[Translation]
SECURITIES REGISTRATION STATEMENT
PUTNAM INCOME FUND
SECURITIES REGISTRATION STATEMENT
To: Minister of Finance
Filing
Date of SRS: August 11, 1997
Filing
Date of the Amendment to SRS:
May 22, 1997
Name of the Registrant Trust: PUTNAM INCOME 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
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 Business Kasumigaseki Building,
25th Floor
2-5,
Kasumigaseki 3-chome
Chiyoda-
ku, Tokyo
Name of Liaison Contact: Harume Nakano
Ken
Miura
Kensuke
Anbe
Attorneys-at-Law
Place of Liaison Contact: Hamada & Matsumoto
Kasumigaseki Building, 25th
Floor
2-5,
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 INCOME FUND
Offering or Sale of Foreign
Investment Fund Securities:
Type and Aggregate Amount of Up to 143.68 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 143.68
million Class M Shares
(The
maximum amount expected to be
sold is 1 billion U.S. dollars
(Yen114.35 billion).
Note 1: U.S.$ amount is translated into Japanese Yen at the
rate of U.S.$l.00=Yen114.35 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 30th June, 1997.
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 30th June, 1997 (U.S.$6.96) by 143.68 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
108 including front and back pages.)
C O N T E N T S
Japanese This
OriginalEnglish
Translation
PART I. INFORMATION CONCERNING SECURITIES 1 1
PART II. INFORMATION CONCERNING ISSUER 4 5
I. DESCRIPTION OF THE FUND 4 5
l. GENERAL INFORMATION 4
5
2. INVESTMENT POLICY 8 10
3. MANAGEMENT STRUCTURE 16 21
4. INFORMATION CONCERNING THE EXERCISE
OF RIGHTS BY SHAREHOLDERS, ETC. 25
34
5. STATUS OF INVESTMENT FUND 28 38
II. OUTLINE OF THE TRUST 32
41
III. OUTLINE OF THE OTHER RELATED COMPANIES 66 70
IV. FINANCIAL CONDITION OF THE FUND 68 72
V. SUMMARY OF INFORMATION CONCERNING
FOREIGN INVESTMENT FUND SECURITIES 182
78
VI. MISCELLANEOUS 182 78
PART III. SPECIAL INFORMATION 183 79
I. OUTLINE OF THE SYSTEM OF INVESTMENT
TRUSTS IN MASSACHUSETTS 183 79
II. FINANCIAL CONDITIONS OF THE INVESTMENT
ADVISER AND MANAGEMENT COMPANY 189 85
III. FORM OF FOREIGN INVESTMENT
FUND SECURITIES 211
85
PART I. INFORMATION CONCERNING
SECURITIES
1. NAME OF FUND: PUTNAM
INCOME FUND
(hereinafter referred to as the
"Fund")
2. NATURE OF FOREIGN Four
classes of shares (Class A
shares,
INVESTMENT FUND SECU- Class B
shares, Class M shares and Class
Y shares)
RITIES CERTIFICATES:
Registered shares 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 TO Up to
143.68 million Shares
BE OFFERED FOR SALE
(IN JAPAN)
4. TOTAL AMOUNT OF Up to
the total amount aggregating the
OFFERING PRICE:
amounts calculated by
multiplying the respective net
asset value per Share by the
respective number of Shares in
respect of 143.68 million Shares
(The
maximum amount expected to be
sold is 1 billion U.S. dollars
(Yen114.35 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 30th June, 1997
($6.96) by the number of Shares to be offered
(143.68 million).
Note 2: Dollar amount is translated for convenience at
the rate of $1.00=Yen114.35 (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 30th June,
1997). 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:A "Fund Business Day" means a day on which the New
York Stock Exchange is open for business.
6. SALES CHARGE: The
sales charge in Japan shall be
3% of the amount obtained by
deduction of the amount
equivalent to 3% of the public
offering price from such price
(hereinafter referred to as the
"Sales Price"). Any amount,
which is over the net asset
value, of the Sales Price shall
be retained by Putnam Mutual
Funds Corp., principal
underwriter of the Fund.
The
public offering price means the
amount calculated by dividing
the net asset value by (1-
0.0325) and rounded to three
decimal places.
7. MINIMUM AMOUNT OR The
minimum amount for purchase of
NUMBER OF SHARES Shares
is 200 shares and in integral
FOR SUBSCRIPTION:
multiples of 100 shares.
8. PERIOD OF SUBSCRIPTION: From:
August 27, 1997 (Wednesday)
To:
February 26, 1998 (Thursday)
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: Kankaku
Securities Co., Ltd.
(hereinafter referred to as "
Kankaku")
Shibusawa City Place A., 13-16,
Nihonbashi-Kayaba-cho 1-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 PLACE
Investors shall pay the Issue
Price and Sales
OF PAYMENT: Charge
to Kankaku within 4 business
days in Japan from the day when
Kankaku confirms the execution
of the order (the "Trade Day")
(see page 28).
The
total issue price for each
Application Day will be
transferred by Kankaku to the
account of the Fund at Putnam
Fiduciary Trust Company, the
transfer agent, within 3 Fund
Business Days (hereinafter
referred to as "Payment Date")
from (and including) the
Application Day.
12. OUTLINE OF UNDERWRITING, ETC.:
(A) Kankaku will undertake to make a public offering of
143.68 million Shares in accordance with an agreement
dated 18th August, 1997 with Putnam Mutual Funds Corp.
(hereinafter referred to as the "Fund") in connection
with the sale of the Shares in Japan.
(B) During the public offering period, Kankaku 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 Kankaku 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 enter into
with a Handling Securities Company an agreement
concerning transactions of foreign securities. A
Handling Securities Company shall provide to the
investors a Contract Concerning a Foreign Securities
Transactions Account ("Contract") and the investors
submit to the Handling Securities Company an application
for requesting the opening of a transactions account
under the Contract. The subscription amount shall be
paid in yen in principle and the yen exchange rate shall
be the exchange rate which shall be based on the foreign
exchange rate quoted in the Tokyo Foreign Exchange Market
on the Trade Day of each subscription and which shall be
determined by such Handling Securities Company.
The subscription amount shall be paid in dollars to
the account of the Fund with Putnam Fiduciary Trust
Company as custodian for the Fund by Kankaku on the
Payment Date.
(B) Expenses summary:
Expenses are one of several factors to consider when
investing. The following table summarizes investor's
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 public offering price) 3.25%
Deferred sales charge None
Annual Fund operating expenses
(as a percentage of average net assets)
Management fees 0.57%
12b-1 fees 0.50%
Other expenses 0.35%
Total Fund operating expenses 1.42%
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.
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 $76
5 years $108
10 years $197
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.
(C) 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 Income Fund (the "Fund")
(2) Form of the Fund
Putnam Income Fund is a Massachusetts business trust
organized on August 13, 1982. 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.
The Fund is an open-end, diversified management
investment company with an unlimited number of authorized
shares of beneficial interest which 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 four classes. Only the Fund's class
M shares are currently offered in Japan. The Fund also
offers in the United States of America 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 all classes 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 a shareholder owns fewer shares than the minimum
set by the Trustees (presently 20 shares), the Fund may
choose to redeem the 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 shares 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 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 consistent with
what Putnam Investment Management, Inc. (the "Investment
Management Company") believes to be prudent risks. The
Fund is not intended to be a complete investment program,
and there is no assurance it will achieve its objective.
(D) History of the Fund:
August 13, 1982:
Organization of the Fund as a
Massachusetts business trust.
Adoption of the Agreement and
Declaration of Trust.
April 7, 1989:
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. ("Principal
Underwriter") engages in providing marketing
services to the Fund.
(4) Kankaku 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 consistent with
what the Investment Management Company believes to be
prudent risk. The Fund is not intended to be a complete
investment program, and there is no assurance it will
achieve its objective.
Basic investment strategy
The Fund seeks high current income consistent with
what Investment Management Company believes to be prudent
risk. The Fund may invest in debt securities, including
both government and corporate obligations, preferred
stocks and dividend-paying common stocks. The Fund may
also hold a portion of its assets in cash or money market
instruments.
In recent years, the Fund's portfolio has emphasized
fixed-income securities. Investment Management Company
presently expects that it will continue to do so.
Declines in the prices of equity securities coupled with
rising dividend payouts, however, could result in an
increase in the Fund's equity positions.
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 Fund assets.
In implementing these defensive strategies, the Fund
may invest without limit in money market instruments and
in U.S. government or agency obligations, or in any other
securities Investment Management Company considers
consistent with such defensive strategies.
It is impossible to predict when, or for how long,
these alternative strategies would be used.
Risk factors
Non-U.S. investments
The Fund may invest in securities of non-U.S.
issuers that are not actively traded in U.S. markets.
These non-U.S. investments involve certain special risks
described below.
Non-U.S. securities are normally denominated and
traded in non-U.S. currencies. As a result, the value of
the Fund's non-U.S. investments and the value of its
shares may be affected favorably or unfavorably by
changes in currency exchange rates relative to the U.S.
dollars. The Fund may engage in a variety of non-U.S.
currency exchange transactions in connection with its non-
U.S. investments, including transactions involving
futures contracts, forward contracts and options.
Investments in non-U.S. securities may subject the
Fund to other risks as well. For example, there may be
less information publicly available about a non-U.S.
issuer than about a U.S. issuer, and non-U.S. issuers are
not generally subject to accounting, auditing and
financial reporting standards and practices comparable to
those in the Unites States. The securities of some non-
U.S. issuers are less liquid and at times more volatile
than securities of comparable U.S. issuers. Non-U.S.
brokerage commissions and other fees are also generally
higher than 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 the Fund's assets held abroad) and
expenses not present in the settlement of investments in
U.S. markets.
In addition, the Fund's investments in non-U.S.
securities may be subject to the risk of nationalization
or expropriation of assets, imposition of currency
exchange controls or restrictions on the repatriation of
non-U.S. currency, confiscatory taxation, political or
financial instability and diplomatic developments which
could affect the value of the Fund's investments in
certain non-U.S. countries. Dividends or interest on, or
proceeds from the sale of, non-U.S. securities may be
subject to non-U.S. withholding taxes, and special U.S.
tax considerations may apply.
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 the Fund's ability to invest in
securities of certain issuers organized under the laws of
those non-U.S. countries.
The risks described above are typically increased in
connection with investments in less developed and
developing nations, which are sometimes referred to as
"emerging markets." For example, political and economic
structures in these countries may be in their infancy and
developing rapidly, causing instability. High rates of
inflation or currency devaluations my adversely affect
the economies and securities markets of such countries.
Investments in emerging markets may be considered
speculative.
The Fund expects that its investments in non-U.S.
securities generally will not exceed 20% of its total
assets, although the Fund's investments in non-U.S.
securities may exceed this amount from time to time.
