August 1, 1996
Putnam International Growth and Income Fund
Class A, B and M shares
INVESTMENT STRATEGY: Growth & Income
This prospectus explains concisely what you should know before
investing in Putnam International Growth and Income Fund (the
"fund"), a portfolio of Putnam Funds Trust (the "Trust"). Please
read it carefully and keep it for future reference. You can find
more detailed information in the August 1, 1996 statement of
additional information (the "SAI"), as amended from time to time.
For a free copy of the SAI or other information, call Putnam
Investor Services at 1-800-225-1581. The SAI has been filed with
the Securities and Exchange Commission and is incorporated into
this prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
BOSTON * LONDON * TOKYO<PAGE>
ABOUT THE FUND
Expenses summary
This section describes the sales charges, management fees, and
annual operating expenses that apply to the fund's various
classes of shares. Use it to help you estimate the impact of
transaction costs on your investment over time.
Objectives
Read this section to make sure the fund's objectives are
consistent with your own.
How the fund pursues its objectives
This section explains in detail how the fund seeks its investment
objectives.
Risk factors.
All investments entail some risk. Read this section to make
sure you understand certain risks that may be involved when
investing in the fund.
How performance is shown
This section describes and defines the measures used to assess
the fund's performance. All data are based on the fund's past
investment results and do not predict future performance.
How the fund is managed
Consult this section for information about the fund's management,
allocation of the fund's expenses, and how purchases and sales of
securities are made for the fund.
Organization and history
In this section, you will learn when the fund was introduced, how
it is organized, how it may offer shares, and who its Trustees are.
ABOUT YOUR INVESTMENT
Alternative sales arrangements
Read this section for descriptions of the classes of shares this
prospectus offers and for points you should consider when making
your choice.
How to buy shares
This section describes the ways you may purchase shares and tells
you the minimum amounts required to open various types of accounts.
It explains how sales charges are determined and how you may become
eligible for reduced sales charges on each class of shares.
Distribution plans
This section tells you what distribution fees are charged against
each class of shares.
How to sell shares
In this section, you can learn how to sell shares of the fund,
either directly to the fund or through an investment dealer.
How to exchange shares
Find out in this section how you may exchange shares of the fund
for shares of other Putnam funds. The section also explains how
exchanges can be made without sales charges and the conditions
under which sales charges may be required.
How the fund values its shares
This section explains how the fund determines the value of its
shares.
How the fund makes distributions to shareholders; tax information
This section describes the various options you have in choosing
how to receive dividends from the fund. It also discusses the
federal tax status of the payments and counsels shareholders to
seek specific advice about their own situation.
ABOUT PUTNAM INVESTMENTS, INC.
Read this section to learn more about the companies that provide
the marketing, investment management, and shareholder account
services to Putnam funds and their shareholders.
<PAGE>
About the fund
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following table summarizes your maximum transaction costs from
investing in the fund and estimated expenses for the first fiscal
year. The examples show the cumulative expenses attributable to a
hypothetical $1,000 investment over specified periods.
Class A Class B Class M
shares shares shares
Shareholder transaction
expenses
Maximum sales charge
imposed on purchases
(as a percentage of
offering price) 5.75% NONE* 3.50%*
Deferred sales charge 5.0% in the first
(as a percentage year, declining
of the lower of to 1.0% in the
original purchase sixth year, and
price or redemption eliminated
proceeds) NONE** thereafter NONE
Annual fund operating expenses
(as a percentage of average net assets)
Total fund
Management 12b-1 Other operating
fees (after fees expenses (afterexpenses (after
expense limitation) expense limitation) expense
limitation)
- --------------- ----- --------------- ---------------
Class A .62% .25% .84% 1.71%
Class B .62% 1.00% .84% 2.46%
Class M .62% .75% .84% 2.21%
The table is provided to help you understand the expenses of
investing in the fund and your share of the operating expenses
that the fund expects to incur during its first fiscal year. The
expenses shown in the table do not reflect the application of
credits related to brokerage service and expense offset
arrangements that reduce certain fund expenses. In the absence
of the expense limitation, management fees, and total
fund operating expenses would be 0.80%, and 1.89%
respectively for class A shares; 0.80%, and 2.64%
respectively for class B shares; and 0.80%, and
2.39% respectively for class M shares. The 12b-1 fees
shown in the table reflect amounts currently payable under each
distribution plan. "Other expenses" are based on estimated
expenses the fund expects to incur during its first fiscal year.
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and, except as indicated, redemption at
the end of each period:
1 3
year years
Class A $74 $108
Class B $75 $107
Class B (no redemption) $25 $77
Class M $57 $102
The examples do not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the examples to assume a 5% annual return,
but actual annual return will vary.
* The higher 12b-1 fees borne by class B and class M shares
may cause long-term shareholders to pay more than the
economic equivalent of the maximum permitted front-end
sales charge on class A shares.
** A deferred sales charge of up to 1.00% is assessed on
certain redemptions of class A shares that were purchased
without an initial sales charge. See "How to buy shares -
- Class A shares."
OBJECTIVES
Putnam International Growth and Income Fund seeks capital growth.
Current income is a secondary objective. The fund is not
intended to be a complete investment program, and there is no
assurance it will achieve its objectives.
HOW THE FUND PURSUES ITS OBJECTIVES
Basic investment strategy
The fund will invest primarily in common stocks that offer
potential for capital growth, and may, consistent with its
investment objectives, invest in stocks that offer potential for
current income. Under normal market conditions, the fund expects
to invest substantially all of its assets in securities
principally traded on markets outside the United States.
The fund will normally diversify its investment among a number of
different countries, and, except when investing for defensive
purposes as described below, will invest at least 65% of its
total assets in at least three countries other than the
United States. The fund may invest in securities of issuers in
emerging market countries (as defined below under "Investment
policies and techniques; risk factors -- Foreign investments"),
as well as securities of issuers in more developed countries.
Investing in emerging market countries involves special risks.
See "Investment policies and techniques; risk factors -- Foreign
investments."
The fund may also purchase corporate bonds, notes and debentures,
preferred stocks, securities convertible into common stock or
other equity securities, or U.S. or foreign government securities
if Putnam Investment Management, Inc., the fund's investment
manager ("Putnam Management"), determines that their purchase
would help further the fund's investment objectives.
The types of securities held by the fund may vary from time to
time in light of the fund's investment objectives, changes in
interest rates, and economic and other factors. When selecting
portfolio securities for the fund that have the potential for
capital growth, Putnam Management will seek to identify
securities that are significantly undervalued in relation to
underlying asset values or earnings potential. The fund may also
hold a portion of its assets in cash or high-quality money market
instruments.
Common stocks of foreign issuers have historically offered lower
yields than common stocks of comparable U.S. issuers. In
addition, foreign withholding taxes may further reduce the
amount of income available for distribution to fund shareholders.
As a result, the fund's yield is expected to be lower than that
of funds with similar investment objectives that invest primarily
in U.S. issuers. See "How the fund makes distributions to
shareholders."
Investment policies and techniques; risk factors
Foreign investments. Since foreign securities are normally
denominated and traded in foreign currencies, the value of the
fund's assets may be affected favorably or unfavorably by
currency exchange rates and exchange control regulations. There
may be less information publicly available about a foreign
company than about a U.S. company, and foreign companies are not
generally subject to accounting, auditing and financial reporting
standards and practices comparable to those in the United States.
The securities of some foreign companies are less liquid and at
times more volatile than securities of comparable U.S. companies.
Foreign brokerage commissions and other fees are also generally
higher than in the United States. Foreign settlement procedures
and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the
fund's assets held abroad) and expenses not present in the
settlement of domestic investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial
instability and diplomatic developments which could affect the
value of the fund's investments in certain foreign countries.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit the
fund's ability to invest in securities of certain issuers located
in those foreign countries. Special tax considerations apply to
foreign securities.
The risks described above, including the risks of nationalization
or expropriation of assets, are typically increased to the extent
that the fund invests in issuers located in emerging market
countries. For these purposes, a country is considered to be an
"emerging market country" based on Putnam Management's evaluation
of its level of economic development or the size and experience
of its securities markets. Political and economic structures in
many of these countries may be in their infancy and developing
rapidly, and such countries may lack the social, political and
economic stability characteristic of more developed countries.
Certain of these countries have in the past failed to recognize
private property rights and have at times nationalized and
expropriated the assets of private companies.
A more detailed explanation of foreign investments, and the risks
and special tax considerations associated with them, is included
in the SAI.
Foreign currency exchange transactions. Putnam Management may
engage in foreign currency exchange transactions to protect
against uncertainty in the level of future exchange rates.
