aa are judged to be of high quality and are subject to very low credit risk.

**A** – Obligations rated A are judged to be upper-medium grade and are subject to low credit risk.

**Baa** – Obligations rated Baa are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

**Ba** – Obligations rated Ba are judged to be speculative and are subject to substantial credit risk.

**B** – Obligations rated B are considered speculative and are subject to high credit risk.

**Caa** – Obligations rated Caa are judged to be speculative of poor standing and are subject to very high credit risk.

**Ca** – Obligations rated Ca are highly speculative and are likely in, or very near, default, with some prospect of recovery of principal and interest.

**C** – Obligations rated C are the lowest rated and are typically in default, with little prospect for recovery of principal or interest.

Note: Moody's appends numerical modifiers 1, 2, and 3 to each generic rating classification from Aa through Caa. The modifier 1 indicates that the obligation ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of that generic rating category. Additionally, a "(hyb)" indicator is appended to all ratings of hybrid securities issued by banks, insurers, finance companies, and securities firms.

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By their terms, hybrid securities allow for the omission of scheduled dividends, interest, or principal payments, which can potentially result in impairment if such an omission occurs. Hybrid securities may also be subject to contractually allowable write-downs of principal that could result in impairment. Together with the hybrid indicator, the long-term obligation rating assigned to a hybrid security is an expression of the relative credit risk associated with that security.

**Global Short-Term Rating Scale** (original maturity of 13 months or less)

**P-1** – Issuers (or supporting institutions) rated Prime-1 have a superior ability to repay short-term debt obligations.

**P-2** – Issuers (or supporting institutions) rated Prime-2 have a strong ability to repay short-term debt obligations.

**P-3** – Issuers (or supporting institutions) rated Prime-3 have an acceptable ability to repay short-term obligations.

**NP** – Issuers (or supporting institutions) rated Not Prime do not fall within any of the Prime rating categories.

US Municipal Short-Term Obligation Ratings

**MIG 1** – This designation denotes superior credit quality. Excellent protection is afforded by established cash flows, highly reliable liquidity support, or demonstrated broad-based access to the market for refinancing.

**MIG 2** – This designation denotes strong credit quality. Margins of protection are ample, although not as large as in the preceding group.

**MIG 3** – This designation denotes acceptable credit quality. Liquidity and cash-flow protection may be narrow, and market access for refinancing is likely to be less well-established.

**SG** – This designation denotes speculative grade credit quality. Debt instruments in this category may lack sufficient margins of protection.

**US Municipal Demand Obligation Ratings** 

**VMIG 1** – This designation denotes superior credit quality. Excellent protection is afforded by the superior short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**VMIG 2** – This designation denotes strong credit quality. Good protection is afforded by the strong short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**VMIG 3** – This designation denotes acceptable credit quality. Adequate protection is afforded by the satisfactory short-term credit strength of the liquidity provider and structural and legal protections that ensure the timely payment of purchase price upon demand.

**SG** – This designation denotes speculative-grade credit quality. Demand features rated in this category may be supported by a liquidity provider that does not have an investment grade short-term rating or may lack the structural and/or legal protections necessary to ensure the timely payment of purchase price upon demand.

**<u>Standard & Poor's</u>**

**Long-Term Issue Credit Ratings** (original maturity of one year or more)

**AAA** – An obligation rated 'AAA' has the highest rating assigned by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is extremely strong.

**AA** – An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong.

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**A** – An obligation rated 'A' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher-rated categories. However, the obligor's capacity to meet its financial commitment on the obligation is still strong.

**BBB** – An obligation rated 'BBB' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

**BB; B; CCC; CC** and **C** – Obligations rated 'BB', 'B', 'CCC', 'CC', and 'C' are regarded as having significant speculative characteristics. 'BB' indicates the lowest degree of speculation and 'C' the highest. While such obligations will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions.

**BB** – An obligation rated 'BB' is less vulnerable to nonpayment than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial, or economic conditions which could lead to the obligor's inadequate capacity to meet its financial commitment on the obligation.

**B** – An obligation rated 'B' is more vulnerable to nonpayment than obligations rated 'BB', but the obligor currently has the capacity to meet its financial commitment on the obligation. Adverse business, financial, or economic conditions will likely impair the obligor's capacity or willingness to meet its financial commitment on the obligation.

**CCC** – An obligation rated 'CCC' is currently vulnerable to nonpayment, and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation. In the event of adverse business, financial, or economic conditions, the obligor is not likely to have the capacity to meet its financial commitment on the obligation.

**CC** – An obligation rated 'CC' is currently highly vulnerable to nonpayment. The 'CC' rating is used when a default has not yet occurred, but Standard & Poor's expects default to be a virtual certainty, regardless of the anticipated time to default.

**C** – An obligation rated 'C' is currently highly vulnerable to nonpayment, and the obligation is expected to have lower relative seniority or lower ultimate recovery compared to obligations that are rated higher.

**D** – An obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the date due, unless Standard & Poor's believes that such payments will be made within five business days in the absence of a stated grace period or within the earlier of the stated grace period or 30 calendar days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer.

**NR** – This indicates that no rating has been requested, or that there is insufficient information on which to base a rating, or that Standard & Poor's does not rate a particular obligation as a matter of policy.

Note: The ratings from 'AA' to 'CCC' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories.

**Short-Term Issue Credit Ratings** (original maturity of 365 days or less)

**A-1** – A short-term obligation rated'A-1' is rated in the highest category by Standard & Poor's. The obligor's capacity to meet its financial commitment on the obligation is strong. Within this category, certain obligations are designated with a plus sign (+). This indicates that the obligor's capacity to meet its financial commitment on these obligations is extremely strong.

**A-2** – A short-term obligation rated 'A-2' is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than obligations in higher rating categories. However, the obligor's capacity to meet its financial commitment on the obligation is satisfactory.

**A-3** – A short-term obligation rated 'A-3' exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to lead to a weakened capacity of the obligor to meet its financial commitment on the obligation.

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**B** – A short-term obligation rated 'B' is regarded as vulnerable and has significant speculative characteristics. The obligor currently has the capacity to meet its financial commitments; however, it faces major ongoing uncertainties which could lead to the obligor's inadequate capacity to meet its financial commitments.

**C** – A short-term obligation rated 'C' is currently vulnerable to nonpayment and is dependent upon favorable business, financial, and economic conditions for the obligor to meet its financial commitment on the obligation.

**D** – A short-term obligation rated 'D' is in default or in breach of an imputed promise. For non-hybrid capital instruments, the 'D' rating category is used when payments on an obligation are not made on the due date, unless Standard & Poor's believes that such payments will be made within any stated grace period. However, any stated grace period longer than five business days will be treated as five business days. The 'D' rating also will be used upon the filing of a bankruptcy petition or the taking of a similar action and where default on an obligation is a virtual certainty, for example due to automatic stay provisions. An obligation's rating is lowered to 'D' if it is subject to a distressed exchange offer.

**Municipal Short-Term Note Ratings** (original maturity of 3 years or less)

**SP-1** – Strong capacity to pay principal and interest. An issue determined to possess a very strong capacity to pay debt service is given a plus (+) designation.

**SP-2** – Satisfactory capacity to pay principal and interest, with some vulnerability to adverse financial and economic changes over the term of the notes.

**SP-3** – Speculative capacity to pay principal and interest.

**<u>Fitch Ratings</u>**

**Long-Term Rating Scales** 

**AAA** – Highest credit quality. 'AAA' ratings denote the lowest expectation of default risk. They are assigned only in cases of exceptionally strong capacity for payment of financial commitments. This capacity is highly unlikely to be adversely affected by foreseeable events.

**AA** – Very high credit quality. 'AA' ratings denote expectations of very low default risk. They indicate very strong capacity for payment of financial commitments. This capacity is not significantly vulnerable to foreseeable events.

**A** – High credit quality. 'A' ratings denote expectations of low default risk. The capacity for payment of financial commitments is considered strong. This capacity may, nevertheless, be more vulnerable to adverse business or economic conditions than is the case for higher ratings.

**BBB** – Good credit quality. 'BBB' ratings indicate that expectations of default risk are currently low. The capacity for payment of financial commitments is considered adequate but adverse business or economic conditions are more likely to impair this capacity.

**BB** – Speculative. 'BB' ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.

**B** – Highly speculative. 'B' ratings indicate that material default risk is present, but a limited margin of safety remains. Financial commitments are currently being met; however, capacity for continued payment is vulnerable to deterioration in the business and economic environment.

**CCC** – Substantial credit risk. Default is a real possibility.

**CC** – Very high levels of credit risk. Default of some kind appears probable.

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**C** – Exceptionally high levels of credit risk. Default is imminent or inevitable, or the issuer is in standstill. Conditions that are indicative of a 'C' category rating for an issuer include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the issuer has entered into a grace or cure period following non-payment of a material financial obligation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the issuer has entered into a temporary negotiated waiver or standstill agreement following a payment default
on a material financial obligation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. Fitch Ratings otherwise believes a condition of 'RD' or 'D' to be imminent or inevitable,
including through the formal announcement of a distressed debt exchange.

**RD** – Restricted default. 'RD' ratings indicate an issuer that in Fitch Ratings' opinion has experienced an uncured payment default on a bond, loan or other material financial obligation but which has not entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, and which has not otherwise ceased operating. This would include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. the selective payment default on a specific class or currency of debt;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. the uncured expiry of any applicable grace period, cure period or default forbearance period following a
payment default on a bank loan, capital markets security or other material financial obligation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;c. the extension of multiple waivers or forbearance periods upon a payment default on one or more material
financial obligations, either in series or in parallel; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;d. execution of a distressed debt exchange on one or more material financial obligations.

**D** – Default. 'D' ratings indicate an issuer that in Fitch Ratings' opinion has entered into bankruptcy filings, administration, receivership, liquidation or other formal winding-up procedure, or which has otherwise ceased business.

Default ratings are not assigned prospectively to entities or their obligations; within this context, non-payment on an instrument that contains a deferral feature or grace period will generally not be considered a default until after the expiration of the deferral or grace period, unless a default is otherwise driven by bankruptcy or other similar circumstance, or by a distressed debt exchange.

"Imminent" default typically refers to the occasion where a payment default has been intimated by the issuer, and is all but inevitable. This may, for example, be where an issuer has missed a scheduled payment, but (as is typical) has a grace period during which it may cure the payment default. Another alternative would be where an issuer has formally announced a distressed debt exchange, but the date of the exchange still lies several days or weeks in the immediate future.

In all cases, the assignment of a default rating reflects the agency's opinion as to the most appropriate rating category consistent with the rest of its universe of ratings, and may differ from the definition of default under the terms of an issuer's financial obligations or local commercial practice.

Note: The modifiers "+" or "-" may be appended to a rating to denote relative status within major rating categories. Such suffixes are not added to the 'AAA' Long-Term Issuer Default Rating (IDR) category, or to Long-Term IDR categories below 'B'.

**Short-Term Ratings** 

**F1** – Highest short-term credit quality. Indicates the strongest intrinsic capacity for timely payment of financial commitments; may have an added "+" to denote any exceptionally strong credit feature.

**F2** – Good short-term credit quality. Good intrinsic capacity for timely payment of financial commitments.

**F3** – Fair short-term credit quality. The intrinsic capacity for timely payment of financial commitments is adequate.

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**B** – Speculative short-term credit quality. Minimal capacity for timely payment of financial commitments, plus heightened vulnerability to near term adverse changes in financial and economic conditions.

**C** – High short-term default risk. Default is a real possibility.

**RD** – Restricted default. Indicates an entity that has defaulted on one or more of its financial commitments, although it continues to meet other financial obligations, typically applicable to entity ratings only.

**D** – Default. Indicates a broad-based default event for an entity, or the default of a short-term obligation.

**Appendix A** 

**Putnam Investments** 

<u>Proxy Voting Procedures</u> 

*<u>Introduction and Summary</u>*

Many of Putnam's investment management clients have delegated to Putnam the authority to vote proxies for shares in the client accounts Putnam manages. Putnam believes that the voting of proxies can be an important tool for institutional investors to promote best practices in corporate governance and votes all proxies in the best interests of its clients as investors. In Putnam's view, strong corporate governance policies, most notably oversight by an independent board of qualified directors, best serve investors' interests. Putnam will vote proxies and maintain records of voting of shares for which Putnam has proxy voting authority in accordance with its fiduciary obligations and applicable law.

Putnam's voting policies are rooted in our views that (1) strong, independent corporate governance is important to long-term company financial performance, and (2) long-term investors' active engagement with company management, including through the proxy voting process, strengthens issuer accountability and overall market discipline, potentially reducing risk and improving returns over time. Our voting program is offered as a part of our investment management services, at no incremental fee to Putnam, and, while there can be no guarantees, it is intended to offer potential investment benefits over a long-term horizon. Our voting policies are designed with investment considerations in mind, not as a means to pursue particular political, social, or other goals. As a result, we may not support certain proposals whose costs to the issuer (including implementation costs, practicability, and other factors), in Putnam's view, outweigh their investment merits.

This memorandum sets forth Putnam's policies for voting proxies. It covers all accounts for which Putnam has proxy voting authority. These accounts include the Putnam Mutual Funds<sup>1</sup> and Putnam Exchange-Traded Funds, US and international institutional accounts and funds managed or sub-advised by The Putnam Advisory Company, LLC and Putnam Fiduciary Trust Company, LLC. In addition, the policies include US mutual funds and other accounts sub-advised by Putnam Investment Management, LLC.<sup>2</sup>

*<u>Proxy Committee</u>*

<sup>1</sup> Effective January 27, 2023, the Board of Trustees of the Putnam Mutual Funds delegated proxy voting authority to Putnam Investment Management, LLC, the investment manager to the Putnam Mutual Funds.

<sup>2</sup> The Putnam Proxy Voting Procedures and Guidelines will apply also to certain funds and institutional and other accounts managed by Franklin Advisers, Inc. ("FAV") but formerly managed or sub-advised by one of the Putnam adviser entities identified above, pursuant to sub-advisory agreements in effect from time to time between FAV and the relevant Putnam entity(ies).

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Putnam has a Proxy Committee composed of senior professionals, including from the Putnam Equity investment team and the Putnam Equity Sustainability Strategy group. The Chief Investment Officer of Putnam Equity appoints the members of the Proxy Committee. The Proxy Committee is responsible for setting general policy as to proxies. Specifically, the Committee:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Reviews these procedures and the Proxy Voting Guidelines annually and approves any amendments considered to be
advisable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Considers special proxy issues as they may from time to time arise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*3.* Must approve all vote overrides recommended by investment professionals.

*<u>Proxy Voting Administration</u>*

The Putnam Sustainability Strategy group administers Putnam's proxy voting through a Proxy Voting Team. The Proxy Voting Team has the following duties:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Annually prepares the Proxy Voting Guidelines and distributes them to the Proxy Committee for review.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Coordinates the Proxy Committee's review of any new or unusual proxy issues and serves as Secretary
thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Manages the process of referring issues to portfolio managers for voting instructions.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Oversees the work of any third-party vendor hired to process proxy votes (as of the date of these procedures
Putnam has engaged Institutional Shareholder Services (ISS) to process proxy votes) and the process of setting up the voting process with ISS and custodial banks for new clients.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Coordinates responses to investment professionals' questions on proxy issues and proxy policies, including
forwarding specialized proxy research from ISS and other vendors and forwards information to investment professionals prepared by other areas at Putnam.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Implements the exception process with respect to referred items on securities held solely in accounts managed
by the Global Asset Allocation ("GAA") team within Franklin Templeton Investment Solutions described in more detail in the Proxy Referral section below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Maintains required records of proxy votes on behalf of the appropriate Putnam client accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. Prepares and distributes reports required by Putnam clients.

*<u>Proxy Voting Guidelines</u>*

Putnam maintains written voting guidelines ("Guidelines") setting forth voting positions determined by the Proxy Committee on those issues believed most likely to arise day to day. The Guidelines may call for votes to be cast normally in favor of or opposed to a matter or may deem the matter an item to be referred to investment professionals on a case-by-case basis. A copy of the Guidelines is attached to this memorandum as Exhibit A.

In light of our views on the importance of issuer governance and investor engagement, which we believe are applicable across our various strategies and clients, regardless of a specific portfolio's investment objective, Putnam will vote all proxies in accordance with the Guidelines, subject to two exceptions as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. If the portfolio managers of client accounts holding the stock of a company with a proxy vote believe that
following the Guidelines in any specific case would not be in the clients' best interests, they may request the Proxy Voting Team not to follow the guidelines in such case. The request must be in writing and include an explanation of the
rationale for doing so. The Proxy Voting Team will review any such request with the Proxy Committee (or, in cases with limited time, with the Chair of the Proxy Committee acting on the Proxy Committee's behalf) prior to implementing the
request.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Putnam may accept instructions to vote proxies under client specific guidelines subject to review and
acceptance by the Investment Division and the Legal and Compliance Department.

*<u>Other</u>*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Putnam may elect not to vote when the security is no longer held.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Putnam will  **<u>abstain</u>** on items that require case-by-case review when a vote recommendation from the appropriate investment professional(s) cannot be obtained due to restrictive voting deadlines or other prohibitive operational or administrative
requirements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Where securities held in Putnam client accounts, including the Putnam mutual funds, have been loaned to third
parties in connection with a securities lending program administered by Putnam (through securities lending agents overseen by Putnam), Putnam has instructed lending agents to recall U.S. securities on loan to vote proxies, in accordance with
Putnam's securities lending procedures. Due to differences in non-U.S. markets, Putnam does not currently seek to recall non-U.S. securities on loan. In addition,
where Putnam does not administer a client's securities lending program, this recall policy does not apply, since Putnam generally does not have information on loan details or authority to effect recalls in those cases. It is possible that, for
impracticability or other reasons, a recalled security may not be returned to the relevant custodian in time to allow Putnam to vote the relevant proxy.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Putnam will make its reasonable best efforts to vote all proxies except when impeded by circumstances that are
reasonably beyond its control and responsibility, such as custodial proxy voting services, in part or whole, not available or not established by a client, or custodial error.

*<u>Proxy Voting Referrals</u>*

Under the Guidelines, certain proxy matters will be referred to Portfolio Managers. The Portfolio Manager receiving the referral request may delegate the vote decision to an appropriate Analyst from among a list of eligible analysts (such list to be approved by the Chief Investment Officer of the Putnam Equity group and the Director of Equity Research for the Putnam Equity group). The Analyst will be required to make the affirmation and disclosures identified in (3) below. Normally specific referral items will be referred to the portfolio team leader (or another member of the portfolio team he or she designates) whose accounts hold the greatest number of shares of the issuer of the proxies through the Proxy Referral Administration Database. The referral request contains (1) a field that will be used by the portfolio team leader or member for recommending a vote on each referral item, (2) a field for describing any contacts relating to the proxy referral item the portfolio team may have had with any Franklin Templeton employee outside Putnam Equity or with any person other than a proxy solicitor acting in the normal course of proxy solicitation, and (3) a field for portfolio managers to affirm that they are making vote recommendations in the best interest of client accounts and have disclosed to Compliance any potential conflicts of interest relevant to their vote recommendation.

Putnam may vote any referred items on securities held solely in accounts managed by the GAA team within Franklin Templeton Investment Solutions (and not held by any other investment product team) in accordance with the recommendation of Putnam's third-party proxy voting service provider. The Proxy Voting Team will first give the relevant portfolio manager(s) on the GAA team the opportunity to review the referred items and vote on them. If the portfolio manager(s) on the GAA team do not decide to make any active voting decision on any of the referred items, the items will be voted in accordance with the service provider's recommendation. If the security is also held by other investment teams at Putnam Equity, the items will be referred to the largest holder who is not a member of the GAA team.

The portfolio team leader or members who have been requested to provide a recommendation on a proxy referral item will complete the referral request. Upon receiving each completed referral request from the applicable Portfolio Manager or Analyst, the Proxy Voting Team will review the completed request for accuracy and completeness, and will follow up with investment personnel as appropriate.

*<u>Conflicts of Interest</u>*

A potential conflict of interest may arise when voting proxies of an issuer which has a significant business relationship with Putnam. For example, Putnam could manage a defined benefit or defined contribution pension plan for the issuer. Putnam's

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policy is to vote proxies based solely on the investment merits of the proposal. In order to guard against conflicts, the following procedures have been adopted:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The Proxy Committee is composed of senior professionals, including Portfolio Managers in Putnam Equity and the
Putnam Equity Sustainability Strategy group. None of these individuals or groups reports to Franklin Templeton's marketing businesses.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. No Franklin Templeton employee outside Putnam Equity may contact any portfolio manager about any proxy vote
without first contacting the Proxy Voting Team or a senior lawyer in the Legal and Compliance Department. There is no prohibition on employees seeking to communicate investment-related information to investment professionals except for Putnam's
restrictions on dissemination of material, non-public information. However, the Proxy Voting Team will coordinate the delivery of such information to investment professionals to avoid appearances of conflict.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Investment professionals responding to referral requests must disclose any contacts with third parties other
than normal contact with proxy solicitation firms and must affirm that they are making vote recommendations in the best interest of client accounts and have disclosed to the Proxy Voting Team any potential conflicts of interest relevant to their
vote recommendation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Proxy Voting Team will review the name of the issuer of each proxy that contains a referral item against
various sources of Putnam business relationships maintained by the Legal and Compliance Department or Client Service for potential material business relationships (i.e., conflicts of interest). For referrals, the Proxy Voting Team will complete the
Proxy Voting Conflict of Interest Disclosure Form (attached as Exhibit B and C) via the Proxy Referral Administration Database and will prepare a quarterly report for the Putnam Chief Compliance Officer identifying all completed Conflict of Interest
Disclosure forms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Putnam's Proxy Voting Guidelines may only be overridden with the written recommendation from a member of
the Investment Division and concurrence of the Proxy Committee (or, in cases with limited time, with the Chair of the Proxy Committee on the Proxy Committee's behalf).

