PUTNAM HIGH YIELD ADVANTAGE FUND PROSPECTUS ATTACHMENT
This prospectus explains what you should know before investing in
shares of Putnam High Yield Advantage Fund. Please read it
carefully and keep it for future reference.
EXPENSE SUMMARY
Expenses are one of several factors to consider when investing.
The following table summarizes your maximum transaction costs
from investing in class M shares of the Fund and expenses
incurred in respect of class M shares in the most recent fiscal
year. The example shows the cumulative expenses attributable to
a hypothetical $1,000 investment in class M shares over the
specified periods.
SHAREHOLDER TRANSACTION EXPENSES
Maximum sales charge imposed
on purchases (as a percentage of
offering price) 3.25%
Deferred sales charge None
ANNUAL FUND OPERATING EXPENSES
Management fees 0.65%
12b-1 fees 0.50%
Other expenses 0.20%
Total Fund operating expenses 1.35%
The table is provided to help you understand the expenses of
investing in class M shares of the Fund and of your share of the
operating expenses the Fund incurs. The expenses shown in the
table do not reflect the application of credits related to
expense offset arrangements that reduce certain Fund expenses.
The 12b-1 fee reflects the amount currently payable under the
Class M distribution plan.
EXAMPLE
An investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period.
One year $46
3 years $74
5 years $104
10 years $190
The example does not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the example to assume a 5% annual return, but
actual annual return varies. The 12b-1 fees borne by the class M
shares may cause long-term shareholders to pay more than the
economic equivalent of the maximum from-end sales charge
permitted by applicable regulation.
FINANCIAL HIGHLIGHTS
The following table presents per share financial information for
class M shares. This information has been audited and reported
on by the Fund's independent accountants. Financial statements
included in the Fund's annual report to shareholders for the 1995
fiscal year are presented in their entirety further on in this
prospectus. The Fund's annual report, which contains additional
information, is available without charge upon request.
For the period
December 1, 1994
(commencement
of operations to
November 30
1995
Class M
Net asset value, beginning
of period $9.05
Investment operations
Net investment income .99
Net realized and unrealized gain
(loss) on investments .45
Total from investment operations 1.44
Less distributions:
From net investment income (.98)
In excess of net investment income(a) --
From net realized gain on investments --
Paid in capital (a) --
Total distributions (.98)
Net asset value, end of period $9.51
Total investment return at
net asset value (%) (b) 16.72
Net assets, end of period
(in thousands) $20,077
Ratio of expenses to average
net assets (%)1.02(c) 1.35
Ratio of net investment income
to average net assets (%) 10.06
Portfolio turnover (%)(c) 89.96
(a) See Note 1 to Financial Statements.
(b) Total investment return assumes dividend reinvestment and
does not reflect the effect of sales charges.
(c) Not Annualized.
[Translation]
SECURITIES REGISTRATION STATEMENT
(including an amendment filed on September 10, 1996)
PUTNAM HIGH YIELD ADVANTAGE FUND
SECURITIES REGISTRATION STATEMENT
To: Minister of Finance
Filing Date of SRS:August 30, 1996
Filing Date of an amendment to SRS:September 10, 1996
Name of the Registrant Trust:PUTNAM HIGH YIELD ADVANTAGE FUND
Name and Official Title of Trustees:George Putnam
William F. Pounds
Jameson A. Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
Address of Principal Office:One Post Office Square
Boston, Massachusetts 02109
U. S. A.
Name and Title of Registration Agent:Harume Nakano
Attorney-at-Law
Signature [Harume Nakano]_
(Seal)
Ken Miura
Attorney-at-Law
Signature [Ken Miura]_____
(Seal)
Address or Place of BusinessSankyu Building
6-l4, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Name of Liaison Contact:Harume Nakano
Ken Miura
Attorneys-at-Law
Place of Liaison Contact:Hamada & Matsumoto
Sankyu Bldg.
6-l4, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Phone Number:03-3580-3377
- ii -
Public Offering or Sale for Registration
Name of the Fund Making Public PUTNAM HIGH YIELD
Offering or Sale of Foreign ADVANTAGE FUND
Investment Fund Securities:
Type and Aggregate Amount of Up to 50 million Class M Shares
Foreign Investment Fund Securities Up to the total amount
aggregating the
to be Publicly Offered or Sold:amounts calculated by
multiplying the respective net asset value per Class M
Share by the respective number of Class M Shares in respect
of 50 million Class M Shares
(The Maximum amount expected to be sold is 4.6675 billion U.S. dollars
(Yen50.5 billion).
Note 1:U.S.$ amount is translated into Japanese Yen at the
rate of U.S.$l.00=Yen107.95 the mean of the exchange rate
quotations by The Bank of Tokyo-Mitsubishi, Ltd. for buying
and selling spot dollars by telegraphic transfer against
yen on 31st July, 1996.
Note 2:The maximum amount expected to be sold is an amount
calculated by multiplying the net asset value per Class M
Share as of 31st July, 1996 (U.S.$9.35) by 50 million Class
M Shares for convenience.
Places where a copy of this Securities Registration
Statement is available for Public Inspection
Not applicable.
(Total number of pages of this Securities Registration Statement
in Japanese is
109 including front and back pages.)
C O N T E N T S
Japanese This
Original English
Translation
PART I.INFORMATION CONCERNING SECURITIES 11
PART II.INFORMATION CONCERNING ISSUER 34
I.DESCRIPTION OF THE FUND 34
l.GENERAL INFORMATION 34
2.INVESTMENT POLICY 89
3.MANAGEMENT STRUCTURE 1519
4.INFORMATION CONCERNING THE EXERCISE
OF RIGHTS BY SHAREHOLDERS, ETC. 2229
5.STATUS OF INVESTMENT FUND 2433
II.OUTLINE OF THE TRUST 2635
III.OUTLINE OF THE OTHER RELATED COMPANIES 5661
IV.FINANCIAL CONDITION OF THE FUND 5864
V.SUMMARY OF INFORMATION CONCERNING
FOREIGN INVESTMENT FUND SECURITIES 18367
VI.MISCELLANEOUS 18367
PART III.SPECIAL INFORMATION 18468
I.OUTLINE OF THE SYSTEM OF INVESTMENT
TRUSTS IN MASSACHUSETTS 18468
II.FINANCIAL CONDITIONS OF THE INVESTMENT
ADVISER AND MANAGEMENT COMPANY 19073
III.FORM OF FOREIGN INVESTMENT
FUND SECURITIES 21373
PART I.INFORMATION CONCERNING SECURITIES
1.NAME OF FUND:PUTNAM HIGH YIELD ADVANTAGE FUND
(hereinafter referred to as the "Fund")
2.NATURE OF FOREIGNThree classes of shares (Class
INVESTMENT FUND SECU-A shares, Class B shares and Class M
RITIES CERTIFICATES:Shares)
Registered share certificate without par value
In Japan, Class M Shares (hereinafter referred to as the
"Shares") are for public offering. No rating has been
acquired.
3.NUMBER OF SHARES TOUp to 50 million Shares
BE OFFERED FOR SALE
(IN JAPAN)
4.TOTAL AMOUNT OFUp to the total amount aggregating
OFFERING PRICE:the amounts calculated by multiplying the
respective net asset value per Share by the respective
number of Shares in respect of 50 million Shares
(The maximum amount expected to be sold is 4.6675 billion U.S.
dollars (Yen50.5 billion).
Note 1:The maximum amount expected to be sold is the
amount calculated, for convenience, by multiplying the
net asset value per Share as of 31st July, 1996 ($9.35)
by the number of Shares to be offered (50 million).
Note 2:Dollar amount is translated for convenience at
the rate of $1.00=Yen107.95 (the mean of the exchange
rate quotations by The Bank of Tokyo-Mitsubishi, Ltd.
for buying and selling spot dollars by telegraphic
transfer against yen on 31st July, 1996). The same
applies hereinafter.
Note 3:In this document, money amounts and percentages
have been rounded. Therefore, there are cases in which
the amount of the "total column" is not equal to the
aggregate amount. Also, translation into yen is made
simply by multiplying the corresponding amount by the
conversion rate specified and rounded up when
necessary. As a result, in this document, there are
cases in which Japanese yen figures for the same
information differ from each other.
5.ISSUE PRICE:The Net Asset Value per Share next
calculated on a Fund Business Day after the application
for purchase is received by the Fund.
Note:The "Business Day" means a day on which the New
York Stock Exchange is open for business.
6.SALES CHARGE:Sales charge (in Japan) is 3.25% of the
Subscription Amount
Note:3% consumption tax on the Sales charge will be
added.
7.MINIMUM AMOUNT ORThe minimum
amount for purchase of
NUMBER OF SHARESShares is 100
shares and in integral
FOR SUBSCRIPTION:multiples of 10
shares.
8.PERIOD OF SUBSCRIPTION:From:17th September, 1996
(Tuesday)
To:14th March, 1997 (Friday)
Provided that the subscription is handled only on a Fund
Business Day and a business day when securities companies
are open for business in Japan.
9.DEPOSIT FOR SUBSCRIPTION:None.
10.PLACE OF SUBSCRIPTION:KOKUSAI Securities Co., Ltd.
(hereinafter referred to as "KOKUSAI")
Tokyo-Sumitomo Twin Bldg. East, 27-1, Shinkawa 2-chome, Chuo-ku,
Tokyo
Note:The subscription is handled at the head office and
the branch offices in Japan of the above-mentioned
securities company.
11.DATE AND PLACEInvestors shall pay the Issue Price and
OF PAYMENT:Sales Charge to KOKUSAI within 4 business days in
Japan from the day when KOKUSAI confirms the execution of
the order (the "Trade Day") (see page 18).
The total issue price for each Application Day will be
12.OUTLINE OF UNDERWRITING, ETC.:
(A)KOKUSAI will enter into an agreement dated 6th
September, 1996 with Putnam Mutual Funds Corp. (hereinafter
referred to as the "Fund") in connection with the sale and
repurchase of the Shares in Japan, and undertake to make a
public offering of 50 million Shares.