Putnam Management may engage in foreign currency exchange
transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect the
value of specific portfolio positions ("position hedging").
The fund may engage in transaction hedging to protect against a
change in the foreign currency exchange rate between the date on
which the fund contracts to purchase or sell the security and the
settlement date, or to "lock in" the U.S. dollar equivalent of a
dividend or interest payment in a foreign currency. The fund may
purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate as part of its transaction hedging
strategies. If conditions warrant, the fund may also enter into
contracts to purchase or sell foreign currencies at a future date
("forward contracts") and may purchase and sell foreign currency
futures contracts as part of its transaction hedging strategies.
A foreign currency forward contract is a negotiated agreement to
exchange currency at a future time at a rate or rates that may be
higher or lower than the spot rate. Foreign currency futures
contracts are standardized exchange-traded contracts and have
margin requirements. The fund may also purchase exchange-listed
and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies.
The fund may engage in "position hedging" to protect against the
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 foreign currencies for
securities which the fund intends to buy, when the fund holds
cash reserves or short-term investments). For position hedging
purposes, the fund may purchase or sell foreign currency futures
contracts, foreign currency forward contracts, and put and call
options on foreign currency futures contracts and on foreign
currencies on exchanges or over-the-counter markets. In
connection with position hedging, the fund may also purchase or
sell foreign currencies on a spot basis.
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 involve currencies other than those in
which its portfolio securities are then denominated. Putnam
Management will engage in such "cross hedging" activities when it
believes that such transactions provide significant hedging
opportunities for the fund. Cross hedging transactions by the
fund involve the risk of imperfect correlation between changes in
the values of the currencies to which such transactions relate
and changes in the value of the currency or other asset or
liability which is the subject of the hedge.
Hedging transactions involve costs and may result in losses. 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 tax and regulatory constraints ,
and the availability of suitable transactions. Accordingly,
there can be no assurance that the fund will engage in foreign
currency exchange transactions at any given time or from time to
time. In addition, the currencies of certain foreign countries
are not widely traded, and as a result foreign currency
exchange transactions may not be available with respect to such
currencies.
The fund's hedging transactions may affect the character
or amount of its distributions.
Investments in securities of small-capitalization companies. The
fund may invest a portion of its assets in securities of small-
capitalization companies (defined for these purposes as companies
with equity market capitalizations of less than $1 billion).
These securities may involve certain special risks. Such
companies may have limited product lines, markets or financial
resources, and may be dependent on a limited management group.
Such securities may trade less frequently and in smaller volume
than more widely held securities. The values of these securities
may fluctuate more sharply than those of other securities, and
the fund may experience some difficultly in establishing or
closing out positions in these securities at prevailing market
prices. There may be less publicly available information about
the issuers of these securities or less market interest in such
securities than in the case of larger companies, and it may take
a longer period of time for the prices of such securities to
reflect the full value of their issuers' underlying earnings
potential or assets.
Investments in fixed-income securities. The fund may invest in
fixed-income securities rated at the time of purchase C or better
by Moody's Investor Services, Inc. ("Moody's") or Standard &
Poor's ("S&P"), and in unrated securities which Putnam Management
determined to be comparable quality. The values of fixed-income
securities generally fluctuate in response to changes in interest
rates. Thus, a decrease in interest rates will generally result
in an increase in the value of the fixed-income securities held
by the fund. Conversely, during periods of rising interest
rates, the value of the fixed-income securities held by the fund
will generally decline. The values of lower-rated fixed-income
securities (i.e., securities rated below Baa by Moody's or BBB by
S&P and unrated securities of comparable quality),
commonly known as "junk bonds," generally fluctuate more than
those of higher-rated fixed-income securities. Securities in the
lower rating categories may, depending on the rating, have large
uncertainties or major exposure to adverse conditions. The
rating services' descriptions of securities in the various rating
categories, including the speculative characteristics of
securities in the lower rating categories, are set forth in the
SAI.
The lower ratings of these securities reflect a greater
possibility that adverse changes in the financial condition of
their issuers, or in general economic conditions, or both, or an
unanticipated rise in interest rates, may impair the ability of
their issuers to make payments of interest and principal. In
addition, under such circumstances the values of such securities
may be more volatile, and the markets for such securities may be
less liquid, than those for higher-rated securities, and the fund
may as a result find it more difficult to determine the fair
value of such securities. When the fund invests in securities
in the lower ratings categories, the achievement of the fund's
goals is more dependent on Putnam Management's ability than would
be the case if the fund were investing in securities in the
higher rating categories.
Portfolio turnover. The length of time the fund has held a
particular security is not generally a consideration in
investment decisions. A change in the securities held by the
fund is known as "portfolio turnover." As a result of the fund's
investment policies, under certain market conditions, the fund's
portfolio turnover rate may be higher than that of other mutual
funds.
Portfolio turnover generally involves some expense to the fund,
including brokerage commissions or dealer markups and other
transaction costs on the sale of securities and reinvestment in
other securities. These transactions may result in realization
of taxable capital gains. While it is impossible to predict
portfolio turnover rates, based on its experience, Putnam
Management believes that such rate will not exceed 150%.
Financial futures and related options. The fund may buy and sell
financial futures contracts on stock indexes and foreign
currencies. A futures contract is a contract to buy or sell
units of a particular stock index, or a certain amount of a
foreign currency, at an agreed price on a specified future date.
In addition to or as an alternative to purchasing or selling
futures contracts, the fund may buy and sell call and put options
on futures contracts, stock indexes and foreign currencies. The
fund may engage in futures and options transactions for hedging
purposes and for nonhedging purposes, such as to attempt
to additional income or to adjust its exposure to relevant
markets.
The use of financial futures and related options involves certain
special risks. Futures and options transactions involve costs
and may result in losses.
Certain risks arise because of the possibility of imperfect
correlations between movements in the prices of financial futures
and options and movements in the prices of the underlying stock
index or currencies, or of the securities or currencies which are
the subject of the hedge. The successful use of futures and
options further depends on Putnam Management's ability to
forecast market movements correctly.
Other risks arise from the fund's potential inability to close
out its futures or related options positions, and there can be no
assurance that a liquid secondary market will exist for any
futures contract or option at a particular time. The use of
futures and options transactions for purposes other than hedging
entails greater risks. The fund's ability to terminate option
positions established in the over-the-counter market may be more
limited than for exchange-traded options and may also involve the
risk that securities dealers participating in such transactions
would fail to meet their obligations to the fund. Because the
markets for options and futures on foreign stock indexes and
currencies are relatively new and still developing, the fund's
ability to engage in such transactions may be limited. Certain
provisions of the Internal Revenue Code and certain regulatory
requirements may also limit the fund's ability to engage in
futures and options transactions.
A more detailed explanation of futures and options transactions,
including the risks associated with them, is included in the SAI.
Options. The fund may seek to increase its current return by
writing covered call and put options on securities it owns or in
which it may invest. The fund receives a premium from writing a
call or put option, which increases the return if the option
expires unexercised or is closed out at a net profit.
When the fund writes a call option, it gives up the opportunity
to profit from any increase in the price of a security above the
exercise price of the option; when it writes a put option, the
fund takes the risk that it will be required to purchase a
security from the option holder at a price above the current
market price of the security. The fund may terminate an option
that it has written prior to its expiration by entering into a
closing purchase transaction in which it purchases an option
having the same terms as the option written.
The fund may also buy and sell put and call options for hedging
purposes. From time to time, the fund may also buy and sell
combinations of put and call options on the same underlying
security to earn additional income. The fund may also invest in
warrants to purchase equity securities. The aggregate value of
the securities underlying options may not exceed 25% of the
fund's assets. The use of these strategies may be limited by
applicable law.
A more detailed explanation of options transactions,
including the risks associated with them, is included in the SAI.
Securities loans, repurchase agreements and forward commitments.
The fund may lend portfolio securities amounting to not more than
25% of its assets to broker-dealers and may enter into repurchase
agreements on up to 25% of its assets. These transactions must
be fully collateralized at all times. The fund may also purchase
securities for future delivery, which may increase its overall
investment exposure and involves a risk of loss if the value of
the securities declines prior to the settlement date. These
transactions involve some risk to the fund if the other party
should default on its obligation and the fund is delayed or
prevented from recovering the collateral or completing the
transaction.
Defensive strategies
At times Putnam Management may judge that conditions in securities
markets make pursuing the basic investment strategy of the fund
inconsistent with the best interests of the fund's shareholders.