Certain of the foregoing risks may also apply to some
extent to securities of U.S. issuers that are denominated
in non-U.S. currencies or that are traded in non-U.S.
markets, or securities of U.S. issuers having significant
non-U.S. operations.
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 than 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 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 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 such 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 Fund shares. As a result, an
investor who purchases Fund shares 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 its "yield," which is
computed on a yield-to-maturity basis in accordance with
SEC regulations and which reflects amortization of market
premiums.
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 its portfolio turnover rate may be higher than
that of other mutual funds.
Portfolio turnover generally involves some expense,
including brokerage commissions or dealer markups and
other transaction costs on the sale of securities and
reinvestment in other securities. These transactions may
result in realization of taxable capital gains.
Investments in fixed-income securities
The Fund may invest in both higher-rated and lower-
rated fixed-income securities. The values of lower-rated
securities generally fluctuate more than those of higher-
rated securities. In addition, the lower rating reflects
a greater possibility that the financial condition of the
issuer, or adverse changes in economic conditions, or
both, may impair the ability of the issuer to make
payments of income and principal.
The Fund will not invest in securities rated lower
than B by a nationally recognized securities rating
agency, such as Standard & Poor's ("S&P") or Moody's
Investors Service, Inc. ("Moody's"), or in unrated
securities determined by Investment Management Company to
be of comparable quality. Securities rated B are
predominantly speculative and have large uncertainties or
major exposures to adverse conditions. Securities rated
below BBB or Baa are commonly know as "junk bonds." The
foregoing investment limitations will be measured at the
time of purchase and, to the extent a security is
assigned a different rating by one or more of the various
rating agencies, Investment Management Company will use
the highest rating assigned by any agency.
Investors should carefully consider their ability to
assume the risks of owning shares of a mutual fund that
invests in lower-rated securities before making an
investment.
The market values of the Fund's investments will
change in response to changes in interest rates and other
factors. During periods of falling interest rates, the
values of long-term fixed-income securities generally
rise. Conversely, during periods of rising interest
rates, the values of such securities generally decline.
Changes by recognized rating services in their ratings of
fixed-income securities 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 the Fund's portfolio securities will not
affect interest income derived from these securities but
will affect the Fund's net asset value.
The table below shows the percentages of Fund assets
invested during fiscal 1996 in securities assigned to the
various rating categories by S&P, or, if unrated by S&P,
assigned to comparable rating categories by another
rating agency, and in unrated securities determined by
Investment Management Company to be of comparable
quality:
Rated securities, Unrated
securities
as percentage of of comparable
Rating net assets quality, as
percentage of net
asssets
"AAA" 61.13% -
"AA" 4.87% -
"A" 5.54% -
"BBB" 10.21% 1.96%
"BB" 7.33% 1.74%
"B" 5.44% 0.05%
"CCC" 0.28% 0.03%
Total 94.80% 3.78%
Investment Management Company seeks to minimize the
risks of investing in lower-rated securities through
careful investment analysis. When the Fund invests in
securities in the lower rating categories, the
achievement of the Fund's goals is more dependent on
Investment Management Company's ability than would be the
case if the Fund were investing in securities in the
higher rating categories.
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
consider such reduction in its determination of whether
the Fund should continue to hold the security in its
portfolio.
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, it may be more
difficult to sell these securities when Investment
Management Company believes it advisable to do so or the
Fund 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 its 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.
Certain investment grade securities in which the
Fund may invest share some of the risk factors discussed
above with respect to lower-rated securities.
Mortgage-backed and asset-backed securities
The Fund may invest a substantial portion of its
assets in mortgage-backed securities, including
collateralized mortgage obligations ("CMOs") and certain
stripped mortgage-backed securities. CMOs and other
mortgage-backed securities represent a participation in,
or are secured by, mortgage loans and include:
Certain securities issued or guaranteed by the U.S.
government or one of its agencies or
instrumentalities;
Securities issued by private issuers that represent
an interest in or are secured by mortgage-backed
securities issued or guaranteed by the U.S.
government or one of its agencies or
instrumentalities; and
Securities issued by private issuers that represent
an interest in or are secured by mortgage loans or
mortgage-backed securities without a government
guarantee but usually having some form of private
credit enhancement.
Stripped mortgage-backed securities are usually
structured with two classes that receive different
portions of the interest and principal distributions on a
pool of mortgage loans. The Fund may invest in both the
interest-only or "IO" class and the principal-only or
"PO" class.
The Fund may also invest in asset-backed securities.
Asset-backed securities are structured like mortgage-
backed securities, but instead of mortgage loans or
interests in mortgage loans, the underlying assets may
include such items as motor vehicle installment sales or
installment loan contracts, leases of various types of
real and personal property, and receivables from credit
card agreements. The ability of an issuer of asset-
backed securities to enforce its security interest in the
underlying assets may be limited.
Prepayment risk. Mortgage-backed and asset-backed
securities have yield and maturity characteristics
corresponding to the underlying assets. Unlike
traditional debt securities, which may pay a fixed rate
of interest until maturity when the entire principal
amount comes due, payments on certain mortgage-backed and
asset-backed securities include both interest and a
partial payment of principal. Besides the scheduled
repayment of principal, payments of principal may result
from voluntary prepayment, refinancing, or foreclosure of
the underlying mortgage loans.
Mortgage-backed and asset-backed securities are less
effective than other types of securities as a means of
"locking in" attractive long-term interest rates. One
reason is the need to reinvest prepayments of principal;
another is the possibility of significant unscheduled
prepayments resulting from declines in interest rates.
These prepayments would have to be reinvested at lower
rates. As a result, these securities may have less
potential for capital appreciation during periods of
declining interest rates than other securities of
comparable maturities, although they may have a similar
risk of decline in market value during periods of rising
interest rates. Prepayments may also significantly
shorten the effective maturities of these securities,
especially during periods of declining interest rates.
Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective
maturities of these securities, subjecting them to a
greater risk of decline in market value in response to
rising interest rates than traditional debt securities,
and, therefore, potentially increasing the volatility of
the Fund.
At times, some of the mortgage-backed and asset-
backed securities in which the Fund may invest will have
higher than market interest rates and therefore will be
purchased at a premium above their par value. Prepayments
may cause losses in securities purchased at a premium, as
unscheduled prepayments, which are made at par, will
cause the Fund to experience a loss equal to any
unamortized premium.
CMOs. CMOs are issued with a number of classes or
series that have different maturities and that may
represent interests in some or all of the interest or
principal on the underlying collateral. Payment of
interest or principal on some classes or series of CMOs
may be subject to contingencies or some classes or series
may bear some or all of the risk of default on the
underlying mortgages. CMOs of different classes or
series are generally retired in sequence as the
underlying mortgage loans in the mortgage pool are
repaid. If enough mortgages are repaid ahead of
schedule, the classes or series of a CMO with the
earliest maturities generally will be retired prior to
their maturities. Thus, the early retirement of
particular classes or series of a CMO would have the same
effect as the prepayment of mortgages underlying other
mortgage-backed securities. Conversely, slower than
anticipated prepayments can extend the effective
maturities of CMOs, subjecting them to a greater risk of
decline in market value in response to rising interest
rates than traditional debt securities, and, therefore,
potentially increasing the volatility of the Fund.
Stripped mortgage-backed securities. The yield to
maturity on an IO or PO class of stripped mortgage-backed
securities is extremely sensitive not only to changes in
prevailing interest rates but also to the rate of
principal payments (including prepayments) on the
underlying assets. A rapid rate of principal prepayments
may have a measurably adverse effect on the Fund's yield
to maturity to the extent it invests in IOs. If the
assets underlying the IOs experience greater than
anticipated prepayments of principal, the Fund may fail
to recoup fully its initial investment in these
securities. Conversely, POs tend to increase in value if
prepayments are greater than anticipated and decline if
prepayments are slower than anticipated.
In either event, the secondary market for stripped
mortgage-backed securities may be more volatile and less
liquid than that for other mortgage-backed securities,
potentially limiting the Fund's ability to buy or sell
these securities at any particular time.
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 the
Fund's fixed income securities would decline, but this
decline might be offset in whole or in part by an
increase in the value of the futures contracts. The Fund
may also purchase and sell call and put options on
futures contracts or on securities the Fund is permitted
to purchase directly in addition to or as an alternative
to purchasing and selling futures contracts. The Fund
will engage in these transactions for hedging purposes
and, to the extent permitted by applicable law, for non-
hedging purposes, such as to manage the effective
duration of the Fund's portfolio or as a substitute for
direct investment.
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. Options on certain U.S. government 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 prices of the securities underlying the
futures and options purchased and sold by the Fund, of
the option and futures contract themselves, and, in the
case of hedging transactions, of the securities which are
the subject of a hedge.
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 in the following investment
practices, each of which involves certain special risks.
Options. The Fund may seek to increase its current
return by writing covered call and put options on
securities it owns or in which it may invest. The Fund
receives a premium from writing a call or put option,
which increases the return if the option expires
unexercised or is closed out at a net profit.
When the Fund writes a call option, it gives up the
opportunity to profit from any increase in the price of a
security above the exercise price of the option; when it
writes a put option, it takes the risk that it will be
required to purchase a security from the option holder at
a price above the current market price of the security.
The Fund may terminate an option that it has written
prior to its expiration by entering into a closing
purchase transaction in which it purchases an option
having the same terms as the option written.
The Fund may also buy and sell put and call options,
including combinations of put and call options on the
same underlying security. The aggregate value of the
securities underlying the options may not exceed 25% of
Fund assets. The use of these strategies may be limited
by applicable law.
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 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 may
invest, such as options, forward contracts and CMOs, 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
an index.
(B) Restrictions of Investment:
Except for the investment restrictions is designated
as fundamental below, the investment restrictions
described in this Securities Registration Statement and
the Japanese prospectus are not fundamental investment
restrictions. The Trustees may change any non-
fundamental restrictions without shareholder approval.
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) With respect to 75% of its total assets, invest in
the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Fund
(taken at current value) would be invested in the
securities of such issuer; provided that this limitation
does not apply to obligations issued or guaranteed as to
interest or principal by the U.S. government or its
agencies or instrumentalities.
(2) With respect to 75% of its total assets, acquire
more than 10% of the outstanding voting securities of any
issuer.
(3) Borrow money in excess of 10% of its total assets
(taken at cost) and then only as a temporary measure for
extraordinary or emergency purposes and not for
investment. (The Fund may borrow only from banks and
immediately after any such borrowing there must be an
asset coverage (total assets of the Fund including the
amount borrowed less liabilities other than such
borrowings) of at least 300% of the amount of all
borrowings. In the event that, due to market decline or
other reasons, such asset coverage should at any time
fall below 300%, the Fund is required within three days
not including Sundays and holidays to reduce the amount
of its borrowings to the extent necessary to cause the
asset coverage of such borrowings to be at least 300%.
If this should happen, the Fund may have to sell
securities at a time when it would be disadvantageous to
do so.)
