1. | 1 272269 1/12 Not FDIC Insured May Lose Value No Bank Guarantee Planning opportunities in 2012: Capitalizing on the changing tax landscape

2. | 2 272269 1/12 Topics for today A closer look at the nation’s debt crisis The outlook for taxes Planning considerations and strategies

3. | 3 272269 1/12 The debt crisis was front-page news in 2011 April 8Government shutdown narrowly averted with passage of last minute budget deal August 2Debt ceiling crisis resolved through passage of the Budget Control Act of 2011, which cut discretionary spending by $900B over 10 years and called for establishment of a bipartisan committee to identify an additional $1.2T in long- term deficit reduction September 19The Obama administration announces a deficit reduction proposal calling for $3T in deficit reduction including $1.5T in tax increases November 21Co-chairs of Joint Select Committee on Deficit Reduction release statement announcing inability to reach an agreement

4. | 4 272269 1/12 Annual U.S. federal budget surplus/deficit, 2000–2011 ($B) Source: Congressional Budget Office, Monthly Budget Review, November 2011. $1.3 Trillion ($) Annual budget deficits have increased significantly since 2008…

5. | 5 272269 1/12 …and have driven federal debt to historically high levels 1940 Source: Office of Management and Budget, Historical Tables, 2011. Total gross federal debt includes debt held by the public as well as intra- governmental debt such as amounts owed to Social Security and federal employee retirement programs. Current level of 93% is the highest since WWII Gross federal debt as a % of GDP, 1940 – 2010 (%)120 0 60 20101975 30 90

6. | 6 272269 1/12 Entitlement program spending will drive longer-term deficits Source: Congressional Budget Office, Long-term Budget Outlook, June 2011. Projections based on CBO Alternative Fiscal Scenario. Tax revenues based on historical average of roughly 18% of GDP. Social Security, Medicare, and Medicaid spending as a percent of GDP, 1971 – 2081 1971 (%)25 0 15 20812026 Entitlement spending alone is projected to surpass tax revenues in 2047 Tax revenues historically average 18% of GDP 10 20 5

7. | 7 272269 1/12 Mandatory 63% Discretionary 37% Source: Congressional Budget Office, Reducing the Deficit, Spending and Revenue Options, March 2011. Mandatory spending types primarily include Social Security, Medicare, and Medicaid, as well as interest on existing debt. Discretionary spending includes defense and non-defense items. The majority of government spending is on auto-pilot U.S. federal government spending by type, 2011 estimated

8. | 8 272269 1/12 Tax rates are at historic lows This chart reflects the maximum federal income tax rate at each year-end. Source: Internal Revenue Service, 2011. Tax rate (%) 19602012 Kennedy tax cuts Tax Reform Act of ’86 Bush/Clinton tax hikes Bush tax cuts U.S. federal income tax rates, 1960–2012 (%)

9. | 9 272269 1/12 U.S. federal estate tax figures, 1990–2012 Estates currently benefit from historically low levels also $ (%)

10. | 10 272269 1/12 The outlook for taxes: Preparing for a rising tax environment

11. | 11 272269 1/12 What to watch for in 2012 Proposed legislation to delay, reduce, or eliminate $1.2T in automatic spending cuts scheduled to begin in 2013 due to super-committee failure U.S. Supreme Court ruling on the health-care reform law — is the individual mandate to purchase health insurance constitutional? Debate around extension of the Bush-era tax cuts, potential tax reform, and changes to major entitlement programs culminating in increased rhetoric leading up to November elections Major tax changes before November elections unlikely

12. | 12 272269 1/12 Taxes are poised to increase in 2013 Tax item20122013 Ordinary income35.0%43.4% Dividends15.0%43.4% Capital gains15.0%23.8% Payroll tax4.2%7.1% Estate and gift taxes35.0%55.0% Estate and gift tax exemption amounts $5.12M$1M Tax rates reflect highest marginal rate and incorporate additional taxes related to the health-care reform law. Health-care-related taxes include a surtax of 3.8% on net investment income and additional 0.9% payroll tax affecting single filers with income in excess of $200,000, and joint filers with income in excess of $250,000. Assumes employee payroll tax rate of 4.2% is extended into 2012.

13. | 13 272269 1/12 New health-care taxes take effect in 2013 Increase in the individual portion of the Medicare payroll tax on wages from 1.45% to 2.35% New Medicare investment income tax of 3.8% Will affect interest, dividends, capital gains, rental income Distributions from retirement accounts are excluded Interest from municipal bonds not affected Targeted at individuals with more than $200K income (couples with $250K income)

14. | 14 272269 1/12 Income phaseouts on itemized deductions and personal exemptions return Marriage tax penalty returns Certain tax brackets eliminated 10% income tax bracket and 0% long-term capital gains/dividends tax bracket for example Educational tax-related benefits reduced Deduction for student loan interest ends American Opportunity education tax credit expires Coverdell IRA contribution limit reverts to $500 (from $2,000 currently) Child tax credit reverts to $500 (from $1,000 currently) Other tax-related changes on tap for 2013

15. | 15 272269 1/12 Planning considerations and strategies

16. | 16 272269 1/12 Five planning strategies to consider in 2012 1.Accelerate income in 2012 Take advantage of low rates now and avoid new health-care related taxes beginning in 2013 Consider Roth IRA conversions, IRA distributions, realizing more income if self-employed, taking deferred compensation, etc. Realize capital gains to take advantage of 15% rate Consult with your tax professional on your personal situation

17. | 17 272269 1/12 Five planning strategies to consider in 2012 2.Accelerate tax deductions if feasible For 2012, tax benefit of itemized deductions is not phased out at higher income levels Many debt reduction proposals have been proposed recently that would eliminate or reduce tax deductions Examples of ways to accelerate deductions: – Prepay mortgage interest or property taxes – Make charitable contributions – Schedule elective medical procedures if likely to result in significant out-of-pocket expenses

18. | 18 272269 1/12 Five planning strategies to consider in 2012 3.Review estate plan strategies and documents With the estate tax exemption of $5 million, it makes sense to review trust documents Don’t forget that some states will have their own death and/or inheritance taxes Consult with an estate planning attorney to explore options such as a life insurance trust to create liquidity at death 4.Consider making lifetime gifts in 2012 Individuals can gift up to $5 million currently without being subject to federal gift tax Gifting now removes those funds plus any future appreciation out of your estate

19. | 19 272269 1/12 Five planning strategies to consider in 2012 5.Hedge against the uncertainty of future tax rates by being “tax diversified” Having exposure across taxable, tax-deferred, and tax-free accounts can help retirees better manage their tax bill in retirement Create tax-free sources of income through Roth IRAs and municipal bonds

20. | 20 272269 1/12 Closing thoughts The historically low tax environment is potentially ending after 2012 There is a risk of a rising tax environment over the longer term as the nation deals with budget deficits Consult with your financial advisor and tax professional to discuss potential short-term opportunities while planning for the risk of higher taxes in the future

21. | 21 272269 1/12 A BALANCED APPROACH A WORLD OF INVESTING A COMMITMENT TO EXCELLENCE

22. | 22 272269 1/12 This information is not meant as tax or legal advice. Please consult your legal or tax advisor before making any decisions. Investors should carefully consider the investment objectives, risks, charges, and expenses of a fund before investing. For a prospectus, or a summary prospectus if available, containing this and other information for any Putnam fund or product, call your financial representative or call Putnam at 1-800-225-1581. Please read the prospectus carefully before investing. Putnam Retail Management putnam.com