At such times Putnam Management may temporarily use alternative
strategies, primarily designed to reduce fluctuations in the value
of the fund's assets. In implementing these "defensive"
strategies, the fund may invest without limit in cash or money
market instruments, preferred stocks, debt securities issued by
the U.S. government or any foreign government or their agencies or
instrumentalities, or in any other securities Putnam Management
considers consistent with such defensive strategies. In addition,
when pursuing such defensive strategies, the fund may invest
without limit in securities primarily traded in U.S. markets. It
is impossible to predict when, or for how long, the fund will use
alternative strategies.
Diversification
The fund is a "diversified" investment company under the
Investment Company Act of 1940. This means that with respect to
75% of its total assets the fund may not invest more than 5% of
its total assets in the securities of any one issuer (except U.S.
government securities). The remaining 25% of the fund's total
assets is not subject to this restriction. To the extent the fund
invests a significant portion of its assets in the securities of a
particular issuer, the fund will be subject to an increased risk
of loss if the market value of such issuer's securities declines.
Derivatives
Certain of the instruments in which the fund will invest, such as
futures contracts, options and forward contracts, are considered
to be "derivatives." Derivatives are financial instruments whose
value depends upon, or is derived from, the value of an underlying
asset, such as a security, a currency or an index. Further
information about these instruments and the risks involved in
their use is included elsewhere in this prospectus and in the SAI.
Limiting investment risk
Specific investment restrictions help the fund limit investment
risks for its shareholders. These restrictions prohibit the fund
(with respect to 75% of its total assets) from acquiring more than
10% of the voting securities of any one issuer. They also
prohibit the fund from investing more than:
(a) (with respect to 75% of its assets) 5% of its total assets
(taken at current value) in securities of any one
issuer; (except certain government securities) *
(b) 25% of its total assets in any one industry (securities of the
U.S. government, its agencies or instrumentalities are not
considered to represent industries);*
(c) 15% of its net assets in any combination of securities that
are not readily marketable, in securities restricted as to resale
(excluding securities determined by the Trustees (or the person
designated by the Trustees to make such determinations) to be
readily marketable), and in repurchase agreements maturing in more
than seven days.
Restrictions marked with an asterisk (*) above are summaries of
fundamental investment policies. See the SAI for the full text of
these policies and the fund's other fundamental investment
policies. Except for investment policies designated as
fundamental in this prospectus or the SAI, the investment policies
described in this prospectus and in the SAI are not fundamental
policies. The Trustees may change any non-fundamental investment
policies without shareholder approval. As a matter of policy, the
Trustees would not materially change the fund's investment
objectives without shareholder approval.
HOW PERFORMANCE IS SHOWN
The fund's investment performance may from time to time be
included in advertisements about the fund. "Yield" for each
class of shares is calculated by dividing the annualized net
investment income per share during a recent 30-day period by the
maximum public offering price per share of the class on the last
day of that period.
"Total return" for the one-, five- and ten-year periods (or for
the life of a class, if shorter) through the most recent calendar
quarter represents the average annual compounded rate of return
on an investment of $1,000 in the fund invested at the maximum
public offering price (in the case of class A and class M shares)
or reflecting the deduction of any applicable contingent deferred
sales charge (in the case of class B shares). Total return may
also be presented for other periods or based on investment at
reduced sales charge levels. Any quotation of investment
performance not reflecting the maximum initial sales charge or
contingent deferred sales charge would be reduced if the sales
charge were used.
All data are based on past investment results and do not predict
future performance.
Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the
fund's portfolio, the fund's operating expenses and which class
of shares the investor purchases. Investment performance also
often reflects the risks associated with the fund's investment
objectives and policies. These factors should be considered when
comparing the fund's investment results with those of other
mutual funds and other investment vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the
limitation had not been in effect. The fund's performance may be
compared to that of various indexes. See the SAI.
HOW THE FUND IS MANAGED
The Trustees of the fund are responsible for generally overseeing
the conduct of the fund's business. Subject to such policies as
the Trustees may determine, Putnam Management furnishes a
continuing investment program for the fund and makes investment
decisions on its behalf. Subject to the control of the Trustees,
Putnam Management also manages the fund's other affairs and
business.
The fund pays Putnam Management a quarterly fee for these
services based on the fund's average net assets. See "Expenses
summary" and the SAI.
The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the fund's
portfolio since the year stated below:
Business experience
Year (at least 5 years)
----- -------------------------
Justin M. Scott 1996 Employed as an investment
Managing Director professional by Putnam
Management since 1988.
The fund pays its share of all expenses not assumed by Putnam
Management, including Trustees' fees, auditing, legal, custodial,
investor servicing and shareholder reporting expenses, and
payments under its distribution plans. Expenses of the Trust
directly charged or attributable to the fund will be paid from
the assets of the fund. General expenses of the Trust will be
allocated among the fund and other series of the Trust on a basis
that the Trustees deem fair and equitable, which may be based on
the relative assets of the fund and other series of the Trust or
the nature of the services performed and relative applicability
to the fund. The fund also reimburses Putnam Management for a
portion of the compensation and related expenses of certain
officers of the Trust and their staff who provide administrative
services to the Trust. The total reimbursement is determined
annually by the Trustees.
Putnam Management places all orders for purchases and sales of
the fund's securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of the fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers.
The fund pays a quarterly fee to Putnam Management based on the
average net assets of the fund, as determined at the close of
each business day during the quarter, at the following annual
rates, expressed as a percentage of the fund's average net
assets: 0.80% of the first $500 million of the average net asset
value of the fund; 0.70% of the next $500 million; 0.65% of the
next $500 million; 0.60% of the next $5 billion; 0.575% of the
next $5 billion; 0.555% of the next $5 billion; 0.54% of the next
$5 billion; and 0.53% of any excess thereafter.
In order to limit the fund's expenses during its start-up period,
Putnam Management has agreed to limit its compensation (and, to
the extent necessary, bear other expenses) through July 1, 1997,
to the extent that expenses of the fund (exclusive of brokerage,
interest, taxes, deferred organizational and extraordinary
expense, and payments under the fund's distribution plans) would
exceed 1.45% of the fund's average net assets. For the purpose of
determining any such limitation on Putnam Management's
compensation, fund expenses shall not reflect the application of
commissions or cash management credits that may reduce designated
fund expenses. With Trustee approval, this expense limitation may
be terminated earlier, in which event shareholders would be
notified and this prospectus would be revised.
ORGANIZATION AND HISTORY
The Trust is a Massachusetts business trust organized on January
22, 1996. A copy of the Agreement and Declaration of Trust, which
is governed by Massachusetts law, is on file with the Secretary of
State of The Commonwealth of Massachusetts. As of August 1, 1996,
Putnam Investments, Inc. owned more than 25% of the shares
of the fund and therefore each may be deemed to "control" the
fund.
The Trust is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. Shares of the Trust may be divided without
shareholder approval into two or more series of shares
representing separate investment portfolios. Only shares of
Putnam International Growth and Income Fund are offered by this
prospectus.
Any such series of shares may be divided without shareholder
approval into two or more classes of shares having such
preferences and special or relative rights and privileges as the
Trustees determine. The fund's shares are currently divided into
four classes. Only the fund's class A, B and M shares are offered
by this prospectus. The fund may also offer other classes of
shares with different sales charges and expenses. Because of
these different sales charges and expenses, the investment
performance of the classes will vary. For more information,
including your eligibility to purchase any other class of shares,
contact your investment dealer or Putnam Mutual Funds (at 1-800-
225-1581).
Each share has one vote, with fractional shares voting
proportionally. Shares of each class will vote together as a
single class without regard to series or classes of shares on all
matters except, (i) when required by the Investment Company Act of
1940 or when the Trustees have determined that the matter affects
the interests of one or more series or classes materially
differently, shares will be voted by individual series or class;
and (ii) when the Trustees have determined that the matter affects
only the interest of one or more series or classes, only
shareholders of that series or class shall be entitled to vote
thereon. Shares are freely transferable, are entitled to
dividends as declared by the Trustees, and, if the fund were
liquidated, would receive the net assets of the fund. The fund
may suspend the sale of shares at any time and may refuse any
order to purchase shares. Although the Trust 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.
If you own fewer shares than a minimum amount set by the Trustees
(presently 20 shares), the fund may choose to redeem your shares.
You will receive at least 30 days' written notice before the fund
redeems your shares, and you may purchase additional shares at any
time to avoid a redemption. The fund may also redeem shares if
you own shares above a maximum amount set by the Trustees. There
is presently no maximum, but the Trustees may establish one at any
time, which could apply to both present and future shareholders.