*<u>Recordkeeping</u>*

The Putnam Equity Sustainability Strategy Group will retain copies of the following books and records:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A copy of the Proxy Voting Procedures and Guidelines as are from time to time in effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. A copy of each proxy statement received with respect to securities in client accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Records of each vote cast for each client;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Internal documents generated in connection with a proxy referral, such as emails, memoranda, etc.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Written reports to clients on proxy voting and all client requests for information and Putnam's response.

All records will be maintained for seven years. A proxy vendor may on Putnam's behalf maintain the records noted in 2 and 3 above if it commits to providing copies promptly upon request.

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<u>Exhibit A to Proxy Procedures</u> 

**Putnam Investments Proxy Voting Guidelines** 

The proxy voting guidelines below summarize Putnam's positions on various issues of concern to investors and indicate how client portfolio securities will be voted on proposals dealing with a particular issue. The proxy voting service is instructed to vote all proxies relating to client portfolio securities in accordance with these guidelines, except as otherwise instructed by the Proxy Voting Team.

Putnam's voting policies are rooted in our views that (1) strong, independent corporate governance is important to long-term company financial performance, and (2) long-term investors' active engagement with company management, including through the proxy voting process, strengthens issuer accountability and overall market discipline, potentially reducing risk and improving returns over time. Our voting program is offered as a part of our investment management services, at no incremental fee to Putnam, and, while there can be no guarantees, it is intended to offer potential investment benefits over a long-term horizon. Our voting policies are designed with investment considerations in mind, not as a means to pursue particular political, social, or other goals. As a result, we may not support certain proposals whose costs to the issuer (including implementation costs, practicability, and other factors), in Putnam's view, outweigh their investment merits.

These proxy voting policies are intended to be decision-making guidelines. The guidelines are not exhaustive and do not include all potential voting issues. In addition, as contemplated by and subject to Putnam's Proxy Voting Procedures, because proxy issues and the circumstances of individual companies are so varied, portfolio teams may recommend votes that may vary from the general policy choices set forth in the guidelines.

The following guidelines are grouped according to the types of proposals generally presented to shareholders. Part I deals with proposals which have been approved and recommended by a company's board of directors. Part II deals with proposals submitted by shareholders for inclusion in proxy statements. Part III addresses unique considerations pertaining to non-US issuers.

**I. Board-Approved Proposals** 

Proxies will be voted **<u>for</u>** board-approved proposals, except as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A.  **<u>Matters Relating to the Board of Directors</u>** 

***Uncontested Election of Directors***

The board of directors has the important role of overseeing management and its performance on behalf of shareholders. When evaluating a company's board, Putnam may consider the diversity of professional backgrounds and personal characteristics. Putnam believes that companies generally benefit from diversity on the board, including diversity with respect to gender, ethnicity, race, skills, perspectives and experience.

Proxies will be voted **<u>for</u>** the election of the company's nominees for directors (and/or subsidiary directors) and **<u>for</u>** board-approved proposals on other matters relating to the board of directors (provided that such nominees and other matters have been approved by an independent nominating committee), except as follows:

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have a majority of independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have nominating, audit and compensation committees composed solely of independent directors,
or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has more than <u>15</u> members or fewer than <u>five</u> members, absent special circumstances.

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|:---|:---|
| ⮚ | Putnam may refrain from withholding votes from the board due to insufficient key committee independence due to director resignation, change in board structure, or other specific circumstances, provided that the company has stated (for example in an 8-K), or it can otherwise be determined, that the board will address committee composition to ensure compliance with the applicable corporate governance code in a timely manner after the shareholder meeting and the company has a history of appropriate board independence.  |

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Unless otherwise indicated, for the purposes of determining whether a board has a majority of independent directors and independent nominating, audit, and compensation committees, an independent director is a director who (1) meets all requirements to serve as an independent director of a company under the final NYSE Corporate Governance Rules (e.g., no material business relationships with the company and no present or recent employment relationship with the company (including employment of an immediate family member as an executive officer)), and (2) has not accepted directly or indirectly any consulting, advisory, or other compensatory fee (excluding immaterial fees for transactional services as defined by the NYSE Corporate Governance rules) from the company other than in his or her capacity as a member of the board of directors or any board committee. Putnam believes that the receipt of such compensation for services other than service as a director raises significant independence issues.

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director who is considered an independent director by the company and who has received compensation within the last three years from the company for the provision of professional services (e.g., investment banking, consulting, legal or financial advisory fees).  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director who attends fewer than 75% of board and committee meetings. Putnam may refrain from withholding votes on a **<u>case-by-case</u>** basis if a valid reason for the absence exists, such as illness, personal emergency, potential conflict of interest, etc.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any incumbent nominee for director who served on a board that has not acted to implement a policy requested in a shareholder proposal that received the support of a majority of the votes actually cast on the matter at its previous two annual meetings, or  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any incumbent nominee for director who served on a board that adopted, renewed, or made a material adverse modification to a shareholder rights plan (commonly referred to as a "poison pill") without shareholder approval during the current or prior calendar year. (This is applicable to any type of poison pill, for example, advance-warning type pill, EGM pill, and Trust Defense Plans in Japan.)  |

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Putnam will refrain from opposing the board members who served at the time of the adoption of the poison pill if the duration is one year or less, if the plan contains other suitable restrictions; or if the company publicly discloses convincing rationale for its adoption and seeks shareholder approval of future renewals of the poison pill. (Suitable restrictions could include but are not limited to, a higher threshold for passive investors. Convincing rationale could include circumstances such as, but not limited to, extreme market disruption or conditions, stock volatility, substantial merger, active investor interest, or takeover attempts.)

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|:---|:---|
| ⮚ | Putnam will vote on a **case-by-case** basis and may consider voting against the Nominating Committee Chair if there is a lack of evidence of board diversity.  |

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Putnam is concerned about over-committed directors. In some cases, directors may serve on too many boards to make a meaningful contribution. This may be particularly true for senior executives of public companies (or other directors with substantially full-time employment) who serve on more than a few outside boards.

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** any non-executive nominee for director who serves on more than four (4) public company boards, except where Putnam would otherwise be withholding votes for the entire board of directors. For the purpose of this guideline, boards of affiliated registered investment companies and other similar entities such as UCITS will count as one board. Generally, Putnam will withhold support from directors serving on more than four unaffiliated public company boards, although an exception may be made in the case of a director who represents an investing firm with the sole purpose of managing a portfolio of investments that includes the company.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold</u>** votes from any nominee for director who serves as an executive officer of any public company ("home company") while serving on more than two (2) public company board**s** other than the home company board. (Putnam will withhold votes from the nominee at each company where Putnam client portfolios own shares.) In addition, if Putnam client portfolios are shareholders of the executive's home company, Putnam will withhold votes from members of the company's governance committee. For the purpose of this guideline, boards of affiliated registered investment companies and other similar entities such as UCITS will count as one board.  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from any nominee for director of a public company (Company A) who is employed as a senior executive of another public company (Company B) if a director of Company B serves as a senior executive of Company A (commonly referred to as an "interlocking directorate").  |

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Board independence depends not only on its members' individual relationships, but also the board's overall attitude toward management. Independent boards are committed to good corporate governance practices and, by providing objective independent judgment, enhancing shareholder value. Putnam may withhold votes on a case-by-case basis from some or all directors that, through their lack of independence, have failed to observe good corporate governance practices or, through specific corporate action, have demonstrated a disregard for the interest of shareholders.

Note: Designation of executive director is based on company disclosure.

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that provide that a director may be removed only for cause. Putnam will generally vote **<u>for</u>** proposals that permit the removal of directors with or without cause.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals authorizing a board to fill a director vacancy without shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on subsidiary director nominees if Putnam will be voting against the nominees of the parent company's board.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis for director nominees, including nominees for positions on Supervisory Boards or Supervisory Committees, or similar board entities (depending on board structure), for (re)election when cumulative voting applies.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to approve annual directors' fees, except that Putnam will vote on a **<u>case-by-case</u>** basis if Putnam's independent proxy voting service has recommended a vote against such proposal. Additionally, Putnam will vote **<u>for</u>** proposals to approve the grant of equity awards to directors, except that Putnam will consider these proposals on a **<u>case-by-case</u>** basis if Putnam's proxy service provider is recommending a vote against the proposal.  |

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***Classified Boards***

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to classify a board, absent special circumstances indicating that shareholder interests would be better served by this structure.  |

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***Ratification of Auditors***

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to ratify the selection of independent auditors if there is evidence that the audit firm's independence or the integrity of an audit is compromised. (Otherwise, Putnam will vote **<u>for</u>**.)  |

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***Contested Elections of Directors***

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis in contested elections of directors.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**B. <u>Executive Compensation</u>**

Putnam will vote on a **<u>case-by-case</u>** basis on board-approved proposals relating to executive compensation, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** stock option and restricted stock plans that will result in an average annual dilution of 1.67% or less (based on the disclosed term of the plan and including all equity-based plans), except where Putnam would otherwise be withholding votes for the entire board of directors in which case Putnam will evaluate the plans on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option and restricted stock plans that will result in an average annual dilution of greater than 1.67% (based on the disclosed term of the plan and including all equity plans).  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** any stock option or restricted stock plan where the company's actual grants of stock options and restricted stock under all equity-based compensation plans during the prior three (3) fiscal years have resulted in an average annual dilution of greater than 1.67%.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Additionally, if the annualized dilution cannot be calculated, Putnam will vote  **<u>for</u>** plans where the
Total Potential Dilution is 5% or less. If the annualized dilution cannot be calculated and the Total Potential Dilution exceeds 5%, then Putnam will vote  **<u>against</u>** . Note: Such plans must first pass all of Putnam's other screens.

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|:---|:---|
| ⮚ | Putnam will vote proposals to issue equity grants to executives on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans that permit replacing or repricing of underwater options (and **<u>against</u>** any proposal to authorize such replacement or repricing of underwater options).  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans that permit issuance of options with an exercise price below the stock's current market price.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option plans/ restricted stock plans with evergreen features providing for automatic share replenishment.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** bonus plans under which payments are treated as performance-based compensation that is deductible under Section 162(m) of the Internal Revenue Code of 1986, as amended, except as follows:  |

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Vote on a **<u>case-by-case</u>** basis on such proposals if any of the following circumstances exist:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the amount per employee under the plan is unlimited, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the maximum award pool is undisclosed, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the incentive bonus plan's performance criteria are undisclosed, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the independent proxy voting service recommends a vote against.

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|:---|:---|
| ⮚ | Putnam will vote in favor of the annual presentation of advisory votes on executive compensation (Say-on-Pay).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** advisory votes on executive compensation (Say-on-Pay). However, Putnam will vote **<u>against</u>** an advisory vote if the company fails to effectively link executive compensation to company performance according to benchmarking performed by the independent proxy voting service.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will review the proposal on a  **<u>case-by-case</u>** basis if there is no recommendation of the independent proxy voting service.

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on severance agreements (e.g., golden and tin parachutes)  |

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|:---|:---|
| ⮚ | Putnam will **<u>withhold</u>** votes from members of a Board of Directors which has approved compensation arrangements Putnam's investment personnel have determined are grossly unreasonable at the next election at which such director is up for re-election.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** employee stock purchase plans that have the following features: (1) the shares purchased under the plan are acquired for no less than 85% of their market value, (2) the offering period under the plan is 27 months or less, and (3) dilution is 10% or less.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** Non-qualified Employee Stock Purchase Plans with all the following features:  |

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1) Broad-based participation (i.e., all employees of the company with the exclusion of individuals with 5 percent or more of beneficial ownership of the company). 

2) Limits on employee contribution, which may be a fixed dollar amount or expressed as a percent of base salary. 

3) Company matching contribution up to 25 percent of employee's contribution, which is effectively a discount of 20 percent from market value. 

4) No discount on the stock price on the date of purchase since there is a company matching contribution.

Putnam will vote **<u>against</u>** Non-qualified Employee Stock Purchase Plans when any of the plan features do not meet the above criteria.

Putnam may vote against executive compensation proposals on a **<u>case-by-case</u>** basis where compensation is excessive by reasonable corporate standards, or where a company fails to provide transparent disclosure of executive compensation. In voting on proposals relating to executive compensation, Putnam will consider whether the proposal has been approved by an independent compensation committee of the board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**C. <u>Capitalization</u>** 

Putnam will vote on a case-by-case basis on board-approved proposals involving changes to a company's capitalization, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals relating to the authorization of additional common stock, except that Putnam will evaluate such proposals on a **<u>case-by-case</u>** basis if (i) they relate to a specific transaction or to common stock with special voting rights, (ii) the company has a non-shareholder approved poison pill in place, or (iii) the company has had sizeable stock placements to insiders within the past three years at prices substantially below market value without shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to effect stock splits (excluding reverse stock splits.)  |

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| ⮚ | Putnam will vote **<u>for</u>** proposals authorizing share repurchase programs, except that Putnam will vote on a **<u>case-by-case</u>** basis if there are concerns that there may be abusive practices related to the share repurchase programs.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**D. <u>Acquisitions, Mergers, Reorganizations and Other Transactions</u>** 

Putnam will vote on a **<u>case-by-case</u>** basis on business transactions such as acquisitions, mergers, reorganizations involving business combinations, liquidations and sale of all or substantially all of a company's assets.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**E. <u>Anti-Takeover Measures</u>** 

Putnam will vote **<u>against</u>** board-approved proposals to adopt anti-takeover measures such as supermajority voting provisions, issuance of blank check preferred stock, the creation of a separate class of stock with disparate voting rights, control share acquisition provisions, targeted share placements, and ability to make greenmail payments, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to ratify or approve shareholder rights plans;  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to adopt fair price provisions.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to issue blank check preferred stock in the case of REITs (only).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals that enable or expand shareholders' ability to take action by written consent.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to <u>increase</u> shares of an existing class of stock with disparate voting rights from another share class.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on **shareholder or board-approved** proposals to eliminate supermajority voting provisions at controlled companies (companies in which an individual or a group voting collectively holds a majority of the voting interest).  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u> basis** on **board-approved** proposals to adopt supermajority voting provisions at controlled companies (companies in which an individual or a group voting collectively holds a majority of the voting interest).  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to issue blank check preferred stock if appropriate "*de-clawed"* language is present. Specifically, appropriate *de-clawed* language will include cases where the Company states (i.e., through 8-K, proxy statement or other public disclosure) it will not use the preferred stock for anti-takeover purposes, or in order to implement a shareholder rights plan, or discloses a commitment to submit any future issuances of preferred stock to be used in a shareholder rights plan/anti-takeover purpose to a shareholder vote prior to its adoption.  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**F. <u>Other Business Matters</u>** 

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved proposals approving routine business matters such as changing the company's name and procedural matters relating to the shareholder meeting, except as follows:  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals to amend a company's charter or bylaws (except for charter amendments necessary or to effect stock splits, to change a company's name, to authorize additional shares of common stock or other matters which are considered routine (for example, director age or term limits), technical in nature, fall within Putnam's guidelines (for example, regarding board size or virtual meetings), are required pursuant to regulatory and/or listing rules, have little or no economic impact or will not negatively impact shareholder rights).  |

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|:---|:---|
| ⮚ | Additionally, Putnam believes the bundling of items, whether the items are related or unrelated, is generally not in shareholders' best interest. We may vote **<u>against</u>** the entire bundled proposal if we would normally vote against any of the items if presented individually. In these cases, we will review the bundled proposal on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam generally supports quorum requirements if the level is set high enough to ensure a broad range of shareholders is represented in person or by proxy but low enough so that the Company can transact necessary business. Putnam will vote on a **<u>case-by-case</u>** basis on proposals seeking to change quorum requirements; however, Putnam will normally support proposals that seek to comply with market or exchange requirements.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals seeking to change a company's state of incorporation. However, Putnam will vote **<u>for</u>** mergers and reorganizations involving business combinations designed solely to reincorporate a company in Delaware.  |

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| ⮚ | Putnam will vote **<u>against</u>** authorization to transact other unidentified, substantive business at the meeting.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals where there is a lack of information to make an informed voting decision.  |

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|:---|:---|
| ⮚ | Putnam will vote as follows on proposals to adjourn shareholder meetings:  |

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If Putnam is withholding support for the board of the company at the meeting, any proposal to adjourn should be referred for **<u>case-by-case</u>** analysis.

If Putnam is not withholding support for the board, Putnam will vote in favor of adjourning, unless the vote concerns an issue that is being referred back to Putnam for case-by-case review. Under such circumstances, the proposal to adjourn should also be referred to Putnam for **<u>case-by-case</u>** analysis.

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** management proposals to adopt a specific state's courts, or a specific U.S. district court as the exclusive forum for certain disputes, except that Putnam will vote **<u>for</u>** proposals adopting the State of Delaware, or the Delaware Chancery Court, as the exclusive forum, for corporate law matters for issuers incorporated in Delaware. Requiring shareholders to bring actions solely in one state may discourage the pursuit of derivative claims by increasing their difficulty and cost. However, Putnam's guideline recognizes the expertise of the Delaware state court system in handling disputes involving Delaware corporations. In addition, Putnam will **<u>withhold votes</u>** from the chair of the Nominating/Governance committee if a company amends its Bylaws, or takes other actions, to adopt a specific state's courts (other than Delaware courts, for issuers incorporated in Delaware) or a specific U.S. district court as the exclusive forum for certain disputes <u>without</u> shareholder approval.  |

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|:---|:---|
| ⮚ | Putnam will vote on a case-by-case basis on management proposals seeking to adopt a bylaw amendment allowing the company to shift legal fees and costs to unsuccessful plaintiffs in intra-corporate litigation (fee-shifting bylaw). Additionally, Putnam will vote against the Chair of the Nominating/Governance committee if a company adopts a fee-shifting bylaw amendment without shareholder approval.  |

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⮚ Putnam will support management/shareholder proxy access proposals as long as the proposals align with the following principles for a shareholder (or up to 20 shareholders together as a group) to receive proxy access:

1) The required minimum aggregate ownership of the Company's outstanding common stock is no greater than 3%; 

2) The required minimum holding period for the shareholder proponent(s) is no greater than two years; and

3) The shareholder(s) are permitted to nominate at least 20% of director candidates for election to the board. 

Proposals requesting shares be held for 3 years will be reviewed on a **<u>case-by-case</u>** basis. Putnam will vote **<u>agains</u>**<u>t</u> proposals requesting shares be held for more than three years. Proposals that meet Putnam's stated criteria and include other requirements relating to issues such as, but not limited to, shares on loan or compensation agreements with nominees, will be reviewed on a **<u>case-by-case</u>** basis.

Additionally, shareholder proposals seeking an amendment to a company's proxy access policy which include any one of the supported criteria under Putnam's guidelines, for example, a 2-year holding period for shareholders, will be reviewed on a **<u>case-by-case</u>** basis.

Putnam supports management / shareholder proposals giving shareholders the right to call a special meeting as long as the ownership requirement in such proposals is at least **15%** of the company's outstanding common stock and not more than **25%**.

In general, Putnam will vote **<u>for</u>** management or shareholder proposals to reduce the ownership requirement below a company's existing threshold, as long as the new threshold is at least **15%** and not greater than **25%** of the company's outstanding common stock.

Putnam will vote **<u>against</u>** any proposal with an ownership requirement exceeding **25%** of the company's common stock or an ownership requirement that is less than **15%** of the company's outstanding common stock.

In cases where there are competing management and shareholder proposals giving shareholders the right to call a special meeting, Putnam will generally vote **<u>for</u>** the proposal which has the lower minimum shareholder ownership threshold, as long as that threshold is within Putnam's recommended minimum/maximum thresholds. If only one of the competing proposals has a threshold that falls within Putnam's threshold range, Putnam will normally support that proposal as long as

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it represents an improvement (reduction) from the previous requisite ownership level. Putnam will normally vote **<u>against</u>** both proposals if neither proposal has a requisite ownership level between **15%** and **25%** of the company's outstanding common stock**.**

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **fo**<u>r</u> management or shareholder proposals to allow a company to hold virtual-only or hybrid shareholder meetings or to amend its articles/charter/by-laws to allow for virtual-only or hybrid shareholder meetings, provided the proposal does not preclude in-person meetings (at any given time), and does not otherwise limit or impair shareholder participation; and if the company has provided clear disclosure to ensure that shareholders can effectively participate in virtual-only shareholder meetings and meaningfully communicate with company management and directors. Additionally, Putnam may consider the rationale of the proposal and whether there have been concerns about the company's previous meeting practices.  |

---

Disclosure should address the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the ability of shareholders to ask questions during the meeting

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o including time guidelines for shareholder questions

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o rules around what types of questions are allowed

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o and rules for how questions and comments will be recognized and disclosed to meeting participants

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o the manner in which appropriate questions received during the meeting will be addressed by the board

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● procedures, if any, for posting appropriate questions received during the meeting and the company's answers
on the investor page of their website as soon as is practical after the meeting

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● technical and logistical issues related to accessing the virtual meeting platform; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● procedures for accessing technical support to assist in the event of any difficulties accessing the virtual
meeting

Putnam may vote against proposals that do not meet these criteria.