(4) Make loans, except by purchase of debt obligations
in which the Fund may invest consistent with its
investment policies, by entering into repurchase
agreements, or by lending its portfolio securities.
(5) Purchase or sell real estate, although it may
purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate,
and securities which represent interests in real estate,
and it may acquire and dispose of real estate or
interests in real estate acquired through the exercise of
its rights as a holder of debt obligations secured by
real estate or interests therein.
(6) Purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell financial
futures contracts and options and may enter into foreign
currency exchange transactions and other financial
transactions not involving physical commodities.
(7) Underwrite securities issued by other persons except
to the extent that, in connection with the disposition of
its portfolio investments, it may be deemed to be an
underwriter under certain federal securities laws.
(8) Purchase securities (other than securities of the
U.S. government, its agencies or instrumentalities), if,
as a result of such pruchase, more than 25% of the Fund's
total assets would be invested in any one industry.
Although certain of the Fund's fundamental
investment restrictions permit it to borrow money to a
limited extent, the Fund does not currently intend to do
so and did not do so last year.
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 Fund shares, or (2)
67% or more of the shares present at a meeting if more
than 50% of the outstanding Fund shares are represented
at the meeting in person or by proxy.
It is contrary to the Fund's present policy, which
may be changed without shareholder approval, to:
(1) Invest in (a) securities which are not readily
marketable, (b) securities restricted as to resale
(excluding securities determined by the Trustees of the
Fund (or the person designated by the Trustees of the
Fund to make such determinations) to be readily
marketable), and (c) repurchase agreements maturing in
more than seven days, if, as a result, more 15% of the
Fund's net assets (taken at current value) would be
invested in securities described in (a), (b) and (c)
above.
In addition, 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 of the
Japan Securities Dealers Association.
1. The Fund may not 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;
2. The Fund may not invest in securities of any issuer
if, immediately after such investment, more than 5% of
the total assets of the Fund (taken at current value)
would be invested in the securities of such issuer,
provided that this limitation does not apply to
obligations issued or guaranteed as to interest or
principal by the U.S. or other sovereign government or
its agencies or instrumentalities;
3. The Fund may not acquire more than 10% of the
outstanding voting securities of any issuer or may not
acquire more than 15% of the outstanding voting
securities of any issuer together with other mutual funds
managed by Investment Management Company;
4. 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;
5. 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 Automated
Quotation System). This restriction shall not be
applicable to fixed income securities determined by
Investment Management Company to be liquid and for which
a market price (including a dealer quotation) is
generally obtainable or determinable.
If any violation of the foregoing 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 the Fund is permitted under its investment
policies to invest without limit in so-called "interest-
only" (IO) and "principal-only" (PO) classes of mortgage-
backed securities, the Fund has no present intention of
investing more than 15% of its net assets in such
securities.
All percentage limitations on investments (other
than pursuant to non-fundamental restriction (1)) will
apply at the time of the making of an investment and
shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a
result of such investment.
(C) Distribution Policy:
The Fund distributes net investment income monthly
and any net realized capital gains at least annually.
Distributions from capital gains are made after applying
any available capital loss carryovers. The Fund normally
pays distributions on the 25th day of each month to
investors who hold shares as of 15th day of each month.
The payment to Japanese investors may be made at the end
of each month by Kankaku.
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 using 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 using procedures approved by the
Trustees.
B. Management Fee, etc.:
(1) Management Fee:
(a) Management and Agent Securities Company Fees
Under a Management Contract dated April 6, 1995,
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 0.65% of the first $500 million of average net
assets, 0.55% of the next $500 million, 0.50% of the
next $500 million, 0.45% of the next $5 billion,
0.425 % of the next $5 billion, 0.405% of the next
$5 billion, 0.39% of the next $5 billion, and 0.38%
thereafter.
For the fiscal years ending on October 31, 1996,
1995 and 1994 the Fund paid $8,111,205, $5,587,152
and $3,505,928, respectively as a management fee.
(b) Custodian Fee and Charges of the Investor
Servicing Agent
Putnam Fiduciary Trust Company, the Fund's
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, payable monthly 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.
The Fund will pay to Putnam Investor Services, a
division of Putnam Fiduciary Trust Company, the
Fund's Investor Servicing Agent, such fee, out of
the assets of the Fund, as is mutually agreed upon
in writing from time to time, in the amount, at the
time and in the manner of payment mutually agreed.
For the fiscal year ending on October 31, 1996,
the Fund paid $4,072,240 as a custodian fee and
investor servicing agent fee.
(c) Fee on Class M Distribution Plan
The Class M distribution plan provides for
payments by the Fund to Putnam Mutual Funds Corp. 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.
Putnam Mutual Funds Corp. makes quarterly
payments to Kankaku and other dealers at an annual
rate of 0.40% of the average net asset value of
Class M shares attributable to shareholders for whom
Kankaku and other dealers are designated as the
dealer of record.
Payments under the plan are intended to
compensate Putnam Mutual Funds Corp. for services
provided and expenses incurred by it as principal
underwriter of the Fund's shares, including the
payments to dealers mentioned above. Putnam Mutual
Funds Corp. may suspend or modify such payments to
dealers.
For the fiscal year ending on October 31, 1996,
the Fund paid fees under the distribution plan of
$3,020,633 for Class B shares.
(d) Other Expenses:
The Fund pays all expenses not assumed by
Investment Management Company, including Trustees'
fees, auditing, legal, custodial, investor servicing
and shareholder reporting expenses, and payments
under its distribution plans (which are in turn
allocated to the relevant class of shares). The
Fund also reimburses Investment Management Company
for the compensation and related expenses of certain
Fund officers and their staff who provide
administrative services. The total reimbursement is
determined annually by the Trustees and was $23,188
for Fiscal 1996.
Each Trustee receives a fee for his or her
services. Each Trustee also receives fees for
serving as Trustee of other Putnam funds. The
Trustees periodically review their fees to assure
that such fees continue to be appropriate in light
of their responsibilities as well as in relation to
fees paid to trustees of other mutual fund
complexes. The Trustees meet monthly over a two-day
period, except in August. The Compensation
Committee, which consists solely of Trustees not
affiliated with the Investment Management Company
and is responsible for recommending Trustee
compensation, estimates that Committee and Trustee
meeting time together with the appropriate
preparation requires the equivalent of at least
three business days per Trustee meeting. The
following table shows the year each Trustee was
first elected a Trustee of the Putnam funds, the
fees paid to each Trustee by the Fund for fiscal
1996 and the fees paid to each Trustee by all of the
Putnam funds during calendar 1996:
COMPENSATION TABLE
Pension on Estimated Total
Aggregate retirement annual benefits
compensation
compensation benefits accruedfrom
all from all
from the as part of Putnam funds Putnam
Trustees/Year fund (1) fund expenses (2) upon
retirement (3) funds (4)
Jameson A. Baxter/1994 (5)$2,541 $0 $85,646 $172,291
Hans H. Estin/1972 2,533 0 85,646 171,291
John A. Hill/1985 (5) 2,525 0 85,646 170,791
Ronald J. Jackson/1996 (5)(6) 1,027 0 85,646
94,807
Elizabeth T. Kennan/19922,533 0 85,646 171,291
Lawrence J. Lasser/1992 *2,520 0 85,646 169,791
Robert E. Patterson/19842,659 0 85,646 182,291
Donald S. Perkins/1982 *2,525 0 85,646 170,291
William F. Pounds/19712,801 (7) 0 85,646 197,292
George Putnam/1957 * 2,533 0 85,646 171,291
George Putnam, III/1984 *2,533 0 85,646 171,291
A.J.C. Smith/1986 * 2,520 0 85,646 169,791
W. Nicholas Thorndike/19922,647 0 85,646 181,291
(1) Includes an annual retainer and an attendance fee
for each meeting attended.
(2) The Trustees approved a Retirement Plan for Trustees
of the Putnam funds on October 1, 1996. Prior to
that date, voluntary retirement benefits were paid
to certain retired Trustees.
(3) Assumes that each Trustee retires at the normal
retirement date. Estimated benefits for each
Trustee are based on Trustee fee rates in effect
during calendar 1996.
(4) As of December 31, 1996, there were 96 funds in the
Putnam family.
(5) Includes compensation deferred pursuant to a Trustee
Compensation Deferral Plan. The total amounts of
deferred compensation payable by the Fund to
Ms. Baxter, Mr. Hill and Mr. Jackson as of October
31, 1996 were $2,253, $3,513 and $1,050,
respectively, including income earned on such
amounts.
(6) Elected as a Trustee in May 1996.
(7) Includes additional compensation for service as Vice
Chairman of the Putnam funds.
* Is or may be deemed to be an "interested person," as
defined in the Investment Company Act of 1940 of the
Fund, Investment Management Company or Putnam Mutual
Funds Corp.
Under a Retirement Plan for Trustees of the
Putnam funds (the "Plan") each Trustee who retires
with at least five years of service as a Trustee of
the funds is entitled to receive an annual
retirement benefit equal to one-half of the average
annual compensation paid to such Trustee for the
last three years of service prior to retirement.
This retirement benefit is payable during a
Trustee's lifetime, beginning the year following
retirement, for a number of years equal to such
Trustee's years of service. A death benefit is also
available under the Plan which assures that the
Trustee and his or her beneficiaries will receive
benefit payments for the lesser of an aggregate
period of (i) ten years or (ii) such Trustee's total
years of service.
The Plan Administrator (a committee comprised of
Trustees who are not "interested persons" of the
Fund, as defined in the Investment Company Act of
1940) may terminate or amend the Plan at any time,
but no termination or amendment will result in a
reduction in the amount of benefits (i) currently
being paid to a Trustee at the time of such
termination or amendment, or (ii) to which a current
Trustee would have been entitled had he or she
retired immediately prior to such termination or
amendment.
Investment Management Company places all orders
for purchases and sales of Fund securities. In
selecting broker-dealers, Investment Management
Company may consider research and brokerage services
furnished to it and its affiliates. Subject to
seeking the most favorable price and execution
available, Investment Management Company may
consider sales of Fund shares (and, if permitted by
law, of the other Putnam Funds) as a factor in the
selection of broker-dealers. During fiscal 1994,
1995 and 1996, the Fund paid $1,730,430, $123,878
and $27,784 in brokerage commissions, respectively.
During fiscal 1996 the Fund paid $75,718,858 on
transactions with an aggregate principal value of
$103,584 (24.78% of transactions) to brokers and
dealers to recognize research, statistical and
quotation services provided to Investment Management
Company and its affiliates.
For the fiscal year ending on October 31, 1996,
the Fund paid $6,427,291 in total other expenses,
including payments under its distribution plans, but
excluding management fees, investor servicing agent
expenses and custodian expenses.
C. Sales, Repurchases and Custody:
(1) Sales of Shares:
a. Sales in the United States
Investors residing in the United States 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 $25 or
more per month through automatic deductions from
investor's bank checking or savings account.