The Trust's Trustees: George Putnam,* Chairman. President of the
Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; William F. Pounds, Vice
Chairman. Professor of Management, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology; Jameson Adkins
Baxter, President, Baxter Associates, Inc.; Hans H. Estin, Vice
Chairman, North American Management Corp.; John A. Hill, Chairman
and Managing Director, First Reserve Corporation; Ronald J.
Jackson, Former Chairman, President and Chief Executive Officer of
Fisher-Price, Inc., Trustee of Salem Hospital and Overseer of the
Peabody Essex Museum; Elizabeth T. Kennan, President Emeritus and
Professor, Mount Holyoke College; Lawrence J. Lasser,* Vice
President of the Putnam funds. President, Chief Executive Officer
and Director of Putnam Investments, Inc. and Putnam Management.
Director, Marsh & McLennan Companies, Inc.; Robert E. Patterson,
Executive Vice President and Director of Acquisitions, Cabot
Partners Limited Partnership; Donald S. Perkins,* Director of
various corporations, including Cummins Engine Company, Inc.,
Lucent Technologies Inc., Springs Industries, Inc. and Time Warner
Inc.; George Putnam, III,* President, New Generation Research,
Inc.; Eli Shapiro, Alfred P. Sloan Professor of Management,
Emeritus, Alfred P. Sloan School of Management, Massachusetts
Institute of Technology; A.J.C. Smith,* Chairman and Chief
Executive Officer, Marsh & McLennan Companies, Inc.; and W.
Nicholas Thorndike, Director of various corporations and
charitable organizations, including Data General Corporation,
Bradley Real Estate, Inc. and Providence Journal Co. Also,
Trustee of Massachusetts General Hospital and Eastern Utilities
Associates. The Trust's Trustees are also Trustees of the other
Putnam funds. Those marked with an asterisk (*) are or may be
deemed to be "interested persons" of the fund, Putnam Management
or Putnam Mutual Funds.
About Your Investment
ALTERNATIVE SALES ARRANGEMENTS
This prospectus offers investors three classes of shares that bear
sales charges in different forms and amounts and that bear
different levels of expenses:
Class A shares. An investor who purchases class A shares pays a
sales charge at the time of purchase. As a result, class A shares
are not subject to any charges when they are redeemed, except for
certain sales at net asset value that are subject to a contingent
deferred sales charge ("CDSC"). Certain purchases of class A
shares qualify for reduced sales charges. Class A shares bear a
lower 12b-1 fee than class B and class M shares. See "How to buy
shares -- Class A shares" and "Distribution plans."
Class B shares. Class B shares are sold without an initial sales
charge, but are subject to a CDSC if redeemed within a specified
period after purchase. Class B shares also bear a higher 12b-1
fee than class A and class M shares. Class B shares automatically
convert into class A shares, based on relative net asset value,
approximately eight years after purchase. For more information
about the conversion of class B shares, see the SAI. This
discussion will include information about how shares acquired
through reinvestment of distributions are treated for conversion
purposes. The discussion will also note certain circumstances
under which a conversion may not occur. Class B shares provide an
investor the benefit of putting all of the investor's dollars to
work from the time the investment is made. Until conversion,
class B shares will have a higher expense ratio and pay lower
dividends than class A and class M shares because of the higher
12b-1 fee. See "How to buy shares -- Class B shares" and
"Distribution plans."
Class M shares. An investor who purchases class M shares pays a
sales charge at the time of purchase that is lower than the sales
charge applicable to class A shares. Certain purchases of class M
shares qualify for reduced sales charges. Class M shares bear a
12b-1 fee that is lower than class B shares but higher than class
A shares. Class M shares are not subject to any CDSC and do not
convert into any other class of shares. See "How to buy shares --
Class M shares" and "Distribution plans."
Which arrangement is best for you? The decision as to which class
of shares provides a more suitable investment for an investor
depends on a number of factors, including the amount and intended
length of the investment. Investors making investments that
qualify for reduced sales charges might consider class A or class
M shares. Investors who prefer not to pay an initial sales charge
might consider class B shares. Orders for class B shares for
$250,000 or more will be treated as orders for class A shares or
declined. For more information about these sales arrangements,
consult your investment dealer or Putnam Investor Services. Sales
personnel may receive different compensation depending on which
class of shares they sell. Shares may only be exchanged for
shares of the same class of another Putnam fund. See "How to
exchange shares."
HOW TO BUY SHARES
You can open a fund account with as little as $500 and make
additional investments at any time with as little as $50. You
can buy fund shares three ways - through most investment dealers,
through Putnam Mutual Funds (at 1-800-225-1581), or through a
systematic investment plan. If you do not have a dealer, Putnam
Mutual Funds can refer you to one.
Buying shares through Putnam Mutual Funds. Complete an order
form and write a check for the amount you wish to invest, payable
to the fund. Return the completed form and check to Putnam
Mutual Funds, which will act as your agent in purchasing shares
through your designated investment dealer.
Buying shares through systematic investing. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking or savings account. Application forms
are available from your investment dealer or through Putnam
Investor Services.
<PAGE>
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.
Class A shares
The public offering price of class A shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, in its discretion, allocates the entire amount to
your investment dealer.
Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- -----------------------------------------------------------------
Under 50,000 6.10% 5.75% 5.00%
50,000 but under 100,000 4.71 4.50 3.75
100,000 but under 250,000 3.63 3.50 2.75
250,000 but under 500,000 2.56 2.50 2.00
500,000 but under 1,000,000 2.04 2.00 1.75
- -----------------------------------------------------------------
There is no initial sales charge on purchases of class A shares
of $1 million or more. However, a CDSC of 1.00% or 0.50%,
respectively, will be imposed on redemptions (other than
redemptions be certain participant-directed qualified retirement
plans, which are subject to a two year CDSC of 1.00%, as
described below) within the first or second year after
purchase .
There are also no initial sale charges on class A shares
purchased by participant-directed qualified retirement plans with
at least 200 eligible employees. A CDSC of 1.00% will, however,
be imposed upon the redemption of shares purchased at net asset
value by a participant-directed qualified retirement plan
(including a plan with at least 200 eligible employees) that
initially invested less than $20 million in Putnam funds and
other investment managed by Putnam Management or its affiliates
and that sells 90% or more of the amount initially invested
within two years after its initial purchase.
Any CDSC will be based on the lower of the shares' cost and
current net asset value. Any shares acquired by reinvestment of
distributions will be redeemed without a CDSC.
Shares purchased by certain investors investing $1 million or
more who have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission as described below
are not subject to the CDSC.
In determining whether a CDSC is payable, the fund will first
redeem shares not subject to any charge. Putnam Mutual Funds
receives the entire amount of any CDSC you pay. See the SAI for
more information about the CDSC.
Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of class A shares of $1
million or more based on an investor's cumulative purchases
during the one-year period beginning with the date of the initial
purchase at net asset value. Each subsequent one-year measuring
period for these purposes will begin with the first net asset
value purchase following the end of the prior period. Such
commissions are paid at the rate of 1.00% of the amount under $3
million, 0.50% of the next $47 million and 0.25% thereafter.
On sales at net asset value to a participant-directed qualified
retirement plan initially investing less than $20 million in
Putnam funds and other investments managed by Putnam Management
or its affiliates (including a plan with at least 200 eligible
employees), Putnam Mutual Funds pays commissions during each one-
year measuring period, determined as described above, at the rate
of 1.00% of the first $2 million, 0.80% of the next $1 million
and 0.50% thereafter. On sales at net asset value to all other
participant-directed qualified retirement plans, Putnam Mutual
Funds pays commissions on the initial investment and on
subsequent net quarterly sales at the rate of 0.15%.
Class B shares
Class B shares are sold without an initial sales charge, although
a CDSC will be imposed if you redeem shares within a specified
period after purchase, as shown in the table below. The
following types of shares may be redeemed without charge at any
time: (i) shares acquired by reinvestment of distributions and
(ii) shares otherwise exempt from the CDSC, as described in "How
to buy shares -- General" below. For other shares, the amount
of the charge is determined as a percentage of the lesser of the
current market value or the cost of the shares being redeemed.
Year 1 2 3 4 5 6 7+
- -------------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%
In determining whether a CDSC is payable on any redemption, the
fund will first redeem shares not subject to any charge, and then
shares held longest during the CDSC period. For this purpose,
the amount of any increase in a share's value above its initial
purchase price is not regarded as a share exempt from the CDSC.
Thus, when a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial
purchase price. For information on how sales charges are
calculated if you exchange your shares, see "How to exchange
shares." Putnam Mutual Funds receives the entire amount of any
CDSC you pay.