(B)During the public offering period, KOKUSAI will execute
or forward the purchase orders and repurchase requests of
the Shares received directly or indirectly through other
Handling Securities Companies to the Fund.
(C)The Fund has appointed KOKUSAI as the Agent Securities
Company in Japan.
Note:"The Agent Securities Company" shall mean a
securities company which, under a contract made with a
foreign issuer of investment securities, makes public
the net asset value per Share and submits or forwards
the financial reports or other documents to the Japan
Securities Dealers Association ("JSDA") and other
handling securities companies (the "Handling Securities
Companies") rendering such other services.
13.MISCELLANEOUS:
(A)Method of Subscription:
Investors who subscribe to Shares shall submit to a
Handling Securities Company an Agreement Concerning the
Opening of a Foreign Securities Transactions Account
("Account Agreement") or, in case of investors who shall
not entrust the custody of Shares with a Handling
Securities Company shall submit to it an Agreement
Concerning Foreign Securities Transactions ("Transactions
Agreement"). The subscription amount shall be paid in yen
in principle and the yen exchange rate shall be the forward
cable exchange rate in Tokyo on the Trade Day fixed on each
Payment Date.
The subscription amount shall be paid in dollars to the
account of the Fund with Putnam Fiduciary Trust Company as
transfer agent for the Fund by Kokusai on the Payment Date.
(B)Offerings other than in Japan:
Shares are simultaneously offered in the United States of
America.
PART II.INFORMATION CONCERNING ISSUER
I.DESCRIPTION OF THE FUND
1.GENERAL INFORMATION
(A)Outline of Laws Regulating the Fund in the Jurisdiction Where
Established:
(1)Name of the Fund:Putnam High Yield Advantage Fund (the
"Fund")
(2)Form of the Fund
Putnam High Yield Advantage Fund is a Massachusetts
business trust organized on January 13, 1986. 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. Prior to April 1,
1992 the Fund was known as Putnam High Yield Trust II.
The Fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. Shares of the Fund may be divided
without shareholder approval into two or more series of
shares representing separate investment portfolios.
Any such series of shares may be divided without
shareholder approval into two or more classes of shares
having such preferences and special or relative rights and
privileges as the Trustees determine. The Fund's shares
are not currently divided into any series, but are divided
into three classes. Only the Fund's class A, B and M
shares are currently offered. 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.
Each share has one vote, with fractional shares voting
proportionally. Shares of each class will vote together as
a single class except when otherwise required by law or as
determined by the Trustees. Shares are freely
transferable, are entitled to dividends as declared by the
Trustees, and, if the Fund were liquidated, would receive
the net assets of the Fund. The Fund may suspend the sale
of shares at any time and may refuse any order to purchase
shares. Although the Fund is not required to hold annual
meetings of its shareholders, shareholders holding at least
10% of the outstanding shares entitled to vote have the
right to call a meeting to elect or remove Trustees, or to
take other actions as provided in the Agreement and
Declaration of Trust.
If shareholders own fewer shares than a minimum amount set
by the Trustees (presently 20 shares), the Fund may choose
to redeem shareholders' shares. Shareholders will receive
at least 30 days' written notice before the Fund redeems
shareholders' shares, and shareholders may purchase
additional shares at any time to avoid a redemption. The
Fund may also redeem shares if shareholders 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.
(3)Governing Laws
The Fund was created under, and is subject to, the laws of
the Commonwealth of Massachusetts. The sale of the Fund's
share is subject to, among other things, the Securities Act
of 1933, as amended, and certain state securities laws.
The Fund also attempts to qualify each year and elect to
be taxed as a regulated investment company under the United
States Internal Revenue Code of 1986, as amended.
The following is a broad outline of certain of the
principal statutes regulating the operations of the Fund in
the U.S.:
a.Massachusetts General Laws, Chapter 182 - Voluntary
Associations and Certain Trusts
Chapter 182 provides in part as follows:
A copy of the declaration of trust must be filed with
the Secretary of State of the Commonwealth of
Massachusetts and with the Clerk of the City of Boston.
Any amendment of the declaration of trust must be filed
with the Secretary and the Clerk within thirty days
after the adoption of such amendment.
A trust must annually file with the Secretary of State
on or before June 1 a report providing the name of the
trust, its address, number of shares outstanding and
the names and addresses of its trustees.
Penalties may be assessed against the trust for failure
to comply with certain of the provisions of Chapter
182.
b.Investment Company Act of 1940
The Investment Company Act of 1940, as amended (the
"1940 Act"), in general, requires investment companies
to register as such with the U.S. Securities and
Exchange Commission (the "SEC"), and to comply with a
number of substantive regulations of their operations.
The 1940 Act requires an investment company, among
other things, to provide periodic reports to its
shareholders.
c.Securities Act of 1933
The Securities Act of 1933, as amended (the "1933
Act"), regulates many sales of securities. The Act,
among other things, imposes various registration
requirements upon sellers of securities and provides
for various liabilities for failures to comply with its
provisions or in respect of other specified matters.
d.Securities Exchange Act of 1934
The Securities Exchange Act of 1934, as amended (the
"1934 Act"), regulates a variety of matters involving,
among other things, the secondary trading of
securities, periodic reporting by the issuers of
securities, and certain of the activities of transfer
agents and brokers and dealers.
e.The Internal Revenue Code
The Fund intends to qualify as a "regulated investment
company" for federal income tax purposes and to meet
all other requirements that are necessary for it to be
relieved of federal taxes on income and gains it
distributes to shareholders.
f.Other laws
The Fund is subject to the provisions of other laws,
rules, and regulations applicable to the Fund or its
operations, such as, for example, various state laws
regarding the sale of the Fund's shares.
(B)Outline of the Supervisory Authorities
Among the regulatory authorities having jurisdiction
over the Fund or certain of its operations are the SEC
and state regulatory agencies or authorities.
a.The SEC has broad authority to oversee the
application and enforcement of the federal securities
laws, including the 1940 Act, the 1933 Act, and the
1934 Act, among others, to the Fund. The 1940 Act
provides the SEC broad authority to inspect the records
of investment companies, to exempt investment companies
or certain practices from the provisions of the Act,
and otherwise to enforce the provisions of the Act.
b.State authorities typically have broad authority to
regulate the offering and sale of securities to their
residents or within their jurisdictions and the
activities of brokers, dealers, or other persons
directly or indirectly engaged in related activities.
(C)Objects and Basic Nature of the Fund:
The Fund seeks high current income. Capital growth is
a secondary objective when consistent with the objective
of high current income. The Fund is not intended to be
a complete investment program, and there is no
assurance it will achieve its objectives.
(D)History of the Fund:
January 13, 1986:Organization of the Fund as a
Massachusetts business trust. Adoption of the
Agreement and Declaration of Trust.
April, 1, 1992:Change of the
Fund's name.
May 5, 1994:Adoption of the Amended and Restated
Agreement and Declaration of Trust.
(E)Affiliated Companies of the Fund:
Names and related business of the affiliated companies
of the Fund are as follows:
(1)Putnam Investment Management, Inc. ("Investment
Management Company") renders investment management
services to the Fund.
(2)Putnam Fiduciary Trust Company (the "Custodian" and
"Investor Servicing Agent") acts as Custodian and
Investor Servicing Agent.
(3)Putnam Mutual Funds Corp. ("Distributor") engages in
providing marketing services to the Fund.
(4)KOKUSAI Securities Co., Ltd. ("Distributor in Japan" and
"Agent Securities Company") engages in forwarding the
purchase or repurchase orders for the Shares in Japan
and also acts as the agent securities company.
2.INVESTMENT POLICY
(A)Basic Policy for Investment and Objects of Investment:
The Fund seeks high current income. Capital growth is a
secondary objective when consistent with the objective of
high current income. The Fund is not intended to be a
complete investment program, and there is no assurance it
will achieve its objectives.
Basic investment strategy
The Fund seeks high current income by investing primarily
in high-yielding, lower-rated fixed-income securities,
constituting a diversified portfolio which Putnam
Investment Management, Inc., the Fund's investment
management company (the "Investment Management Company "),
believes does not involve undue risk to income or
principal. Normally, at least 80% of the Fund's assets
will be invested in debt securities, convertible securities
or preferred stocks that are consistent with its primary
investment objective of high current income. The Fund's
remaining assets may be held in cash or money market
instruments, or invested in common stocks and other equity
securities when these types of investments are consistent
with the objective of high current income.
The Fund seeks its secondary objective of capital growth,
when consistent with its primary objective of high current
income, by investing in securities which may be expected to
appreciate in value as a result of declines in long-term
interest rates or favorable developments affecting the
business or prospects of the issuer which may improve the
issuer's financial condition and credit rating. Investment
Management Company believes that such opportunities for
capital appreciation often exist in the securities of
smaller capitalization companies. Although these smaller
companies may present greater opportunities for capital
appreciation, they may also include greater risks than
larger, more established issuers.
Differing yields on fixed-income securities of the same
maturity are a function of several factors, including the
relative financial strength of the issuers of such
securities. Higher yields are generally available from
securities in the lower rating categories of recognized
rating agencies: Baa or lower by Moody's Investors Service,
Inc. ("Moody's") or BBB or lower by Standard & Poor's
("S&P"). Securities rated below Baa or BBB are considered
to be of poor standing and predominantly speculative. The
Fund may invest up to 15% of its assets in securities rated
below Caa by Moody's or CCC by S&P, including securities in
the lowest rating category of each rating agency, or in
unrated securities that Investment Management Company
determines are of comparable quality. Such securities may
be in default and are generally regarded by the rating
agencies as having extremely poor prospects of ever
attaining any real investment standing.