Application forms are available from investor's
investment dealer or through Investor Servicing
Agent.
Shares are sold at the public offering price
based on the net asset value next determined after
Investor Servicing Agent receives a shareholder's
order. In most cases, in order to receive that day's
public offering price, Investor Servicing Agent must
receive a shareholder's order before the close of
regular trading on the New York Stock Exchange. If
shareholders buy shares through their investment
dealer, the dealer must receive the shareholders'
orders before the close of regular trading on the
New York Stock Exchange to receive that day's public
offering price.
U.S. Offering Price and Sales Charges
The public offering price of class M shares is
the net asset value plus a sales charge that varies
depending on the size of investor's purchase. The
Fund receives the net asset value. The sales charge
is allocated between an investor's investment dealer
and Putnam Mutual Funds Corp. as shown in the
following table, except when Putnam Mutual Funds
Corp., and its discretion, allocates the entire
amount to the investor's investment dealer.
Sales charge as
Amount of sales
a percentage of:
charge reallowed
Net to dealers as
a
Amount of transactionamount Offering percentage
of
at offering price ($) invested price
offering price
Under 50,000 3.36 % 3.25 %
3.00 %
50,000 but under 100,000 2.30 % 2.25 %
2.00 %
100,000 but under 250,000 1.52 % 1.50 %
1.25 %
250,000 but under 500,000 1.01 % 1.00 %
1.00 %
500,000 and above None None None
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. Participant-directed
qualified retirement plans with at least 50 eligible
employees and members of qualified groups may also
purchase Class M shares without a sales charge.
An investor may be eligible to buy class M
shares at reduced sales charges. For fiscal 1995
and 1996, Putnam Mutual Funds Corp. received $58,818
and $128,856, respectively, in sales charges for
Class M shares, of which it retained $6,200 and
$13,212, respectively.
b. Sales in Japan
In Japan, Shares of the Fund are offered on any
Business Day and any business day of securities
company in Japan 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.
A Handling Securities Company shall provide to the
investors a Contract Concerning a Foreign Securities
Transactions Account (the "Contract") and receive
from such investors an application for requesting
the opening of a transactions account under the
Contract. The purchase shall be made in the minimum
investment amount of 200 shares and in integral
multiples of 100 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. The sales
charge in Japan shall be 3% of the amount obtained
by deduction of the amount equivalent to 3% of the
public offering price from such price (hereinafter
referred to as the "Sales Price"). Any amount,
which is over the net asset value, of the Sales
Price shall be retained by Putnam Mutual Fund Corp.,
principal underwriter of the Fund. The public
offering price means the amount calculated by
dividing the net asset value by (1- 0.0325) and
rounded to three decimal places.
The Investors having entrusted a Handling
Securities Company with safekeeping of the
certificates for Fund shares will receive a
certificate of safekeeping in exchange for the
purchase price. In such case payment shall be made
in yen in principle and the applicable exchange rate
shall be the exchange rate which shall be based on
the foreign exchange rate quoted in the Tokyo
Foreign Exchange Market on the Trade Day and which
shall be determined by such Handling Securities
Company. 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 the United States
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 U.S. securities law.
A shareholder may use Investor Servicing Agent's
Telephone Redemption Privilege to redeem shares
valued up to $100,000 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.
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 that is business day of securities
companies in Japan without a contingent deferred
sales charge. The repurchase shall be made is
integral multiples of 100 shares.
The price a shareholder in Japan will receive is
the next net asset value calculated after the Fund
receives the repurchase request from Kankaku,
provided the request is received before the close of
regular trading on the New York Stock Exchange. The
payment of the price shall be made in yen through
the Handling Securities Companies pursuant to the
Contracts or, if the Handling Securities Companies
agree, in dollars. The payment for repurchase
proceeds shall be made on the fourth business day of
securities companies in Japan after and including
the Trade Day.
(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 U.S. 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 U.S. Securities and
Exchange Commission for protection of investors.
(4) Custody of Shares:
Share certificates shall be held by Shareholders
at their own risk.
The custody of the Share certificates (if
issued) representing Shares sold to Japanese
Shareholders shall, unless otherwise instructed by
the Shareholder, be held, in the name of the
custodian, by the custodian of Kankaku.
Certificates of custody for the Shares shall be
delivered by the Handling Securities Companies to
the Japanese Shareholders.
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 31st October.
(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 maintained in
the office of the Trust and are made available for
public inspection for the Shareholders. Originals
or copies of the Agreement and Declaration of Trust,
as amended, are on file in the United States 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 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, or
other similar rights.
(6) How Performance Is Shown:
Fund advertisements may, from time to time,
include performance information. "Yield" is
calculated by dividing the annualized net investment
income per share during a recent 30-day period by
the maximum public offering price per share on the
last day of that period.
For purposes of calculating yield, net
investment income is calculated in accordance with
U.S. Securities and Exchange Commission regulations
and may differ from net investment income as
determined for financial reporting purposes. U.S.
Securities and Exchange Commission regulations
require that net investment income be calculated on
a "yield-to-maturity" basis, which has the effect of
amortizing any premiums or discounts in the current
market value of fixed-income securities. The
current dividend rate is based on net investment
income as determined for tax purposes, which may not
reflect amortization in the same manner.
Yield is based on the price of the shares,
including the maximum initial sales charge.
"Total return" for the one-, five- and ten-year
periods (or for the life of the Fund, if shorter)
through the most recent calendar quarter represents
the average annual compounded rate of return on an
investment of $1,000 in the Fund invested at the
maximum public offering price. Total return may
also be presented for other periods or based on
investment at reduced sales charge levels. Any
quotation of investment performance not reflecting
the maximum initial sales charge or contingent
deferred sales charge would be reduced if the sales
charge were used. For the one-year, five-year and
ten-year periods ended June 30, 1997, the average
annual total return for Class M shares of the Fund
was 5.7%, 6.7% and 8.3%, respectively. Returns for
Class M shares reflect the deduction of the current
maximum initial sales charge of 3.25% for Class M
shares. Returns shown for Class M shares for
periods prior to December 14, 1996 are derived from
the historical performance of Class A shares,
adjusted to reflect both the deduction of the
initial sales charge and the higher operating
expenses applicable to Class M shares. The 30-day
yield for the Class M shares of the Fund for the
period ended June 30, 1997 was 5.9%.
All data are based on past investment results
and do not predict future performance. Investment
performance, which will vary, is based on many
factors, including market conditions, portfolio
composition, Fund operating expenses and which class
of shares the investor purchases. Investment
performance also often reflects the risks associated
with the Fund's investment objective and policies.
These factors should be considered when comparing
the Fund's investment results with those of other
mutual Funds and other investment vehicles.
Quotations of investment performance for any
period when an expense limitation was in effect will
be greater than if the limitation had not been in
effect. Fund performance may be compared to that of
various indexes.
(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 investment fund is required to send to its
shareholders annual and semi-annual reports
containing financial information.
(ii)Disclosure to the SEC
The investment fund has filed a registration
statement with the SEC on Form N-1A; the Fund
updates that registration statement periodically in
accordance with the Investment Company Act of 1940.
(2) Disclosure in Japan:
a. Disclosure to the Supervisory Authority:
When the Fund intends 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 the Fund
and the agreements with major related companies as
attachments thereto. The said documents are made
available for public inspection for 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 the
contents of which are substantially identical to
Part I and Part II of the securities registration
statements. For the purpose of disclosure of the
financial conditions, etc., the Trustees 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 period 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, or any
major shareholder thereof (meaning a shareholder who
holds to the actual knowledge of Investment Management
Company, on his own account whether in his own or other
name (as well as a nominee's name), 10% or more of the
total issued outstanding shares of such a company) acting
as principal or for their own account 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:
Shareholders must register their shares in their own
name in order to exercise directly their rights as
Shareholders. Therefore, the Shareholders in Japan who
entrust the custody of their Shares to the Handling
Securities Company cannot exercise directly their
Shareholder rights, because their Shares are registered
in the name of the custodian. 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.
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 Shareholders 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 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, the accounting
books at the discretion of the Court and the minutes
of any shareholders' meetings.
(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
If, under the 1933 Act, there is any false
statement concerning any important matter in the
U.S. Registration Statement, or any omission of any
statement of important matters to be stated therein
or not to cause any misunderstanding, shareholders
are generally entitled to institute a lawsuit,
against the person who had signed the relevant
Registration Statement, the trustee of the issuer
(or any person placed in the same position) at the
time of filing such Statement, any person involved
in preparing such Statement or any subscriber of the
relevant shares.
(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.
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
Kasumigaseki Building, 25th Floor
2-5, 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
Kasumigaseki Building, 25th Floor
2-5, 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 the Investment Fund
(A) Diversification of Investment Fund:
(As of the end of
June, 1997)
Types of Assets Name of Total Investme
Country U.S. nt
Dollars Ratio
(%)
US Government United 799,592,08 46.54
Obligations States 1
Corporate Bonds United 534,888,82 31.13
States 3
Chile 29,704,515 1.73
Canada 28,719,134 1.67
Netherla 21,143,060 1.23
nds
Malaysia 10,020,147 0.58
United 9,821,966 0.57
Kingdom
Qatar 9,159,165 0.53
China 9,139,711 0.53
Denmark 8,139,519 0.47
Indonesi 7,647,302 0.45
a
Sweden 6,952,268 0.41
Israel 6,388,287 0.37
Norway 4,085,777 0.24
Finland 1,448,666 0.09
Mexico 537,700 0.03
Brazil 474,691 0.03
Luxembou 354,050 0.02
rg
Greece 252,500 0.02
Argentin 162,225 0.00
a
Ireland 157,300 0.00
Ecuador 53,125 0.00
Sub-total 689,249,93 40.12
1
Foreign Government United 58,833,398 3.42
Bonds Kingdom
Australi 46,430,499 2.70
a
Canada 26,124,620 1.52
Russia 22,710,430 1.32
South 17,782,270 1.04
Africa
Denmark 8,769,210 0.51
Sub-total 180,650,42 10.51
7
Collateralized United 57,024,739 3.32
Mortgage States
Obligations
Brady Bonds Mexico 27,350,370 1.59
Bulgaria 22,139,280 1.29
Sub-total 49,489,650 2.88
Short-term United 21,968,392 1.28
(Repurchase States
Agreement)
Asset-Backed United 16,014,438 0.93
Securities States
Municiapal Bonds United 7,665,000 0.45
States
Preferred Stock United 3,130,536 0.18
States
Germany 357,000 0.02
Sub-total 3,487,536 0.20
Units United 2,002,389 0.12
States
United 175,500 0.01
Kingdom
Sub-total 2,177,889 0.13
Common stock United 1,174,852 0.07
States
Options, Futures Japan 764,899 0.04
and
Other Derivatives United 286,149 0.02
States
Germany 2,079 0.00
Sub-total 1,053,127 0.06
Convertible bonds United 321,200 0.02
States
Convertible United 250,000 0.01
Preferred Stocks States
Warrants United 21,274 0.00
States
Cash, Deposit and - -6.52
Other Assets (After 112,139,03
deduction of 8
liabilities)
Total 1,718,001, 100.00
498
(Net Asset (Yen196,45
Value) 3 million)
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
following fiscal years and at the end of each month
within one year prior to the end of June, 1997 is as
follows:
(Note) Operations of Class M Shares were commenced on
December 14, 1994.