Additionally, Putnam may vote **<u>agains</u>**t the Chair of the Governance Committee when the board is planning to hold a virtual-only shareholder meeting and the company has not provided sufficient disclosure (as noted above) or shareholder access to the meeting.

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to approve a company's board-approved climate transition action plan ("say on climate" proposals in which the company's board proposes that shareholders indicate their support for the company's plan), unless the proxy voting service has recommended a vote against the proposal, in which case Putnam will vote on a **<u>case-by-case</u>** basis on the proposal.  |

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|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on board-approved proposals that conflict with shareholder proposals.  |

---

**II. Shareholder Proposals** 

Shareholder proposals are non-binding votes that are often opposed by management. Some proposals relate to matters that are financially immaterial to the company's business, while others may be impracticable or costly for a company to implement. At the same time, well-crafted shareholder proposals may serve the purpose of raising issues that are material to a company's business for management's consideration and response. Putnam seeks to weigh the costs of different types of proposals against their expected financial benefits. More specifically:

Putnam will vote **<u>in accordance with the recommendation of the company's board of directors</u>** on all shareholder proposals, except as follows:

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals that are consistent with Putnam's proxy voting guidelines for board-approved proposals.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals to declassify a board, absent special circumstances which would indicate that shareholder interests are better served by a classified board structure.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals to require shareholder approval of shareholder rights plans.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals asking that director nominees receive support from holders of a majority of votes cast or a majority of shares outstanding of the company in order to be (re) elected.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will review on a **<u>case-by-case</u>** basis, shareholder proposals requesting that the board adopt a policy whereby, in the event of a significant restatement of financial results or significant extraordinary write-off, the board will recoup, to the fullest extent practicable, for the benefit of the company, all performance-based bonuses or awards that were made to senior executives based on having met or exceeded specific performance targets to the extent that the specified performance targets were not met.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to seek shareholder approval of any future supplemental executive retirement plan ("SERP"), or individual retirement arrangement, for senior executives that provides credit for additional years of service not actually worked, preferential benefit formulas not provided under the company's tax-qualified retirement plans, accelerated vesting of retirement benefits or retirement perquisites and fringe benefits that are not generally offered to other company employees. (Implementation of this policy shall not breach any existing employment agreement or vested benefit.)  |

---

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to report on their executive retirement benefits. (Deferred compensation, split-dollar life insurance, SERPs and pension benefits)  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requesting that a company establish a pay-for-superior-performance standard whereby the company discloses defined financial and/or stock price performance criteria (along with the detailed list of comparative peer group) to allow shareholders to sufficiently determine the pay and performance correlation established in the company's performance-based equity program. In addition, no <u>multi-year</u> award should be paid out unless the company's performance exceeds, <u>during the current CEO's tenure (three or more years)</u>, its peer median or mean performance on selected financial and stock price performance criteria.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to disclose in a separate report to shareholders, the Company's relationships with its executive compensation consultants or firms. Specifically, the report should identify the entity that retained each consultant (the company, the board or the compensation committee) and the types of services provided by the consultant in the past five years (non-compensation-related services to the company or to senior management and a list of all public company clients where the Company's executives serve as a director.)  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to accelerate vesting of equity awards under management severance agreements only if both of the following conditions are met:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the company undergoes a change in control, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the change in control results in the termination of employment for the person receiving the severance payment.

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring that the chair's position be filled by an independent director (separate chair/CEO). However, Putnam will vote on a **<u>case-by-case</u>** basis on such proposals when the company's board has a lead-independent director (or already has an independent or separate chair) <u>and</u> Putnam is supporting the nominees for the board of directors.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals seeking the submission of golden coffins to a shareholder vote or the elimination of the practice altogether.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals seeking a policy that forbids any director who receives more than 25% withhold votes cast (based on for and withhold votes) from serving on any key board committee for two years and asking the board to find replacement directors for the committees if need be.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals urging the board to seek shareholder approval of severance agreements (e.g., golden and tin parachutes).  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● However, Putnam will vote  **<u>against</u>** such proposals when the company has a policy that minimally
requires shareholder approval of severance agreements for executives that provides for cash severance benefits exceeding 2.99 times the sum of the executive's base salary plus target annual non-equity incentive plan bonus opportunity.

Putnam will vote on a **<u>case-by-case</u>** basis on approving such compensation arrangements.

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals requiring companies to make cash payments under management severance agreements only if both of the following conditions are met: the company undergoes a change in control, and the change in control results in the termination of employment for the person receiving the severance payment.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on shareholder proposals to limit a company's ability to make excise tax gross-up payments under management severance agreements as well as proposals to limit income or other tax gross-up payments.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>in accordance with the recommendation of the company's board of directors</u>** on shareholder proposals regarding corporate political spending, unless Putnam is voting against the directors, in which case the proposal would be reviewed on a **<u>case-by-case</u>** basis.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on shareholder proposals that conflict with board-approved proposals.  |

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**Environmental and Social** 

---

| | |
|:---|:---|
| ⮚ | Putnam believes that sustainable environmental practices and sustainable social policies are important components of long-term value creation. Companies should evaluate the potential risks to their business operations that are directly related to environmental and social factors (among others). In evaluating shareholder proposals relating to environmental and social initiatives, Putnam takes into account (1) the relevance and materiality of the proposal to the company's business, (2) whether the proposal is well crafted (e.g., whether it references science-based targets, or standard global protocols), and (3) the practicality or reasonableness of implementing the proposal.  |

---

Putnam may support well-crafted and well-targeted proposals that request additional reporting or disclosure on a company's plans to mitigate risk to the company related to the following issues and/or their strategies related to these issues: Environmental issues, including but not limited to, climate change, greenhouse gas emissions, renewable energy, and broader sustainability issues; and Social issues, including but not limited to, fair pay, employee diversity and development, safety, labor rights, supply chain management*,* privacy and data security.

In addition, Putnam will consider proposals related to Artificial Intelligence ("AI") on a case-by-case basis.

Putnam will consider factors such as (i) the industry in which the company operates, (ii) the company's current level of disclosure, (iii) the company's level of oversight, (iv) the company's management of risk arising out of these matters, (v) whether the company has suffered a material financial impact. Other factors may also be considered.

Putnam will consider the recommendation of its third-party proxy service provider and may consider other factors such as third-party evaluations of ESG performance.

Additionally, Putnam may vote on a **<u>case-by-case</u>** basis on proposals which ask a company to take action beyond reporting where our third-party proxy service provider has identified one or more reasons to warrant a vote FOR.

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**III. Voting Shares of Non-US Issuers** 

Many non-US jurisdictions impose material burdens on voting proxies. There are three primary types of limits as follows:

1) Share blocking. Shares must be frozen for certain periods of time to vote via proxy. 

2) Share re-registration. Shares must be re-registered out of the name of the local custodian or nominee into the name of the client for the meeting and, in many cases, then re-registered back. Shares are normally blocked in this period.

3) Powers of Attorney. Detailed documentation from a client must be given to the local sub-custodian. In many cases Putnam is not authorized to deliver this information or sign the relevant documents.

Putnam's policy is to weigh the benefits to clients from voting in these jurisdictions against the detriments of not doing so. For example, in a share blocking jurisdiction, it will normally not be in a client's interest to freeze shares simply to participate in a non-contested routine meeting. More specifically, Putnam will normally not vote shares in non-US jurisdictions imposing burdensome proxy voting requirements except in significant votes (such as contested elections and major corporate transactions) where directed by portfolio managers.

Putnam recognizes that the laws governing non**-**US issuers will vary significantly from US law and from jurisdiction to jurisdiction. Accordingly, it may not be possible or even advisable to apply these guidelines mechanically to non-US issuers. However, Putnam believes that shareholders of all companies are protected by the existence of a sound corporate governance and disclosure framework. Accordingly, Putnam will vote proxies of non**-**US issuers **<u>in accordance with the foregoing guidelines where applicable</u>**, except as follows:

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals calling for a majority of the directors to be independent of management.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** shareholder proposals that implement corporate governance standards similar to those established under U.S. federal law and the listing requirements of U.S. stock exchanges, and that do not otherwise violate the laws of the jurisdiction under which the company is incorporated.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals relating to (1) the issuance of common stock in excess of 20% of a company's outstanding common stock where shareholders do not have preemptive rights, or (2) the issuance of common stock in excess of 100% of a company's outstanding common stock where shareholders have preemptive rights.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to authorize share repurchase programs that are recommended for approval by Putnam's proxy voting service provider, otherwise Putnam will vote **<u>against</u>** such proposals; except that Putnam will vote on a **<u>case-by-case basis</u>** if there are concerns that there may be abusive practices related to the share repurchase programs.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** authorizations to repurchase shares or issue shares or convertible debt instruments with or without preemptive rights when such authorization can be used as a takeover defense without shareholder approval. Putnam will not apply this policy to a company with a shareholder who controls more than 50% of its voting rights.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **for** proposals that include debt issuances, however substantive/non-routine proposals, and proposals that fall outside of normal market practice or reasonable standards, will be reviewed on a **<u>case-by-case</u>** basis.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved routine, market-practice proposals. These proposals are limited to (1) those issues that will have little or no economic impact, such as technical, editorial, or mandatory regulatory compliance items, (2) those issues that will not adversely affect and/or which clearly improve shareholder rights/values, and which do not violate Putnam's proxy voting guidelines, or (3) those issues that do not seek to deviate from existing laws or regulations. Examples include but are not limited to, related party transactions (non-strategic), profit-and-loss transfer agreements (Germany), authority to increase paid-in capital (Taiwan). Should any unusual circumstances be identified concerning a normally routine issue, such proposals will be referred back to Putnam for internal review.  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals regarding amendments seeking to expand business lines or to amend the corporate purpose, provided the proposal would not include a significant or material departure from the company's current business, and/or will provide the company with greater flexibility in the performance of its activities.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will normally vote **<u>for</u>** management proposals concerning allocation of income and the distribution of dividends. However, Putnam portfolio teams will override this guideline when they conclude that the proposals are outside the market norms (i.e., those seen as consistently and unusually small or large compared to market practices).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals seeking to adjust the par value of common stock. However, non-routine, substantive proposals will be reviewed on a **<u>case-by-case</u>** basis.  |

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|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that would authorize the company to reduce the notice period for calling special or extraordinary general meetings to less than 21-Days.  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals relating to transfer of reserves/increase of reserves (i.e., France, Japan). However, Putnam will vote on a **<u>case-by-case</u>** basis if the proposal falls outside of normal market practice.  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to increase the maximum variable pay ratio. However, Putnam will vote on a **<u>case-by-case</u>** basis if we are voting against a company's remuneration report or if the proposal seeks an increase in excess of 200%.  |

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|:---|:---|
| ⮚ | Putnam will review stock option plans on a **<u>case-by-case</u>** basis which allow for the options exercise price to be reduced by dividend payments (if the plan would normally pass Putnam's Guidelines).  |

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|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** requests to provide loan guarantees however, Putnam will vote on a **<u>case-by-case</u>** basis if the total amount of guarantees is in excess of 100% of the company's audited net assets.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will generally support remuneration report/policy proposals (i.e., advisory/binding) where a company's executive compensation is linked directly with the performance of the business and executive. Putnam will generally support compensation proposals which incorporate a mix of reasonable salary and performance based short- and long-term incentives. Companies should demonstrate that their remuneration policies are designed and managed to incentivize and retain executives while growing the company's long-term shareholder value.  |

---

Generally, Putnam will vote **<u>against</u>** remuneration report/policy proposals (i.e., advisory/binding) in the following cases:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Disconnect between pay and performance

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● No performance metrics disclosed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● No relative performance metrics utilized;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Single performance metric was used and it was an absolute measure;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Performance goals were lowered when management failed or was unlikely to meet original goals;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Long Term Incentive Plan is subject to retesting (e.g., Australia);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Service contracts longer than 12 months (e.g., United Kingdom);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Allows vesting below median for relative performance metrics;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Ex-gratia / non-contractual payments have been made (e.g., United Kingdom and Australia);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Contains provisions to automatically vest upon change-of-control; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Other poor compensation practices or structures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Pension provisions for new executives is not at the same level as the majority of the wider workforce; pension
provisions for incumbent executives are not set to decrease over time (United Kingdom)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Proposed CEO salary increases are not justifiably appropriate in comparison to wider workforce or rationale for
exception increases is not fully disclosed (United Kingdom)

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case basis</u>** on bonus payments to executive directors or senior management; however, Putnam will vote **<u>against</u>** payments that include outsiders or independent statutory auditors.  |

---

**<u>Matters Relating to Board of Directors</u>**

**<u>Uncontested Board Elections</u>**

***Asia: China, Hong Kong, India, Indonesia, Philippines, Taiwan and Thailand***

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| | |
|:---|:---|
| ⮚ | Putnam will **vote <u>against</u>** the entire board of directors if  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o fewer than one-third of the directors are independent directors, or

◾ the board has not established <u>audit</u>, <u>compensation</u> and <u>nominating</u> committees each composed of a majority of independent directors, or

◾ the chair of the audit, compensation or nominating committee is not an independent director.

Commentary: Companies listed in China (or dual-listed in China and Hong Kong) often have a separate supervisory committee in addition to a standard board of directors containing audit, compensation, and nominating committees. The supervisory committee provides oversight of the financial affairs of the company and supervises members of the board and management, while the board of directors makes decisions related to the company's business and investment strategies. The supervisory committee normally comprises employee representatives and shareholder representatives. Shareholder representatives are elected by shareholders of the company while employee representatives are elected by the company's staff. Shareholder representatives may be independent or may be affiliated with the company or its substantial shareholders. Current laws and regulations neither provide a basis for evaluation of supervisor independence nor do they require a supervisor to be independent.

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote in favor of nominees to the Supervisory Committee  |

---

***Australia***

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire board of directors if  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● fewer than a majority of the directors are independent, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed solely of non-executive directors, a majority of whom, including the chair of the committee (who should not be the board chair), should be independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established nominating and compensation committees each composed of a majority of independent, non-executive directors, with an independent chair.

***Brazil***

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| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> proposals requesting cumulative voting unless there are more candidates than number of seats available, in which case vote for.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals for the proportional allocation of cumulative votes if Putnam is supporting the entire slate of nominees. Putnam will vote **<u>against</u>** such proposals if Putnam is not supporting the entire slate.  |

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|:---|:---|
| ⮚ | Putnam will **<u>abstain</u>** on individual director allocation proposals if Putnam is voting for the proportional allocation of cumulative votes. Putnam will vote on a **<u>case-by-case</u>** basis on individual director allocation proposals if Putnam is voting against the proportional allocation of votes.  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to cumulate votes of common and preferred shareholders if the nominees are known and Putnam is supporting the applicable nominees; Putnam will vote **<u>against</u>** such proposals if Putnam is not supporting the known nominees, or if the nominees are unknown.  |

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| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>against</u>** proposals seeking the recasting of votes for amended slate (as new candidates could be included in the amended slate without prior disclosure to shareholders).  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals regarding instructions if meeting is held on second call if election of directors is part of the recasting as the slate can be amended without (prior) disclosure to shareholders.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals regarding the casting of minority votes to the candidate with largest number of votes.  |

---

***Canada***

Canadian corporate governance requirements mirror corporate governance reforms that have been adopted by the NYSE and other U.S. national securities exchanges and stock markets. As a result, Putnam will vote on matters relating to the board of directors of Canadian issuers **<u>in accordance with the guidelines applicable to U.S. issuers.</u>**

<u>Commentary</u>: Like the UK's Combined Code on Corporate Governance, the policies on corporate governance issued by Canadian securities regulators embody the "comply and explain" approach to corporate governance. Because Putnam believes that the board independence standards contained in the proxy voting guidelines are integral to the protection of investors in Canadian companies, these standards will be applied in a prescriptive manner.

***Continental Europe (ex-Germany)***

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire board of directors if  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● fewer than a majority of the directors are <u>i</u> ndependent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established <u>audit, nominating</u> and <u>compensation</u> committees each composed of a
majority of independent directors.

<u>Commentary</u>: An "independent director" under the European Commission's guidelines is one who is free of any business, family or other relationship, with the company, its controlling shareholder or the management of either, that creates a conflict of interest such as to impair his judgment. A "non-executive director" is one who is not engaged in the daily management of the company.

In France, Employee Representatives are employed by the company and represent rank and file employees. These representatives are elected by company employees. The law also provides for the appointment of employee shareholder representatives, if the employee shareholdings exceed 3% of the share capital. Employee shareholder representatives are elected by the company's shareholders (via general meeting).

***Germany***

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| | |
|:---|:---|
| ⮚ | For companies subject to "co-determination," Putnam will vote <u>for</u> the election of nominees to the supervisory board, except:  |

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| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the Supervisory Board if  |

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee comprising an Independent chair.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the audit committee chair serves as board chair.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board contains more than two former management board members.

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| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the election of a former member of the company's managerial board to chair of the supervisory board.  |

---

<u>Commentary</u>: German corporate governance is characterized by a two-tier board system - a managerial board composed of the company's executive officers, and a supervisory board. The supervisory board appoints the members of the managerial board. Shareholders elect members of the supervisory board, except that in the case of companies with a large number of employees, company employees are allowed to elect some of the supervisory board members (one-half of supervisory board members are elected by company employees at companies with more than 2,000 employees; one-third of the supervisory board members are elected by company employees at companies with more than 500 employees but fewer than 2,000). This practice is known as co-determination.

***Israel***

**<u>Non-Controlled Banks</u>**<u>:</u> Director elections at Non-Controlled banks are overseen by the Supervisor of the Banks and nominees for election as "other" (non-external) directors and external directors (under Companies Law and Directive 301) are put forward by an external and independent committee. As such,

⮚ Putnam's guidelines regarding board Nominating Committees will not apply

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** on nominees when there are more nominees than seats available.  |

---

***Italy***

Election of directors and statutory auditors:

---

| | |
|:---|:---|
| ⮚ | Putnam will apply the director guidelines to the majority shareholder supported list and vote accordingly (**<u>for</u>** or **<u>against</u>**) if multiple lists of director candidates are presented. If there is no majority shareholder supported slate of**<u> </u>**nominees, Putnam will support the shareholder slate of nominees that is recommended for approval by Putnam's service provider.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the entire list of director nominees if the list is bundled as one proposal and if Putnam would otherwise be voting against any one director nominee.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** the majority shareholder supported list of statutory auditor nominees.  |

---

Note: Pursuant to Italian law, directors and statutory auditors are elected through a slate voting system whereby candidates are presented in lists submitted by shareholders representing a minimum percentage of share capital.

---

| | |
|:---|:---|
| ⮚ | Putnam will withhold votes from any director not identified in the proxy materials. (Example: Co-opted director nominees.)  |

---

***Japan***

---

| | |
|:---|:---|
| ⮚ | For companies that have established a U.S.-style corporate governance structure, Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have a majority of outside directors,

A-560

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established nominating and compensation committees composed of a majority of outside directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of a majority of independent directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder.

⮚ For companies that have established a statutory auditor board structure:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will  **<u>withhold votes</u>** from the appointment of members of a company's board of statutory
auditors if a majority of the members of the board of statutory auditors is not independent.

---

| | |
|:---|:---|
| ⮚ | For companies that have established a statutory auditor board structure, Putnam will **withhold votes** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two outside directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● Putnam will vote  **<u>against</u>** any statutory auditor nominee who attends fewer than 75% of board and
committee meeting without valid reasons for the absences (i.e., illness, personal emergency, etc.) (Note that Corporate Law requires disclosure of outsiders' attendance but not that of insiders, who are presumed to have no more important time
commitments.)

---

| | |
|:---|:---|
| ⮚ | For companies that have established an audit committee board structure (one-tier / one committee), Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two outside directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board does not have at least two independent directors for companies with a controlling shareholder, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of a majority of independent directors

**Election of Executive Director and Election of Supervisory Director - REIT** 

REITs have a unique two-tier board structure with generally one or more executive directors and two or more supervisory directors. The number of supervisory directors must be greater than, not equal to, the number of executive directors. Shareholders are asked to vote on both types of directors. Putnam will vote as follows, provided each board of executive / supervisory directors meets legal requirements.

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote <u>for</u> the election of Executive Director  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote <u>for</u> the election of Supervisory Directors  |

---

<u>Commentary</u>:

**Definition of outside director and independent director:** 

The Japanese Companies Act focuses on two director classifications: Insider or Outsider. An outside director is a director who is not a director, executive, executive director, or employee of the company or its parent company, subsidiaries or affiliates. Further, a director, executive, executive director or employee, who have executive responsibilities, of the company or subsidiaries can regain eligibility ten years after his or her resignation, provided certain other requirements are met. An outside director is designated as an "independent" director based on the Tokyo Stock Exchange listing rules. An outside director is "independent" if that person can make decisions completely independent from the managers of the company, its parent, subsidiaries, or affiliates

A-561

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and does not have a material relationship with the company (i.e., major client, trading partner, or other business relationship; familial relationship with current director or executive; etc.).