Securities ratings are based largely on the issuer's
historical financial condition and the rating agencies'
investment analysis at the time of rating. Consequently,
the rating assigned to any particular security is not
necessarily a reflection of the issuer's current financial
condition, which may be better or worse than the rating
would indicate. Although Investment Management Company
considers securities ratings when making investment
decisions, it performs its own investment analysis and does
not rely principally on the ratings assigned by the rating
services. Investment Management Company's analysis may
include consideration of the issuer's experience and
managerial strength, changing financial condition,
borrowing requirements or debt maturity schedules, and its
responsiveness to changes in business conditions and
interest rates. It also considers relative values based on
anticipated cash flow, interest or dividend coverage, asset
coverage and earnings prospects. Because of the greater
number of investment considerations involved in investing
in lower-rated securities, the achievement of the Fund's
objectives depends more on Investment Management Company's
analytical abilities than would be the case if the Fund
were investing primarily in securities in the higher rating
categories.
The Fund may invest in participations and assignments of
fixed and floating rate loans made by financial
institutions to governmental or corporate borrowers. In
addition to other risks associated with investments in debt
securities, participations and assignments involve the
additional risk that the institution's insolvency could
delay or prevent the flow of payments on the underlying
loan to the Fund. The Fund may have limited rights to
enforce the terms of the underlying loan, and the liquidity
of loan participations and assignments may be limited.
At times Investment Management Company may judge that
conditions in the securities markets make pursuing the
Fund's basic investment strategy inconsistent with the best
interests of its shareholders. At such times Investment
Management Company 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
increase the portion of its assets invested in money market
instruments and may invest in higher-rated fixed-income
securities, or other securities Investment Management
Company considers consistent with such defensive
strategies. The yield on these securities would generally
be lower than the yield on lower-rated fixed income
securities. It is impossible to predict when, or for how
long, the Fund will use these alternative strategies.
Non-U.S. Investments
The Fund may invest up to 20% of its assets in securities
principally traded in non-U.S. markets. The Fund may also
purchase Eurodollar certificates of deposit without regard
to the 20% limit. Since non-U.S. securities are normally
denominated and traded in non-U.S. currencies, the values
of the Fund assets may be affected favorably or unfavorably
by currency exchange rates and exchange control
regulations. There may be less information publicly
available about a non-U.S. company than about a U.S.
company, and non-U.S. companies are not generally subject
to accounting, auditing, and financial reporting standards
and practices comparable with those in the United States.
The securities of some non-U.S. companies are less liquid
and at times more volatile than securities of comparable
U.S. companies. Non-U.S. brokerage commissions and other
fees are also generally higher than those in the United
States. Non-U.S. settlement procedures and trade
regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of
fund assets held abroad) and expenses not present in the
settlement of U.S. 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 that could affect
the value of investments in certain non-U.S. countries.
Legal remedies available to investors in certain non-U.S.
countries may be more limited than those available with
respect to investments in the United States or in other non-
U.S. countries. The laws of some non-U.S. countries may
limit investments in securities of certain issuers located
in those non-U.S. countries. Special tax considerations
apply to non-U.S. securities.
The risks described above are typically increased for
investments in securities principally traded in, or issued
by issuers located in, underdeveloped and developing
nations, which are sometimes referred to as "emerging
markets."
The Fund may buy or sell non-U.S. currencies, non-U.S.
currency forward contracts, non-U.S. currency futures
contracts and call options on non-U.S. currencies for
hedging purposes in connection with its non-U.S.
investments.
Investments in premium securities
At times, the Fund may invest in securities bearing coupon
rates higher than prevailing market rates. Such "premium"
securities are typically purchased at prices greater then
the principal amounts payable on maturity.
The Fund does not amortize the premium paid for these
securities in calculating its net investment income. As a
result, the purchase of premium securities provides the
Fund a higher level of investment income distributable to
shareholders on a current basis than if the Fund purchased
securities bearing current market rates of interest.
Because the value of premium securities tends to approach
the principal amount as they approach maturity (or call
price in the case of securities approaching their first
call date), the purchase of such securities may increase
the Fund's risk of capital loss if such securities are held
to maturity (or first call date).
During a period of declining interest rates, many of the
Fund's portfolio investments will likely bear coupon rates
that are higher than the current market rates, regardless
of whether the securities were originally purchased at a
premium. These securities would generally carry premium
market values that would be reflected in the net asset
value of the Fund's shares. As a result, an investor who
purchases shares of the Fund during such periods would
initially receive higher taxable monthly distributions
(derived from the higher coupon rates payable on the Fund's
investments) than might be available from alternative
investments bearing current market interest rates, but the
investor may face an increased risk of capital loss as
these higher coupon securities approach maturity (or first
call date). In evaluating the potential performance of an
investment in the Fund, investors may find it useful to
compare the Fund's current dividend rate with the Fund's
"yield," which is computed on a yield-to-maturity basis in
accordance with SEC regulations and which reflects
amortization of market premiums.
Illiquid securities
The Fund may invest up to 10% of its assets in illiquid
securities. Investment Management Company believes that
opportunities to earn high yields may exist from time to
time in securities which are illiquid and which may be
considered speculative. The sale of these securities is
usually restricted under federal securities laws. As a
result of illliquidity, the Fund may not be able to sell
these securities when Investment Management Company
considers it desirable to do so or may have to sell them at
less than fair market value.
Options and futures portfolio strategies
The Fund may engage in a variety of transactions involving
the use of options and futures contracts. The Fund may
purchase and sell futures contracts in order to hedge
against changes in the values of securities the Fund owns
or expects to purchase or to hedge against interest rate
changes. For example, if Investment Management Company
expected interest rates to increase, the Fund might sell
futures contracts on U.S. Government Securities. If rates
were to increase, the value of U.S. Government Securities
held by the Fund would decline, but this decline would be
offset in whole or in part by an increase in the value of
the Fund's positions in its futures contracts. The Fund
may also purchase and sell call and put options on futures
contracts or on securities the Fund owns or expects to
purchase in addition to or as an alternative to purchasing
and selling futures contracts. To the extent permitted by
applicable law, the Fund may engage in futures and options
transactions for purposes other than hedging, such as to
earn additional income. The Fund may also buy and sell
combinations of put and call options on the same underlying
security to earn additional income. The Fund will not
purchase put and call options with respect to such
securities if as a result more than 5% of its assets would
at the time be invested in such options.
Options and futures transactions involve costs and may
result in losses. The effective use of options and futures
strategies depends on the Fund's ability to terminate
options and futures positions at times when Investment
Management Company deems it desirable to do so. Although
the Fund will enter into an option or futures contract
position only if Investment Management Company believes
that a liquid secondary market exists for such option or
futures contract, there is no assurance that the Fund will
be able to effect closing transactions at any particular
time or at an acceptable price. Options on certain
securities are traded in significant volume on securities
exchanges. However, other options which the Fund may
purchase or sell are traded in the "over-the-counter"
market rather than on an exchange. This means that the
Fund will enter into such option contracts with particular
securities dealers who make markets in these options. The
Fund's ability to terminate options positions 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 might
fail to meet their obligations to the Fund.
The use of options and futures strategies also involves the
risk of imperfect correlation among movements in the values
of the securities underlying the futures and options
purchased and sold by the Fund, of the option and futures
contract itself, and of the securities which are the
subject of a hedge. The successful use of these strategies
further depends on the ability of Investment Management
Company to forecast interest rates and market movements
correctly. The use of futures and options transactions for
purposes other than hedging entails greater risks.
The Fund's ability to engage in options and futures
transactions and to sell related securities may be limited
by tax considerations and by certain regulatory
requirements.
Other investment practices.
The Fund may also engage to a limited extent in the
following investment practices, each of which involves
certain special risks.
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.
Derivatives
Certain of the instruments in which the Fund will invest,
such as options, futures contracts and forward contracts
are considered to be "derivatives." Derivatives are
financial instruments whose value depends upon, or is
derived from, the value of an underlying asset, such as a
security or foreign currency.
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 mark-ups
and other transaction costs on the sale of securities and
reinvestment in other securities. Such transactions may
result in realization of taxable capital gains.
(B)Restrictions of Investment:
As fundamental investment restrictions, which may not be
changed without a vote of a majority of the outstanding
voting securities, the Fund may not and will not:
(1)Borrow money in excess of 10% of the value (taken at the
lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is
made, and then only from banks as a temporary measure to
facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely
disposition of portfolio investments or for extraordinary
or emergency purposes. Such borrowings will be repaid
before any additional investments are purchased.
(2)Pledge, hypothecate, mortgage or otherwise encumber its
assets in excess of 15% of its total assets (taken at
current value) and then only to secure borrowings permitted
by restriction 1 above. Collateral arrangements with
respect to margin for futures contracts and options are not
deemed to be pledges or other encumbrances for purposes of
this restriction.
(3)Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases
and sales of securities, and except that it may make margin
payments in connection with transactions in futures
contracts and options.
(4)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 equal
in amount to, the securities sold short.
(5)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 federal securities laws.
(6)Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities
which are secured by interests in real estate and
securities representing interests in real estate.
(7)Purchase or sell commodities or commodity contracts,
except that it may purchase and sell financial futures
contracts and related options.
(8)Make loans, except by purchase of debt obligations in
which the Fund may invest consistent with its investment
policies, by entering into repurchase agreements with
respect to not more than 25% of its total assets (taken at
current value), or through the lending of its portfolio
securities with respect to not more than 25% of its total
assets.
(9)Invest in securities of any issuer if, to the knowledge
of the Fund, officers and Trustees of the Fund and officers
and directors of Investment Management Company who
beneficially own more than 0.5% of the securities of that
issuer together own more than 5%.
(10)Invest in securities of any issuer if, immediately
after such investment, more than 5% of the total assets of
the Fund (taken at current value) would be invested in the
securities of such issuer, provided that this limitation
does not apply to obligations issued or guaranteed as to
interest and principal by the U.S. government or its
agencies or instrumentalities.