(2) Record of Distributions Paid
(Note) Record of distribution paid from November 1996 to
June 1997 are as follows:
(C) Record of Sales and Repurchases
Record of sales and repurchases during the following
fiscal years and number of outstanding Shares of the Fund as
of the end of such Fiscal Years are as follows:
Number of Number of Number of
Shares Sold Shares Outstanding
Repurchased Shares
1st Fiscal 1,163,283 73,164 1,090,119
Year (0) (0) (0)
(12/14/94-
10/31/95)
2nd Fiscal 2,435,804 816,055 2,709,868
Year (0) (0) (0)
(11/1/95-
10/31/96)
Note: The Share will be sold in Japan from August 27, 1997.
II. OUTLINE OF THE TRUST
1. Trust
(A) Law of Place of Incorporation
The Trust is a Massachusetts business trust
organized in Massachusetts, U.S.A. on August 13, 1982.
Chapter 182 of the Massachusetts General Laws
prescribes the fundamental matters in regard to the
operations of certain business trusts constituting
voluntary associations under that chapter.
The Trust is an open-end, diversified 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
August 13, 1982:
Organization of the Fund as a
Massachusetts business trust.
Adoption of the Agreement and
Declaration of Trust.
April 7, 1989:
Adoption of the 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 Trustees 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 U.S. 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 vote 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 in the Agreement and Declaration of Trust),
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) Trustees and Officers of the Trust
Shares
Name Office and Resume Owned
Title
George Putnam Chairman and present: Chairman and 52,862
President Director of .442
Putnam Management
and Putnam Mutual
Funds Corp.
Director, Marsh &
McLennan
Companies, Inc.
William F. Vice present: Professor of 26,636
Pounds Chairman Management, .691
Alfred P. Sloan
School of
Management,
Massachusetts
Institute of
Technology
Jameson Adkins Trustee present: President,
Baxter Baxter 854.678
Associates, Inc.
Hans H. Estin Trustee present: Vice Chairman,
North American 337.355
Management Corp.
John A. Hill Trustee present: Chairman and
Managing 596.964
Director, First
Reserve
Corporation
Ronald J. Trustee present: Former
Jackson Chairman, 392.855
President and
Chief Executive
Officer of Fisher-
Price, Inc.,
Director of
Safety 1st, Inc.,
Trustee of Salem
Hospital and the
Peabody Essex
Museum
Elizabeth T. Trustee present: President
Kennan Emeritus and 227.135
Professor, Mount
Holyoke College
Lawrence J. Trustee and present: President,
Lasser Vice Chief Executive 146.686
President Officer and
Director of
Putnam
Investments, Inc.
and Putnam
Management
Director, Marsh &
McLennan
Companies, Inc.
Robert E. Trustee present: Executive Vice
Patterson President and 949.154
Director of
Acquisitions,
Cabot Partners
Limited
Partnership
Donald S. Trustee present: Director of
Perkins various 3,113.477
corporations,
including Cummins
Engine Company,
Lucent
Technologies,
Inc., Springs
Industries, Inc.
and Time Warner
Inc.
George Putnam, Trustee present: President, New
III Generation 3,859.416
Research, Inc.
A.J.C. Smith Trustee present: Chairman and
Chief Executive 219.393
Officer, Marsh &
McLennan
Companies, Inc.
W. Nicholas Trustee present: Director of
Thorndike various 146.686
corporations and
charitable
organizations,
including Data
General
Corporation,
Bradley Real
Estate, Inc. and
Providence
Journal Co.
Trustee of
Massachusetts
General Hospital
and Eastern
Utilities
Associations
Charles E. Executive present: Managing 0
Porter Vice Director of
President Putnam
Investments, Inc.
and Putnam
Management
Patricia C. Senior Vice present: Senior Vice 0
Flaherty President President of
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 0
Silver President Senior Managing
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 present Senior Vice 0
President President of
and Putnam Management
Treasurer
Beverly Marcus Clerk and N/A 0
Assistant
Treasurer
Gary N. Coburn Vice present Senior 0
President Managing Director
of Putnam
Investments, Inc.
and Putnam
Management
John R. Verani Vice present Senior Vice 0
President President of
Putnam
Investment, Inc.
and Putnam
Management
Kenneth J. Vice present Senior Vice 0
Taubes President President of
Putnam
Investments, Inc.
and Putnam
Management
William J. Vice present Managing 0
Curtin President Director of
Putnam
Investments, Inc.
and Putnam
Management
(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 retained Putnam
Investment Management, Inc., the investment adviser, to
render investment advisory services and Putnam Fiduciary
Trust Company, to hold the assets of the Fund in custody
and act as 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 October 31. 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.
(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
$159 billion in assets in over 8 million shareholder
accounts at the end of June, 1997. 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., which is wholly owned by Marsh
& McLennan Companies, Inc., a publicly-owned holding
company whose principal businesses are international
insurance and reinsurance brokerage, employee benefit
consulting and investment management.
(E) Amount of Capital Stock (as of the end of June, 1997)
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)
End of 1992 $42,618,341
End of 1993 $49,847,760
End of 1994 $48,149,491
End of 1995 $45,521,351
End of 1996 $45,817,658
(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 managed by Investment Management Company is
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 Fixed Income Investments 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 securities 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 and other debt securities in the United States.
The following officers of Investment Management Company
have had primary responsibility for the day-to-day
management of the Fund's portfolio since the years stated
below:
Names Yea Business Experience
r (at least 5 years)
D. William 199 Employed as an investment professional by
Kohli 4 Investment Management Company since 1994.
Managing Prior to September, 1994, Mr. Kohli was
Director Executive Vice President and Co-Director of
Global Bond Management and, prior to
October, 1993, Senior Portfolio Manager at
Franklin Advisors/Templeton Investment
Counsel.
Kenneth J. 199 Employed as an investment professional by
Taubes 3 Investment Management Company since 1991.
Senior Vice
President
Robert M. Paine 199 Employed as an investment professional by
Senior Vice 7 Investment Management Company since 1987.
President
Rosemary H. 199 Employed as an investment professional by
Thomsen 5 Investment Management Company since 1986.
Senior Vice
President
(G) Information Concerning Major Stockholders
As of the end of June, 1997, 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. ( as of June 30, 1997 )
Position with
Putnam
Name Investment Other Business Affiliation
Management,
Inc.
Putnam, Chairman Chairman of Putnam Mutual
George Funds Corp.
Lasser, President and
Lawrence Director
J.
Silver, Director and Putnam Fiduciary Trust
Gordon H. Senior Company
Managing Senior Administrative
Director Officer and Director of
Putnam Mutual Funds Corp.
Jamieson, Director and Treasurer of Putnam Mutual
Douglas Senior Funds Corp.
B. Managing
Director
Moran, Managing Treasurer, Director and
Timothy Director Security Officer of Putnam
P. Fiduciary Trust Company
Burke, Director and Senior Managing Director of
Robert W. Senior Putnam Mutual Funds Corp.
Managing
Director
Coburn, Senior
Gary N. Managing
Director
Ferguson, Senior
Ian C. Managing
Director
Spiegel, Director and Senior Managing Director of
Steven Senior Putnam Mutual Funds Corp.
Managing
Director
Anderson, Managing
Blake E. Director
Bankart, Managing
Alan J. Director
Bogan, Managing
Thomas Director
Browchuk, Managing
Brett Director
Collman, Managing Managing Director of Putnam
Kathleen Director Mutual Funds Corp.
M.
Curtin, Managing
William Director
J.
D'Alelio, Managing
Edward H. Director
DeTore, Managing Managing Director of Putnam
John A. Director Fiduciary Trust Company
Durgarian Managing Director and Managing
, Karnig Director Director of Putnam Fiduciary
H. Trust Company
Esteves, Senior
Irene M. Managing
Director
Ho, Jin Managing
W. Director
Hurley, Managing Managing Director of Putnam
William Director Mutual Funds Corp.
J.
Jacobs, Managing
Jerome J. Director
Kearney, Managing Managing Director of Putnam
Mary E. Director Mutual Funds Corp.
Kohli, D. Managing
William Director
Kreisel, Managing
Anthony Director
I.
Landes, Managing
William Director
J.
Maloney, Managing
Kevin J. Director
Martino, Managing
Michael Director
Maxwell, Managing
Scott M. Director
McGue, Managing
William Director
F.
McMullen, Managing
Carol C. Director
Miller, Managing
Daniel L. Director
Montgomer Managing
y, Director
Kenneth
Morgan Managing Managing Director of Putnam
Jr., John Director Fiduciary Trust Company
J.
O'Donnell Managing
Jr., C. Director
Patrick
Peacher, Managing
Stephen Director
C.
Porter, Managing
Charles Director
E.
Reilly, Managing
Thomas V. Director
Scott, Managing Managing Director of Putnam
Justin M. Director Fiduciary Trust Company
Talanian, Managing Managing Director of Putnam
John C. Director Mutual Funds Corp.
Woolverto Managing Managing Director of Putnam
n, Director Mutual Funds Corp.
William
H.
Asher, Senior Vice Senior Vice President of
Steven E. President Putnam Mutual Funds Corp.
Baumback, Senior Vice
Robert K. President
Beck, Senior Vice
Robert R. President
Bousa, Senior Vice
Edward P. President
Bresnahan Senior Vice Senior Vice President of
, Leslee President Putnam Mutual Funds Corp.
R.
Burns, Senior Vice
Cheryl A. President
Cassaro, Managing
Joseph A. Director
Chapman, Senior Vice
Susan President
Cotner, Senior Vice
Beth C. President
Curran, Senior Vice Senior Vice President of
J. Peter President Putnam Mutual Funds Corp.
Dalferro, Senior Vice
John R. President
Daly, Senior Vice Senior Vice President of
Kenneth President Putnam Mutual Funds Corp.
L.
England, Senior Vice
Richard President
B.
Fitzgeral Senior Vice
d, President
Michael
T.
Flaherty, Senior Vice Senior Vice President of
Patricia President Putnam Mutual Funds Corp.
C.
Francis, Senior Vice
Jonathan President
H.
Frucci, Senior Vice Senior Vice President of
Richard President Putnam Fiduciary Trust
M. Company
Fullerton Senior Vice Senior Vice President of
, Brian President Putnam Mutual Funds Corp.
J.