The guidelines have incorporated these definitions in applying the board independence standards above.

***Korea***

Putnam will **<u>withhold votes</u>** from the entire board of directors if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● For large companies (i.e., those with assets of at least KRW 2 trillion); the board does not have at least three
independent directors or less than a majority of directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● For small companies (i.e., those with assets of less than KRW 2 trillion), fewer than one-fourth of the directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has not established a nominating committee with at least half of the members being outside directors,
or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee composed of at least three members and in which at least two-thirds of its members are independent directors.

<u>Commentary</u>: For purposes of these guidelines, an "outside director" is a director who is independent from the management or controlling shareholders of the company and holds no interests that might impair performing his or her duties impartially from the company, management or controlling shareholder. In determining whether a director is an outside director, Putnam will also apply the standards included in Article 382 of the Korean Commercial Act*,* i.e., no employment relationship with the company for a period of two years before serving on the committee, no director or employment relationship with the company's largest shareholder, etc.) and may consider other business relationships that would affect the independence of an outside director.

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to amend the Executive Officer Retirement Allowance Policy unless the recipients of the grants include non-executives; the proposal would have a negative impact on shareholders, or the proposal appear to be outside of normal market practice, in which case Putnam will vote **<u>against</u>**.  |

---

**Malaysia** 

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● less than 50% of the directors are independent directors, or less than a majority of the directors are
independent directors for large companies,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established an audit committee with all members being independent directors, including the
committee chair,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a nominating committee with all members being non-executive directors, a majority of whom are independent, including the committee chair; the board chair should not serve as a member of the nomination committee, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a compensation committee with all members being non-executive directors, a majority of whom are independent; the board chair should not serve as a member of the remuneration committee.

***Nordic Markets – Finland, Norway, Sweden***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> the entire board of directors if:  |

---

**<u>Board Independence:</u>**

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have a majority of directors independent from the company and management. (Sweden, Finland,
Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board does not have at least two directors independent from the company and its major shareholders holding
> 10% of the Company's share capital. (Sweden, Finland, Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive director is a member of the board. (Norway)

**<u>Audit Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee does not consist of a majority of directors independent from the company and management.
(Sweden, Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee does not have at least one director independent from the company and its major shareholders
holding > 10% of the Company's share capital. (Sweden, Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The audit committee is not majority independent. (Norway)

**<u>Remuneration Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not fully independent of the company, excluding the chair. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not majority independent of the company. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee does not consist fully of non-executive directors. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not fully independent of management (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The remuneration committee is not majority independent from the company and its major shareholders holding >
50% of the Company's share capital. (Sweden, Finland, Norway)

**<u>Board Nomination Committee:</u>**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The nomination committee does not consist of a majority of directors independent from the company. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive is a member of the nomination committee. (Finland)

**<u>External Nomination Committee:</u>** Vote against the establishment of the nomination committee and its guidelines when:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee is not majority independent of the company and management. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee does not have at least one director not affiliated to largest shareholder on the
committee. (Sweden)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee does not meet best practice based on ISS analysis. (Finland)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee is not majority independent of the board and management. (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The external committee has more than one member of the board of the directors sitting on the committee. (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● There is insufficient disclosure provided for new nominees (Norway)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● An executive is a member of the committee. (Norway)

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***Russia***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a <u>case-by-case basis</u> for the election of nominees to the board of directors.  |

---

<u>Commentary</u>: In Russia, director elections are handled through a cumulative voting process. Cumulative voting allows shareholders to cast all of their votes for a single nominee for the board of directors, or to allocate their votes among nominees in any other way. In contrast, in "regular" voting, shareholders may not give more than one vote per share to any single nominee. Cumulative voting can help to strengthen the ability of minority shareholders to elect a director.

***Singapore***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** from the entire board of directors if  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● in the case of a board with an independent director serving as chair, fewer than one-third of the directors are independent directors; or, in the case of a board not chaired by an independent director, fewer than half of the directors are independent directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established <u>audit</u> and <u>compensation</u> committees, each with an independent director
serving as chair, with at least a majority of the members being independent directors, and with all of the directors being non-executive directors, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a <u>nominating</u> committee, with an independent director serving as chair, and
with at least a majority of the members being independent directors.

***United Kingdom, Ireland***

<u>Commentary</u>:

**Application of guidelines**: Although the Combined Code has adopted the "comply and explain" approach to corporate governance, Putnam believes that the guidelines discussed above with respect to board independence standards are integral to the protection of investors in UK companies. As a result, these guidelines will be applied in a prescriptive manner.

**Definition of independence**: For the purposes of these guidelines, a non-executive director shall be considered independent if the director meets the independence standards in section A.3.1 of the Combined Code (i.e., no material business or employment relationships with the company, no remuneration from the company for non-board services, no close family ties with senior employees or directors of the company, etc.), except that Putnam does not view service on the board for more than nine years as affecting a director's independence.

**Smaller companies**: A smaller company is one that is below the FTSE 350 throughout the year immediately prior to the reporting year.

---

| | |
|:---|:---|
| ⮚ | Putnam will **<u>withhold votes</u>** from the entire board of directors if:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board, excluding the Non-Executive Chair, is not comprised of at
least half independent non-executive directors,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a Nomination committee composed of a majority of independent non-executive directors, excluding the Non-Executive Chair, or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● the board has not established a Compensation committee composed of (1) at least three directors (in the case
of smaller companies, as defined by the Combined Code, two directors) and (2) solely of independent non-executive directors. The company chair may be a member of, but not chair, the Committee provided he
or she was considered independent on appointment as chair, or

A-564

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;● The board has not established an Audit Committee composed of, (1) at least three directors (in the case of
smaller companies as defined by the Combined Code, two directors) and (2) solely of independent non-executive directors. The board chair may not serve on the audit committee of large or small companies.

***All other jurisdictions***

---

| | |
|:---|:---|
| ⮚ | In the absence of jurisdiction specific guidelines, Putnam will vote as follows for boards/supervisory boards:  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;o Putnam will vote  **<u>against</u>** the entire board of directors if

◾ fewer than a majority of the directors are independent directors, or

◾ the board has not established audit, nominating and compensation committees each composed of a majority of independent directors.

**Additional Commentary regarding all Non-US jurisdictions:** 

Whether a director is considered "independent" or not will be determined by reference to local corporate law or listing standards.

Some jurisdictions may legally require or allow companies to have a certain number of employee representatives, employee shareholder representatives (e.g., France) and/or shareholder representatives on their board. Putnam generally does not consider these representatives independent. The presence of employee representatives or employee shareholder representatives on the board and key committees is generally legally mandated. In most markets, shareholders do not have the ability to vote on the election of employee representatives or employee shareholder representatives. In some markets, significant shareholders have a legal right to nominate shareholder representatives. Shareholders are required to approve the election of shareholder representatives to the board. Unlike employee representatives, there are no legal requirements regarding the presence of shareholder representatives on the board or its committees.

---

| | |
|:---|:---|
| ⮚ | Putnam will **not include** employee or employee shareholder representatives in the independence calculation of the board or key committees, nor in the calculation of the size of the board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will **include** shareholder representatives in the independence calculation of the board and key committees, and in the calculation of the size of the board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally support shareholder or employee representatives if included in the agenda Putnam will vote on a **<u>case-by-case</u>** basis when there are more candidates than seats. Additionally, Putnam will vote **<u>against</u>** such**<u> </u>**nominees when there is insufficient information disclosed.  |

---

⮚ Putnam Investments' policies regarding the provision of professional services and transactional relationship with regard to directors will apply.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **for** independent nominees for alternate director, unless such nominees do not meet Putnam's individual director standards.  |

---

**Shareholder nominated directors/self-nominated directors** 

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>against</u> shareholder nominees if Putnam supports the board of directors.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a <u>case-by case</u> basis if Putnam will be voting against the current board.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a case-by-case basis if the proposal regarding a self-nominated/shareholder nominated director nominee would add an additional seat to the board if the nominee is approved.  |

---

**<u>Other Business Matters</u>**

A-565

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***Japan***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>A. Article Amendments</u>**

---

| | |
|:---|:---|
| ⮚ | The Japanese Companies Act gives companies the option to adopt a U.S.-Style corporate structure (i.e., a board of directors and audit, nominating, and compensation committees). Putnam will vote **<u>for</u>** proposals to amend a company's articles of incorporation to adopt the U.S.-Style "Board with Committees" structure. However, the independence of the outside directors is critical to effective corporate governance under this new system. Putnam will, therefore, scrutinize the backgrounds of the outside director nominees at such companies, and will vote **<u>against</u>** the amendment where Putnam believes the board lacks the necessary level of independence from the company or a substantial shareholder.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on granting the board the authority to repurchase shares at its discretion.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** amendments to delete a requirement directing the company to reduce authorized capital by the number of treasury shares cancelled. If issued share capital decreases while authorized capital remains unchanged, then the company will have greater leeway to issue new shares (for example as a private placement or a takeover defense).  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to authorize appointment of special directors. Under the new Corporate Law, companies are allowed to appoint, from among their directors, "special directors" who will be authorized to make decisions regarding the purchase or sale of important assets and major borrowing or lending, on condition that the board has at least six directors, including at least one non-executive director. At least three special directors must participate in the decision-making process and decisions shall be made by a majority vote of the special directors. However, the law does not require any of the special directors to be non-executives, so in effect companies may use this mechanism to bypass outsiders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** proposals to create new class of shares or to conduct a share consolidation of outstanding shares to squeeze out minority shareholders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals seeking to enable companies to establish specific rules governing the exercise of shareholder rights. (Note: Such as, shareholders' right to submit shareholder proposals or call special meetings.)  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>B. Compensation Related Matters</u>**

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** option plans which allow the grant of options to suppliers, customers, and other outsiders.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** stock option grants to independent internal statutory auditors. The granting of stock options to internal auditors, at the discretion of the directors, can compromise the independence of the auditors and provide incentives to ignore accounting problems, which could affect the stock price over the long term.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** the payment of retirement bonuses to directors and statutory auditors when one or more of the individuals to whom the grants are being proposed has not served in an executive capacity for the company. Putnam will also vote **<u>against</u>** payment of retirement bonuses to any directors or statutory auditors who have been designated by the company as independent. Retirement bonus proposals are all-or-nothing, meaning that split votes against individual payments cannot be made. If any one individual does not meet Putnam's criteria, Putnam will vote **<u>against</u>** the entire bundled item.  |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**<u>C. Other Business Matters</u>**

---

| | |
|:---|:---|
| ⮚ | Putnam votes **<u>for</u>** mergers by absorptions of wholly-owned subsidiaries by their parent companies. These deals do not require the issuance of shares, and do not result in any dilution or new obligations for shareholders of the parent company. These transactions are routine.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** the acquisition if it is between parent and wholly-owned subsidiary.  |

---

A-566

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---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** the formation of a holding company, if routine. Holding companies are once again legal in Japan and a number of companies, large and small, have sought approval to adopt a holding company structure. Most of the proposals are intended to help clarify operational authority for the different business areas in which the company is engaged and promote effective allocation of corporate resources. As most of the reorganization proposals do not entail any share issuances or any change in shareholders' ultimate ownership interest in the operating units, Putnam will treat most such proposals as routine.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals that authorize the board to vary the AGM record date.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to abolish the retirement bonus system  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** board-approved director/officer indemnification proposals  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on private placements (Third-party share issuances). Where Putnam views the share issuance necessary to avoid bankruptcy or to put the company back on solid financial footing, Putnam will generally vote **<u>for</u>**. When a private placement allows a particular shareholder to obtain a controlling stake in the company at a discount to market prices, or where the private placement otherwise disadvantages ordinary shareholders, Putnam will vote **<u>against</u>**.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>against</u>** shareholder rights plans (poison pills). However, if all of the following criteria are met, Putnam will evaluate such poison pills on a **<u>case-by-case</u>** basis:  |

---

1) The poison pill must have a duration of no more than three years.

2) The trigger threshold must be no less than 20 percent of issued capital. 

3) The company must have no other types of takeover defenses in place.

4) The company must establish a committee to evaluate any takeover offers, and the members of that committee must all meet Putnam's' definition of independence.

5) At least 20 percent, and no fewer than two, of the directors must meet Putnam's definition of independence. These independent directors must also meet Putnam's guidelines on board meeting attendance. 

6) The directors must stand for reelection on an annual basis.

7) The company must release its proxy materials no less than three weeks before the meeting date.

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to allow the board to decide on income allocation without shareholder vote.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to limit the liability of External Audit Firms ("Accounting Auditors")  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals seeking a reduction in board size that eliminates all vacant seats.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam may generally vote **<u>against</u>** proposals seeking an increase in authorized capital that leaves the company with as little as 25 percent of the authorized capital outstanding (general request). However, such proposals will be evaluated on a company specific basis, taking into consideration such factors as current authorization outstanding, existence (or lack thereof) of preemptive rights and rationale for the increase.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** corporate split agreement and transfer of sales operations to newly created wholly-owned subsidiaries where the transaction is a purely internal one which does not affect shareholders' ownership interests in the various operations. All other proposals will be referred back to Putnam for **<u>case-by-case</u>** review. These reorganizations usually accompany the switch to a holding company structure, but may be used in other contexts.  |

---

***United Kingdom***

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---

| | |
|:---|:---|
| ⮚ | Putnam will not apply the U.S. standard 15% discount cap for employee share purchase schemes at U.K. companies. As such, Putnam will generally vote **<u>for</u>** 'Save-As-You-Earn' schemes in the U.K which allow for no more than a 20% purchase discount, and which otherwise comply with U.K. law and Putnam standards.  |

---

***France***

---

| | |
|:---|:---|
| ⮚ | Putnam will not apply the U.S. standard 15% discount cap for employee share purchase schemes at French companies. As such, Putnam will generally vote **<u>for</u>** employee share purchase schemes in France that allow for no greater than a 30% purchase discount, or 40% purchase discount if the vesting period is equal to or greater than ten years, and which otherwise comply with French law and Putnam standards.  |

---

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** the Remuneration Report (established based on SRD II), however Putnam will vote on a **<u>case-by-case</u>** basis when Putnam is voting against both the ex-Post Remuneration Report (CEO) and ex-Ante**<u> </u>**Remuneration Policy (CEO, or proposal including CEO remuneration package) in the current year, and Putnam's third party service provider(s) is recommending a vote against.  |

---

***Canada***

---

| | |
|:---|:---|
| ⮚ | Putnam will generally vote **<u>for</u>** Advance Notice provisions for submitting director nominations not less than 30 days prior to the date of the annual meeting. For Advance Notice provisions where the minimum number of days to submit a shareholder nominee is less than 30 days prior to the meeting date, Putnam will vote on a **<u>case-by-case</u>** basis. Putnam will also vote on a **<u>case-by-case</u>** basis if the company's policy expressly prohibits the commencement of a new notice period in the event the originally scheduled meeting is adjourned or postponed**.**  |

---

***Hong Kong***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote <u>for</u> proposals to approve a general mandate permitting the company to engage in non-pro rata share issuances of up to 20% of total equity in a year if the company's board meets Putnam's independence standards; if the company's board does not meet Putnam's independence standards, then Putnam will vote against these proposals.  |

---

---

| | |
|:---|:---|
| ⮚ | Additionally, Putnam will vote <u>for</u> proposals to approve the reissuance of shares acquired by the company under a share repurchase program, provided that: (1) Putnam supported (or would have supported, in accordance with these guidelines) the share repurchase program, (2) the reissued shares represent no more than 10% of the company's outstanding shares (measured immediately before the reissuance), and (3) the reissued shares are sold for no less than 85% of current market value.  |

---

This policy supplements policies regarding share issuances as stated above under section

III. Voting Shares of Non-US Issuers.

***Taiwan***

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>against</u>** proposals to release the board of directors from the non-compete restrictions specified in Taiwanese Company Law. However, Putnam will vote **<u>for</u>** such proposals if the directors are engaged in activities with a wholly- owned subsidiary of the company.  |

---

***Australia***

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals to carve out, from the general cap on non-pro rata share issues of 15% of total equity in a rolling 12-month period, a particular proposed issue of shares or a particular issue of shares made previously within the 12-month period, if the company's board meets Putnam's independence standards; if the company's board does <u>not</u> meet Putnam's independence standards, then Putnam will vote **<u>against</u>** these proposals.  |

---

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| | |
|:---|:---|
| ⮚ | Putnam will vote **<u>for</u>** proposals renewing partial takeover provisions.  |

---

A-568

------

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| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on Board-Spill proposals.  |

---

***Turkey***

---

| | |
|:---|:---|
| ⮚ | Putnam will vote on a **<u>case-by-case</u>** basis on proposals involving related party transactions. However, Putnam will vote **<u>against</u>** when such proposals do not provide information on the specific transaction(s) to be entered into with the board members or executives.  |

---

A-569

------

**<u>Exhibit B to Proxy Procedures</u>**

<u>PUTNAM INVESTMENTS</u> 

<u>PROXY VOTING CONFLICT</u> 

OF INTEREST DISCLOSURE FORM

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. *Company name*:____________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. *Date of Meeting: ___________________________________________* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. *Referral Item(s): ____________________________________________* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. *Description of Putnam's Business Relationship with Issuer of Proxy which may give rise to a conflict of interest:________________________________* 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. _____________________________________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;*5.* *Describe procedures used to address any conflict of interest:* <u>_______________________________</u> 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. Describe any contacts from parties outside Putnam Management (other than routine communications from proxy
solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation:

__ _________________________________________________________________

CERTIFICATION

The undersigned officer of Putnam Investments certifies that, to the best of his or her knowledge, any recommendation of an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

Name:

Proxy Voting Team

A-570

------

**<u>Exhibit C to Proxy Procedures</u>**

<u>PUTNAM INVESTMENTS</u> 

<u>PROXY VOTING CONFLICT</u> 

OF INTEREST DISCLOSURE FORM

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. *Company name*: <u>_______</u>________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. *Date of Meeting*: _______________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. *Referral Item(s)*: ___________________________________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. *Description of Putnam's Business Relationship with Issuer of Proxy which may give rise to a conflict of interest:* <u>______None________</u>_____________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. *Describe procedures used to address any conflict of interest*: _____N/A_________

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. *Describe any contacts from parties outside Putnam Management (other than routine communications from proxy solicitors) with respect to the referral item not otherwise reported in an investment professional's recommendation*:

None________________________________________________________________

CERTIFICATION

The undersigned officer of Putnam Investments certifies that, to the best of his or her knowledge, any recommendation of an investment professional provided under circumstances where a conflict of interest exists was made solely on the investment merits and without regard to any other consideration.

Name:

Proxy Voting Team

A-571

------

**PUTNAM ETF TRUST** 

**PART C** 

**Other Information** 

**Item 15.** **Indemnification** <br>

Reference is made to Article VII, sections 7.5 through 7.7, of the Registrant's Amended and Restated Agreement and Declaration of Trust, which is incorporated by reference to Post-Effective Amendment No. 1 to the Registrant's Registration Statement on Form N-1A under the Investment Company Act of 1940, as amended (File No. 811-23643). In addition, the Registrant maintains a trustees and officers liability insurance policy under which the Registrant and its trustees and officers are named insureds. Certain service providers to the Registrant also have contractually agreed to indemnify and hold harmless the trustees against liability arising in connection with the service provider's performance of services under the relevant agreement.

The Registrant has also agreed to contractually indemnify each Trustee. The agreement between the Registrant and each Trustee, in addition to delineating certain procedural aspects relating to indemnification and advancement of expenses to the fullest extent permitted by the Registrant's Amended and Restated Agreement and Declaration of Trust and Bylaws and the laws of state of Delaware, the Securities Act of 1933, the Securities Exchange Act of 1934 and the Investment Company Act of 1940, as now or hereafter in force, provides that the Registrant and each series of the Registrant shall indemnify and hold harmless the Trustee against any and all expenses actually and reasonably incurred by the Trustee in any proceeding arising out of or in connection with the Trustee's service to the Registrant, unless the Trustee has been adjudicated in a final adjudication on the merits to have engaged in certain disabling conduct.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to trustees, officers and controlling persons of the Registrant by the Registrant pursuant to the Registrant's organizational instruments or otherwise, the Registrant is aware that in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and, therefore, is unenforceable.