(11)Acquire more than 10% of the voting securities of any
issuer.
(12)Invest more than 25% of the value of its total assets
in any one industry.
(13)Purchase securities restricted as to resale if, as a
result, such investments would exceed 15% of the value of
the Fund's net assets, excluding restricted securities that
have been determined by the Trustees of the Fund (or the
person designated by them to make such determinations) to
be readily marketable.
(14)Buy or sell oil, gas or other mineral leases, rights or
royalty contracts.
(15)Make investments for the purpose of gaining control of
a company's management.
(16)Issue any class of securities which is senior to the
Fund's shares of beneficial interest.
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 15% of the
Fund's net assets (taken at current value) would then be
invested in securities described in (a), (b) and (c) above.
(2)Invest in warrants (other than warrants acquired by the
Fund as part of a unit or attached to securities at the
time of purchase).
(3)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 obligation of the U.S. government or its
instrumentalities or agencies.
(4)Invest in the securities of other registered open-end
investment companies, except as they may be acquired as
part of a merger, consolidation or acquisition of assets.
The Fund will, so long as shares of the Fund are being
offered for sale by the Fund in Japan, comply with the
following standards of selection Japan Securities Dealers
Association.
1.The Fund may not acquire more than 15% of the voting
securities of any issuer together with other mutual funds
managed by Putnam Investment Management, Inc.;
2.The Fund may not invest in the securities of other
registered open-end investment funds or companies, except
as they may be acquired as part of a merger, consolidation
or acquisition of assets;
3.The Fund may not invest more than 10% of the net assets
of the Fund in securities which are not traded on an
official stock exchange or other regulated market,
operating regularly and being recognized and open to the
public (which shall include, without limitation, the
National Association of Securities Dealers Quotation
System). This restriction shall not be applicable to bonds
determined by Putnam Investment Management, Inc. to be
liquid and for which a market price (including a dealer
quotation) is generally obtainable or determinable;
If any violation of the foregoing three standards occurs,
the Fund will, promptly after discovery of the violation,
take such action as may be necessary to cause the violation
to cease, which shall be the only obligation of the Fund
and the only remedy in respect of the violation.
Although certain of the Fund's fundamental investment
restrictions permit the Fund to borrow money to a limited
extent, the fund does not currently intend to do so and did
not do so last year. The Fund has undertaken to a state
securities authority (i) that it will engage in futures
contracts or options transactions only to the extent that
the aggregate premiums paid for all uncovered options
written by others do not exceed 2.0% of the net assets of
the Fund and (ii) that it will not accept payment for
shares in securities in which it does not already maintain
a position if to accept such securities would be for the
purpose of resale.
The Fund has also undertaken to a state securities
authority that the Fund will not 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 interests therein, or (c)
acquire real estate through exercise of its rights as a
holder of obligations secured by real estate or interests
therein or sell real estate so acquired.
The Fund may invest without limitation in "premium
securities" as referred to in 2.(A) above.
All percentage limitations on investments will apply at the
time of the making of an investment and shall not be
considered violated unless an excess or deficiency occurs
or exists immediately after and as a result of such
investment.
The 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 are represented at the meeting in
person or by proxy.
(C)Risk Factors
The values of fixed-income securities fluctuate in response
to changes in interest rates. A decrease in interest rates
will generally result in an increase in the value of the
Fund's assets. Conversely, during periods of rising
interest rates, the value of the Fund's assets will
generally decline. The magnitude of these fluctuations
generally is greater for securities with longer maturities.
However, the yields on such securities are also generally
higher. In addition, the values of fixed-income securities
are affected by changes in general economic conditions and
business conditions affecting the specific industries of
their issuers.
Changes by recognized rating services in their ratings of a
fixed-income security and changes in the ability of an
issuer to make payments of interest and principal may also
affect the value of these investments. Changes in the
value of portfolio securities generally will not affect
income derived from these securities, but will affect the
Fund's net asset value.
Investors should carefully consider their ability to assume
the risks of owning shares of a mutual fund that invests
primarily in lower-rated securities before making an
investment in the Fund.
The lower ratings of certain securities held by the Fund
reflect a greater possibility that adverse changes in the
financial condition of the issuer, or in general economic
conditions, or both, or an unanticipated rise in interest
rates, may impair the ability of the issuer to make
payments of interest and principal.
The inability (or perceived inability) of issuers to make
timely payments of interest and principal would likely make
the values of securities held by the Fund more volatile and
could limit the Fund's ability to sell its securities at
prices approximating the values the Fund had placed on such
securities. In the absence of a liquid trading market for
securities held by it, the Fund at times may be unable to
establish the fair value of such securities.
The rating assigned to a security by Moody's or S&P does
not reflect an assessment of the volatility of the
security's market value or of the liquidity of an
investment in the security.
The table below shows the percentages of the Fund assets
invested during fiscal 1995 in securities assigned to the
various rating categories by S&P, or, if unrated by S&P,
assigned to comparable rating categories by Moody's, and in
unrated securities determined by Investment Management
Company to be of comparable quality:
________________________________________________________________
_________
Rated securities,Unrated securities of
as percentage ofcomparable quality, as
Ratingnet assetspercentage of net assets
"AAA"1.29 %0 %
"AA"1.28 %0 %
"A"2.57 %0 %
"BBB"0.34 %4.43 %
"BB"16.53 %3.25 %
"B"51.45 %1.40 %
"CCC"6. 10 %0 %
_________________________________________________________________________
Total79.56 %9.08 %
The Fund will not necessarily dispose of a security when
its rating is reduced below its rating at the time of
purchase. However, Investment Management Company will
monitor the investment to determine whether continued
investment in the security will assist in meeting the
Fund's investment objectives.
Certain of the lower-rated securities in which the Fund
invests are issued to raise funds in connection with the
acquisition of a company in so-called "leveraged buy-out"
transactions. The highly leveraged capital structure of
such issuers may make them especially vulnerable to adverse
changes in economic conditions.
At times, a substantial portion of Fund assets may be
invested in securities as to which the Fund, by itself or
together with other funds and accounts managed by
Investment Management Company and its affiliates, holds all
or a major portion. Under adverse market or economic
conditions or in the event of adverse changes in the
financial condition of the issuer, the Fund could find it
more difficult to sell these securities when Investment
Management Company believes it advisable to do so or may be
able to sell the securities only at prices lower than if
they were more widely held. Under these circumstances, it
may also be more difficult to determine the fair value of
such securities for purposes of computing the Fund's net
asset value.
In order to enforce its rights in the event of a default of
these securities, the Fund may be required to participate
in various legal proceedings or take possession of and
manage assets securing the issuer's obligations on the
securities. This could increase the Fund's operating
expenses and adversely affect the Fund's net asset value.
Certain securities held by the Fund may permit the issuer
at its option to "call," or redeem, its securities. If an
issuer were to redeem securities held by the Fund during a
time of declining interest rates, the Fund may not be able
to reinvest the proceeds in securities providing the same
investment return as the securities redeemed.
The Fund at times may invest in so-called "zero-coupon"
bonds and "payment-in-kind" bonds. Zero-coupon bonds are
issued at a significant discount from their principal
amount and pay interest only at maturity rather than at
intervals during the life of the security. Payment-in-kind
bonds allow the issuer, at its option, to make current
interest payments on the bonds either in cash or in
additional bonds. The values of zero-coupon bonds and
payment-in-kind bonds are subject to greater fluctuation in
response to changes in market interest rates than bonds
that pay interest in cash currently. Both zero-coupon
bonds and payment-in-kind bonds allow an issuer to avoid
the need to generate cash to meet current interest
payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently.
Even though such bonds do not pay current interest in cash,
the Fund nonetheless is required to accrue interest income
on these investments and to distribute the interest income
at least annually to shareholders. Thus, the Fund could be
required at times to liquidate other investments in order
to satisfy its distribution requirements.
Certain investment grade securities in which the Fund may
invest share some of the risk factors discussed above with
respect to lower-rated securities.
(D)Distribution Policy:
The Fund distributes any net investment income at least
monthly and any net realized capital gains at least
annually. Distributions from capital gains are made after
applying any available capital loss carryovers. A capital
loss carryover is currently available. The Fund normally
pays a distribution to Japanese investors who hold shares
as at 15th day of each month at the end of each month,
provided, however, the distribution may be paid at the
beginning of next month.
3.MANAGEMENT STRUCTURE
(A)Outline of Management of Assets, etc.:
A.Valuation of assets:
The Fund determines the net asset value per share of each
class of shares once each day the New York Stock Exchange
(the "Exchange") is open. Currently, the Exchange is
closed Saturdays, Sundays and the following U.S. holidays:
New Year's Day, Presidents' Day, Good Friday, Memorial Day,
the Fourth of July, Labor Day, Thanksgiving and Christmas.
The Fund determines net asset value as of the close of
regular trading on the Exchange, currently 4:00 p.m.
However, equity options held by the Fund are priced as of
the close of trading at 4:10 p.m., and futures contracts on
U.S. government and other fixed-income securities and index
options held by the Fund are priced as of their close of
trading at 4:15 p.m.
Securities for which market quotations are readily
available are valued at prices which, in the opinion of
Investment Management Company, most nearly represent the
market values of such securities. Currently, such prices
are determined using the last reported sale price or, if no
sales are reported (as in the case of some securities
traded over-the-counter), the last reported bid price,
except that certain securities are valued at the mean
between the last reported bid and asked prices. Short-term
investments having remaining maturities of 60 days or less
are valued at amortized cost, which approximates market
value. All other securities and assets are valued at their
fair value procedures approved by the Trustees.
Liabilities are deducted from the total, and the resulting
amount is divided by the number of shares of the class
outstanding.