Class M shares
The public offering price of class M shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, at its discretion, allocates the entire amount to
your investment dealer.
Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- -----------------------------------------------------------------
Under 50,000 3.63% 3.50% 3.00%
50,000 but under 100,000 2.56 2.50 2.00
100,000 but under 250,000 1.52 1.50 1.00
250,000 but under 500,000 1.01 1.00 1.00
500,000 and above NONE NONE NONE
General
You may be eligible to buy class A shares and class M shares at
reduced sales charges.
Consult your investment dealer or Putnam Mutual Funds for details
about Putnam's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, employee
benefit plans, and other plans. Descriptions are also included
in the order form and in the SAI.
A participant-directed employee benefit plan participating in a
"multi-fund" program approved by Putnam Mutual Funds may include
amounts invested in other mutual funds participating in such
program for purposes of determining whether the plan may purchase
class A shares at net asset value. These investments will also
be included for purposes of the discount privileges and programs
described above.
Sales charges will not apply to class M shares purchased with
redemption proceeds received within the prior 90 days from non-
Putnam mutual funds on which the investor paid a front-end or a
contingent deferred sales charge or to class M shares purchased
by participant-directed qualified retirement plans with at least
50 eligible employees. The fund may also sell class M shares at
net asset value to members of qualified groups.
<PAGE>
The fund may sell class A, class B and class M shares at net
asset value without an initial sales charge or a CDSC to the
fund's current and retired Trustees (and their families), current
and retired employees (and their families) of Putnam Management
and affiliates, registered representatives and other employees
(and their families) of broker-dealers having sales agreements
with Putnam Mutual Funds, employees (and their families) of
financial institutions having sales agreements with Putnam Mutual
Funds (or otherwise having an arrangement with a broker-dealer or
financial institution with respect to sales of fund shares),
financial institution trust departments investing an aggregate of
$1 million or more in Putnam funds, clients of certain
administrators of tax-qualified plans, tax-qualified plans when
proceeds from repayments of loans to participants are invested
(or reinvested) in Putnam funds, "wrap accounts" for the benefit
of clients of broker-dealers, financial institutions or financial
planners adhering to certain standards established by Putnam
Mutual Funds, and investors meeting certain requirements who sold
shares of certain Putnam closed-end funds pursuant to a tender
offer by the closed-end fund.
In addition, the fund may sell shares at net asset value without
an initial sales charge or a CDSC in connection with the
acquisition by the fund of assets of an investment company or
personal holding company. The CDSC will be waived on redemptions
of shares arising out of the death or post-purchase disability of
a shareholder or settlor of a living trust account, and on
redemptions in connection with certain withdrawals from IRA or
other retirement plans. Up to 12% of the value of shares subject
to a systematic withdrawal plan may also be redeemed each year
without a CDSC. The SAI contains additional information about
purchasing the fund's shares at reduced sales charges.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of the fund at net asset value.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you
should pay for those shares with a certified check to avoid any
delay in redemption, exchange or transfer. Otherwise the fund
may delay payment until the purchase price of those shares has
been collected or, if you redeem by telephone, until 15 calendar
days after the purchase date. To eliminate the need for
safekeeping, the fund will not issue certificates for your shares
unless you request them.
<PAGE>
Putnam Mutual Funds will from time to time, at its expense,
provide additional promotional incentives or payments to dealers
that sell shares of the Putnam funds. These incentives or
payments may include payments for travel expenses, including
lodging, incurred in connection with trips taken by invited
registered representatives and their guests to locations within
and outside the United States for meetings or seminars of a
business nature. In some instances, these incentives or payments
may be offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares.
DISTRIBUTION PLANS
Class A distribution plan. The class A plan provides for
payments by the fund to Putnam Mutual Funds at the annual rate of
up to 0.35% of the fund's average net assets attributable to
class A shares, subject to the authority of the Trustees to
reduce the amount of payments or to suspend the class A plan for
such periods as they may determine.
Putnam Mutual Funds makes quarterly payments to qualifying
dealers (including, for this purpose, certain financial
institutions) to compensate them for services provided in
connection with sales of class A shares and the maintenance of
shareholder accounts. The payments are based on the average net
asset value of class A shares attributable to shareholders for
whom the dealers are designated as the dealer of record.
This calculation excludes until one year after purchase shares
purchased at net asset value, known as "NAV shares," by
shareholders investing $1 million or more. Also excluded until
one year after purchase are NAV shares purchased by participant-
directed qualified retirement plans with at least 200 eligible
employees. NAV shares are not subject to the one-year exclusion
provision in cases where certain shareholders who invested $1
million or more have made arrangements with Putnam Mutual Funds
and the dealer of record waived the sales commission.
Except as stated below, Putnam Mutual Funds makes the quarterly
payments at the annual rate of 0.25% of such average net asset
value for class A shares (including shares acquired through
reinvestment of distributions).
For participant-directed qualified retirement plans initially
investing less than $20 million in Putnam funds and other
investments managed by Putnam Management or its affiliates,
Putnam Mutual Funds' payments to qualifying dealers on NAV shares
are 100% of the rate stated above if average plan assets in
Putnam funds (excluding money market funds) during the quarter
are less than $20 million, 60% of the stated rate if average plan
assets are at least $20 million but under $30 million, and 40% of
the stated rate if average plan assets are $30 million or more.
For all other participant-directed qualified retirement plans
purchasing NAV shares, Putnam Mutual Funds makes quarterly
payments to qualifying dealers at the annual rate of 0.10% of the
average net asset value of such shares.
Class B and class M distribution plans. The class B and class M
plans provide for payments by the fund to Putnam Mutual Funds at
the annual rate of up to 1.00% of average net assets attributable
to class B shares and class M shares, as the case may be. The
Trustees currently limit payments under the class M plan to the
annual rate of 0.75% of such assets.
Although class B shares are sold without an initial sales charge,
Putnam Mutual Funds pays a sales commission equal to 4.00% of the
amount invested to dealers who sell class B shares. These
commissions are not paid on exchanges from other Putnam funds or
on sales to investors exempt from the CDSC.
The amount paid to dealers at the time of the sale of class M
shares is set forth above under "How to buy shares -- Class M
shares." In addition, to further compensate dealers (including
qualifying financial institutions) for services provided in
connection with sales of class B shares and class M shares and
the maintenance of shareholder accounts, Putnam Mutual Funds
makes quarterly payments to qualifying dealers.
The payments are based on the average net asset value of class B
shares and class M shares attributable to shareholders for whom
the dealers are designated as the dealer of record. Putnam
Mutual Funds makes the payments at an annual rate of 0.25% of
such average net asset value of class B shares and class M
shares, as the case may be.
Putnam Mutual Funds also pays to dealers, as additional
compensation with respect to the sale of class M shares, 0.40% of
such average net asset value of class M shares. For class M
shares, the total annual payment to dealers equals 0.65% of such
average net asset value.
General. Payments under the plans are intended to compensate
Putnam Mutual Funds for services provided and expenses incurred
by it as principal underwriter of fund shares, including the
payments to dealers mentioned above. Putnam Mutual Funds may
suspend or modify such payments to dealers.
The payments are also subject to the continuation of the relevant
distribution plan, the terms of service agreements between
dealers and Putnam Mutual Funds, and any applicable limits
imposed by the National Association of Securities Dealers, Inc.
HOW TO SELL SHARES
You can sell your shares to the fund any day the New York Stock
Exchange is open, either directly to the fund or through your
investment dealer. The fund will only redeem shares for which it
has received payment.
Selling shares directly to the fund. Send a signed letter of
instruction or stock power form to Putnam Investor Services,
along with any certificates that represent shares you want to
sell. The price you will receive is the next net asset value
calculated after the fund receives your request in proper form
less any applicable CDSC. In order to receive that day's net
asset value, Putnam Investor Services must receive your request
before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more,
the signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer or
certain other financial institutions. See the SAI for more
information about where to obtain a signature guarantee. Stock
power forms are available from your investment dealer, Putnam
Investor Services and many commercial banks.
If you want your redemption proceeds sent to an address other
than your address as it appears on Putnam's records, a signature
guarantee is required. Putnam Investor Services usually requires
additional documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
The fund generally sends you payment for your shares the business
day after your request is received. Under unusual circumstances,
the fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Putnam's Telephone Redemption Privilege to redeem
shares valued up to $100,000 from your account unless you have
notified Putnam Investor Services of an address change within the
preceding 15 days. Unless an investor indicates otherwise on the
account application, Putnam Investor Services will be authorized
to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide Putnam Investor
Services with his or her account registration and address as it
appears on Putnam Investor Services' records.