**Item 16. Exhibits** 

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| | |
|:---|:---|
| (1)(a) | Certificate of Trust dated December 21, 2020 - [filed with initial Registration Statement on Form N-1A ("Initial Registration Statement") on February 17, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000211/b_etfcertoftrust.htm) |
| (1)(b) | Amended and Restated Agreement and Declaration of Trust dated April 20, 2021 – [Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/b_eftex99a2.htm) |
| (1)(c) | Amended Schedule A to the Amended and Restated Declaration of Trust dated September 23, 2022 –[Incorporated by reference to Post-Effective Amendment No. 9 to the Registrant's Registration Statement (No. 333-253222) filed on September 28, 2022.](http://www.sec.gov/Archives/edgar/data/1845809/000092881622001051/b_etfex99a3.htm) |
| (2) | Amended and Restated Bylaws dated June 23, 2023 - [Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement (No. 333-253222) filed on August 24, 2023.](http://www.sec.gov/Archives/edgar/data/1845809/000092881623001253/b_etfex99b2.htm) |
| (3) | Not applicable. |
| (4) | Form of Agreement and Plan of Reorganization – included as Appendix A to Part A hereof. |
| (5)(a) | Portions of Agreement and Declaration of Trust Relating to Shareholders' Rights – [Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/c_etfex99c1.htm) |
| (5)(b) | Portions of Bylaws Relating to Shareholders' Rights - [Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement (No. 333-253222) filed on August 24, 2023.](http://www.sec.gov/Archives/edgar/data/1845809/000092881623001253/c_etfex99c.htm) |

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| | |
|:---|:---|
| (6)(a) | [Management Contract with Franklin Advisers, Inc. ("FAV") for Franklin California Municipal Income ETF, Franklin Massachusetts Municipal Income ETF, Franklin Minnesota Municipal Income ETF, Franklin Municipal High Yield ETF, Franklin Municipal Income ETF, Franklin New Jersey Municipal Income ETF, Franklin New York Municipal Income ETF, Franklin Ohio Municipal Income ETF, Franklin Pennsylvania Municipal Income ETF, and Franklin Short-Term Municipal Income ETF is filed herewith.](d91160dex996a.htm) |
| (6)(b) | [Sub-Advisory Agreement between FAV and Franklin Templeton Investment Management Limited ("FTIML") is filed herewith.](d91160dex996b.htm) |
| (6)(c) | [Subadvisory Agreement between FAV and Putnam Investment Management, LLC ("PIM") is filed herewith.](d91160dex996c.htm) |
| (7)(a) | Amended and Restated Distributor's Contract with Franklin Distributors, LLC dated August 2, 2024. –[Incorporated by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement (No. 333-253222) filed on December 27, 2024.](http://www.sec.gov/Archives/edgar/data/1845809/000092881624002123/c_etfex99e1.htm) |
| (7)(b) | Form of Authorized Participant Agreement - [Incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement (No. 333-253222) filed on August 27, 2024.](http://www.sec.gov/Archives/edgar/data/1845809/000092881624001264/g_pea19ex99e2.htm) |
| (8) | Not applicable |
| (9)(a) | Master Custodian Agreement with State Street Bank and Trust Company dated January 1, 2007; Appendix A dated December 30, 2020 – [Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/i_etfex99g1.htm) |
| (9)(b) | Amendment to Master Custodian Agreement with State Street Bank and Trust Company dated August 1, 2013 –[Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/a_nf76stixmod1.htm) |
| (9)(c) | Amendment to Master Custodian Agreement with State Street Bank and Trust Company dated June 25, 2020 –[Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/a_nf76stixmod2.htm) |
| (9)(d) | Amendment to Master Custodian Agreement with State Street Bank and Trust Company dated April 1, 2021 –[Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/j_etfex99g4.htm) |
| (9)(e) | Amendment to Master Custodian Agreement with State Street Bank and Trust Company dated June 25, 2021 –[Incorporated by reference to Post-Effective Amendment No. 3 to the Registrant's Registration Statement (No. 333-253222) filed on May 23, 2022.](http://www.sec.gov/Archives/edgar/data/1845809/000092881622000573/c_ex99g5.htm) |
| (9)(f) | Amendment to Master Custodian Agreement with State Street Bank and Trust Company dated September 23, 2022 –[Incorporated by reference to Post-Effective Amendment No. 9 to the Registrant's Registration Statement (No. 333-253222) filed on September 28, 2022.](http://www.sec.gov/Archives/edgar/data/1845809/000092881622001051/g_etfexg6.htm) |
| (9)(g) | Amendment to Master Custodian Agreement with State Street Bank and Trust Company dated January 18, 2023 –[Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement (No. 333-253222) filed on January 18, 2023.](http://www.sec.gov/Archives/edgar/data/1845809/000092881623000041/e_esgetfex99g7.htm) |
| (9)(h) | Amendment to Master Custodian Agreement with State Street Bank and Trust Company dated July 2, 2024 –[Incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement (No. 333-253222) filed on August 27, 2024.](http://www.sec.gov/Archives/edgar/data/1845809/000092881624001264/h_pea19ex99g8.htm) |
| (10) | 12b-1 Distribution Plan and Agreement dated April 20, 2021 –[Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/p_etfex99m.htm) |

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| | |
|:---|:---|
| (11) | [Opinion and consent of Morris, Nichols, Arsht & Tunnell LLP as to the legality of the securities being registered is filed herewith.](d91160dex9911.htm) |
| (12) | Opinion and consent of Ropes & Gray LLP as to tax matters - to be filed by amendment. |
| (13)(a) | Transfer Agency and Service Agreement with State Street Bank and Trust Company dated April 1, 2021 –[Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/k_etfex99h1.htm) |
| (13)(b) | Amendment to Transfer Agent Agreement with State Street Bank and Trust Company dated September 23, 2022 –[Incorporated by reference to Post-Effective Amendment No. 9 to the Registrant's Registration Statement (No. 333-253222) filed on September 28, 2022.](http://www.sec.gov/Archives/edgar/data/1845809/000092881622001051/h_etfexh2.htm) |
| (13)(c) | Amendment to Transfer Agent Agreement with State Street Bank and Trust Company dated January 18, 2023 –[Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement (No. 333-253222) filed on January 18, 2023.](http://www.sec.gov/Archives/edgar/data/1845809/000092881623000041/f_esgetfex99h3.htm) |
| (13)(d) | Master Sub-Accounting Services Agreement between Putnam Investment Management, LLC and State Street Bank and Trust Company dated January 1, 2007; Appendix A amended as of July 24, 2017 –[Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/a_ssbacctgmod3.htm) |
| (13)(e) | Amendment to Master Sub-Accounting Services Agreement between Putnam Investment Management, LLC and State Street Bank and Trust Company dated August 1, 2013 –[Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/a_nf77stixmod1.htm) |
| (13)(f) | Amendment to Master Sub-Accounting Services Agreement between Putnam Investment Management, LLC and State Street Bank and Trust Company dated April 1, 2021 –[Incorporated by reference to Pre-Effective Amendment No. 1 to the Registrant's Registration Statement (No. 333-253222) filed on May 14, 2021.](http://www.sec.gov/Archives/edgar/data/1845809/000092881621000557/l_etfex99h4.htm) |
| (13)(g) | Amendment to Master Sub-Accounting Services Agreement between Putnam Investment Management, LLC and State Street Bank and Trust Company dated June 25, 2021 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/868648/000092881621001210/a_nf77sitxmod2.htm) |
| (13)(h) | Amendment to Master Sub-Accounting Agreement between Putnam Investment Management, LLC and State Street Bank and Trust Company dated September 23, 2022 –[Incorporated by reference to Post-Effective Amendment No. 9 to the Registrant's Registration Statement (No. 333-253222) filed on September 28, 2022.](http://www.sec.gov/Archives/edgar/data/1845809/000092881622001051/i_etfexh7.htm) |
| (13)(i) | Amendment to Master Sub-Accounting Services Agreement between Putnam Investment Management, LLC and State Street Bank and Trust Company dated January 18, 2023 –[Incorporated by reference to Post-Effective Amendment No. 14 to the Registrant's Registration Statement (No. 333-253222) filed on January 18, 2023.](http://www.sec.gov/Archives/edgar/data/1845809/000092881623000041/g_esgetfex99h9.htm) |
| (13)(j) | Amendment to Master Sub-Accounting Services Agreement between Putnam Investment Management, LLC and State Street Bank and Trust Company dated July 2, 2024 –[Incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement (No. 333-253222) filed on August 27, 2024.](http://www.sec.gov/Archives/edgar/data/1845809/000092881624001264/i_pea19ex99h10.htm) |
| (13)(k) | Credit Agreement with State Street Bank and Trust Company and certain other lenders dated September 24, 2015 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/868648/000092881615001430/a_modcmmtd1.htm) |

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| | |
|:---|:---|
| (13)(l) | Joinder Agreement No. 1 to Credit Agreement with State Street Bank and Trust Company and certain other lenders dated August 29, 2016 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/81259/000092881616003887/a_joincmtdmod.htm) |
| (13)(m) | Amendment No. 1 to Credit Agreement with State Street Bank and Trust Company dated September 22, 2016 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/792288/000092881617002097/a_amndcmtdmod.htm) |
| (13)(n) | Amendment No. 2 to Credit Agreement with State Street Bank and Trust Company, dated September 21, 2017 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/719712/000092881618000707/a_amndcmtdmod1.htm) |
| (13)(o) | Amendment No. 3 to Credit Agreement with State Street Bank and Trust Company, dated September 20, 2018 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/719712/000092881619000567/a_amndcmtdmod2.htm) |
| (13)(p) | Amendment No. 4 to Credit Agreement with State Street Bank and Trust Company, dated September 19, 2019 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/822671/000092881620000223/a_amndcmtdmod3.htm) |
| (13)(q) | Amendment No. 5 to Credit Agreement with State Street Bank and Trust Company, dated October 18, 2019 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/81251/000092881620000174/amndcmtdmod4.htm) |
| (13)(r) | Amendment No. 6 and Consent No. 3 to Credit Agreement with State Street Bank and Trust Company, dated August 27, 2020 – [Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/868648/000092881621001210/a_amndcmtdmod5.htm) |
| (13)(s) | Amendment No. 7 to Credit Agreement with State Street Bank and Trust Company, dated October 16, 2020 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/868648/000092881621001210/a_amndcmtdmod6.htm) |
| (13)(t) | Amendment No. 8 to Credit Agreement with State Street Bank and Trust Company, dated October 15, 2021 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/932101/000092881621001266/d_amndcmtdmod7.htm) |
| (13)(u) | Amendment No. 9 to Credit Agreement with State Street Bank and Trust Company, dated October 14, 2022 –[Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement (No. 333-253222) filed on December 27, 2022.](http://www.sec.gov/Archives/edgar/data/1845809/000092881622001332/a_amndcmtdmod8.htm) |
| (13)(v) | Amendment No. 10 to Credit Agreement with State Street Bank and Trust Company dated May 2, 2023 –[Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement (No. 333-253222) filed on August 24, 2023.](http://www.sec.gov/Archives/edgar/data/1845809/000092881623001253/a_amndcmtdmod9.htm) |
| (13)(w) | Amendment No. 11 and Consent No. 6 to Credit Agreement with State Street Bank and Trust Company dated December 7, 2023 - [Incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement (No. 333-253222) filed on August 27, 2024.](http://www.sec.gov/Archives/edgar/data/1005942/000092881623001261/a_amndunctdmod10.htm) |
| (13)(x) | Amendment No. 12 to Credit Agreement with State Street Bank and Trust Company dated April 30, 2024 –[Incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement (No. 333-253222) filed on August 27, 2024.](http://www.sec.gov/Archives/edgar/data/932101/000092881624000734/c_amndcmtdmod11.htm) |
| (13)(y) | Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company dated September 24, 2015 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/0001845809/000092881621001365/c_moduncmmtd1.htm) |

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| | |
|:---|:---|
| (13)(z) | First Amendment to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company dated August 29, 2016 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/932101/000092881616003881/a_amndunctdmod.htm) |
| (13)(aa) | Second Amendment to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company dated September 22, 2016 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/792288/000092881617002097/a_amndunctdmod1.htm) |
| (13)(bb) | Third Amendment to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company, dated September 21, 2017 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/719712/000092881618000707/a_amndunctdmod2.htm) |
| (13)(cc) | Fourth Amendment to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company dated September 20, 2018 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/719712/000092881619000567/a_amndunctdmod3.htm) |
| (13)(dd) | Fifth Amendment to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company dated September 19, 2019 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/822671/000092881620000223/a_amndunctdmod4.htm) |
| (13)(ee) | Sixth Amendment to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company, dated October 18, 2019 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/822671/000092881620000223/a_amndunctdmod5.htm) |
| (13)(ff) | Seventh Amendment and Consent to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company, dated August 27, 2020 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/868648/000092881621001210/a_amndunctdmod6.htm) |
| (13)(gg) | Eighth Amendment to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company, dated October 16, 2020 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/868648/000092881621001210/a_amndunctdmod7.htm) |
| (13)(hh) | Ninth Amendment Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company, dated October 15, 2021 –[Incorporated by reference to Post-Effective Amendment No. 2 to the Registrant's Registration Statement (No. 333-253222) filed on December 28, 2021.](http://www.sec.gov/Archives/edgar/data/932101/000092881621001266/e_amndunctdmod8.htm) |
| (13)(ii) | Tenth Amendment to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company, dated October 14, 2022 –[Incorporated by reference to Post-Effective Amendment No. 13 to the Registrant's Registration Statement (No. 333-253222) filed on December 27, 2022.](http://www.sec.gov/Archives/edgar/data/1845809/000092881622001332/a_amndunctdmod9.htm) |
| (13)(jj) | Eleventh Amendment to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company dated May 2, 2023 –[Incorporated by reference to Post-Effective Amendment No. 15 to the Registrant's Registration Statement (No. 333-253222) filed on August 24, 2023.](http://www.sec.gov/Archives/edgar/data/1845809/000092881623001253/a_amndunctdmod10.htm) |
| (13)(kk) | Amendment No. 12 and Consent No. 4 to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company dated December 7, 2023 –[Incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement (No. 333-253222) filed on August 27, 2024.](http://www.sec.gov/Archives/edgar/data/787836/000092881624000507/a_amndunctdmod11.htm) |
| (13)(ll) | Thirteenth Amendment to Amended and Restated Uncommitted Line of Credit Agreement with State Street Bank and Trust Company dated April 30, 2024 –[Incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement (No. 333-253222) filed on August 27, 2024.](http://www.sec.gov/Archives/edgar/data/932101/000092881624000734/d_amndunctdmod12.htm) |
| (13)(mm) | Form of Indemnification Agreement. –[Incorporated by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement (No. 333-253222) filed on December 27, 2024.](http://www.sec.gov/Archives/edgar/data/1845809/000092881624002123/d_etfex99h39i.htm) |

---

------

---

| | |
|:---|:---|
| (13)(nn) | Schedule of Indemnification Agreements conforming in all material respects to the Form of Indemnification Agreement filed as Exhibit (13)(mm) but which have not been filed as exhibits to the Registrant's Registration Statement in reliance on Rule 483(d)(2) under the Securities Act of 1933, as amended –[Incorporated by reference to Post-Effective Amendment No. 19 to the Registrant's Registration Statement (No. 333-253222) filed on August 27, 2024.](http://www.sec.gov/Archives/edgar/data/1845809/000092881624001264/j_pea19ex99h39ii.htm) |
| (13)(oo) | Expense Limitation Agreement with PIM and FAV dated July 1, 2024. –[Incorporated by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement (No. 333-253222) filed on December 27, 2024.](http://www.sec.gov/Archives/edgar/data/868648/000092881624001677/a_exlmtpifamod1.htm) |
| (13)(pp) | Subcontract for Fund Administrative Services between FAV and Franklin Templeton Services, LLC dated July 15, 2024 –[Incorporated by reference to Post-Effective Amendment No. 22 to the Registrant's Registration Statement (No. 333-253222) filed on December 27, 2024.](http://www.sec.gov/Archives/edgar/data/1845809/000092881624002123/e_etfex99h41.htm) |
| (14)(a) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam Short-Term Municipal Income Fund is filed herewith.](d91160dex9914a.htm) |
| (14)(b) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam New York Tax Exempt Income Fund is filed herewith.](d91160dex9914b.htm) |
| (14)(c) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam Massachusetts Tax Exempt Income Fund and Putnam Ohio Tax Exempt Income Fund is filed herewith.](d91160dex9914c.htm) |
| (14)(d) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam New Jersey Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, and Putnam Pennsylvania Tax Exempt Income Fund is filed herewith.](d91160dex9914d.htm) |
| (14)(e) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam Tax-Free High Yield Fund is filed herewith.](d91160dex9914e.htm) |
| (14)(f) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam California Tax Exempt Income Fund and Putnam Tax Exempt Income Fund is filed herewith.](d91160dex9914f.htm) |
| (15) | Not applicable. |
| (16) | [Power of Attorney is filed herewith.](d91160dex9916.htm) |

---

**Item 17. Undertakings** 

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) The undersigned Registrant agrees that, prior to any public reoffering of the securities registered through the use of a
prospectus which is a part of this registration statement by any person or party who is deemed to be an underwriter within the meaning of Rule 145(c) under the Securities Act of 1933, as amended (the "1933 Act"), the reoffering prospectus
will contain the information called for by the applicable registration form for reofferings by persons who may be deemed underwriters, in addition to the information called for by the other items of the applicable form.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) The undersigned Registrant agrees that every prospectus that is filed under paragraph (1) above will be filed as a
part of an amendment to the registration statement and will not be used until the amendment is effective, and that, in determining any liability under the Securities Act, each post-effective amendment shall be deemed to be a new registration
statement for the securities offered therein, and the offering of the securities at that time shall be deemed to be the initial bona fide offering of them.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) The undersigned Registrant agrees to file an opinion of counsel supporting the tax consequences of the proposed
reorganization as an amendment to this registration statement within a reasonable time after receipt of such opinion.

------

**SIGNATURES** 

As required by the Securities Act of 1933, as amended, this Registration Statement has been signed on behalf of the Registrant, in the City of Boston and The Commonwealth of Massachusetts on the 6th day of August, 2025.

---

| | |
|:---|:---|
|  **Putnam ETF Trust** | **Putnam ETF Trust** |
|  /s/ Jonathan S. Horwitz | /s/ Jonathan S. Horwitz |
|  Name: | Jonathan S. Horwitz |
|  Title: | Executive Vice President, Principal Executive Officer and Compliance Liaison |

---

As required by the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the date indicated:

---

| | |
|:---|:---|
|  Signature | Title |
|  Barbara M. Baumann\* | Chair, Board of Trustees |
|  Robert L. Reynolds\* | President and Trustee |
|  Jonathan S. Horwitz\* | Executive Vice President, Principal Executive |
|  | Officer and Compliance Liaison |
|  Michael J. Higgins\* | Vice President, Treasurer, and Clerk |
|  Jeffrey W. White\* | Vice President, Principal Financial Officer, |
|  | Principal Accounting Officer and Assistant Treasurer |
|  Liaquat Ahamed\* | Trustee |
|  Katinka Domotorffy\* | Trustee |
|  Catharine Bond Hill\* | Trustee |
|  Gregory G. McGreevey\* | Trustee |
|  Jennifer Williams Murphy\* | Trustee |
|  Marie Pillai\* | Trustee |
|  George Putnam III\* | Trustee |
|  Manoj P. Singh\* | Trustee |
|  Mona K. Sutphen\* | Trustee |
|  Jane E. Trust\* | Trustee |
|  | \* By: /s/ Jonathan S. Horwitz, as Attorney-in-Fact pursuant to Power of Attorney filed herewith |
|  | August 6, 2025 |

---

------

**EXHIBIT INDEX** 

---

| | |
|:---|:---|
| (6)(a) | [Management Contract with Franklin Advisers, Inc. ("FAV") for Franklin California Municipal Income ETF, Franklin Massachusetts Municipal Income ETF, Franklin Minnesota Municipal Income ETF, Franklin Municipal High Yield ETF, Franklin Municipal Income ETF, Franklin New Jersey Municipal Income ETF, Franklin New York Municipal Income ETF, Franklin Ohio Municipal Income ETF, Franklin Pennsylvania Municipal Income ETF, and Franklin Short-Term Municipal Income ETF.](d91160dex996a.htm) |
| (6)(b) | [Sub-Advisory Agreement between FAV and Franklin Templeton Investment Management Limited ("FTIML").](d91160dex996b.htm) |
| (6)(c) | [Subadvisory Agreement between FAV and Putnam Investment Management, LLC ("PIM").](d91160dex996c.htm) |
| (11) | [Opinion and consent of Morris, Nichols, Arsht & Tunnell LLP as to the legality of the securities being registered is filed herewith.](d91160dex9911.htm) |
| (14)(a) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam Short-Term Municipal Income Fund is filed herewith.](d91160dex9914a.htm) |
| (14)(b) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam New York Tax Exempt Income Fund is filed herewith.](d91160dex9914b.htm) |
| (14)(c) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam Massachusetts Tax Exempt Income Fund and Putnam Ohio Tax Exempt Income Fund is filed herewith.](d91160dex9914c.htm) |
| (14)(d) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam New Jersey Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, and Putnam Pennsylvania Tax Exempt Income Fund is filed herewith.](d91160dex9914d.htm) |
| (14)(e) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam Tax-Free High Yield Fund is filed herewith.](d91160dex9914e.htm) |
| (14)(f) | [Consent of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm, for Putnam California Tax Exempt Income Fund and Putnam Tax Exempt Income Fund is filed herewith.](d91160dex9914f.htm) |
| (16) | [Power of Attorney.](d91160dex9916.htm) |

---

## Ex-99.(6)(A)

**Exhibit 6(a)** 

**PUTNAM ETF TRUST** 

**MANAGEMENT CONTRACT** 

This Management Contract (the "Contract") is dated as of August 1, 2025 between PUTNAM ETF TRUST, a Delaware statutory trust (the "Fund"), and FRANKLIN ADVISERS, INC., a corporation organized and existing under the laws of the State of California (the "Manager").