Reliable market quotations are not considered to be readily
available for long-term corporate bonds and notes, certain
preferred stocks, tax-exempt securities, and certain
foreign securities. These investments are valued at fair
value on the basis of valuations furnished by pricing
services, which determine valuations for normal,
institutional-size trading units of such securities using
methods based on market transactions for comparable
securities and various relationships between securities
which are generally recognized by institutional traders.
If any securities held by the Fund are restricted as to
resale, Investment Management Company determines their fair
value pursuant to procedures approved by the Trustees. The
fair value of such securities is generally determined as
the amount which the Fund could reasonably expect to
realize from an orderly disposition of such securities over
a reasonable period of time. The valuation procedures
applied in any specific instance are likely to vary from
case to case. However, consideration is generally given to
the financial position of the issuer and other fundamental
analytical data relating to the investment and to the
nature of the restrictions on disposition of the securities
(including any registration expenses that might be borne by
the Fund in connection with such disposition). In
addition, specific factors are also generally considered,
such as the cost of the investment, the market value of any
unrestricted securities of the same class, the size of the
holding, the prices of any recent transactions or offers
with respect to such securities and any available analysts'
reports regarding the issuer.
Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various
times prior to the close of the Exchange. The values of
these securities used in determining the net asset value of
the Fund's shares are computed as of such times. Also,
because of the amount of time required to collect and
process trading information as to large numbers of
securities issues, the values of certain securities (such
as convertible bonds, U.S. government securities, and
tax-exempt securities) are determined based on market
quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such securities
may occur between such times and the close of the Exchange
which will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then
these securities will be valued at their fair value
following procedures approved by the Trustees.
B.Management Fee, etc.:
(1)Management Fee:
(a)Management and Agent Securities Company Fees
Under a Management Contract dated May 6, 1994, the Fund
pays a quarterly fee to Investment Management Company
based on the average net assets of the Fund, as
determined at the close of each business day during the
quarter at an annual rate of 0.70% of the first $500
million of average net assets, 0.60% of the next $500
million, 0.55% of the next $500 million and 0.50% of
any amount over $1.5 billion.
For the fiscal year ending on November 30, 1995, the
Fund paid $6,014,802 as a management fee.
(b)Custodian Fee
The Custodian shall be entitled to receive, out of the
assets of the Fund reasonable compensation for its
services and expenses as Custodian, as agreed from time
to time between the Fund and the Custodian, not
including fees paid by the Custodian to any sub-
custodian, a monthly custodian fee based on the average
daily total net assets of the Fund during the relevant
month. Any reasonable disbursements and out-of-pocket
expenses (including without limitation telephone,
telex, cable and postage expenses) incurred by the
Custodian, and any custody charges of banks and
financial institutions to whom the custody of assets of
the Fund is entrusted, will be borne by the Fund.
(c)Charges of the Investor Servicing Agent
The Fund will pay to the Investor Servicing Agent such
fee, out of the assets of the Fund, as mutually agreed
upon in writing from time to time, in the amount, the
time and manner of payment.
For the fiscal year ending on November 30, 1995, the
Fund paid $1,405,209 as a custodian fee and investor
servicing agent fee.
(d)Fee on Class M Distribution Plan
The Class M distribution plan provides 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
M shares. The Trustees currently limit payments under
the Class M plan to the annual rate of 0.50% of such
assets.
Payments under the plans are intended to compensate
Putnam Mutual Funds Corp. for services provided and
expenses incurred by it as principal underwriter of
Fund shares, including the payments to dealers
mentioned above.
The payments are based on the average net asset value
of Class M shares attributable to shareholders for whom
Kokusai and other dealers are designated as the dealer
of record. Putnam Mutual Funds Corp. makes the
payments at an annual rate of 0.25% of such average net
asset value of Class M shares.
Putnam Mutual Funds Corp. also pays to Kokusai and
other dealers, as additional compensation with respect
to the sale of Class M shares, 0.15% of such average
net asset value of Class M shares. For Class M shares,
the total annual payment to Kokusai and other dealers
equals 0.40% of such average net asset value. Putnam
Mutual Funds Corp. makes quarterly payments to
qualifying dealers.
For the fiscal year ending on November 30, 1995, the
Fund paid the fees on the distribution plan of
$1,918,495, $1,413,289 and $48,204 for the Class A
Shares, Class B Shares and Class M shares,
respectively.
(e)Other Expenses:
The Fund pays all of its expenses not assumed by Putnam
Investment Management, Inc. with respect to its
management services. In addition to the investment
management and distribution plan fees discussed herein,
the principal expenses that the Fund is expected to pay
include, but are not limited to, fees and expenses of
certain of its Trustees; shareholder servicing agent
expenses; custodian expenses; fees of its independent
auditors and legal counsel; fees payable to government
agencies, including registration and qualification fees
attributable to the Fund and its shares under federal
and state securities laws; and certain extraordinary
expenses. In addition, each class will pay all of the
expenses attributable to it. The Fund also pays its
brokerage commissions, interest charges and taxes.
C.Sales, Repurchases and Custody:
(1)Sales of Shares:
a.Sales in the United States
Investors residing outside Japan can open a fund
account with as little as $500 and make additional
investments at any time with as little as $50. They
can buy fund shares three ways - through most
investment dealers, through Putnam Mutual Funds Corp.
or through a systematic investment plan.
Buying shares through Putnam Mutual Funds Corp.
Complete an order form and write a check for the amount
shareholders wish to invest, payable to the Fund.
Return the completed form and check to Putnam Mutual
Funds Corp., which will act as investor's agent in
purchasing shares through investor's designated
investment dealer.
Buying shares through systematic investing. Investors
can make regular investments of $25 or more per month
through automatic deductions from investor's bank
checking or savings account. Application forms are
available from investor's investment dealer or through
Investor Servicing Agent.
Shares are sold at the public offering price based on
the net asset value next determined after Investor
Servicing Agent receives shareholders' order. In most
cases, in order to receive that day's public offering
price, Investor Servicing Agent must receive
shareholders' order before the close of regular trading
on the New York Stock Exchange. If shareholders buy
shares through shareholders' investment dealer, the
dealer must receive shareholders' order before the
close of regular trading on the New York Stock Exchange
to receive that day's public offering price.
Class M Shares
The public offering price of class M shares is the net
asset value plus a sales charge that varies depending
on the size of investor's purchase. The Fund receives
the net asset value. The sales charge is allocated
between investor's investment dealer and Putnam Mutual
Funds Corp. as shown in the following table, except
when Putnam Mutual Funds Corp., and its discretion,
allocates the entire amount to investor's investment
dealer.
Sales charge asAmount of sales
a percentage of:charge reallowed
Netto dealers as a
Amount of transactionamountOfferingpercentage of
at offering price ($)investedpriceoffering price
Under 50,0003.36 %3.25 %3.00 %
50,000 but under 100,0002.30 %2.25 %2.00 %
100,000 but under 250,0001.52 %1.50 %1.25 %
250,000 but under 500,0001.01 %1.00 %1.00 %
500,000 and aboveNoneNoneNone
An investor may be eligible to buy class A shares and
class M shares at reduced sales charges.
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.
b.Sales in Japan
In Japan, Shares of the Fund are offered on any
Valuation Date during the Subscription Period mentioned
in "8. Period of Subscription, Part I Information
concerning Securities" of a securities registration
statement pursuant to the terms set forth in Part I.
Information concerning Securities of the relevant
securities registration statement. Investors shall
submit an Account Agreement or Transaction Agreement
(together with the Account Agreement referred to herein
as the "Agreements") to the Handling Securities
Companies. The purchase shall be made in the minimum
investment amount of 100 shares and in integral
multiples of 10 shares.
The issue price for Shares during the Subscription
period shall be, in principle, the Net Asset Value per
Share next calculated on the day on which the Fund has
received such application. The Trade Day in Japan is
the day when the Handling Securities Company confirms
the execution of the order (ordinarily the business day
in Japan next following the placement of orders), and
the payment and delivery shall be made on the fourth
Business Day after and including the Trade Day. Sales
charge shall be 3.25% of the amount of subscription all
of which may be retained by the selling dealer. 3%
consumption tax on the Sales charge will be added.
The investors having submitted the Account Agreement
will receive from the Handling Securities Company a
certificate of safekeeping in exchange for the purchase
price. In such case payment shall be made in yen in
principle and the exchange into dollars shall be made
at the forward cable exchange rate for the payment day
in Tokyo as of the Trade Day. The payment may be made
in dollars to the extent that the Handling Securities
Companies can agree.
In addition, Handling Securities Companies in Japan who
are members of the Japan Securities Dealers'
Association cannot continue sales of the Shares in
Japan when the net assets of the Fund are less than
Yen500,000,000 or the Shares otherwise cease to comply
with the "Standards of Selection of Foreign Investment
Fund Securities" established by the Association.
(2)Repurchase of Shares:
a.Repurchase in overseas markets
A shareholders can sell his shares to the Fund any day
the New York Stock Exchange is open, either directly to
the Fund or through his investment dealer. The Fund
will only redeem shares for which it has received
payment.
Selling shares directly to the Fund. A shareholder
must send a signed letter of instruction or stock power
form to Investor Servicing Agent, along with any
certificates that represent shares a shareholder wants
to sell. The price a shareholder will receive is the
next net asset value calculated after the Fund receives
a shareholder's request in proper form. In order to
receive that day's net asset value, Investor Servicing
Agent must receive a shareholder's request before the
close of regular trading on the New York Stock
Exchange.
If a shareholder sells 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.
If a shareholder wants his redemption proceeds sent to
an address other than his address as it appears on
records of the Investor Servicing Agent, a signature
guarantee is required. Investor Servicing Agent
usually requires additional documentation for the sale
of shares by a corporation, partnership, agent or
fiduciary, or a surviving joint owner.
The Fund generally sends shareholders payment for
shareholders' shares the business day after
shareholders' request is received. Under unusual
circumstances, the Fund may suspend repurchase, or
postpone payment for more than seven days, as permitted
by federal securities law.