Putnam Investor Services will employ these and other reasonable
procedures to confirm that instructions communicated by telephone
are genuine; if it fails to employ reasonable procedures, Putnam
Investor Services may be liable for any losses due to unauthorized
or fraudulent instructions. For information, consult Putnam
Investor Services.
During periods of unusual market changes and shareholder
activity, you may experience delays in contacting Putnam Investor
Services by telephone. In this event, you may wish to submit a
written redemption request, as described above, or contact your
investment dealer, as described below. The Telephone Redemption
Privilege is not available if you were issued certificates for
shares that remain outstanding. The Telephone Redemption
Privilege may be modified or terminated without notice.
Selling shares through your investment dealer. Your dealer must
receive your request before the close of regular trading on the
New York Stock Exchange to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary
documentation to Putnam Investor Services, and may charge you for
its services.
HOW TO EXCHANGE SHARES
You can exchange your shares for shares of the same class of
certain other Putnam funds at net asset value beginning 15 days
after purchase. Not all Putnam funds offer all classes of
shares. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you
redeem the shares acquired through the exchange, the redemption
may be subject to the CDSC, depending upon when you originally
purchased the shares. The CDSC will be computed using the
schedule of any fund into or from which you have exchanged your
shares that would result in your paying the highest CDSC
applicable to your class of shares. For purposes of computing
the CDSC, the length of time you have owned your shares will be
measured from the date of original purchase and will not be
affected by any exchange.
To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services. The
form is available from Putnam Investor Services. For federal
income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss. A Telephone
Exchange Privilege is currently available for amounts up to
$500,000. Putnam Investor Services' procedures for telephonic
transactions are described above under "How to sell shares." The
Telephone Exchange Privilege is not available if you were issued
certificates for shares that remain outstanding. Ask your
investment dealer or Putnam Investor Services for prospectuses of
other Putnam funds. Shares of certain Putnam funds are not
available to residents of all states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where Putnam Management or the Trustees
believe doing so would be in the best interests of the fund, the
fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to
the extent required by law. Consult Putnam Investor Services
before requesting an exchange. See the SAI to find out more
about the exchange privilege.
HOW THE FUND VALUES ITS SHARES
The fund calculates the net asset value of a share of each class
by dividing the total value of its assets, less liabilities, by
the number of its shares outstanding. Shares are valued as of
the close of regular trading on the New York Stock Exchange each
day the Exchange is open.
Portfolio securities for which market quotations are readily
available are valued at market value. Short-term investments
that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities and assets
are valued at their fair value following procedures approved by
the Trustees.
HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION
The fund distributes any net investment income at least quarterly
and any net realized capital gains at least annually.
Distributions from capital gains are made after applying any
available capital loss carryovers.
You can choose from three distribution options:
- - Reinvest all distributions in additional shares without a
sales charge;
- - Receive distributions from net investment income in cash
while reinvesting net capital gains distributions in
additional shares without a sales charge; or
- - Receive all distributions in cash.
You can change your distribution option by notifying Putnam
Investor Services in writing. If you do not select an option
when you open your account, all distributions will be reinvested.
All distributions not paid in cash will be reinvested in shares
of the class on which the distributions are paid. You will
receive a statement confirming reinvestment of distributions in
additional shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs.
If a check representing a fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in the fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in the fund. Similarly, if
correspondence sent by the fund or Putnam Investor Services is
returned as "undeliverable," fund distributions will
automatically be reinvested in the fund or in another Putnam
fund.
The fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements necessary for it to be relieved of federal taxes on
income and gains it distributes to shareholders. The fund will
distribute substantially all of its ordinary income and capital
gain net income on a current basis.
All fund distributions will be taxable to you as ordinary income,
except that any distributions of net long-term capital gains will
be taxable as such, regardless of how long you have held the
shares. Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions.
Fund investments in foreign securities may be subject to
withholding taxes at the source on dividend or interest payments.
In that case, the fund's yield on those securities would be
decreased.
If at the end of the fund's fiscal year more than 50% of the
value of the fund's total assets represents securities of foreign
corporations, the fund intends to make an election permitted by
the Internal Revenue Code (the "Code") to treat any
foreign taxes it paid as paid by its shareholders. In this case,
shareholders who are U.S. citizens, U.S. corporations and, in
some cases, U.S. residents generally will be required to include
in U.S. taxable income their pro rata share of such taxes, but
may then generally be entitled to claim a foreign tax credit or
deduction (but not both) for their share of such taxes.
Fund transactions in foreign currencies and hedging activities
may give rise to ordinary income or loss to the extent such
income or loss results from fluctuations in value of the foreign
currency concerned. In addition, such activities will likely
produce a difference between book income and taxable income.
This difference may cause a portion of the fund's income
distributions to constitute a return of capital for tax purposes
or require the fund to make distributions exceeding book income
to qualify as a regulated investment company for tax purposes.
Investment in an entity that qualifies as a "passive
foreign investment company" under the Code could be subject the
fund to a U.S. federal income tax or other charge on certain
"excess distributions" with respect to the investment, and on the
proceeds from disposition of the investment.
Early in each year Putnam Investor Services will notify you of
the amount and tax status of distributions paid to you for the
preceding year.
The foregoing is a summary of certain federal income tax
consequences of investing in the fund. You should consult your
tax adviser to determine the precise effect of an investment in
the fund on your particular tax situation (including possible
liability for state and local taxes).
About Putnam Investments, Inc.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the principal underwriter of the fund and
of other Putnam funds. Putnam Fiduciary Trust Company is the
fund's custodian. Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, is the fund's investor servicing and
transfer agent.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., which is
wholly owned by Marsh & McLennan Companies, Inc., a publicly-
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.<PAGE>
Make the most of your Putnam privileges
As a Putnam mutual fund shareholder, you have access to a number
of services that can help you build a more effective and flexible
financial program. Here are some of the ways you can use these
privileges to make the most of your Putnam mutual fund
investment.
SYSTEMATIC INVESTMENT PLAN
Invest as much as you wish ($25 or more) on any business day of
the month except for the 29th, 30th, or 31st. The amount will be
automatically transferred from your checking or savings account.
SYSTEMATIC WITHDRAWAL
Make regular withdrawals of $50 or more monthly, quarterly, or
semiannually from an account valued at $10,000 or more. Your
automatic withdrawal may be made on any business day of the month
except for the 29th, 30th, or 31st.
SYSTEMATIC EXCHANGE
Transfer assets automatically from one Putnam account to another
on a regular, prearranged basis. There is no additional charge
for this service.
FREE EXCHANGE PRIVILEGE
Exchange money between Putnam funds in the same class of shares
without charge. The exchange privilege allows you to adjust your
investments as your objectives change. A signature guarantee is
required for exchanges of more than $500,000 and shares of all
Putnam funds may not be available to all investors.
DIVIDENDS PLUS
Diversify your portfolio by investing dividends and other
distributions from one Putnam fund automatically into another at
net asset value.
STATEMENT OF INTENTION
To reduce a front-end sales charge, you may agree to invest a
minimum dollar amount over 13 months. Depending on your fund,
the minimum is $25,000, $50,000, or $100,000. Whenever you make
an investment under this arrangement, you or your investment
advisor should notify Putnam that a Statement of Intention is in
effect.
<PAGE>
Investors may not maintain, within the same fund, simultaneous
plans for systematic investment or exchange and systematic
withdrawal or exchange. These privileges are subject to change
or termination.
For more information about any of these services and privileges,
call your investment advisor or a Putnam customer service
representative toll-free at 1-800-225-1581.<PAGE>
PUTNAM INTERNATIONAL GROWTH AND INCOME FUND
One Post Office Square
Boston, MA 02109
FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
PUTNAM INVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
<PAGE>
PUTNAM INTERNATIONAL GROWTH AND INCOME FUND
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
August 1, 1996
This SAI is not a prospectus and is only authorized for
distribution when accompanied or preceded by the prospectus of
the fund dated August 1, 1996, as revised from time to time.
This SAI contains information which may be useful to investors
but which is not included in the prospectus. If the fund has
more than one form of current prospectus, each reference to the
prospectus in this SAI shall include all of the fund's
prospectuses, unless otherwise noted. The SAI should be read
together with the applicable prospectus. Investors may obtain a
free copy of the applicable prospectus from Putnam Investor
Services, Mailing address: P.O. Box 41203, Providence, RI
02940-1203.
Part I of this SAI contains specific information about the fund.
Part II includes information about the fund and the other Putnam
funds.