In consideration of the mutual covenants herein contained, it is agreed as follows:

1. SERVICES TO BE RENDERED BY MANAGER TO FUND.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Manager, at its expense, will furnish continuously an investment program for the Fund or, in the case of a Fund that has divided its shares into two or more series under Section 18(f)(2) of the Investment Company Act of 1940, as amended (the "1940 Act"), each series of the Fund identified from time to time on <u>Schedule</u> <u>A</u> to this Contract (each reference in this Contract to "a Fund" or to "the Fund" is also deemed to be a reference to any existing series of the Fund, as appropriate in the particular context), will determine what investments will be purchased, held, sold or exchanged by the Fund and what portion, if any, of the assets of the Fund will be held uninvested and will, on behalf of the Fund, make changes in such investments. Subject always to the control of the Trustees of the Fund, the Manager will also manage, supervise and conduct the other affairs and business of the Fund and matters incidental thereto. In the performance of its duties, the Manager will comply with the provisions of the Agreement and Declaration of Trust and By-Laws of the Fund and the stated investment objectives, policies and restrictions of the Fund, will use its best efforts to safeguard and promote the welfare of the Fund and to comply with other policies which the Trustees may from time to time determine.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Manager, at its expense, except as such expense is paid by the Fund as provided in Section 1(e), will furnish (1) all necessary investment and management facilities, including salaries of personnel, required for it to execute its duties faithfully; (2) suitable office space for the Fund; and (3) administrative facilities, including bookkeeping, clerical personnel and equipment necessary for the efficient conduct of the affairs of the Fund, including determination of the net asset value of the Fund, but excluding shareholder accounting services. The Manager will pay the compensation, if any, of the officers of the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Manager, at its expense, will place all orders for the purchase and sale of portfolio investments for the Fund's account with brokers or dealers selected by the Manager. In the selection of such brokers or dealers and the placing of such orders, the Manager will use its best efforts to obtain for the Fund the most favorable price and execution available, except to the extent it may be permitted to pay higher brokerage commissions for brokerage and research services as described below. In using its best efforts to obtain for the Fund the most favorable price and execution available, the Manager, bearing in mind the Fund's best interests at all times, will consider all factors it deems relevant, including by way of illustration, price, the size of the transaction, the nature of the market for the security, the amount of the commission, the timing of the transaction taking into account market prices and trends, the reputation, experience and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The Manager will vote all proxies solicited by or with respect to issuers of securities in which assets of a Fund may be invested from time to time in accordance with its proxy voting policy in effect from time to time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) In consideration of the fees payable by the Fund to the Manager pursuant to Section 3, the Manager will also pay all expenses incurred by the Fund, or reimburse the Fund for, all of the Fund's organizational and other operating expenses, excluding only (i) interest and taxes (including, but not limited to, income, excise, transfer and withholding taxes); (ii) expenses of the Fund incurred with respect to the acquisition and disposition of portfolio securities, commodities or other financial instruments and the execution of portfolio transactions, including brokerage commissions; (iii) expenses incurred in connection with any distribution plan adopted by the Fund in compliance with Rule 12b-1 under the 1940 Act, including distribution fees; (iv) expenses of printing and mailing proxy materials to shareholders of the Fund; (v) all other expenses incidental to holding meetings of the Fund's shareholders, including proxy solicitations therefor; (vi) litigation expenses (including, but not limited to, any indemnification obligation, attorneys' fees, expenses, costs, judgments, amounts paid in settlement, fines, penalties, fees of expert witnesses, document production fees, and all other liabilities whatsoever incurred or paid by the Fund or a person indemnified by the Fund); (vii) the fee payable to the Manager hereunder; (viii) any extraordinary expenses (which, for the avoidance of doubt, do not include expenses related to the organization of any subsidiary for a Fund or the ongoing corporate expenses of maintaining such subsidiary) and (ix) acquired fund fees and expenses. The Manager shall promptly inform the Trustees of any expenses, or category of expenses, determined to be "extraordinary expenses" for purposes of this Section 1(e).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Subject to the prior approval of a majority of the Trustees, including a majority of the Trustees who are not "interested persons" and, to the extent required by the 1940 Act and the rules and regulations under the 1940 Act, subject to any applicable guidance or interpretation of the Securities and Exchange Commission or its staff, by the shareholders of the Fund, the Manager may, from time to time, delegate to a sub-adviser or sub-administrator any of the Manager's duties under this Contract, including the management of all or a portion of the assets

------

being managed. In all instances, however, the Manager must oversee the provision of delegated services, the Manager must bear the separate costs of employing any sub-adviser or sub-administrator, and no delegation will relieve the Manager of any of its obligations under this Contract.

2. OTHER AGREEMENTS, ETC.

It is understood that any of the shareholders, Trustees, officers and employees of the Fund may be a shareholder, director, officer or employee of, or be otherwise interested in, the Manager, and in any person controlled by or under common control with the Manager, and that the Manager and any person controlled by or under common control with the Manager may have an interest in the Fund. It is also understood that the Manager and any person controlled by or under common control with the Manager may have advisory, management, service or other contracts with other organizations and persons and may have other interests and business.

3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.

The Fund will pay to the Manager as compensation for the Manager's services rendered, for the facilities furnished and for the expenses borne by the Manager pursuant to paragraphs (a), (b), and (c) of Section 1, a fee, based on the Fund's Average Net Assets, computed and paid monthly at the annual rates set forth on <u>Schedule</u> <u>B</u> attached to this Contract, as from time to time amended. The Fund's "Average Net Assets" means the average of all of the determinations of the Fund's net asset value at the close of business on each business day during each period for which such computation is made. The fee is payable for each month within 15 days after the close of the month.

If the Manager serves for less than the whole of a month, the foregoing compensation will be prorated.

4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS CONTRACT.

This Contract will automatically terminate, without the payment of any penalty, in the event of its assignment, provided that no delegation of responsibilities by the Manager pursuant to Section 1(f) will be deemed to constitute an assignment. No provision of this Contract may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought. No amendment of this Contract is effective until approved in a manner consistent with the 1940 Act, the rules and regulations under the 1940 Act and any applicable guidance or interpretation of the Securities and Exchange Commission or its staff.

5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.

This Contract is effective upon its execution and will remain in full force and effect as to a Fund continuously thereafter (unless terminated automatically as set forth in Section 4 or terminated in accordance with the following paragraph) through June 30, 2027, and will continue in effect from year to year thereafter so long as its continuance is approved at least annually by (i) the Trustees, or the shareholders by the affirmative vote of a majority of the

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outstanding shares of the respective Fund, and (ii) a majority of the Trustees who are not interested persons of the Fund or of the Manager in a manner consistent with the 1940 Act, the rules and regulations under the 1940 Act and any applicable guidance or interpretation of the Securities and Exchange Commission or its staff.

Either party hereto may at any time terminate this Contract as to a Fund by not less than 60 days' written notice delivered or mailed by registered mail, postage prepaid, to the other party. Action with respect to a Fund may be taken either (i) by vote of a majority of the Trustees or (ii) by the affirmative vote of a majority of the outstanding shares of the respective Fund.

Termination of this Contract pursuant to this Section 5 will be without the payment of any penalty.

6. CERTAIN DEFINITIONS.

For the purposes of this Contract, the "affirmative vote of a majority of the outstanding shares" of a Fund means the affirmative vote, at a duly called and held meeting of shareholders of the respective Fund, (a) of the holders of 67% or more of the shares of the Fund present (in person or by proxy) and entitled to vote at the meeting, if the holders of more than 50% of the outstanding shares of the Fund entitled to vote at the meeting are present in person or by proxy or (b) of the holders of more than 50% of the outstanding shares of the Fund entitled to vote at the meeting, whichever is less.

For the purposes of this Contract, the terms "affiliated person," "control," "interested person" and "assignment" have their respective meanings defined in the 1940 Act, subject, however, to the rules and regulations under the 1940 Act and any applicable guidance or interpretation of the Securities and Exchange Commission or its staff; the term "approve at least annually" will be construed in a manner consistent with the 1940 Act and the rules and regulations under the 1940 Act and any applicable guidance or interpretation of the Securities and Exchange Commission or its staff; and the term "brokerage and research services" has the meaning given in the Securities Exchange Act of 1934 and the rules and regulations under the Securities Exchange Act of 1934 and under any applicable guidance or interpretation of the Securities and Exchange Commission or its staff.

7. NON-LIABILITY OF MANAGER.

In the absence of willful misfeasance, bad faith or gross negligence on the part of the Manager, or reckless disregard of its obligations and duties hereunder, the Manager shall not be subject to any liability to the Fund or to any shareholder of the Fund for any act or omission in the course of, or connected with, rendering services hereunder.

8. NO THIRD-PARTY BENEFICIARIES.

No shareholder or any person other than the Fund and the Manager is a party to this Contract or shall be entitled to any right or benefit arising under or in respect of this Contract; there are no third-party beneficiaries of this Contract. Without limiting the generality of the foregoing, nothing in this Contract is intended to, or shall be read to, (i) create in any shareholder or person other than the Fund in question (including without limitation any shareholder in any

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Fund) any direct, indirect, derivative, or other rights against the Manager, or (ii) create or give rise to any duty or obligation on the part of the Manager (including without limitation any fiduciary duty) to any shareholder or person other than the Fund, and all of the rights, duties, and obligations referred to in the foregoing clauses (i) and (ii) are hereby expressly excluded from this Contract.

9. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND SHAREHOLDERS.

Notice is hereby given that this instrument is executed on behalf of the Trustees of the Fund as Trustees and not individually and that the obligations of or arising out of this instrument are not binding upon any of the Trustees, officers or shareholders individually but are binding only upon the assets and property of the respective Fund.

*[The remainder of this page is intentionally left blank.]* 

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**Exhibit 6(a)** 

IN WITNESS WHEREOF, PUTNAM ETF TRUST and FRANKLIN ADVISERS, INC. have each caused this instrument to be signed on its behalf by its President or a Vice President thereunto duly authorized, all as of the day and year first above written.

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| |
|:---|
| PUTNAM ETF TRUST, on behalf of the<br>series listed on <u>Schedule A</u> |
| By: <u>/s/Jonathan S. Horwitz</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Jonathan S. Horwitz<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Executive Vice President, Principal Executive Officer and Compliance Liaison |
| FRANKLIN ADVISERS, INC. |
| By: <u>/s/Thomas Merchant</u> |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Thomas Merchant<br> &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Chief Legal Officer |

---

------

<u>Schedule</u> <u>A</u>

FRANKLIN CALIFORNIA MUNICIPAL INCOME ETF

FRANKLIN MASSACHUSETTS MUNICIPAL INCOME ETF

FRANKLIN MINNESOTA MUNICIPAL INCOME ETF

FRANKLIN MUNICIPAL INCOME ETF

FRANKLIN MUNICIPAL HIGH YIELD ETF

FRANKLIN NEW JERSEY MUNICIPAL INCOME ETF

FRANKLIN NEW YORK MUNICIPAL INCOME ETF

FRANKLIN OHIO MUNICIPAL INCOME ETF

FRANKLIN PENNSYLVANIA MUNICIPAL INCOME ETF

FRANKLIN SHORT-TERM MUNICIPAL INCOME ETF

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<u>Schedule</u> <u>B</u>

FRANKLIN CALIFORNIA MUNICIPAL INCOME ETF:

Fee:

0.35% of Average Net Assets

FRANKLIN MASSACHUSETTS MUNICIPAL INCOME ETF:

Fee:

0.35% of Average Net Assets

FRANKLIN MINNESOTA MUNICIPAL INCOME ETF:

Fee:

0.35% of Average Net Assets

FRANKLIN MUNICIPAL INCOME ETF:

Fee:

0.30% of Average Net Assets

FRANKLIN MUNICIPAL HIGH YIELD ETF:

Fee:

0.35% of Average Net Assets

FRANKLIN NEW JERSEY MUNICIPAL INCOME ETF:

Fee:

0.35% of Average Net Assets

FRANKLIN NEW YORK MUNICIPAL INCOME ETF:

Fee:

0.35% of Average Net Assets

FRANKLIN OHIO MUNICIPAL INCOME ETF:

Fee:

0.35% of Average Net Assets

FRANKLIN PENNSYLVANIA MUNICIPAL INCOME ETF:

------

Fee:

0.35% of Average Net Assets

FRANKLIN SHORT-TERM MUNICIPAL INCOME ETF:

Fee:

0.20% of Average Net Assets

## Ex-99.(6)(B)

**Exhibit 6(b)** 

**<u>SUBADVISORY AGREEMENT</u>**

THIS SUBADVISORY AGREEMENT (the "Agreement") is made as of November 1, 2024 by and between FRANKLIN ADVISERS, INC., a corporation organized and existing under the laws of the State of California (hereinafter called "FAV"), and FRANKLIN TEMPLETON INVESTMENT MANAGEMENT LIMITED ("FTIML"), a corporation existing under the laws of the United Kingdom.

WHEREAS, FAV and FTIML are each registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and engaged in the business of supplying investment management services as an independent contractor; and

WHEREAS, FAV has been retained to render investment advisory services to each of the funds listed on Schedule A hereto (together the "Funds" and each, a "Fund"), including the funds that are series of an investment management company registered with the U.S. Securities and Exchange Commission (the "SEC") pursuant to the Investment Company Act of 1940, as amended (the "1940 Act") as shown on Schedule A; and

WHEREAS, Putnam Investments Limited ("PIL"), an affiliate of FTIML, previously provided sub-advisory services with respect to the Funds pursuant to a Sub-Management Contract dated as of January 1, 2024, which contract was assigned to and assumed by FAV with respect to the Funds with effect as of July 15, 2024;

WHEREAS, in connection with the transfer of substantially all of PIL's assets and liabilities to FTIML on or around the date hereof, the parties are entering into this Agreement to provide for the continuation of services by FTIML, as successor to PIL's advisory business; and

WHEREAS, FAV desires to appoint FTIML as investment sub-adviser to provide certain investment advisory and related services to the Funds, and FTIML is willing to serve in such capacity.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and each of the parties hereto intending to be legally bound, it is agreed as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. FAV hereby retains FTIML and FTIML hereby accepts such engagement, to furnish certain investment advisory and related services with respect to certain assets of the Fund, as more fully set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the overall policies, direction and review of the Fund's Board of Trustees (the "Board") and to the instructions and supervision of FAV, FTIML will provide certain investment advisory and related services for a portion of the Fund as agreed upon from time to time by FAV and FTIML, including:

(i) managing the investment and reinvestment of that portion of the Fund's portfolio allocated for
investment to it by FAV, if any, from time to time with FTIML determining what

------

securities and other property will be purchased, retained or sold with respect to such portion, and placing all purchase and sale orders with respect to such portion;

(ii) providing assistance with purchasing and selling securities and other property for the Fund, including the
placement of orders with broker-dealers selected by FTIML, even if FAV has not delegated investment discretion with respect to such assets; and

(iii) performing research and obtaining and evaluating pertinent economic, statistical, and financial data relevant
to the investment strategies and policies of the Fund, as set forth in the Fund's prospectus and statement of additional information, and sharing such research and data with FAV upon request.

The assets with respect to which FTIML provides the services set forth above are referred to as the "Sub-Advised Portion."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In performing these services, FTIML shall adhere to the Fund's investment goal(s), policies and restrictions as contained in the Fund's current prospectus and statement of additional information, and in the Agreement and Declaration of Trust and Bylaws of the Fund and to the investment guidelines most recently established by FAV (all as may be amended from time to time) and shall comply with the provisions of the 1940 Act and the rules and regulations of the SEC thereunder in all material respects and with the provisions of the United States Internal Revenue Code of 1986, as amended, which are applicable to regulated investment companies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Unless otherwise instructed by FAV or the Board, and subject to the provisions of this Agreement and to any guidelines or limitations specified from time to time by FAV or by the Board, FTIML shall report daily all transactions effected by FTIML on behalf of the Fund to FAV and to other entities as reasonably directed by FAV or the Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) FTIML shall provide the Board at least quarterly, in advance of the regular meetings of the Board, a report of its activities hereunder on behalf of the Fund, in such form and detail as requested by the Board. FTIML shall also make one or more of its personnel available to attend such meetings of the Board as the Board may reasonably request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) In carrying out its duties hereunder, FTIML shall comply with all reasonable instructions of the Fund, the Board or FAV in connection therewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. (a) Where applicable based on the services it provides pursuant to Section 1 above, FTIML shall, in the name of the Fund, place or direct the placement of orders for the execution of portfolio transactions in accordance with the Fund's policies with respect thereto and as set forth in the Fund's Registration Statement, as amended from time to time, and under the Securities Act of 1933, as amended, Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act. In connection with the placement of orders for the execution of the Sub-Advised Portion's portfolio transactions, FTIML shall create and maintain all necessary brokerage records of the Fund in accordance with all applicable laws, rules and regulations, including but not limited to, records required by Section 31(a) of the 1940 Act. All records shall be the property of the Fund and shall be available for inspection and use by the SEC, the Fund or any person retained by the Fund. Where applicable, such records shall be maintained by FTIML for the period and in the place required by Rule 31a-2 under the 1940 Act.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Where applicable based on the services it provides pursuant to Section 1 above, FTIML shall select brokers and dealers for the execution of the Fund's transactions with respect to the Sub-Advised Portion. In selecting brokers or dealers to execute such orders and subject to any policies and procedures adopted by the Trust's Board, FTIML is expressly authorized to consider the fact that a broker or dealer has furnished statistical, research or other information or services which may enhance FTIML's investment research and portfolio management capability generally. It is further understood in accordance with Section 28(e) of the 1934 Act that FTIML may negotiate with and assign to a broker a commission which may exceed the commission which another broker would have charged for effecting the transaction if FTIML determines in good faith that the amount of commission charged was reasonable in relation to the value of brokerage and/or research services (as defined in Section 28(e)) provided by such broker, viewed in terms either of the Fund or FTIML's overall responsibilities to FTIML's discretionary accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. It is understood that the services provided by FTIML are not to be deemed exclusive. FAV acknowledges that FTIML may have investment responsibilities, or render investment advice to, or perform other investment advisory services, for individuals or entities, including other investment companies registered pursuant to the 1940 Act ("Clients"), which may invest in the same type of securities as the Fund. FAV agrees that FTIML may give advice or exercise investment responsibility and take such other action with respect to such Clients which may differ from advice given or the timing or nature of action taken with respect to the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. FTIML agrees to use its best efforts in performing the services to be provided by it pursuant to this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. FTIML will treat confidentially and as proprietary information of the Fund all records and other information relative to the Fund and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where FTIML may be exposed to civil or criminal contempt proceedings for failure to comply when requested to divulge such information by duly constituted authorities, or when so requested by the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. (a) In payment for the investment advisory services to be rendered by FTIML under Section 1(a)(i) hereunder with respect to the Sub-Advised Portion of one or more Funds from time to time, FAV shall pay a monthly fee in U.S. dollars to FTIML calculated daily at the following annual rate for each applicable Fund: 0.25% of the average aggregate net asset value of any assets in equity and asset allocation Sub-Advised Portions and 0.20% per annum of the average net asset value of any assets in fixed income Sub-Advised Portions of the Funds. For the purposes of calculating such fee, the net asset value of the Sub-Advised Portion and the value of the net assets of the Fund shall be determined in the same manner that the Fund uses to compute its net asset value for purposes of pricing purchases and redemptions of its shares, all as set forth more fully in the Fund's then current prospectus and statement of additional information.

With respect to each of Putnam Master Intermediate Income Trust and Putnam Premier Income Trust, FAV will pay to FTIML as compensation for the FTIML's services rendered, a fee, computed and paid quarterly at the annual rate of 0.20% of Average Weekly Assets in a Sub-Advised Portion. "Average Weekly Assets" means the average of the weekly determinations of the difference between the total assets of the Fund (including any assets attributable to leverage

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for investment purposes) attributable to a Sub-Advised Portion and the total liabilities of the Fund (excluding liabilities incurred in connection with leverage for investment purposes) attributable to such Sub-Advised Portion, determined at the close of the last business day of each week, for each week which ends during the quarter. Such fee shall be payable for each quarter within 30 days after the close of such quarter. As used in this Section 6, "leverage for investment purposes" means any incurrence of indebtedness the proceeds of which are to be invested in accordance with the Fund's investment objective.

For purposes of calculating Average Weekly Assets (as defined below), liabilities associated with any instruments or transactions used to leverage the Fund's portfolio for investment purposes (whether or not such instruments or transactions are "covered" within the meaning of the Investment Company Act of 1940 and the rules and regulations thereunder, giving effect to any interpretations of the Securities and Exchange Commission and its staff) are not considered liabilities. For purposes of calculating Average Weekly Assets, the total assets of the Fund will be deemed to include (a) any proceeds from the sale or transfer of an asset (the "Underlying Asset") of the Fund to a counterparty in a reverse repurchase or dollar roll transaction and (b) the value of such Underlying Asset as of the relevant measuring date. "Average Weekly Assets" means the average of the weekly determinations of the difference between the total assets of the Fund (including any assets attributable to leverage for investment purposes) attributable to a Sub-Advised Portion and the total liabilities of the Fund (excluding liabilities incurred in connection with leverage for investment purposes) attributable to such Sub-Advised Portion, determined at the close of the last business day of each week, for each week which ends during the quarter. Such fee shall be payable for each quarter within 30 days after the close of such quarter.