A shareholder may use Investor Servicing Agent's
Telephone Redemption Privilege to redeem shares valued
up to $100,000 from his account unless he has notified
Investor Servicing Agent of an address change within
the preceding 15 days. Unless an investor indicates
otherwise on the account application, Investor
Servicing Agent will be authorized to act upon
redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to
act as his representative, who can provide Investor
Servicing Agent with his account registration and
address as it appears on Investor Servicing Agent's
records.
Investor Servicing Agent will employ these and other
reasonable procedures to confirm that instructions
communicated by telephone are genuine; if it fails to
employ reasonable procedures, Investor Servicing Agent
may be liable for any losses due to unauthorized or
fraudulent instructions.
During periods of unusual market changes and
shareholder activity, a shareholder may experience
delays in contacting Investor Servicing Agent by
telephone. In this event, the shareholder may wish to
submit a written redemption request, as described
above, or contact shareholders' investment dealer, as
described below. The Telephone Redemption Privilege is
not available if the shareholder was issued
certificates for shares that remain outstanding. The
Telephone Redemption Privilege may be modified or
terminated without notice.
Selling shares through investment dealers. A
shareholder's dealer must receive shareholders' request
before the close of regular trading on the New York
Stock Exchange to receive that day's net asset value.
A shareholder's dealer will be responsible for
furnishing all necessary documentation to Investor
Servicing Agent, and may charge a shareholder for its
services.
b.Repurchase in Japan
Shareholders in Japan may at any time request
repurchase of their Shares. Repurchase requests in
Japan may be made to Investor Servicing Agent through
the Handling Securities Company on a Fund Business Day
and the business day of securities companies in Japan
without a contingent deferred sales charge.
The price a shareholder in Japan will receive is the
next net asset value calculated after the Fund receives
the repurchase request from Kokusai, provided the
request is received before the close of regular trading
on the Exchange. The payment of the price shall be
made in yen through the Handling Securities Companies
pursuant to the Agreements or, in case the Handling
Securities Companies agree, in dollars.
(3)Suspension of Repurchase:
The Fund may suspend shareholders' right of redemption,
or postpone payment for more than seven days, if the
New York Stock Exchange is closed for other than
customary weekends or holidays, or if permitted by the
rules of the Securities and Exchange Commission during
periods when trading on the Exchange is restricted or
during any emergency which makes it impracticable for
the Fund to dispose of its securities or to determine
fairly the value of its net assets, or during any other
period permitted by order of the Commission for
protection of investors.
(4)Custody of Shares:
In overseas markets where the Shares are offered, the
Share certificates shall be held by the Shareholders at
their own risk.
The custody of the Share certificates (if issued) sold
to Japanese Shareholders shall be held, in the name of
the custodian, by the custodian of KOKUSAI.
Certificates of custody for the Shares shall be
delivered by the Handling Securities Companies to the
Japanese Shareholders.
The foregoing does not apply to the cases in which
Japanese Shareholders keep the Shares in custody at
their own risk.
D.Miscellaneous:
(1)Duration and Liquidation:
Unless terminated, the Fund shall continue without
limitation of time. The Fund may be terminated at any
time by vote of Shareholders holding at least 66 2/3%
of the Shares entitled to vote or by the Trustees of
the Fund by written notice to the Shareholders.
(2)Accounting Year:
The accounts of the Fund will be closed each year on
30th November.
(3)Authorized Shares:
There is no prescribed authorized number of Shares, and
Shares may be issued from time to time.
(4)Agreement and Declaration of Trust:
Originals or copies of the Agreement and Declaration of
Trust, as amended, are on file with the Secretary of
State of the Commonwealth of Massachusetts and with the
Clerk of the City of Boston.
The Agreement and Declaration of Trust may be amended
at any time by an instrument in writing signed by a
majority of the then Trustees when authorized to do so
by vote of Shareholders holding a majority of the
Shares entitled to vote, except that an amendment which
shall affect the holders of one or more series or
classes of Shares but not the holders of all
outstanding series and classes shall be authorized by
vote of the Shareholders holding a majority of the
Shares entitled to vote of each series and class
affected and no vote of Shareholders of a series or
class not affected shall be required. Amendments
having the purpose of changing the name of the Trust or
of supplying any omission, curing any ambiguity or
curing, correcting or supplementing any defective or
inconsistent provision contained herein shall not
require authorization by Shareholder vote.
In Japan, material changes in the Agreement and
Declaration of Trust shall be published or the notice
thereof shall be sent to the Japanese Shareholders.
(5)Issue of Warrants, Subscription Rights, etc.:
The Fund may not grant privileges to purchase shares of
the Fund to shareholders or investors by issuing
warrants, subscription rights or options, etc.
(B)Outline of Disclosure System:
(1)Disclosure in U.S.A.:
(i)Disclosure to shareholders
In accordance with the Investment Company Act of 1940,
the Fund is required to send to its shareholders annual
and semi-annual reports containing financial
information.
(ii)Disclosure to the SEC
The Fund has filed a registration statement with the
SEC on Form N-1A; the Fund updates that registration
statement periodically in accordance with applicable
law.
(2)Disclosure in Japan:
a.Disclosure to the Supervisory Authority:
When the Fund intend to offer the Shares amounting to
more than 500 million yen in Japan, it shall submit to
the Minister of Finance of Japan securities
registration statements together with the copies of the
Agreement and Declaration of Trust and the agreements
with major related companies as attachments thereto.
The said documents are made available for public
inspection for the investors and any other persons who
desire at the Ministry of Finance.
The Handling Securities Companies of the Shares shall
deliver to the investors prospectuses or explanatory
brochures the contents of which are substantially
identical with Part I and Part II of the securities
registration statements. For the purpose of disclosure
of the financial conditions, etc., the Fund shall
submit to the Minister of Finance of Japan securities
reports within 6 months of the end of each fiscal year,
semi-annual reports within 3 months of the end of each
semi-annual year and extraordinary reports from time to
time when changes occur as to material subjects of the
Fund. These documents are available for public
inspection for the investors and any other persons who
desire at the Ministry of Finance.
b.Disclosure to Japanese Shareholders:
The Japanese Shareholders will be notified of the
material facts which would change their position,
including material amendments to the Agreement and
Declaration of Trust of the Fund, and of notices from
the Trustees, through the Handling Securities
Companies.
The financial statements shall be sent to the Japanese
Shareholders through the Handling Securities Companies
or the summary thereof shall be carried in daily
newspapers.
(C)Restrictions on Transactions with Interested Parties:
Portfolio securities of the Fund may not be purchased from
or sold or loaned to any Trustee of the Fund, Putnam
Investment Management, Inc., acting as investment adviser
of the Fund, or any affiliate thereof or any of their
directors, officers, or employees unless the transaction is
made within the investment restrictions set forth in the
Fund's prospectus and statement of additional information
and either (i) at a price determined by current publicly
available quotations (including a dealer quotation) or
(ii) at competitive prices or interest rates prevailing
from time to time on internationally recognized securities
markets or internationally recognized money markets
(including a dealer quotation).
4.INFORMATION CONCERNING THE EXERCISE OF RIGHTS BY SHAREHOLDERS,
ETC.
(A)Rights of Shareholders and Procedures for Their Exercise:
The Shareholders shall be registered in order to exercise
directly the rights of their Shares. Therefore, the
Shareholders in Japan who entrust the custody of their
Shares to the Handling Securities Company cannot exercise
directly their rights, because they are not registered.
Shareholders in Japan may have the Handling Securities
Companies exercise their rights on their behalf in
accordance with the Account Agreement with the Handling
Securities Companies.
The Shareholders in Japan who do not entrust the custody of
their Shares to the Handling Securities Companies may
exercise their rights in accordance with their own
arrangement under their own responsibility.
The major rights enjoyed by the investors are as follows:
(i)Voting rights
Each share has one vote, with fractional shares voting
proportionally. Shares of each class will vote
together as a single class except when otherwise
required by law or as determined by the Trustees.
Although the Fund is not required to hold annual
meetings of its shareholders, shareholders holding at
least 10% of the outstanding shares entitled to vote
have the right to call a meeting to elect or remove
Trustees, or to take other actions as provided in the
Agreement and Declaration of Trust.
(ii)Repurchase rights
Shareholders are entitled to request repurchase of
Shares at their Net Asset Value at any time.
(iii)Rights to receive dividends
Shareholders are entitled to receive any distribution
from net investment income at least monthly and any net
realized capital gains at least annually.
Distributions from capital gains are made after
applying any available capital loss carryovers.
Shareholders may choose three distribution options,
though investors in Japan may only choose the last
alternative.
- Reinvest all distributions in additional shares
without a sales charge;
- Receive distributions from net investment income in
cash while reinvesting capital gains distributions in
additional shares without a sales charge; or
- Receive all distributions in cash.
(iv)Right to receive distributions upon dissolution
Shareholders of a fund are entitled to receive
distributions upon dissolution in proportion to the
number of shares then held by them, except as otherwise
required.
(v)Right to inspect accounting books and the like
Shareholders are entitled to inspect the Agreement and
Declaration of Trust at the offices of the Fund.
(vi)Right to transfer shares
Shares are transferable without restriction except as
limited by applicable law.
(vii)Rights with respect to the U.S. registration statement
The 1933 Act provided for the liability of the Fund and
certain other persons, subject to various limitations
and exceptions, in respect of materially misleading
disclosures made in the Fund's registration statement.