Gillis, Managing
Roland Director
Goodwin, Senior Vice
Kim C. President
Grant, J. Senior Vice Senior Vice President of
Peter President Putnam Fiduciary Trust
Company
Grim, Senior Vice
Daniel J. President
Haagensen Senior Vice
, Paul E. President
Halperin, Senior Vice
Matthew President
C.
Han, Senior Vice
Billy P. President
Healey, Senior Vice
Deborah President
R.
Joseph, Senior Vice
Joseph P. President
Joyce, Senior Vice Senior Vice President of
Kevin M. President Putnam Mutual Funds Corp.
Kamshad, Senior Vice
Omid President
Kay, Senior Vice Clerk, Director and Senior
Karen R. President Vice President of Putnam
Fiduciary Trust Company
King, Managing
David L. Director
Kirson, Senior Vice
Steven L. President
Leichter, Senior Vice
Jennifer President
E.
Lindsey, Senior Vice
Jeffrey President
R.
Lukens, Senior Vice
James W. President
Manning, Senior Vice
Howard K. President
Matteis, Senior Vice
Andrew S. President
McAuley, Senior Vice
Alexander President
J.
McDonald, Senior Vice
Richard President
E.
Meehan, Senior Vice
Thalia President
Mikami, Senior Vice
Darryl President
Mockard, Senior Vice
Jeanne L. President
Morgan, Senior Vice
Kelly A. President
Mufson, Senior Vice
Michael President
J.
Mullin, Senior Vice
Hugh H. President
Netols, Senior Vice Senior Vice President of
Jeffrey President Putnam Fiduciary Trust
W. Company
Nguyen, Senior Vice
Triet M. President
Paine, Senior Vice
Robert M. President
Pohl, Senior Vice
Charles President
G.
Pollard, Senior Vice
Mark D. President
Powers, Senior Vice
Neil J. President
Quinton, Senior Vice
Keith P. President
Ray, Senior Vice
Christoph President
er A.
Reeves, Senior Vice
William President
H.
Regan, Senior Vice
Anthony President
W.
Rosalanko Senior Vice
, Thomas President
J.
Ruys de Senior Vice Senior Vice President of
Perez, President Putnam Fiduciary Trust
Charles Company
A.
Schwister Senior Vice Senior Vice President of
, Jay E. President Putnam Fiduciary Trust
Company
Senter, Senior Vice Senior Vice President of
Max S. President Putnam Fiduciary Trust
Company
Simon, Senior Vice
Sheldon President
N.
Smith Senior Vice
Jr., Leo President
J.
Smith, Senior Vice
Margaret President
D.
Storkerso Senior Vice Senior Vice President of
n, John President Putnam Fiduciary Trust
K. Company
Strumpf, Senior Vice
Casey President
Sullivan, Senior Vice
Roger R. President
Swanberg, Senior Vice
Charles President
H.
Swift, Senior Vice
Robert President
Taubes, Senior Vice Senior Vice President of
Kenneth President Putnam Fiduciary Trust
J. Company
Thomas, Senior Vice
David K. President
Thomsen, Senior Vice Senior Vice President of
Rosemary President Putnam Fiduciary Trust
H. Company
Tibbetts, Senior Vice Senior Vice President of
Richard President Putnam Mutual Funds Corp.
B.
Till, Senior Vice
Hilary F. President
Van Senior Vice
Vleet, President
Charles
C.
Verani, Senior Vice Senior Vice President of
John R. President Putnam Fiduciary Trust
Company
Weinstein Senior Vice
, Michael President
R.
Weiss, Senior Vice
Man President
uel
Schultz, Senior Vice
Mitchell President
D.
Wheeler, Senior Vice
Diane President
D.F.
Wyke, Senior Vice
Richard President
P.
Zukowski, Senior Vice
Gerald S. President
Haslett, Managing
Thomas R. Director
Zieff, Managing
William Director
Svensson, Senior Vice
Lisa A. President
(I) Summary of Business Lines and Business Operation
Investment Management Company is engaged in the business
of providing investment management and investment
advisory services to mutual funds. As of the end of
June, 1997, Investment Management Company managed,
advised, and/or administered the following 101 funds
and
fund portfolios (having an aggregate net asset value of
approximately $ 159 billion):
(As of the end of June,
1997)
Name Month/D Total Net
ate/ Principa Net Asset
Year l Asset Value
Establi Characte Value per
shed ristics ($ share
millio ($)
n)
The George Putnam Fund 11/5/37 Open/Equ 2,377. 18.06
of Boston; A ity 9
The George Putnam Fund 4/24/92 Open/Equ 820.1 17.95
of Boston; B ity
The George Putnam Fund 12/1/94 Open/Equ 169.0 17.94
of Boston; M ity
The George Putnam Fund 1/1/94 Open/Equ 362.8 18.08
of Boston; Y ity
Putnam Arizona Tax 1/30/91 Open/Bon 122.8 9.09
Exempt Income Fund; A d
Putnam Arizona Tax 7/15/93 Open/Bon 28.5 9.07
Exempt Income Fund; B d
Putnam Arizona Tax 7/3/95 Open/Bon 0.6 9.10
Exempt Income Fund; M d
Putnam American 3/1/85 Open/Bon 1,592. 8.54
Government Income Fund; d 2
A
Putnam American 5/20/94 Open/Bon 28.7 8.50
Government Income Fund; d
B
Putnam American 2/14/95 Open/Bon 1.2 8.54
Government Income Fund; d
M
Putnam Asia Pacific 2/20/91 Open/Equ 493.0 14.27
Growth Fund; A ity
Putnam Asia Pacific 6/1/93 Open/Equ 227.7 14.04
Growth Fund; B ity
Putnam Asia Pacific 2/1/95 Open/Equ 11.5 14.16
Growth Fund; M ity
Putnam Asset Allocation: 2/7/94 Open/Bal 572.5 11.55
Balanced Portfolio; A anced
Putnam Asset Allocation: 2/11/94 Open/Bal 390.0 11.49
Balanced Portfolio; B anced
Putnam Asset Allocation: 9/1/94 Open/Bal 58.9 11.45
Balanced Portfolio; C anced
Putnam Asset Allocation: 2/6/95 Open/Bal 35.4 11.54
Balanced Portfolio; M anced
Putnam Asset Allocation: 7/14/94 Open/Bal 217.9 11.55
Balanced Portfolio; Y anced
Putnam Asset Allocation: 2/7/94 Open/Bal 279.3 10.16
Conservative Portfolio; anced
A
Putnam Asset Allocation: 2/18/94 Open/Bal 125.9 10.13
Conservative Portfolio; anced
B
Putnam Asset Allocation: 9/1/94 Open/Bal 26.1 10.11
Conservative Portfolio; anced
C
Putnam Asset Allocation: 2/7/95 Open/Bal 10.9 10.14
Conservative Portfolio; anced
M
Putnam Asset Allocation: 7/14/94 Open/Bal 17.9 10.17
Conservative Portfolio; anced
Y
Putnam Asset Allocation: 2/8/94 Open/Bal 385.7 12.64
Growth Portfolio; A anced
Putnam Asset Allocation: 2/16/94 Open/Bal 309.6 12.50
Growth Portfolio; B anced
Putnam Asset Allocation: 9/1/94 Open/Bal 54.9 12.42
Growth Portfolio; C anced
Putnam Asset Allocation: 2/1/95 Open/Bal 28.5 12.51
Growth Portfolio; M anced
Putnam Asset Allocation: 7/14/94 Open/Bal 213.9 12.70
Growth Portfolio; Y anced
Putnam Balanced 4/19/85 Open/Bal 567.4 11.17
Retirement Fund; A anced
Putnam Balanced 2/1/94 Open/Bal 68.4 11.09
Retirement Fund; B anced
Putnam Balanced 3/17/95 Open/Bal 6.4 11.13
Retirement Fund; M anced
Putnam California Tax 4/29/83 Open/Bon 3,084. 8.54
Exempt Income Fund; A d 1
Putnam California Tax 1/4/93 Open/Bon 556.2 8.53
Exempt Income Fund; B d
Putnam California Tax 2/14/95 Open/Bon 13.1 8.53
Exempt Income Fund; M d
Putnam VT Asia Pacific 5/1/95 Open/Equ 151.3 11.51
Growth Fund ity
Putnam VT Diversified 9/15/93 Open/Bon 549.0 10.78
Income Fund d
Putnam VT Global Growth 5/1/90 Open/Equ 1,643. 18.62
Fund ity 1
Putnam VT Global Asset 2/1/88 Open/Bal 883.4 17.72
Allocation Fund anced
Putnam VT Growth and 2/1/88 Open/Bal 7,349. 26.41
Income Fund anced 8
Putnam VT High Yield 2/1/88 Open/Bon 873.3 12.61
Fund d
Putnam VT Money Market 2/1/88 Open/Bon 498.7 1.00
Fund d
Putnam VT New 5/2/94 Open/Equ 2,075. 18.95
Opportunities Fund ity 7
Putnam VT U.S. 2/1/88 Open/Bon 758.6 12.70
Government and High d
Quality Bond Fund
Putnam VT Utilities 5/1/92 Open/Bal 699.3 14.41
Growth and Income Fund anced
Putnam VT Voyager Fund 2/1/88 Open/Equ 3,832. 34.46
ity 9
Putnam Capital 8/5/93 Open/Equ 586.7 19.71
Appreciation Fund; A ity
Putnam Capital 11/2/94 Open/Equ 613.3 19.52
Appreciation Fund; B ity
Putnam Capital 1/22/96 Open/Equ 40.1 19.55
Appreciation Fund; M ity
Putnam Convertible 6/29/72 Open/Bal 1,076. 22.12
Income-Growth Trust; A anced 6
Putnam Convertible 7/15/93 Open/Bal 218.5 21.94
Income-Growth Trust; B anced
Putnam Convertible 3/13/95 Open/Bal 12.5 22.00
Income-Growth Trust; M anced
Putnam Diversified 7/1/94 Open/Equ 223.2 13.08
Equity Trust; A ity
Putnam Diversified 7/2/94 Open/Equ 267.8 12.97
Equity Trust; B ity
Putnam Diversified 7/3/95 Open/Equ 18.4 13.01
Equity Trust; M ity
Putnam Diversified 10/3/88 Open/Bon 2,023. 12.36
Income Trust; A d 0
Putnam Diversified 3/1/93 Open/Bon 2,300. 12.31
Income Trust; B d 0
Putnam Diversified 12/1/94 Open/Bon 250.7 12.33
Income Trust; M d
Putnam Diversified 7/11/96 Open/Bon 18.8 12.37
Income Trust ; Y d
Putnam Equity Income 6/15/77 Open/Bal 756.2 15.00