In the event that the FAV's management fee from either of Putnam Master Intermediate Income Trust or Putnam Premier Income Trust is reduced pursuant to the investment management contract between such Fund and FAV because during any Measurement Period (as defined below) the amount of interest payments and fees with respect to indebtedness or other obligation of the Fund incurred for investment leverage purposes, plus additional expenses attributable to any such leverage for investment purposes, exceeds the portion of the Fund's net income and net short-term capital gains (but not long-term capital gains) accruing during such Measurement Period as a result of the fact that such indebtedness or other obligation was outstanding during the Measurement Period, the fee payable to FTIML with respect to such Fund shall be reduced in the same proportion as the fee paid to FAV with respect to such Fund is so reduced. "Measurement Period" shall be any period for which payments of interest or fees (whether designated as such or implied) are payable in connection with any indebtedness or other obligation of the Fund incurred for investment purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The sub-advisory fee under this Agreement shall be payable on the first business day of the first month following the effective day of this Agreement and shall be reduced by the amount of any advance payments made by FAV relating to the previous month. If this Agreement is terminated prior to the end of any month, the monthly fee shall be prorated for the portion of any month in which this Agreement is in effect which is not a complete month according to the proportion which the number of calendar days in the month during which the Agreement is in effect bears to the total number of calendar days in the month, and shall be payable within 10 days after the date of termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations or duties hereunder on the part of FTIML, neither FTIML nor any of its directors, officers, employees or affiliates shall be subject to liability to FAV or the Fund or to

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any shareholder of the Fund for any error of judgment or mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security by the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. During the term of this Agreement, FTIML will pay all expenses incurred by it in connection with its activities under this Agreement other than the cost of securities (including brokerage commissions, if any) purchased for the Fund. The Fund and FAV will be responsible for all of their respective expenses and liabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. This Agreement shall be effective as of the date given above and shall continue in effect for two years. It is renewable annually thereafter so long as such continuance is specifically approved at least annually (i) by a vote of the Board or by the vote of a majority of the outstanding voting securities of the Fund, and (ii) by the vote of a majority of the Trustees of the Trust who are not parties to this Agreement or interested persons thereof, cast in person at a meeting called for the purpose of voting on such approval.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. This Agreement may be terminated at any time, without payment of any penalty, by the Board or by vote of a majority of the outstanding voting securities of the Fund, upon not more than sixty (60) days' written notice to FAV and FTIML, and by FAV or FTIML upon not more than sixty (60) days' written notice to the other party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. This Agreement shall terminate automatically in the event of any assignment thereof, as defined in the 1940 Act, and upon any termination of the Management Contract between FAV and the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. This Agreement shall not be amended with respect to any Fund unless such amendment be approved at a meeting by the vote, cast at a meeting called for the purpose of voting on such approval, of a majority of the Trustees of the related Fund who are not interested persons of such Fund or of FAV and FTIML.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. In compliance with the requirements of Rule 31a-3 under the 1940 Act, FTIML hereby agrees that all records which it maintains for the Fund are the property of the Fund and further agrees to surrender promptly to the Fund, or to any third party at the Fund's direction, any of such records upon the Fund's request. FTIML further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. The terms "majority of the outstanding voting securities" of the Fund and "interested persons" shall have the meanings as set forth in the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16. This Agreement shall be interpreted in accordance with and governed by the laws of the State of California of the United States of America.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested by their duly authorized officers.

FRANKLIN ADVISERS, INC.

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| | |
|:---|:---|
| By: | /s/ Thomas Merchant |
|  | Thomas Merchant |
| Title: | Chief Legal Officer |

---

FRANKLIN TEMPLETON INVESTMENT MANAGEMENT LIMITED

---

| | |
|:---|:---|
| By: | /s/ Euan Wilson |
|  | Euan Wilson |
| Title: | Director |

---

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<u>Schedule A\*</u> 

(amended as of August 1, 2025)

**Putnam California Tax Exempt Income Fund** 

**Putnam Diversified Income Trust** 

**Putnam Asset Allocation Funds** 

-Putnam Dynamic Asset Allocation Balanced Fund

-Putnam Dynamic Asset Allocation Conservative Fund

-Putnam Dynamic Asset Allocation Growth Fund

-Putnam Multi-Asset Income Fund

**Putnam ETF Trust** 

-Franklin California Municipal Income ETF (effective August 1, 2025)

-Franklin Massachusetts Municipal Income ETF (effective August 1, 2025)

-Franklin Minnesota Municipal Income ETF (effective August 1, 2025)

-Franklin Municipal High Yield ETF (effective August 1, 2025)

-Franklin Municipal Income ETF (effective August 1, 2025)

-Franklin New Jersey Municipal Income ETF (effective August 1, 2025)

-Franklin New York Municipal Income ETF (effective August 1, 2025)

-Franklin Ohio Municipal Income ETF (effective August 1, 2025)

-Franklin Pennsylvania Municipal Income ETF (effective August 1, 2025)

-Franklin Short-Term Municipal Income ETF (effective August 1, 2025)

-Putnam ESG Core Bond ETF

-Putnam ESG High Yield ETF

-Putnam ESG Ultra Short ETF

**Putnam Funds Trust** 

-Putnam Core Bond Fund

-Putnam Dynamic Asset Allocation Equity Fund

-Putnam Floating Rate Income Fund

-Putnam Mortgage Opportunities Fund

-Putnam Short Duration Bond Fund

-Putnam Short Term Investment Fund

-Putnam Short-Term Municipal Income Fund

-Putnam Ultra Short Duration Income Fund

-Putnam Ultra Short MAC Series

**Putnam Global Income Trust** 

**Putnam High Yield Fund** 

**Putnam Income Fund** 

**Putnam Investment Funds** 

-Putnam Government Money Market Fund

**Putnam Massachusetts Tax Exempt Income Fund** 

**Putnam Minnesota Tax Exempt Income Fund** 

**Putnam Money Market Fund** 

**Putnam Mortgage Securities 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 Target Date Funds** 

-Putnam Retirement Advantage Maturity Fund

-Putnam Retirement Advantage 2070 Fund (effective August 1, 2025)

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-Putnam Retirement Advantage 2065 Fund

-Putnam Retirement Advantage 2060 Fund

-Putnam Retirement Advantage 2055 Fund

-Putnam Retirement Advantage 2050 Fund

-Putnam Retirement Advantage 2045 Fund

-Putnam Retirement Advantage 2040 Fund

-Putnam Retirement Advantage 2035 Fund

-Putnam Retirement Advantage 2030 Fund

-Putnam Sustainable Retirement Maturity Fund

-Putnam Sustainable Retirement 2070 Fund (effective August 1, 2025)

-Putnam Sustainable Retirement 2065 Fund

-Putnam Sustainable Retirement 2060 Fund

-Putnam Sustainable Retirement 2055 Fund

-Putnam Sustainable Retirement 2050 Fund

-Putnam Sustainable Retirement 2045 Fund

-Putnam Sustainable Retirement 2040 Fund

-Putnam Sustainable Retirement 2035 Fund

-Putnam Sustainable Retirement 2030 Fund

**Putnam Tax Exempt Income Fund** 

**Putnam Tax-Free Income Trust** 

-Putnam Strategic Intermediate Municipal Fund

-Putnam Tax-Free High Yield Fund

**Putnam Variable Trust** 

-Putnam VT Diversified Income Fund

-Putnam VT Global Asset Allocation Fund

-Putnam VT Government Money Market Fund

-Putnam VT High Yield Fund

-Putnam VT Income Fund

-Putnam VT Mortgage Securities Fund

\*FTIML is authorized to act as sub-adviser for each Fund listed in this Schedule A, but a Sub-Advised Portion may not be assigned to FTIML by FAV pursuant to Section 1(a)(i) with respect to a particular Fund at any given time. Sub-Advised Portions will be determined, and compensation under this Agreement will be paid, based on the corporate accounting records of the parties' parent company with respect to portfolio management duty assignments.

---

| | |
|:---|:---|
| FRANKLIN ADVISERS, INC. | FRANKLIN ADVISERS, INC. |
| By: | /s/ Thomas Merchant |
|  | Thomas Merchant |
| Title: | Chief Legal Officer |

---

FRANKLIN TEMPLETON INVESTMENT MANAGEMENT LIMITED

---

| | |
|:---|:---|
| By: | /s/ Euan Wilson |
|  | Euan Wilson |
| Title: | Director |

---

## Ex-99.(6)(C)

**Exhibit 6(c)** 

**<u>SUBADVISORY AGREEMENT</u>**

THIS SUBADVISORY AGREEMENT made as of July 15, 2024 by and between FRANKLIN ADVISERS, INC., a corporation organized and existing under the laws of the State of California (hereinafter called "FAV"), and PUTNAM INVESTMENT MANAGEMENT, LLC, a limited liability company organized and existing under the laws of the State of Delaware ("PIM").

WHEREAS, FAV and PIM are each registered as an investment adviser under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and engaged in the business of supplying investment management services as an independent contractor; and

WHEREAS, FAV has been retained to render investment advisory services to each of the funds listed on Schedule A hereto (each, a "Fund"), including the Funds that are series of an investment management company registered with the U.S. Securities and Exchange Commission (the "SEC") pursuant to the Investment Company Act of 1940, as amended (the "1940 Act") as shown on Schedule A; and

WHEREAS, FAV desires to retain PIM to render certain investment advisory and related services to the Fund pursuant to the terms and provisions of this Agreement, and PIM is interested in furnishing said services.

NOW, THEREFORE, in consideration of the covenants and the mutual promises hereinafter set forth, the parties hereto, intending to be legally bound hereby, mutually agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. FAV hereby retains PIM and PIM hereby accepts such engagement, to furnish certain investment advisory and related services with respect to certain assets of the Fund, as more fully set forth herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the overall policies, direction and review of the Fund's Board of Trustees (the "Board") and to the instructions and supervision of FAV, PIM will provide certain investment advisory and related services for a portion of the Fund as agreed upon from time to time by FAV and PIM, including:

(i) managing the investment and reinvestment of that portion of the Fund's portfolio allocated for
investment to it by FAV, if any, from time to time with PIM determining what securities and other property will be purchased, retained or sold with respect to such portion, and placing all purchase and sale orders with respect to such portion;

(ii) Providing assistance with purchasing and selling securities and other property for the Fund, including the
placement of orders with broker-dealers selected by PIM, even if FAV has not delegated investment discretion with respect to such assets;

(iii) purchasing, holding, making payments and transfers with respect to, and generally dealing in any manner with
and in, any derivatives contract, transaction or arrangement,

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transaction covered under master securities forward transaction or similar agreement, securities lending or repurchase transaction (in each case whether cleared or uncleared and whether or not exchange-traded) ("Trading Arrangements") that is permitted for investment by the prospectus and the statement of additional information of the Fund and all necessary or appropriate documentation relating thereto, and in connection with such Trading Arrangements, taking such related actions (including, without limitation, account arrangements, collateral or margin posting, and regulatory reporting and disclosure and executing or causing to be executed any and all required or appropriate documentation with respect thereto), all on such terms and conditions as PIM shall determine;

(iv) performing research and obtaining and evaluating pertinent economic, statistical, and financial data
relevant to the investment strategies and policies of the Fund, as set forth in the Fund's prospectus and statement of additional information, and sharing such research and data with FAV upon request; and

(v) voting all proxies solicited by or with respect to issuers of securities in which assets of the Fund may be
invested from time to time in accordance with its proxy voting policy in effect from time to time.

The assets with respect to which PIM provides the services set forth in Sections 1(a)(i) through (v) are referred to as the "Sub-Advised Portion."

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In performing these services, PIM shall adhere to the Fund's investment goal(s), policies and restrictions as contained in the Fund's current prospectus and statement of additional information, and in the Agreement and Declaration of Trust and Bylaws of the Fund or Trust, as applicable, and to the investment guidelines most recently established by FAV (all as may be amended from time to time) and shall comply with the provisions of the 1940 Act and the rules and regulations of the SEC thereunder in all material respects and with the provisions of the United States Internal Revenue Code of 1986, as amended, which are applicable to regulated investment companies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Unless otherwise instructed by FAV or the Board, and subject to the provisions of this Agreement and to any guidelines or limitations specified from time to time by FAV or by the Board, PIM shall report daily all transactions effected by PIM on behalf of the Fund to FAV and to other entities as reasonably directed by FAV or the Board.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) PIM shall provide the Board at least quarterly, in advance of the regular meetings of the Board, a report of its activities hereunder on behalf of the Fund, in such form and detail as requested by the Board. PIM shall also make one or more of its personnel available to attend such meetings of the Board as the Board may reasonably request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) In carrying out its duties hereunder, PIM shall comply with all reasonable instructions of the Fund, the Board or FAV in connection therewith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Subject to approval by the Board and any necessary approval of the Fund's shareholders, PIM, at its expense, may select and contract with one or more subadvisers, registered under the Advisers Act, to perform some or all of the services for the Fund for which it is responsible under this Agreement. PIM will compensate any subadviser for its services to the Fund. PIM will evaluate any subadvisers and will make recommendations to the Board about the hiring, termination and replacement of a subadviser. PIM also may terminate the services of any

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subadviser at any time in its sole discretion, provided that it provides advance notification to the Board, and shall at the time of such termination assume the responsibilities of such subadviser unless and until a successor subadviser is selected and the requisite approval of the Fund's shareholders, if any is required, is obtained. PIM will continue to have responsibility for all advisory services furnished by any subadviser and will supervise each subadviser in its performance of its duties for the Fund with a view to preventing violations of the federal securities laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. (a) Where applicable based on the services it provides pursuant to Section 1 above, PIM shall, in the name of the Fund, place or direct the placement of orders for the execution of portfolio transactions in accordance with the Fund's policies with respect thereto and as set forth in the Fund's Registration Statement, as amended from time to time, and under the Securities Act of 1933, as amended (the "1933 Act"), Securities Exchange Act of 1934, as amended (the "1934 Act"), and the 1940 Act. In connection with the placement of orders for the execution of the Sub-Advised Portion's portfolio transactions, PIM shall create and maintain all necessary brokerage records of the Fund in accordance with all applicable laws, rules and regulations, including but not limited to, records required by Section 31(a) of the 1940 Act. All records shall be the property of the Fund and shall be available for inspection and use by the SEC, the Fund or any person retained by the Fund. Where applicable, such records shall be maintained by PIM for the period and in the place required by Rule 31a-2 under the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Where applicable based on the services it provides pursuant to Section 1 above, PIM shall select brokers and dealers for the execution of the Fund's transactions with respect to the Sub-Advised Portion. In selecting brokers or dealers to execute such orders and subject to any policies and procedures adopted by the Trust's Board, PIM is expressly authorized to consider the fact that a broker or dealer has furnished statistical, research or other information or services which may enhance PIM's investment research and portfolio management capability generally. It is further understood in accordance with Section 28(e) of the 1934 Act that PIM may negotiate with and assign to a broker a commission which may exceed the commission which another broker would have charged for effecting the transaction if PIM determines in good faith that the amount of commission charged was reasonable in relation to the value of brokerage and/or research services (as defined in Section 28(e)) provided by such broker, viewed in terms either of the Fund or PIM's overall responsibilities to PIM's discretionary accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. (a) PIM shall, unless otherwise expressly provided and authorized, have no authority to act for or represent FAV or the Fund in any way, or in any way be deemed an agent for FAV or the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) It is understood that the services provided by PIM are not to be deemed exclusive. FAV acknowledges that PIM may have investment responsibilities, or render investment advice to, or perform other investment advisory services, for individuals or entities, including other investment companies registered pursuant to the 1940 Act ("Clients"), which may invest in the same type of securities as the Fund. FAV agrees that PIM may give advice or exercise investment responsibility and take such other action with respect to such Clients which may differ from advice given or the timing or nature of action taken with respect to the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. PIM agrees to use its best efforts in performing the services to be provided by it pursuant to this Agreement.

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. PIM will treat confidentially and as proprietary information of the Fund all records and other information relative to the Fund and prior, present or potential shareholders, and will not use such records and information for any purpose other than performance of its responsibilities and duties hereunder, except after prior notification to and approval in writing by the Fund, which approval shall not be unreasonably withheld and may not be withheld where PIM may be exposed to civil or criminal contempt proceedings for failure to comply when requested to divulge such information by duly constituted authorities, or when so requested by the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. (a) In payment for the investment sub-advisory services to be rendered by PIM under Section 1(a)(i)) hereunder with respect to Putnam Dynamic Asset Allocation Balanced Fund, Putnam Dynamic Asset Allocation Conservative Fund, Putnam Dynamic Asset Allocation Equity Fund, Dynamic Asset Allocation Growth Fund and Putnam VT Global Asset Allocation Fund, FAV shall pay a monthly fee in U.S. dollars to PIM calculated daily at the following annual rate: 0.25% of the average aggregate net asset value of the assets in the Sub-Advised Portion. For the purposes of calculating such fee, the net asset value of the Sub-Advised Portion and the value of the net assets of the Fund shall be determined in the same manner that the Fund uses to compute its net asset value for purposes of pricing purchases and redemptions of its shares, all as set forth more fully in the Fund's then current prospectus and statement of additional information.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In payment for the services to be rendered by PIM under Sections 1(a)(ii)-(v), FAV shall pay a monthly fee in U.S. dollars to PIM based on the costs of PIM in providing services to the Fund, which may include a mark-up determined and revised from time-to-time in accordance with the transfer pricing policy of the parties' parent company (specifically, the global service fee model thereunder) in line with applicable tax/transfer pricing regulations, but not to exceed 15% over such costs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If this Agreement is terminated prior to the end of any month, the monthly fee shall be prorated for the portion of any month in which this Agreement is in effect which is not a complete month according to the proportion which the number of calendar days in the month during which the Agreement is in effect bears to the total number of calendar days in the month, and shall be payable within 10 days after the date of termination.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. (a) In the absence of willful misfeasance, bad faith, gross negligence, or reckless disregard of its obligations or duties hereunder on the part of PIM, neither PIM nor any of its directors, officers, employees or affiliates shall be subject to liability to FAV or the Fund or to any shareholder of the Fund for any error of judgment or mistake of law or any other act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security by the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Notwithstanding paragraph 7(a), to the extent that FAV is found by a court of competent jurisdiction, or the SEC or any other regulatory agency, to be liable to the Fund or any shareholder (a "liability") for any acts undertaken by PIM pursuant to authority delegated as described in Paragraph 1(a), PIM shall indemnify and save FAV and each of its affiliates, officers, directors and employees (each an "Indemnified Party") harmless from, against, for and in respect of all losses, damages, costs and expenses incurred by an Indemnified Party with respect to such liability, together with all legal and other expenses reasonably incurred by any such Indemnified Party, in connection with such liability.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) No provision of this Agreement shall be construed to protect any director or officer of FAV or PIM from liability in violation of Sections 17(h) or (i) of the 1940 Act.

------

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. During the term of this Agreement, PIM will pay all expenses incurred by it in connection with its activities under this Agreement other than the cost of securities (including brokerage commissions, if any) purchased for the Fund. The Fund and FAV will be responsible for all of their respective expenses and liabilities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. This Agreement shall be effective as of the date given above and shall continue in effect for two years. It is renewable annually thereafter so long as such continuance is specifically approved at least annually (i) by a vote of the Board or by the vote of a majority of the outstanding voting securities of the Fund, and (ii) by the vote of a majority of the Trustees of the Trust who are not parties to this Agreement or interested persons thereof, cast in person at a meeting called for the purpose of voting on such approval.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. This Agreement may be terminated at any time, without payment of any penalty, by the Board or by vote of a majority of the outstanding voting securities of the Fund, upon sixty (60) days' written notice to FAV and PIM, and by FAV or PIM upon sixty (60) days' written notice to the other party.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. This Agreement shall terminate automatically in the event of any assignment thereof, as defined in the 1940 Act, and upon any termination of the Management Contract between FAV and the Fund.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. In compliance with the requirements of Rule 31a-3 under the 1940 Act, PIM hereby agrees that all records which it maintains for the Fund are the property of the Fund and further agrees to surrender promptly to the Fund, or to any third party at the Fund's direction, any of such records upon the Fund's request. PIM further agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. If any provision of this Agreement shall be held or made invalid by a court decision, statute, rule, or otherwise, the remainder of this Agreement shall not be affected thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. The terms "majority of the outstanding voting securities" of the Fund and "interested persons" shall have the meanings as set forth in the 1940 Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. This Agreement shall be interpreted in accordance with and governed by the laws of the State of California of the United States of America.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16. PIM acknowledges that it has received notice of and accepts the limitations of the Trust's liability as set forth in its Agreement and Declaration of Trust. PIM agrees that the Trust's obligations hereunder shall be limited to the assets of the Fund, and that PIM shall not seek satisfaction of any such obligation from any shareholders of the Fund nor from any trustee, officer, employee or agent of the Trust.

------

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and attested by their duly authorized officers.

FRANKLIN ADVISERS, INC.