(B)Tax Treatment of Shareholders in Japan:
The tax treatment of Shareholders in Japan shall be as
follows:
(1)The distributions to be made by the Fund will be treated
as distributions made by a domestic investment trust.
a.The distributions to be made by the Fund to Japanese
individual shareholders will be subject to separate
taxation from other income (i.e. withholding of income
tax at the rate of 15% and withholding of local taxes
at the rate of 5% in Japan). In this case, no report
concerning distributions will be filed with the
Japanese tax authorities.
b.The distributions to be made by the Fund to Japanese
corporate shareholders will be subject to withholding
of income tax at the rate of 15% and to withholding of
local taxes at the rate of 5% in Japan. In certain
cases, the Handling Securities Companies will prepare a
report concerning distributions and file such report
with the Japanese tax authorities.
c.Net investment returns such as dividends, etc. and
distributions of short-term net realized capital gain,
among distributions on Shares of the Fund, will be, in
principle, subject to withholding of U. S. federal
income tax at the rate of 15% and the amount obtained
after such deduction will be paid in Japan.
Distributions of long-term net realized capital gain
will not be subject to withholding of U. S. federal
income tax and the full amount thereof will be paid in
Japan. The amount subject to withholding of U. S.
federal income tax may be deducted from the tax levied
on a foreign entity in Japan.
d.The Japanese withholding tax imposed on distributions
as referred to in a. and b. above will be collected by
way of so-called "difference collecting method". In
this method only the difference between the amount
equivalent to 20% of the distributions before U.S.
withholding tax and the amount of U.S. withholding tax
withheld in the U.S. will be collected in Japan.
(2)The provisions of Japanese tax laws giving the privilege
of a certain deduction from taxable income to corporations,
which may apply to dividends paid by a domestic
corporation, shall not apply.
(3)Capital gains and losses arising from purchase and
repurchase of the Shares shall be treated in the same way
as those arising from purchase and sale of a domestic
investment trust. The distribution of the net liquidation
assets shall be also treated in the same way as those
arising from liquidation of a domestic investment trust.
(4)The Japanese securities transaction tax will not be
imposed so far as the transactions concerned are conducted
outside Japan. Such tax, however, is applicable to
dealers' transactions for their own account and to
privately negotiated transactions conducted in Japan.
(C)Foreign Exchange Control in U.S.A.:
In U.S.A., there are no foreign exchange control
restrictions on remittance of dividends, repurchase money,
etc. of the Shares to Japanese Shareholders.
(D)Agent in Japan:
Hamada & Matsumoto
Sankyu Building
6-14, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
The foregoing law firm is the true and lawful agent of the
Fund to represent and act for the Fund in Japan for the
purpose of;
(1)the receipt of any and all communications, claims,
actions, proceedings and processes as to matters involving
problems under the laws and the rules and regulations of
the JSDA and
(2)representation in and out of court in connection with
any and all disputes, controversies or differences
regarding the transactions relating to the public offering,
sale and repurchase in Japan of the Shares of the Fund.
The agent for the registration with the Japanese Minister
of Finance of the initial public offering concerned as well
as for the continuous disclosure is each of the following
persons:
Harume Nakano
Ken Miura
Attorneys-at-law
Hamada & Matsumoto
Sankyu Building
6-l4, Kasumigaseki, 3-chome
Chiyoda-ku, Tokyo
(E)Jurisdiction:
Limited only to litigation brought by Japanese investors
regarding transactions relating to (D)(2) above, the Fund
has agreed that the following court has jurisdiction over
such litigation and the Japanese law is applicable thereto:
Tokyo District Court
1-4, Kasumigaseki 1-chome
Chiyoda-ku, Tokyo
5.STATUS OF INVESTMENT FUND
(1) Diversification of Investment Fund:
Note:Investment ratio is calculated by dividing each asset at
its market value by the total Net Asset Value of the Fund.
The same applies hereinafter.
(B)Results of Past Operations
(1)Record of Changes in Net Assets (Class M Shares)
Record of changes in net assets at the end of the first
fiscal year and at the end of each month within one year
prior to the end of July, 1996 is as follows:
(Note)Operations of Class M Shares were commenced on
December 1, 1994.
(2)Record of Distributions Paid
PeriodAmount of Dividend paid per Share
1st Fiscal Year (12/1/94 - 11/30/95)$0.98 (Yen105.79)
(C)Record of Sales and Repurchases
Record of sales and repurchases during the first fiscal year and
number of outstanding Shares of the Fund as of the end of such
Fiscal Year are as follows:
Number of Number of Number of
Shares Sold Shares Outstanding
Repurchased Shares
1st Fiscal 2,370,932 259,901 2,111,031
Year (0) (0) (0)
Note:The number of Shares sold, repurchased and outstanding in
the parentheses represents those sold, repurchased and
outstanding in Japan.
II. OUTLINE OF THE TRUST
1.Trust
(A)Law of Place of Incorporation
The Trusty is a Massachusetts business trust organized in
Massachusetts, U.S.A. on January 13, 1996.
Chapter 182 of the Massachusetts General Laws prescribes
the fundamental matters in regard to the operations of
certain business trusts constituting voluntar associations
under that chapter.
The Trust is an open-ended, deversified management company
under the Investment Company Act of 1940.
(B)Outline of the Supervisory Authority
Refer to I - l (B) Outline of the Supervisory Authority.
(C)Purpose of the Trust
The purpose of the Trust is to provide investors a managed
investment primarily in securities, debt instruments and
other instruments and rights of a financial character.
(D)History of the Trust
January 13, 1986:Date of initial Agreement and Declaration
of Trust
April 1, 1992:Change of the
Trust's name
May 5, 1994:Date of Amended and Restated Agreement and
Declaration of Trust
(E)Amount of Capital Stock
Not applicable.
(F)Structure of the management of the Trust
The Trustees are responsible for generally overseeing the
conduct of the Fund's business. The Agreement and
Declaration of Trust provides that they shall have all
powers necessary or convenient to carry out that
responsibility. The number of Trustees is fixed by the
Trustees and may not be less than three. A Trustee may be
elected either by the Trustees or by the shareholders. At
any meeting called for the purpose, a Trustee may be
removed by vote of two-thirds of the outstanding shares of
the Trust. Each Trustee elected by the Trustees or the
shareholders shall serve until he or she retires, resigns,
is removed, or dies or until the next meeting of
shareholders called for the purpose of electing Trustees
and until the election and qualification of his or her
successor.
The Trustee of the Trust are authorized by the Agreement
and Declaration of Trust to issue shares of the Trust in
one or more series, each series being preferred over all
other series in respect of the assets allocated to that
series. The Trustees may, without shareholder approval,
divide the shares of any series into two or more classes,
with such preferences and special or relative rights and
privileges as the Trustees may determine.
Under the Agreement and Declaration of Trust the
shareholders shall have power, as and to the extent
provided therein, to vote only (i) for the election of
Trustees, to the extent provided therein (ii) for the
removal of Trustees, to the extent provided therein (iii)
with respect to any investment adviser, to the extent
provided therein (iv) with respect to any termination of
the Trust, to the extent provided therein (v) with respect
to certain amendments of the Agreement and Declaration of
Trust, (vi) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a
court action, proceeding, or claim should or should not be
brought or maintained derivatively or as a class action on
behalf of the Trust or the shareholders, and (vii) with
respect to such additional matters relating to the Trust as
may be required by the Agreement and Declaration of Trust,
the Bylaws of the Trust, or any registration of the Trust
with the Securities and Exchange Commission (or any
successor agency) or any state, or as the Trustees may
consider necessary or desirable. Certain of the foregoing
actions may, in addition, be taken by the Trustees without
vote of the shareholders of the Trust.
On any matter submitted to a vote of shareholders, all
shares of the Trust then entitled to vote are voted in the
aggregate as a single class without regard to series or
classes of shares, except (1) when required by the
Investment Company Act of 1940, as amended, or when the
Trustees hall have determined that the matter affects one
or more series or classes of shares materially differently,
share are voted by individual series or class; and (2) when
the Trustees have determined that the matter affects on the
interests of one or more series or classes, then only
shareholders of such series or classes are entitled to vote
thereon. There is no cumulative voting.
Meetings of shareholders may be called by the Clerk
whenever ordered by the Trustees, the Chairman of the
Trustees, or requested in writing by the holder or holders
of at least one-tenth of the outstanding shares entitled to
vote at the meeting. Written notice of any meeting of
shareholders must be given by mailing the notice at least
seven days before the meeting. Thirty percent of shares
entitled to veto on a particular matter is a quorum for the
transaction of business on that matter at a shareholders'
meeting, except that, where any provision of law or of the
Agreement and Declaration of Trust permits or requires that
holders of any series or class vote as an individual series
or class, then thirty percent of the aggregate number of
shares of that series or class entitled to vote are
necessary to constitute a quorum for the transaction of
business by that series or class. For the purpose of
determining the shareholders of any class or series of
shares who are entitled to vote or act at any meeting, or
who are entitled to receive payment of any dividend or
other distribution, the Trustees are authorized to fix
record dates, which may not be more then 90 days before the
date of any meeting of shareholders or more than 60 days
before the date of payment of any dividend or other
distribution.
The Trustees are authorized by the Agreement and
Declaration of Trust to adopt Bylaws not inconsistent with
the Agreement and Declaration of Trust providing for the
conduct of the business of the Trust. The Bylaws
contemplate that the Trustees shall elect a Chairman of the
Trustees, the President, the Treasurer, and the Clerk of
the Trust, and that other officers, if any, may be elected
or appointed by the Trustees at any time. The Bylaws may
be amended or repealed, in whole or in part, by a majority
of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a
majority.
Regular meetings of the Trustees may be held without call
or notice at such places and at such times as the Trustees
may from time to time determine. It shall be sufficient
notice to a Trustee of a special meeting to send notice by
mail at least forty-eight hours or by telegram at least
twenty-four hours before the meeting or to give notice to
him or her in person or by telephone at least twenty-four
hours before the meeting.
At any meeting of Trustees, a majority of the Trustees then
in office shall constitute a quorum. Except as otherwise
provided in the Agreement and Declaration of Trust or
Bylaws, any action to be taken by the Trustees may be taken
by a majority of the Trustees present at a meeting (a
quorum being present), or by written consents of a majority
of the Trustees then in office.