Fund; A anced
Putnam Equity Income 9/13/93 Open/Bal 371.9 14.93
Fund; B anced
Putnam Equity Income 12/2/94 Open/Bal 42.7 14.94
Fund; M anced
Putnam Europe Growth 9/7/90 Open/Equ 321.4 18.96
Fund; A ity
Putnam Europe Growth 2/1/94 Open/Equ 261.5 18.56
Fund; B ity
Putnam Europe Growth 12/1/94 Open/Equ 16.2 18.85
Fund; M ity
Putnam Florida Tax 8/24/90 Open/Bon 238.9 9.23
Exempt Income Fund; A d
Putnam Florida Tax 1/4/93 Open/Bon 60.3 9.22
Exempt Income Fund; B d
Putnam Florida Tax 5/1/95 Open/Bon 1.5 9.22
Exempt Income Fund; M d
Putnam Federal Income 6/2/86 Open/Bon 351.7 9.97
Trust; A d
Putnam Federal Income 6/6/94 Open/Bon 11.8 9.93
Trust; B d
Putnam Federal Income 4/12/95 Open/Bon 0.8 9.97
Trust; M d
Putnam Global 6/1/87 Open/Bon 319.7 13.79
Governmental Income d
Trust; A
Putnam Global 2/1/94 Open/Bon 42.7 13.76
Governmental Income d
Trust; B
Putnam Global 3/17/95 Open/Bon 2.4 13.74
Governmental Income d
Trust; M
Putnam Global Growth 9/1/67 Open/Equ 2,738. 12.49
Fund; A ity 9
Putnam Global Growth 4/27/92 Open/Equ 1,714. 12.12
Fund; B ity 3
Putnam Global Growth 3/1/95 Open/Equ 42.0 12.41
Fund; M ity
Putnam Global Growth 6/15/94 Open/Equ 103.7 12.66
Fund; Y ity
Putnam Growth and Income 1/5/95 Open/Bal 894.1 14.08
Fund II; A anced
Putnam Growth and Income 1/5/95 Open/Bal 1,077. 14.00
Fund II; B anced 8
Putnam Growth and Income 1/5/95 Open/Bal 133.2 14.04
Fund II; M anced
The Putnam Fund for 11/6/57 Open/Bal 15,519 20.62
Growth and Income; A anced .5
The Putnam Fund for 4/27/92 Open/Bal 12,600 20.42
Growth and Income; B anced .4
The Putnam Fund for 5/1/95 Open/Bal 286.0 20.54
Growth and Income; M anced
The Putnam Fund for 6/15/94 Open/Bal 544.9 20.65
Growth and Income; Y anced
Putnam High Yield 3/25/86 Open/Bon 1,237. 9.76
Advantage Fund; A d 0
Putnam High Yield 5/16/94 Open/Bon 881.5 9.72
Advantage Fund; B d
Putnam High Yield 12/1/94 Open/Bon 1,208. 9.75
Advantage Fund; M d 0
Putnam High Yield Trust; 2/14/78 Open/Bon 3,228. 12.68
A d 0
Putnam High Yield Trust; 3/1/93 Open/Bon 1,224. 12.63
B d 0
Putnam High Yield Trust; 7/3/95 Open/Bon 23.6 12.67
M d
Putnam Health Sciences 5/28/82 Open/Equ 1,664. 56.21
Trust; A ity 6
Putnam Health Sciences 3/1/93 Open/Equ 516.2 54.99
Trust; B ity
Putnam Health Sciences 7/3/95 Open/Equ 21.5 56.39
Trust; M ity
Putnam Income Fund; A 11/1/54 Open/Bon 1,171. 6.99
d 4
Putnam Income Fund; B 3/1/93 Open/Bon 374.7 6.96
d
Putnam Income Fund; M 12/14/9 Open/Bon 27.6 6.96
4 d
Putnam Income Fund; Y 2/12/94 Open/Bon 144.7 7.00
d
Putnam Intermediate U.S. 2/16/93 Open/Bon 138.8 4.84
Government Income Fund; d
A
Putnam Intermediate U.S. 2/16/93 Open/Bon 62.7 4.84
Government Income Fund; d
B
Putnam Intermediate U.S. 4/3/95 Open/Bon 4.5 4.85
Government Income Fund; d
M
Putnam International New 1/3/95 Open/Equ 851.6 13.90
Opportunities Fund; A ity
Putnam International New 7/21/95 Open/Equ 1,035. 13.77
Opportunities Fund; B ity 8
Putnam International New 7/21/95 Open/Equ 88.7 13.83
Opportunities Fund; M ity
Putnam Investors Fund; A 12/1/25 Open/Equ 1,626. 10.96
ity 8
Putnam Investors Fund; B 3/1/93 Open/Equ 253.6 10.63
ity
Putnam Investors Fund; M 12/2/94 Open/Equ 20.7 10.84
ity
Putnam Investors Fund; Y 11/30/9 Open/Equ 16.8 10.97
6 ity
Putnam Massachusetts Tax 10/23/8 Open/Bon 280.5 9.38
Exempt Income Fund; A 9 d
Putnam Massachusetts Tax 7/15/93 Open/Bon 87.1 9.37
Exempt Income Fund; B d
Putnam Massachusetts Tax 5/12/95 Open/Bon 2.7 9.37
Exempt Income Fund; M d
Putnam Michigan Tax 10/23/8 Open/Bon 143.0 9.18
Exempt Income Fund; A 9 d
Putnam Michigan Tax 7/15/93 Open/Bon 35.4 9.17
Exempt Income Fund; B d
Putnam Michigan Tax 4/17/95 Open/Bon 0.8 9.18
Exempt Income Fund; M d
Putnam Minnesota Tax 10/23/8 Open/Bon 99.1 9.01
Exempt Income Fund; A 9 d
Putnam Minnesota Tax 7/15/93 Open/Bon 36.0 8.98
Exempt Income Fund; B d
Putnam Minnesota Tax 4/3/95 Open/Bon 1.4 9.00
Exempt Income Fund; M d
Putnam Money Market 10/1/76 Open/Bon 2,201. 1.00
Fund; A d 9
Putnam Money Market 4/27/92 Open/Bon 485.7 1.00
Fund; B d
Putnam Money Market 12/8/94 Open/Bon 55.7 1.00
Fund; M d
Putnam Municipal Income 5/22/89 Open/Bon 806.3 9.04
Fund; A d
Putnam Municipal Income 1/4/93 Open/Bon 480.3 9.03
Fund; B d
Putnam Municipal Income 12/1/94 Open/Bon 12.3 9.03
Fund; M d
Putnam New Jersey Tax 2/20/90 Open/Bon 228.4 9.08
Exempt Income Fund; A d
Putnam New Jersey Tax 1/4/93 Open/Bon 83.9 9.07
Exempt Income Fund; B d
Putnam New Jersey Tax 5/1/95 Open/Bon 0.4 9.08
Exempt Income Fund; M d
Putnam New York Tax 9/2/83 Open/Bon 1,757. 8.87
Exempt Income Fund; A d 7
Putnam New York Tax 1/4/93 Open/Bon 224.3 8.85
Exempt Income Fund; B d
Putnam New York Tax 4/10/95 Open/Bon 1.6 8.87
Exempt Income Fund; M d
Putnam New York Tax 11/7/90 Open/Bon 162.8 8.98
Exempt Opportunities d
Fund; A
Putnam New York Tax 2/1/94 Open/Bon 52.0 8.97
Exempt Opportunities d
Fund; B
Putnam New York Tax 2/10/95 Open/Bon 1.8 8.96
Exempt Opportunities d
Fund; M
Putnam Global Natural 7/24/80 Open/Equ 230.7 21.07
Resources Fund; A ity
Putnam Global Natural 2/1/94 Open/Equ 128.6 20.75
Resources Fund; B ity
Putnam Global Natural 7/3/95 Open/Equ 7.0 20.96
Resources Fund; M ity
Putnam New Opportunities 8/31/90 Open/Equ 7,380. 44.47
Fund; A ity 4
Putnam New Opportunities 3/1/93 Open/Equ 6,361. 43.09
Fund; B ity 5
Putnam New Opportunities 12/1/94 Open/Equ 337.6 43.91
Fund; M ity
Putnam New Opportunities 7/19/94 Open/Equ 253.7 44.82
Fund; Y ity
Putnam Ohio Tax Exempt 10/23/8 Open/Bon 186.2 9.05
Income Fund; A 9 d
Putnam Ohio Tax Exempt 7/15/93 Open/Bon 48.1 9.04
Income Fund; B d
Putnam Ohio Tax Exempt 4/3/95 Open/Bon 1.0 9.05
Income Fund; M d
Putnam OTC & Emerging 11/1/82 Open/Equ 2,037. 14.99
Growth Fund; A ity 6
Putnam OTC & Emerging 7/15/93 Open/Equ 1,018. 14.46
Growth Fund; B ity 6
Putnam OTC & Emerging 12/2/94 Open/Equ 158.4 14.77
Growth Fund; M ity
Putnam OTC & Emerging 7/12/96 Open/Equ 98.4 15.04
Growth Fund; Y ity
Putnam International 2/28/91 Open/Equ 735.7 17.57
Growth Fund; A ity
Putnam International 6/1/94 Open/Equ 480.5 17.32
Growth Fund; B ity
Putnam International 12/1/94 Open/Equ 58.4 17.48
Growth Fund; M ity
Putnam International 7/12/96 Open/Equ 96.2 17.60
Growth Fund; Y ity
Putnam Pennsylvania Tax 7/21/89 Open/Bon 185.8 9.28
Exempt Income Fund; A d
Putnam Pennsylvania Tax 7/15/93 Open/Bon 78.7 9.27
Exempt Income Fund; B d
Putnam Pennsylvania Tax 7/3/95 Open/Bon 0.7 9.29
Exempt Income Fund; M d
Putnam Preferred Income 1/4/84 Open/Bon 112.8 8.83
Fund; A d
Putnam Preferred Income 4/20/95 Open/Bon 7.3 8.81
Fund; M d
Putnam Tax - Free Income 9/20/93 Open/Bon 596.3 14.29
Trust d
Tax - Free High Yield
Fund; A
Putnam Tax - Free Income 9/9/85 Open/Bon 1,408. 14.29
Trust d 1
Tax - Free High Yield
Fund B
Putnam Tax - Free Income 12/29/9 Open/Bon 15.9 14.28
Trust 4 d
Tax - Free High Yield
Fund M
Putnam Tax - Free Income 9/30/93 Open/Bon 196.9 15.11
Trust d
Tax - Free Insured Fund;
A
Putnam Tax - Free Income 9/9/85 Open/Bon 333.5 15.13
Trust d
Tax - Free Insured Fund;
B
Putnam Tax - Free Income 6/1/95 Open/Bon 0.9 15.11
Trust d
Tax - Free Insured Fund;
M
Putnam Tax Exempt Income 12/31/7 Open/Bon 2,041. 8.96
Fund; A 6 d 9
Putnam Tax Exempt Income 1/4/93 Open/Bon 244.0 8.96
Fund; B d
Putnam Tax Exempt Income 2/16/95 Open/Bon 7.3 8.98
Fund; M d
Putnam Tax Exempt Money 10/26/8 Open/Bon 109.1 1.00
Market Fund 7 d
Putnam U.S. Government 2/8/84 Open/Bon 2,200. 12.87
Income Trust; A d 4
Putnam U.S. Government 4/27/92 Open/Bon 1,327. 12.83
Income Trust; B d 9
Putnam U.S. Government 2/6/95 Open/Bon 7.7 12.86
Income Trust; M d
Putnam U.S. Government 4/11/94 Open/Bon 5.4 12.86
Income Trust; Y d
Putnam Utilities Growth 11/19/9 Open/Bal 631.0 11.90
and Income Fund; A 0 anced
Putnam Utilities Growth 4/27/92 Open/Bal 648.8 11.85
and Income Fund; B anced
Putnam Utilities Growth 3/1/95 Open/Bal 7.8 11.90
and Income Fund; M anced
Putnam Vista Fund; A 6/3/68 Open/Equ 2,316. 11.55
ity 2
Putnam Vista Fund; B 3/1/93 Open/Equ 1,089. 11.16
ity 0
Putnam Vista Fund; M 12/1/94 Open/Equ 78.9 11.40
ity
Putnam Vista Fund; Y 3/28/95 Open/Equ 224.6 11.64
ity
Putnam Voyager Fund II; 4/14/93 Open/Equ 430.7 16.91