---

| | |
|:---|:---|
| By: | /s/ Thomas C. Merchant |
|  | Thomas C. Merchant |
|  | Chief Legal Officer |

---

PUTNAM INVESTMENT MANAGEMENT, LLC

---

| | |
|:---|:---|
| By: | /s/ Stephen J. Tate |
|  | Stephen J. Tate |
|  | Secretary |

---

------

**<u>Schedule A</u>**

(amended as of August 1, 2025)

**Putnam California Tax Exempt Income Fund** 

**Putnam Diversified Income Trust** 

**Putnam Asset Allocation Funds** 

-Putnam Dynamic Asset Allocation Balanced Fund

-Putnam Dynamic Asset Allocation Conservative Fund

-Putnam Dynamic Asset Allocation Growth Fund

-Putnam Multi-Asset Income Fund

**Putnam ETF Trust** 

-Franklin California Municipal Income ETF (effective August 1, 2025)

-Franklin Massachusetts Municipal Income ETF (effective August 1, 2025)

-Franklin Minnesota Municipal Income ETF (effective August 1, 2025)

-Franklin Municipal High Yield ETF (effective August 1, 2025)

-Franklin Municipal Income ETF (effective August 1, 2025)

-Franklin New Jersey Municipal Income ETF (effective August 1, 2025)

-Franklin New York Municipal Income ETF (effective August 1, 2025)

-Franklin Ohio Municipal Income ETF (effective August 1, 2025)

-Franklin Pennsylvania Municipal Income ETF (effective August 1, 2025)

-Franklin Short-Term Municipal Income ETF (effective August 1, 2025)

-Putnam ESG Core Bond ETF

-Putnam ESG High Yield ETF

-Putnam ESG Ultra Short ETF

**Putnam Funds Trust** 

-Putnam Core Bond Fund

-Putnam Dynamic Asset Allocation Equity Fund

-Putnam Floating Rate Income Fund

-Putnam Mortgage Opportunities Fund

-Putnam Short Duration Bond Fund

-Putnam Short Term Investment Fund

-Putnam Short-Term Municipal Income Fund

-Putnam Ultra Short Duration Income Fund

-Putnam Ultra Short MAC Series

**Putnam Global Income Trust** 

**Putnam High Yield Fund** 

**Putnam Income Fund** 

**Putnam Investment Funds** 

-Putnam Government Money Market Fund

**Putnam Massachusetts Tax Exempt Income Fund** 

**Putnam Minnesota Tax Exempt Income Fund** 

**Putnam Money Market Fund** 

**Putnam Mortgage Securities 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 Target Date Funds** 

-Putnam Retirement Advantage Maturity Fund

-Putnam Retirement Advantage 2070 Fund (effective August 1, 2025)

------

-Putnam Retirement Advantage 2065 Fund

-Putnam Retirement Advantage 2060 Fund

-Putnam Retirement Advantage 2055 Fund

-Putnam Retirement Advantage 2050 Fund

-Putnam Retirement Advantage 2045 Fund

-Putnam Retirement Advantage 2040 Fund

-Putnam Retirement Advantage 2035 Fund

-Putnam Retirement Advantage 2030 Fund

-Putnam Sustainable Retirement Maturity Fund

-Putnam Sustainable Retirement 2070 Fund (effective August 1, 2025)

-Putnam Sustainable Retirement 2065 Fund

-Putnam Sustainable Retirement 2060 Fund

-Putnam Sustainable Retirement 2055 Fund

-Putnam Sustainable Retirement 2050 Fund

-Putnam Sustainable Retirement 2045 Fund

-Putnam Sustainable Retirement 2040 Fund

-Putnam Sustainable Retirement 2035 Fund

-Putnam Sustainable Retirement 2030 Fund

**Putnam Tax Exempt Income Fund** 

**Putnam Tax-Free Income Trust** 

-Putnam Strategic Intermediate Municipal Fund

-Putnam Tax-Free High Yield Fund

**Putnam Variable Trust** 

-Putnam VT Diversified Income Fund

-Putnam VT Global Asset Allocation Fund

-Putnam VT Government Money Market Fund

-Putnam VT High Yield Fund

-Putnam VT Income Fund

-Putnam VT Mortgage Securities Fund

FRANKLIN ADVISERS, INC.

---

| | |
|:---|:---|
| By: | /s/ Thomas C. Merchant |
|  | Thomas C. Merchant |
|  | Chief Legal Officer |

---

PUTNAM INVESTMENT MANAGEMENT, LLC

---

| | |
|:---|:---|
| By: | /s/ Stephen J. Tate |
|  | Stephen J. Tate |
|  | Secretary |

---

## Ex-99.(11)

**Exhibit (11)** 

**MORRIS, NICHOLS, ARSHT & TUNNELL LLP** 

1201 NORTH MARKET STREET

P.O. BOX 1347

WILMINGTON, DELAWARE 19899-1347

(302) 658-9200

(302) 658-3989 FAX

August 5, 2025

The Addressees Identified on Schedule I Hereto

Re: <u>Putnam ETF Trust</u>

Ladies and Gentlemen:

We have acted as special Delaware counsel to Putnam ETF Trust, a Delaware statutory trust (the "Trust"), in connection with certain matters relating to the issuance of Shares of each Acquiring Fund (as identified and defined on Annex A hereto). Capitalized terms used herein and not otherwise herein defined are used as defined in the Amended and Restated Agreement and Declaration of Trust of the Trust dated as of April 20, 2021 (the "Governing Instrument").

We understand that, pursuant to an Agreement and Plan of Reorganization ("Plan") to be entered into by and between the Trust, on behalf of each Acquiring Fund, and the addressees identified on Schedule I hereto and subject to the conditions set forth therein, Shares of each Acquiring Fund will be issued to the corresponding Target Fund (as identified and defined on Annex A hereto), as reflected on Annex A hereto, and in turn such Target Fund will distribute such Shares to the shareholders of such Target Fund in connection with the liquidation and termination of such Target Fund.

In rendering this opinion, we have examined and relied on copies of the following documents, each in the form provided to us: the Registration Statement under the Securities Act of 1933 on Form N-14 of the Trust to be filed with the Securities and Exchange Commission on or about the date hereof (the "Registration Statement") to which a form of the Plan is attached as an appendix; the Certificate of Trust of the Trust as filed in the Office of the Secretary of State of the State of Delaware (the "State Office") on December 22, 2020 (the "Certificate of Trust"); the Governing Instrument; the Amended and Restated By-laws of the Trust effective as of June 23, 2023 (the "Bylaws"); the Agreement and Declaration of Trust of the Trust dated as of December 21, 2020 (the "Initial Governing Instrument"); resolutions adopted by the Trustees of the Trust relating to, *inter alia*, the creation of the Acquiring Funds (the "Initial Resolutions"); resolutions adopted by the Trustees of the Trust relating to, *inter alia*, the approval and authorization of the Plan by the Trustees of the Trust and the issuance of Shares pursuant thereto (the "New Resolutions" and together with the Governing Instrument, the Bylaws, the Registration Statement

------

The Addressees Identified on Schedule I Hereto

August 5, 2025

and the Initial Resolutions, the "Governing Documents"); and a certification of good standing of the Trust obtained as of a recent date from the State Office. In such examinations, we have assumed the genuineness of all signatures, the conformity to original documents of all documents submitted to us as copies or drafts of documents to be executed, and the legal capacity of natural persons to complete the execution of documents. We have further assumed for purposes of this opinion: (i) except to the extent set forth in our opinion in paragraph 1 below, the due formation or organization, valid existence and good standing of each entity that is a party to any of the documents reviewed by us under the laws of the jurisdiction of its respective formation or organization; (ii) that the Plan has been completed to include all required information and will be in substantially the form presented to the Trustees; (iii) the due adoption, authorization, execution and delivery by, or on behalf of, each of the parties thereto of the above-referenced agreements, instruments, certificates and other documents (including the due adoption of the Initial Resolutions and the New Resolutions by the Trustees of the Trust prior to the date hereof and the due execution and delivery of the Plan prior to the first issuance of Shares pursuant thereto) and of all documents contemplated by the Governing Documents to be executed by investors desiring to become Shareholders; (iv) the payment of consideration for Shares, and the application of such consideration, as provided in the Initial Governing Instrument, the Governing Documents and the Plan, as applicable, the satisfaction of all conditions precedent to the issuance of Shares pursuant to the Plan (including any required approval of the reorganization by the requisite vote of the shareholders of each Target Fund) and compliance with all other terms, conditions and restrictions set forth in the Initial Governing Instrument, the Plan and the Governing Documents, as applicable, in connection with the issuance of Shares (including the taking of all appropriate action by the Trustees to designate each Acquiring Fund as a Series of the Trust and to designate Shares to be issued under the Plan and the rights and preferences attributable thereto prior to the issuance thereof); (v) that appropriate notation of the names and addresses of, the number of Shares held by, and the consideration paid by, Shareholders will be maintained in the appropriate registers and other books and records of the Trust in connection with the issuance or transfer of Shares; (vi) that no event has occurred, or prior to the issuance of Shares pursuant to the Plan will occur, that would cause a termination, dissolution or reorganization of an Acquiring Fund or the Trust under the Initial Governing Instrument or the Governing Instrument, as applicable, or the Delaware Statutory Trust Act, 12 <u>Del.</u> <u>C.</u> §§ 3801 <u>et</u> <u>seq.</u> (the "Delaware Act"); (vii) that the Trust became, prior to or within 180 days following the first issuance of beneficial interests therein, a registered investment company under the Investment Company Act of 1940, as amended; (viii) that the activities of the Trust have been and will be conducted in accordance with the terms of the Governing Instrument and the Delaware Act; and (ix) that each of the documents examined by us is in full force and effect, expresses the entire understanding of the parties thereto with respect to the subject matter thereof and has not been amended, supplemented or otherwise modified, except as herein referenced. We have not reviewed any documents other than those identified above in connection with this opinion, and we have assumed that there are no other documents, facts or circumstances that are contrary to or inconsistent with the opinions expressed herein. No opinion is expressed herein with respect to the requirements of, or compliance with, federal or state securities or blue sky laws. Further, we express no opinion on the sufficiency or accuracy of the Registration Statement, or any other registration or offering documentation relating to the Trust, an Acquiring Fund or the Shares. As to any facts material to our opinion, other than those assumed, we have

------

The Addressees Identified on Schedule I Hereto

August 5, 2025

relied without independent investigation on the above-referenced documents and on the accuracy, as of the date hereof, of the matters therein contained.

Based on and subject to the foregoing, and limited in all respects to matters of Delaware law, it is our opinion that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Each Acquiring Fund is a series of the Trust, which is a duly formed Delaware statutory trust with transferrable Shares, validly existing and in good standing under the laws of the State of Delaware.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The Shares of each Acquiring Fund to be issued and delivered to the corresponding Target Fund pursuant to the terms of the Plan are duly authorized by such Acquiring Fund and upon issuance, will be legally issued, fully paid and non-assessable.

We hereby consent to the filing of a copy of this opinion with the Securities and Exchange Commission as an exhibit to the Registration Statement. In giving this consent, we do not hereby admit that we come within the category of persons whose consent is required under Section 7 of the Securities Act of 1933, as amended, or the rules and regulations of the Securities and Exchange Commission thereunder. This opinion speaks only as of the date hereof and is based on our understandings and assumptions as to present facts, and on the application of Delaware law as the same exist on the date hereof, and we undertake no obligation to update or supplement this opinion after the date hereof for the benefit of any person or entity with respect to any facts or circumstances that may hereafter come to our attention or any changes in facts or law that may hereafter occur or take effect. This opinion is intended solely for the benefit of the addressee hereof in connection with the matters contemplated hereby and may not be relied on by any other person or entity, or for any other purpose, without our prior written consent.

Very truly yours,

MORRIS, NICHOLS, ARSHT & TUNNELL LLP

<u>*[s] Louis G. Hering*</u>

Louis G. Hering

------

SCHEDULE I

Identification of Addressees of

Morris, Nichols, Arsht & Tunnell LLP Opinion

Dated August 5, 2025

Putnam Funds Trust, on behalf of its Putnam Short-Term Municipal Income Fund series

Putnam Tax Free Income Trust, on behalf of its Putnam Tax-Free High Yield Fund series

Putnam California Tax Exempt Income Fund

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

------

ANNEX A

Funds

---

| | | |
|:---|:---|:---|
| **<u>Target Fund</u>**<br>**<u>(the funds in this column are the "Target Funds"</u>**<br> **<u>and</u> <u>each, individually, a "Target Fund")</u>** |  | **<u>Acquiring Fund</u>**<br>**<u>(the series of the Trust in this column are the</u>**<br> **<u>"Acquiring Funds" and each, individually, an</u>**<br> **<u>"Acquiring Fund")</u>**<br>|
| Putnam California Tax Exempt Income Fund | → | Franklin California Municipal Income ETF |
| Putnam Massachusetts Tax Exempt Income Fund | → | Franklin Massachusetts Municipal Income ETF |
| Putnam Minnesota Tax Exempt Income Fund | → | Franklin Minnesota Municipal Income ETF |
| Putnam New Jersey Tax Exempt Income Fund | → | Franklin New Jersey Municipal Income ETF |
| Putnam New York Tax Exempt Income Fund | → | Franklin New York Municipal Income ETF |
| Putnam Ohio Tax Exempt Income Fund | → | Franklin Ohio Municipal Income ETF |
| Putnam Pennsylvania Tax Exempt Income Fund | → | Franklin Pennsylvania Municipal Income ETF |
| Putnam Short-Term Municipal Income Fund | → | Franklin Short-Term Municipal Income ETF |
| Putnam Tax Exempt Income Fund | → | Franklin Municipal Income ETF |
| Putnam Tax-Free High Yield Fund | → | Franklin Municipal High Yield ETF |

---

## Ex-99.(14)(A)

**Exhibit 14(a)** 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form N-14 of Putnam ETF Trust of our report dated January 16, 2025, relating to the financial statements and financial highlights of Putnam Short-Term Municipal Income Fund, which appear in Putnam Funds Trust's Certified Shareholder Report on Form N-CSR for the year ended November 30, 2024. We also consent to the reference to us under the headings "FINANCIAL STATEMENTS" and "Comparison of Other Key Features of the Funds" in such Registration Statement.

![LOGO](g91160g0627010240044.jpg)

Boston, Massachusetts

August 4, 2025

## Ex-99.(14)(B)

**Exhibit 14(b)** 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form N-14 of Putnam ETF Trust of our report dated January 15, 2025, relating to the financial statements and financial highlights of Putnam New York Tax Exempt Income Fund, which appear in Putnam New York Tax Exempt Income Fund's Certified Shareholder Report on Form N-CSR for the year ended November 30, 2024. We also consent to the reference to us under the heading "FINANCIAL STATEMENTS" and "Comparison of Other Key Features of the Funds" in such Registration Statement.

![LOGO](g91160g0627010240044.jpg)

Boston, Massachusetts

August 4, 2025

## Ex-99.(14)(C)

**Exhibit 14(c)** 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form N-14 of Putnam ETF Trust of our report dated July 21, 2025, relating to the financial statements and financial highlights of Putnam Massachusetts Tax Exempt Income Fund and Putnam Ohio Tax Exempt Income Fund (the "Funds"), which appear in each Fund's Certified Shareholder Report on Form N-CSR for the year ended May 31, 2025. We also consent to the reference to us under the headings "FINANCIAL STATEMENTS" and "Comparison of Other Key Features of the Funds" in such Registration Statement.

![LOGO](g91160g0627010240044.jpg)

Boston, Massachusetts

August 4, 2025

## Ex-99.(14)(D)

**Exhibit 14(d)** 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form N-14 of Putnam ETF Trust of our report dated July 21, 2025, relating to the financial statements and financial highlights of Putnam New Jersey Tax Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, and Putnam Pennsylvania Tax Exempt Income Fund (the "Funds"), which appear in each Fund's Certified Shareholder Report on Form N-CSR for the year ended May 31, 2025. We also consent to the reference to us under the headings "FINANCIAL STATEMENTS" and "Comparison of Other Key Features of the Funds" in such Registration Statement.

![LOGO](g91160g0627010240044.jpg)

Boston, Massachusetts

August 4, 2025

## Ex-99.(14)(E)

**Exhibit 14(e)** 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form N-14 of Putnam ETF Trust of our report dated September 12, 2024, relating to the financial statements and financial highlights of Putnam Tax-Free High Yield Fund, which appear in Putnam Tax-Free High Yield Fund's Certified Shareholder Report on Form N-CSR for the year ended July 31, 2024. We also consent to the reference to us under the headings "FINANCIAL STATEMENTS" and "Comparison of Other Key Features of the Funds" in such Registration Statement.

![LOGO](g91160g0627010240044.jpg)

Boston, Massachusetts

August 4, 2025

## Ex-99.(14)(F)

**Exhibit 14(f)** 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in this Registration Statement on Form N-14 of Putnam ETF Trust of our report dated November 13, 2024, relating to the financial statements and financial highlights of Putnam California Tax Exempt Income Fund and Putnam Tax Exempt Income Fund (the "Funds"), which appear in each Fund's Certified Shareholder Report on Form N-CSR for the year ended September 30, 2024. We also consent to the reference to us under the headings "FINANCIAL STATEMENTS" and "Comparison of Other Key Features of the Funds" in such Registration Statement.

![LOGO](g91160g0627010240044.jpg)

Boston, Massachusetts

August 4, 2025

## Ex-99.(16)

**Exhibit (16)** 

**POWER OF ATTORNEY** 

We, the undersigned Trustees and officers of Putnam ETF Trust (the "Trust"), hereby severally constitute and appoint Barbara M. Baumann, George Putnam, III, Jonathan S. Horwitz, Michael J. Higgins, Bryan Chegwidden and James E. Thomas, and each of them singly, our true and lawful attorneys, with full power to them and each of them, to sign for us, and in our names and in the capacities indicated below, the Registration Statement on Form N-14 of the Trust relating to the merger of each "Target Fund" listed in the table below with and into the corresponding "Acquiring ETF" listed in the table below, each Acquiring ETF a series of the Trust, and any and all amendments (including post-effective amendments) to said Registration Statement and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto our said attorneys, and each of them acting alone, full power and authority to do and perform each and every act and thing requisite or necessary to be done in the premises, as fully to all intents and purposes as he might or could do in person, and hereby ratify and confirm all that said attorneys or any of them may lawfully do or cause to be done by virtue thereof.

---

| | | |
|:---|:---|:---|
|  **<u>Target Fund</u>** |  |  **<u>Acquiring ETF</u>** |
| Putnam California Tax Exempt Income Fund | → | Franklin California Municipal Income ETF |
| Putnam Massachusetts Tax Exempt Income Fund | → | Franklin Massachusetts Municipal Income ETF |
| Putnam Minnesota Tax Exempt Income Fund | → | Franklin Minnesota Municipal Income ETF |
| Putnam New Jersey Tax Exempt Income Fund | → | Franklin New Jersey Municipal Income ETF |
| Putnam New York Tax Exempt Income Fund | → | Franklin New York Municipal Income ETF |
| Putnam Ohio Tax Exempt Income Fund | → | Franklin Ohio Municipal Income ETF |
| Putnam Pennsylvania Tax Exempt Income Fund | → | Franklin Pennsylvania Municipal Income ETF |
| Putnam Short-Term Municipal Income Fund | → | Franklin Short-Term Municipal Income ETF |
| Putnam Tax Exempt Income Fund | → | Franklin Municipal Income ETF |
| Putnam Tax-Free High Yield Fund | → | Franklin Municipal High Yield ETF |

---

*[Signature page follows]* 

------

**WITNESS** my hand and seal on the date set forth below.

---

| | | |
|:---|:---|:---|
|  **Signature** | **Title** | **Date** |
|  <u>/s/ Barbara M. Baumann</u> <br> Barbara M. Baumann | Chair, Board and Trustee | June 20, 2025 |
|  <u>/s/ Robert L. Reynolds</u> <br> Robert L. Reynolds | President and Trustee | June 20, 2025 |
|  <u>/s/ Jonathan S. Horwitz</u><br> Jonathan S. Horwitz | Executive Vice President, Principal Executive Officer and Compliance Liaison | June 20, 2025 |
|  <u>/s/ Michael J. Higgins</u><br> Michael J. Higgins | Vice President, Treasurer, and Clerk | June 20, 2025 |
|  <u>/s/ Jeffrey W. White</u><br> Jeffrey W. White | Vice President, Principal Financial Officer, Principal Accounting Officer and Assistant Treasurer | June 20, 2025 |
|  <u>/s/ Liaquat Ahamed</u> <br> Liaquat Ahamed | Trustee | June 20, 2025 |
|  <u>/s/ Katinka Domotorffy</u><br> Katinka Domotorffy | Trustee | June 20, 2025 |
|  <u>/s/ Catharine Bond Hill</u><br> Catharine Bond Hill | Trustee | June 20, 2025 |
|  <u>/s/ Gregory G. McGreevey</u><br> Gregory G. McGreevey | Trustee | June 20, 2025 |

---

------

---

| | | |
|:---|:---|:---|
|  <u>/s/ Jennifer Williams Murphy</u><br> Jennifer Williams Murphy | Trustee | June 20, 2025 |
|  <u>/s/ Marie Pillai</u><br> Marie Pillai | Trustee | June 20, 2025 |
|  <u>/s/ George Putnam III</u><br> George Putnam III | Trustee | June 20, 2025 |
|  <u>/s/ Manoj P. Singh</u><br> Manoj P. Singh | Trustee | June 20, 2025 |
|  <u>/s/ Mona K. Sutphen</u><br> Mona K. Sutphen | Trustee | June 20, 2025 |
|  <u>/s/ Jane E. Trust</u><br> Jane E. Trust | Trustee | June 20, 2025 |

---