<PAGE>
Table of Contents
Part I
SECURITIES RATINGS . . . . . . . . . . . . . . . . . . . . . . . . . . .I-3
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . .I-6
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . .I-8
ADDITIONAL OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . I-10
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . . . . I-10
Part II
MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-25
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . II-
30
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-40
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-42
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .II-54
INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-55
SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . II- 60
SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-61
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-61
STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . II- 61
COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-63
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . II- 67
<PAGE>
SAI
PART I
SECURITIES RATINGS
The following rating services describe rated securities as
follows:
Moody's Investors Service, Inc.
Bonds
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt-edged". Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
Aa -- Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high-grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than
the Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Caa -- Bonds which are rated Caa are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
Standard & Poor's
Bonds
AAA -- Debt rated 'AAA' has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA -- Debt rated 'AA' has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only
in small degree.
A -- Debt rated 'A' has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Debt rated 'BBB' is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB-B-CCC-CC-C -- Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is
regarded as having predominantly speculative characteristics with
respect to capacity to pay interest and repay principal. 'BB'
indicates the least degree of speculation and 'C' the highest.
While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.
BB -- Debt rated 'BB' has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The 'BB' rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied 'BBB-' rating.
B -- Debt rated 'B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The 'B' rating category is also
used for debt subordinated to senior debt that is assigned an
actual or implied 'BB' or 'BB-' rating.
CCC -- Debt rated 'CCC' has a currently identifiable
vulnerability to default, and is dependent upon favorable
business, financial, and economic conditions to meet timely
payment of interest and repayment of principal. In the event of
adverse business, financial, or economic conditions, it is not
likely to have the capacity to pay interest and repay principal.
The 'CCC' rating category is also used for debt subordinated to
senior debt that is assigned an actual or implied 'B' or 'B-'
rating.
CC -- The rating 'CC' typically is applied to debt subordinated
to senior debt that is assigned an actual or implied 'CCC'-
rating.
C -- The rating 'C' typically is applied to debt subordinated to
senior debt which is assigned an actual or implied 'CCC-' debt
rating. The 'C' rating may be used to cover a situation where
bankruptcy petition has been filed, but debt service payments are
continued.
<PAGE>
INVESTMENT RESTRICTIONS
As fundamental investment restrictions, which may not be changed
with respect to the fund without a vote of the majority of the
outstanding voting securities of the fund, the fund may not and
will not:
(1)Borrow money in excess of 10% of the value (taken at the lower of cost
or current value) of its total assets (not including the amount
borrowed) at the time the borrowing is made, and then only from
banks as a temporary measure to facilitate the meeting of
redemption requests (not for leverage) which might otherwise
require the untimely disposition of portfolio investments or for
extraordinary or emergency purposes. Such borrowings will be
repaid before any additional investments are purchased.
(2)Underwrite securities issued by other persons except to the extent that,
in connection with the disposition of its portfolio investments,
it may be deemed to be an underwriter under certain federal
securities laws.
(3)Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, 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 currency 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,
entering into repurchase agreements, or by lending of its
portfolio securities.
(6)With respect to 75% of its total assets, invest in the securities of any
issuer if, immediately after such investment, more than 5% of the
total assets of the fund (taken at current value) would be
invested in the securities of such issuer; provided that this
limitation does not apply to obligations issued or guaranteed as
to interest or principal by the U.S. government or its agencies
or instrumentalities.
(7)With respect to 75% of its total assets, acquire more than 10% of the
outstanding voting securities of any issuer.
(8)Purchase securities (other than securities of the U.S. government, its
agencies or instrumentalities) if, as a result of such purchase,
more than 25% of the fund's total assets would be invested in any
one industry.
(9)Issue any class of securities which is senior to the fund's shares of
beneficial interest, except for permitted borrowings.
It is contrary to the fund's present policy, which may be changed
without shareholder approval, to:
(1)Invest in (a) securities which at the time of such investment are not
readily marketable, (b) securities restricted as to resale
(excluding securities determined by the Trustees of the fund (or
the person designated by the Trustees of the fund to make such
determinations) to be readily marketable), and (c) repurchase
agreements maturing in more than seven days, if, as a result, more
than 15% of the fund's net assets (taken at current value) would
be invested in securities described in (a), (b) and (c) above.
(2)Invest in warrants (other than warrants acquired by the fund as a part of
a unit or attached to securities at the time of purchase) if, as a
result, such investments (valued at the lower of cost or market
value) would exceed 5% of the value of the fund's net assets;
provided that not more than 2% of the fund's net assets may be
invested in warrants not listed on the New York or American Stock
Exchange.
(3)Pledge, hypothecate, mortgage or otherwise encumber its assets in excess
of 33 1/3%
of its total assets (taken at cost) in connection with
permitted borrowings.
(4)Buy or sell oil, gas or other mineral leases, rights or royalty contracts,
although it may purchase securities which represent interests in,
are secured by interest in, or which are issued by issuers which
deal in, such leases, rights, or contracts, and it may acquire and
dispose of such leases, rights, or contracts acquired through the
exercise of its rights as a holder of debt obligations secured
thereby.
(5)Invest in securities of registered open-end investment companies, except
as they may be acquired as part of a merger or consolidation or
acquisition of assets or by purchases in the open market involving
only customary brokers' commissions.
(6)Make short sales of securities or maintain a short position for the account
of the fund unless at all times when a short position is open it
owns an equal amount of such securities or owns securities which,
without payment of any further consideration, are convertible into
or exchangeable for securities of the same issue as, and in equal
amount to, the securities sold short.
(7)Purchase or sell real property (including limited partnership interests),
except that the fund may (a) purchase or sell readily marketable
interests in real estate investment trusts or readily marketable
securities of companies which invest in real estate, (b) purchase
or sell securities that are secured by interests in real estate,
or (c) acquire real estate through exercise of its rights as
holder of obligations secured by real estate or interests therein
or sell real estate so acquired.
(8)Invest in the securities of any issuer, if, to the knowledge of the fund
and officers and Trustees of the fund and officers and directors
of Putnam Management who beneficially own more than 0.5% of the
securities of that issuer together own more than 5% of such
securities.
(9)Invest in securities of an issuer which, together with any predecessors,
controlling persons, general partners and guarantors, have a
record of less than three years' continuous business operation or
relevant business experience, if, as a result, the aggregate of
such investments would exceed 5% of the value of the fund's net
assets; provided, however, that this restriction shall not apply
to any obligations of the U.S. government or its instrumentalities
or agencies.
--------------------
All percentage limitations on investments (other than pursuant to
non-fundamental restriction (1)) will apply at the time of the
making of an investment and shall not be considered violated
unless an excess or deficiency occurs or exists immediately after
and as a result of such investment.
The Investment Company Act of 1940 provides that a "vote of a
majority of the outstanding voting securities" of the fund means
the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of the fund, or (2) 67% or more of the shares
present at a meeting if more than 50% of the outstanding shares of
the fund are represented at the meeting in person or by proxy.
CHARGES AND EXPENSES
Trustee fees
Each Trustee receives a fee for his or her services. Each Trustee
also receives fees for serving as Trustee of other Putnam funds.
The Trustees periodically review their fees to assure 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 Trustees meet monthly over a two-day period,
except in August. The Compensation Committee, which consists
solely of Trustees not affiliated with Putnam Management and is
responsible for recommending Trustee compensation, estimates that
Committee and Trustee meeting time together with the appropriate
preparation requires the equivalent of at least three business
days per Trustee meeting. The following table shows the year each
Trustee was first elected a Trustee of the Putnam funds, the
estimated fees to be paid to each Trustee by the fund for the
current fiscal year and the fees paid to each Trustee by all of
the Putnam funds during calendar year 1995:
COMPENSATION TABLE
Estimated Total
aggregate compensation
compensation from all
Trustees from the fund* Putnam funds**
- --------------------------------------------------------------
Jameson A. Baxter/1994 $581 $150,854
Hans H. Estin/1972 581 150,854
John A. Hill/1985*** 581 149,854
Ronald J. Jackson/1996**** 581 N/A
Elizabeth T. Kennan/1992 581 148,854
Lawrence J. Lasser/1992 581 150,854
Robert E. Patterson/1984 581 152,854
Donald S. Perkins/1982 581 150,854
William F. Pounds/1971 581 149,854
George Putnam/1957 581 150,854
George Putnam, III/1984 581 150,854
Eli Shapiro/1995***** 581 95,372
A.J.C. Smith/1986 581 149,854
W. Nicholas Thorndike/1992 581 152,854
* Reflects estimated amounts to be paid for the current
fiscal year. Includes an annual retainer and an attendance
fee for each meeting attended.