Subject to a favorable majority shareholder vote (as
defined by the Investment Company Act of 1940), the
Trustees may contract for exclusive or nonexclusive
advisory and/or management services with any corporation,
trust, association, or other organization.
The Agreement and Declaration of Trust contains provisions
for the indemnification of Trustees, officers, and
shareholders of the Trust under the circumstances and on
the terms specified therein.
The Trust may be terminated at any time by vote of
shareholders holding at least two-thirds of the shares
entitled to vote or by the trustees by written notice to
the shareholders. Any series of shares may be terminated
at any time by vote of shareholders holding at least two-
thirds of the shares of such series entitled to vote or by
the Trustees by written notice to the shareholders of such
series.
The foregoing is a general summary of certain provisions of
the Agreement and Declaration of Trust and Bylaws of the
Trust, and is qualified in its entirety by reference to
each of those documents.
(G)Information Concerning Major Shareholders
Not applicable.
(H) Information Concerning Directors, Officers and Employees
(1) Directors and Officers of the Trust
Shares
Name Office and Resume Owned
Title
George Putnam Chairman and present:Chairman and Class A
President Director of 63,102
Putnam Management
and Putnam Mutual
Funds
William F. Vice present:Professor of Class A
Pounds Chairman Management, 16,084
Alfred P. Sloan
School of
Management,
Massachusetts
Institute of
Technology
Jameson A. Trustee present:President, Class A
Baxter Baxter 629
Associates, Inc.
Hans H. Estin Trustee present:Vice Chairman, Class A
North American 166
Management Corp.
Elizabeth T. Trustee present:President Class A
Kennan Emeritus and 1,822
Professor, Mount
Holyoke College
Lawrence J. Trustee and present:President, Class A
Lasser Vice Chief Executive 62,005
President Officer and
Director of
Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
John A. Hill Trustee present:Chairman and Class A
Managing 861
Director, First
Reserve
Corporation
Ronald J. Trustee present:Former Class A
Jackson Chairman, 106
President and
Chief Executive
Officer of Fisher-
Price, Inc.,
Trustee of Salem
Hospital and
Overseer of the
Peabody Essex
Museum
Robert E. Trustee present:Executive Vice Class A
Patterson President, Cabot 15,188
Partners Limited
Partnership
Donald S. Trustee present:Director of Class A
Perkins American 5,974
Telephone &
Telegraph
Company, AON
Corp., Etc.
George Putnam, Trustee present:President, New Class A
III Generation 2,614
Research, Inc.
Eli Shapiro Trustee present:Alfred P. Sloan Class A
Professor of 22,036
Management,
Emeritus, Alfred
P. Sloan School
of Management,
Massachusetts
Institute of
Technology
A.J.C. Smith Trustee present:Chairman, Chief Class A
Executive Officer 278
and Director,
Marsh & McLennan
Companies, Inc.
W. Nicholas Trustee present:Director of Class A
Thorndike Courier 133
Corporation and
Providence
Journal Co.
Charles E. Executive present:Managing 0
Porter Vice Director of
President Putnam
Investments, Inc.
and Putnam
Management
Patricia C. Senior Vice present:Senior Vice Class A
Flaherty President President of 3,659.334
Putnam
Investments, Inc.
and Putnam
Management
William N. Vice present:Director and 0
Shiebler President Senior Managing
Director of
Putnam
Investments, Inc.
President and
Director of
Putnam Mutual
Funds
Gordon H. Vice present:Director and Class A
Silver President Senior Managing 2,488.478
Director of
Putnam
Investments, Inc.
and Putnam
Management
Paul M. O'Neil Vice present:Vice President 0
President of Putnam
Investments, Inc.
and Putnam
Management
John D. Hughes Vice presentSenior Vice Class A
President President of 13,372.19
and Putnam Management 2
Treasurer
Beverly Marcus Clerk and N/A Class A
Assistant 2,605.329
Treasurer
(2) Employees of the Trust
The Trust does not have any employees.
(I)Description of Business and Outline of Operation
The Trust may carry out any administrative and managerial
act, including the purchase, sale, subscription and
exchange of any securities, and the exercise of all rights
directly or indirectly pertaining to the Fund's assets.
The Trust has entrusted Putnam Investment Management, Inc.,
the investment adviser, to render investment advisory
services, Putnam Fiduciary Trust Company, to keep the
assets of the Fund in custody and Investor Servicing Agent.
(J)Miscellaneous
(1)Changes of Trustees and Officers
Trustees may be removed or replaced by, among other
things, a resolution adopted by a vote of two-thirds of
the outstanding shares at a meeting called for the
purpose. In the event of vacancy, the remaining
Trustees may fill such vacancy by appointing for the
remaining term of the predecessor Trustee such other
person as they in their discretion shall see fit. The
Trustees may add to their number as they consider
appropriate. The Trustees may elect and remove
officers as they consider appropriate.
(2)Amendment to the Agreement and Declaration of Trust
Generally, approval of shareholders is required to
amend the Agreement and Declaration of Trust, except
for certain matters such as change of name, curing any
ambiguity or curing any defective or inconsistent
provision.
(3)Litigation and Other Significant Events
Nothing which has or which would have a material
adverse effect on the Trust has occurred which has not
been disclosed. The fiscal year end of the Trust is
November 30. The Trust is established for an
indefinite period and may be dissolved at any time by
vote of the shareholders holding at least two-thirds of
the shares entitled to vote or by the Trustees by
written notice to shareholders.
2.Putnam Investment Management, Inc. (Investment Management
Company)
(A)Law of Place of Incorporation
Putnam is incorporated under the General Corporation Law of
The Commonwealth of Massachusetts, U.S.A. Its investment
advisory business is regulated under the Investment
Advisers Act of 1940.
Under the Investment Advisers Act of 1940, an investment
adviser means, with certain exceptions, any person who, for
compensation, engages in the business of advising others,
either directly or through publications or writings, as to
the value of securities or as to the advisability of
investing in, purchasing or selling securities, or who, for
compensation and as part of a regular business, issues
analyses or reports concerning securities. Investment
advisers under the Act may not conduct their business
unless they are registered with the SEC.
(B) Outline of the Supervisory Authority
Investment Management Company is registered as an
investment adviser under the Investment Advisers Act of
1940. Putnam is regulated under the Investment Advisers
Act.
(C)Purpose of the Company
Investment Management Company's sole business is investment
management, which includes the buying, selling, exchanging
and trading of securities of all descriptions on behalf of
mutual funds in any part of the world.
(D)History of the Company
Investment Management Company is one of America's oldest
and largest money management firms. Investment Management
Company's staff of experienced portfolio managers and
research analysts selects securities and constantly
supervises the fund's portfolio. By pooling an investor's
money with that of other investors, a greater variety of
securities can be purchased than would be the case
individually: the resulting diversification helps reduce
investment risk Investment Management Company has been
managing mutual funds since 1937. Today, the firm serves
as the Investment Management Company for the funds in the
Putnam Family, with over $93 billion in assets in nearly 5
million shareholder accounts at December 31, 1995. An
affiliate, The Putnam Advisory Company, Inc., manages
domestic and foreign institutional accounts and mutual
funds, including the accounts of many Fortune 500
companies. Another affiliate, Putnam Fiduciary Trust
Company, provides investment advice to institutional
clients under its banking and fiduciary powers as well as
shareholder and custody services to the Putnam Funds.
Putnam Investment Management Inc., Putnam Mutual Funds and
Putnam Fiduciary Trust Company are subsidiaries of Putnam
Investments, Inc., a holding company which is in turn
wholly owned by Marsh & McLennan Companies, Inc., a
publicly-owned holding company whose principal operating
subsidiaries are international insurance and reinsurance
brokers, investment management company and management
consultants.
(E)Amount of Capital Stock
(as of August 1, 1996)
1.Amount of Capital (issued capital stock at par value):
Common Stock 1,000 shares at $1 par value
2.Number of authorized shares of capital stock:
Common Stock 1,000 shares
3.Number of outstanding shares of capital stock:
Common Stock 1,000 shares
4. Amount of capital (for the purposes of this Item, "Amount
of Capital" means total stockholders' equity for the
past five years:
Amount of Capital
Year (Total Stockholders' Equity in Thousands)
End of 1991$46,068,726
End of 1992$42,618,341
End of 1993$49,847,760
End of 1994$48,149,491
End of 1995$45,521,351
(F)Structure of the Management of the Company
Investment Management Company is ultimately managed by its
Board of Directors, which is elected by its shareholders.
Each Fund of Investment Management Company managed by one
or more portfolio managers. These managers, in
coordination with analysts who research specific securities
and other members of the relevant investment group (in the
case of the Fund, Investment Management Company's High
Yield Securities Group), provide a continuous investment
program for the Fund and place all orders for the purchase
and sale of portfolio securities.
The investment performance and portfolio of each Fund is
overseen by its Board of Trustees, a majority of whom are
not affiliated with Investment Management Company. The
Trustees meet 11 times a year and review the performance of
each fund with its manager at least quarterly.
In selecting portfolio securities for the Fund, Investment
Management Company looks for high yield bonds that
represent attractive values based on careful issue-by-issue
credit analysis and hundreds of onsite visits and other
contacts with issuers every year. Investment Management
Company is one of the largest managers of high yield debt
securities in the United States. The High Yield Bond Group
comprises 17 investment professionals.
(G)Information Concerning Major Stockholders
As of August 1, 1996, all the outstanding shares of capital
stock of Investment Management Company were owned by Putnam
Investments, Inc. See subsection D above.
(H)Information Concerning Officers and Employees
The following table lists the names of various officers and
directors of Investment Management Company and their
respective positions with Investment Management Company.
For each named individual, the table lists: (i) any other
organizations (excluding other Investment Management
Company's funds) with which the officer and/or director
has recently had or has substantial involvement; and (ii)
positions held with such organization:
List of Officers and Directors of Putnam Investment Management,
Inc. (July 31, 1996)