** Reflects total payments received from all Putnam funds in
the most recent calendar year. As of December 31, 1995,
there were 99 funds in the Putnam family.
*** Includes compensation deferred pursuant to a Trustee
Compensation Deferral Plan. The total amount of deferred
compensation payable to Mr. Hill by all Putnam funds as of
December 31, 1995 was $51,141, including income earned on
such amounts.
**** Elected as a Trustee in May 1996.
*****Elected as a Trustee in April 1995.
The Trustees have approved Retirement Guidelines for Trustees of
the Putnam funds. These Guidelines provide generally that a
Trustee who retires after reaching age 72 and who has at least 10
years of continuous service will be eligible to receive a
retirement benefit from each Putnam fund for which he or she
served as a Trustee. The amount and form of such benefit is
subject to determination annually by the Trustees and, unless
otherwise determined by the Trustees, will be an annual cash
benefit payable for life equal to one-half of the Trustee
retainer fees paid by each fund at the time of retirement.
Several retired Trustees are currently receiving benefits
pursuant to the Guidelines and it is anticipated that the current
Trustees will receive similar benefits upon their retirement. A
Trustee who retired in calendar 1995 and was eligible to receive
benefits under these Guidelines would have received an annual
benefit of $66,749, based upon the aggregate retainer fees paid
by the Putnam funds for such year. The Trustees reserve the
right to amend or terminate such Guidelines and the related
payments at any time, and may modify or waive the foregoing
eligibility requirements when deemed appropriate.
For additional information concerning the Trustees, see
"Management" in Part II of this SAI.
Share ownership
As of the date of this SAI, Putnam Investments, Inc. owned of
record and beneficially all of the shares of the fund. Putnam
Investments, Inc. is incorporated in Massachusetts, and its
parent corporation, Marsh & McLennan Companies, Inc., is
incorporated in Delaware. The address of Putnam Investments,
Inc. is One Post Office Square, Boston, MA 02109.
ADDITIONAL OFFICERS
In addition to the persons listed as officers of the fund in Part
II of this SAI, the following person is also a Vice President of
the fund and Vice President of certain of the Putnam funds.
Officers of Putnam Management hold the same offices in Putnam
Management's parent company, Putnam Investments, Inc.
Justin M. Scott. Managing Director of Putnam Management.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENT
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts
02110, are the fund's independent accountants, providing audit
services, tax return review and other tax consulting services and
assistance and consultation in connection with the review of
various Securities and Exchange Commission filings.
The following report of Independent Accountants and Statement of
Assets and Liabilities have been included in this SAI in reliance
upon the report of the Independent Accountants , given on
their authority as experts in auditing and accounting.
<PAGE>
Report of Independent Accountants
To the Shareholders and Trustees of the
Putnam International Growth and Income Fund
In our opinion, the accompanying statement of assets and
liabilities presents fairly, in all material respects, the
financial position of Putnam International Growth and Income Fund
(the "fund"), a series of Putnam Funds Trust, at July 2, 1996, in
conformity with generally accepted accounting principles. This
financial statement is the responsibility of the fund's
management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit
of this financial statement in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
July 3, 1996
<PAGE>
Statement of Assets and Liabilities
PUTNAM INTERNATIONAL GROWTH AND INCOME FUND
(A series of Putnam Funds Trust)
July 2, 1996
Assets:
Cash. . . . . . . . . . . . . . . . . . . . . . $100,000
Deferred organization expenses
(Note 1). . . . . . . . . . . . . . . . . . . . 64,834
-----------
Total assets. . . . . . . . . . . . . . . . . . . . 164,834
Liabilities:
Estimated organization expenses payable
(Note 1). . . . . . . . . . . . . . . . . . . . . . 64,834
---------
Commitments (Notes 1, 2 and 3)
Net assets applicable to 3,921.647 class A shares,
3,921.569 class B shares and 3,921.569 class M shares
outstanding . . . . . . . . . . . . . . . . . . $100,000
========
Computation of net asset value, redemption and
offering price per share:
Net asset value and redemption price per class A
share ($33,334 divided by 3,921.647 shares) . . . . . $8.50
=====
Offering price per class A share (100/94.25
of $8.50), reduced on sales of $50,000 or more
and in certain other circumstances -- see "HOW
TO BUY SHARES" . . . . . . . . . . . . . . . . . . $9.02
=====
Net asset value and offering price per class B
share ($33,333 divided by 3,921.569 shares)
(redemption price per share is equal to net asset
value less any applicable contingent deferred sales
charge) -- see "HOW TO BUY SHARES". . . . . . . . . . . $8.50
=====
Net asset value and redemption price per class M
share ($33,333 divided by 3,921.569 shares). . . . . $8.50
=====
Offering price per class M share (100/96.50
of $8.50), reduced on sales of $50,000 or more
and in certain other circumstances -- see "HOW
TO BUY SHARES" . . . . . . . . . . . . . . . . . . $8.81
=====
See Notes to Statement of Assets and Liabilities
Notes to Statement of Assets and Liabilities
Note 1. Organization
Putnam Funds Trust (the "Trust") was organized as a Massachusetts
business trust under an Agreement and Declaration of Trust, dated
January 22, 1996, and is registered under the Investment Company
Act of 1940, as amended, as an open-end, diversified, management
investment company, consisting of a series of investment
portfolios, each of which is represented by a separate series of
shares of beneficial interest. The Trust currently consists of
one series: Putnam International Growth and Income Fund (the
"fund"), and offers class A, class B and class M shares. The
Trust's Agreement and Declaration of Trust permits the issuance
of an unlimited number of shares. The Trust has had no
operations other than those relating to organizational matters
and the initial capital contribution of $100,000 to the fund.
The fund's outstanding shares are owned by Putnam Investments,
Inc. and Putnam Investments, Inc. Profit Sharing Retirement
Plan.
Upon the sale of its shares to the public, the fund will become
liable for registration fees payable to the Securities and
Exchange Commission and for not more than $125,000 of expenses in
connection with its organization and the initial public offering
of its shares. Putnam Investment Management, Inc. ("Putnam
Management"), a wholly owned subsidiary of Putnam Investments,
Inc., will pay any such expenses in excess of that amount and
will pay all such expenses in the event that the initial public
offering is withdrawn. At July 2, 1996, estimated deferred
organization expenses for the fund are $64,834 based upon
estimated registration, legal and accounting costs. The fund
will amortize such expenses borne by it over its first five years
of operation based upon projected net asset levels. Putnam
Investments, Inc. has agreed that if any of the initial shares of
the fund are redeemed during such amortization period by any
holder thereof, the redemption proceeds will be reduced by the
amount of the then unamortized organization expenses in the same
ratio as the number of shares redeemed bears to the number of
initial shares held at the time of redemption.
Note 2. Management Contract
The Trust has entered into a Management Contract with Putnam
Management. As compensation for the services rendered,
facilities furnished, and expenses borne by Putnam Management,
the fund will pay Putnam Management a fee, computed and paid
quarterly based on the average net assets of the fund for the
quarter. Such fee is based on the following annual rates:
0.80% of the first $500 million of the average net asset value of
the fund; 0.70% of the next $500 million; 0.65% of the next $500
million; 0.60% of the next $5 billion; 0.575% of the next $5
billion; 0.555% of the next $5 billion; 0.54% of the next $5
billion; and 0.53% of any excess thereafter.
Note 3. Distribution Plans
The Trust has adopted distribution plans (the "Plans") with
respect to its class A, class B and class M shares pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The purpose
of the Plans is to compensate Putnam Mutual Funds Corp., a
wholly-owned subsidiary of Putnam Investments, Inc., for services
provided and expenses incurred by it in distributing shares of
the fund. The Plans provide for payments by the fund to Putnam
Mutual Funds Corp. at an annual rate up to 0.35%, 1.00% and 1.00%
of the average net assets attributable to class A, class B and
class M shares, respectively. The Trustees have approved payment
by the fund at an annual rate of 0.25%, 1.00% and 0.75% of the
average net assets attributable to class A, class B and class M
shares, respectively.
<PAGE>
Differences between the typeset (printed) Class A, Class B and
Class M prospectus and the EDGAR filing version.
1. Pagination is different in printed prospectus.
2. Table of Contents is on Page 1 of printed prospectus.
3. Section headings and subheadings in the printed prospectus are
printed in boldface type with colored ink
4. The first page of the printed prospectus contains an
illustration of the balance scales, the Putnam logo.
5. Each page of printed text between Page 1 and the back cover
has a header identifying the major section of the Prospectus
(i.e. "About the Fund" or "About your investment") discussed
on that page.