A ity
Putnam Voyager Fund II; 10/2/95 Open/Equ 396.5 16.69
B ity
Putnam Voyager Fund II; 10/2/95 Open/Equ 45.4 16.78
M ity
Putnam Voyager Fund; A 4/1/96 Open/Equ 10,015 17.95
ity .4
Putnam Voyager Fund; B 4/27/92 Open/Equ 5,153. 17.12
ity 7
Putnam Voyager Fund; M 12/1/94 Open/Equ 181.0 17.71
ity
Putnam Voyager Fund; Y 4/1/94 Open/Equ 1,141. 18.14
ity 4
Putnam California 11/27/9 Closed/B 69.4 15.06
Investment Grade 2 ond
Municipal Trust
Putnam Convertible 6/29/95 Closed/B 100.3 27.09
Opportunities and Income ond
Trust
Putnam Dividend Income 9/28/89 Closed/B 121.5 11.23
Fund ond
Putnam High Income 7/9/87 Closed/B 134.2 10.05
Convertible and Bond ond
Fund
Putnam Intermediate 6/27/88 Closed/B 532.9 8.28
Government Income Trust ond
Putnam Investment Grade 10/26/8 Closed/B 242.6 11.80
Municipal Trust 9 ond
Putnam Investment Grade 11/27/9 Closed/B 186.1 13.94
Municipal Trust II 2 ond
Putnam Investment Grade 11/29/9 Closed/B 52.5 13.10
Municipal Trust III 3 ond
Putnam Managed High 6/25/93 Closed/B 107.0 14.26
Yield Trust ond
Putnam Managed Municipal 2/24/89 Closed/B 450.0 9.84
Income Trust ond
Putnam Master Income 12/28/8 Closed/B 486.2 9.16
Trust 7 ond
Putnam Master 4/29/88 Closed/B 331.2 8.62
Intermediate Income ond
Trust
Putnam Municipal 5/28/93 Closed/B 223.2 13.81
Opportunities Trust ond
Putnam New York 11/27/9 Closed/B 39.2 13.76
Investment Grade 2 ond
Municipal Trust
Putnam Premier Income 2/29/88 Closed/B 1,227. 8.75
Trust ond 8
Putnam Tax - Free Heath 6/29/92 Closed/B 202.4 14.66
Care Fund ond
Putnam American 10/2/95 Open/Equ 4.8 12.24
Renaissance Fund; A ity
Putnam Diversified 2/19/95 Open/Bon 44.0 8.53
Income Trust II; A d
Putnam Diversified 2/19/96 Open/Bon 63.1 8.53
Income Trust II; B d
Putnam Diversified 2/19/96 Open/Bon 7.3 8.53
Income Trust II; M d
Putnam Equity Fund 97 12/30/9 Open/Equ 2.4 8.37
6 ity
Putnam High Yield Total 1/1/97 Open/Bon 9.3 8.72
Return Fund; A d
Putnam High Yield Total 1/1/97 Open/Bon 11.0 8.71
Return Fund; B d
Putnam High Yield Total 1/1/97 Open/Bon 1.3 8.72
Return Fund; M d
Putnam VT International 1/1/97 Open/Bal 109.5 11.57
Growth and Income anced
Putnam VT International 1/1/97 Open/Equ 84.2 11.17
New Opportunities Fund ity
Putnam VT International 1/1/97 Open/Equ 82.3 11.58
Growth Fund ity
Putnam Balanced Fund 10/2/95 Open/Bal 2.5 11.07
anced
Putnam Emerging Markets 10/2/95 Open/Equ 47.1 12.21
Fund; A ity
Putnam Emerging Markets 10/2/95 Open/Equ 34.1 12.16
Fund; B ity
Putnam Emerging Markets 10/2/95 Open/Equ 3.6 12.17
Fund; M ity
Putnam California Tax 10/26/8 Open 34.1 1.00
Exempt Money Market Fund 7
Putnam High Yield 5/25/89 Closed 200.0 9.20
Municipal Trust
Putnam New York Tax 10/26/8 Open 47.0 1.00
Exempt Money Market Fund 7
Putnam International 8/1/96 Open 158.1 10.76
Growth and Income Fund;
A
Putnam International 8/1/96 Open 173.5 10.72
Growth and Income Fund;
B
Putnam International 8/1/96 Open 16.9 10.74
Growth and Income Fund;
M
Putnam Research Fund 10/2/95 Open 10.7 12.48
Putnam New Value Fund; 1/3/95 Open 388.4 14.29
A
Putnam New Value Fund; 2/26/96 Open 368.9 14.17
B
Putnam New Value Fund; 2/26/96 Open 42.4 14.22
M
Putnam Global Growth and 1/3/95 Open 2.7 11.74
Income Fund
Putnam International 12/28/9 Open 3.8 9.99
Fund 5
Putnam Japan Fund 12/28/9 Open 3.3 7.67
5
Putnam International 12/28/9 Open 33.4 11.96
Voyager Fund; A 5
Putnam International 10/30/9 Open 25.3 11.92
Voyager Fund; B 6
Putnam International 10/30/9 Open 3.3 11.93
Voyager Fund; M 6
Putnam VT New Value Fund 1/2/97 Open 113.8 11.19
Putnam VT Vista Fund 1/2/97 Open 90.4 11.04
(J) Miscellaneous
1. Election and Removal of Directors
Directors of Investment Management Company are
elected to office or removed from office by vote of
either stockholders or directors, in accordance with
Articles of Organization and By-Laws of Investment
Management Company.
2. Results of operations
Officers are elected by the Board of Directors. The
Board of Directors may remove any officer without cause.
3. Supervision by SEC of Changes in Directors and
Certain Officers
Putnam files certain reports with the SEC in
accordance with Sections 203 and 204 of the Investment
Advisers Act of 1940, which reports list and provide
certain information relating to directors and officers
of Investment Management Company.
4. Amendment to the Articles of Organization, Transfer
of Business and Other Important Matters.
a. Articles of Organization of Investment
Management Company may be amended, under the
General Corporation Law of The Commonwealth of
Massachusetts, by appropriate shareholders'
vote.
b. Under the General Corporation Law of The
Commonwealth of Massachusetts, transfer of
business requires a vote of 2/3 of the
stockholders entitled to vote thereon.
c. Investment Management Company has no direct
subsidiaries.
5. Litigation, etc.
There are no known facts, such as legal proceedings,
which are expected to materially affect the Fund and/or
Investment Management Company within the six-month period
preceding the filing of this Registration Statement.
III. OUTLINE OF THE OTHER RELATED COMPANIES
(A) Putnam Fiduciary Trust Company (the Transfer Agent,
Shareholder Service Agent and Custodian)
(1) Amount of Capital
U.S.$37,984,000 as of the end of June, 1997
(2) Description of Business
Putnam Fiduciary Trust Company is a Massachusetts
trust company and is a wholly-owned subsidiary of
Putnam Investments, Inc., parent of Putnam. Putnam
Fiduciary Trust Company has been providing paying
agent and shareholder service agent services to
mutual funds, including the Fund, since its
inception and custody services since 1990.
(3) Outline of Business Relationship with the Fund
Putnam Fiduciary Trust Company provides transfer
agent services, shareholder services and custody
services to the Fund.
(B) Putnam Mutual Funds Corp. (the Principal Underwriter)
(1) Amount of Capital
U.S.$183,055,000 as of the end of June, 1997
(2) Description of Business
Putnam Mutual Funds Corp. is the Principal
Underwriter of the shares of Putnam Funds including
the Fund.
(3) Outline of Business Relationship with the Fund
Putnam Mutual Funds Corp. engages in providing
marketing services to the Fund.
(C) Kankaku Securities Co., Ltd. (Distributor in Japan and
Agent Securities Company)
(1) Amount of Capital
Yen51.1 billion as of the end of June, 1997
(2) Description of Business
Kankaku Securities Co., Ltd. is a diversified
securities company in Japan. Kankaku Securities
Co., Ltd. engages in handling the sales and
redemptions of the fund shares for 4 offering
foreign investment funds.
(3) The Company acts as a Distributor in Japan and Agent
Securities Company for the Fund in connection with
the offering of shares in Japan.
(D) Capital Relationships
100% of the shares of Putnam Investment Management,
Inc. are held by Putnam Investments, Inc.
(E) Interlocking Directors and Auditors
Names and functions of officers of the Fund who also
are officers of the related companies are as follows:
( as of the filing
date)
Name of Investment Transfer Agent
Officer Management and
or Fund Company Shareholder
Trustee Service Agent
George Chairman and Chairman and None
Putnam Trustee Director
Charles Executive Vice Managing None
E. Porter President Director
Patricia Senior Vice Senior Vice None
C. President President
Flaherty
Lawrence Trustee and President and None
J. Lasser Vice President CEO
Gordon H. Vice President Senior Director
Silver Managing
Director
Gary N. Vice President Senior None
Coburn Managing
Director
Jin W. Ho Vice President Managing None
Director
John R. Vice President Senior Vice None
Verani President
Paul M. Vice President Vice President None
O'Neil
Gail S. Vice President Senior Vice None
Attridge President
D. Vice President Managing None
William Director
Kohli
Michael Vice President Managing None
Martino Director
Kenneth Vice President Senior Vice None
J. Taubes President
William Vice President Managing None
J. Curtin Director
David L. Vice President Managing None
Waldman Director
IV. FINANCIAL CONDITION OF THE FUND
1. FINANCIAL STATEMENTS
[Omitted, in Japanese version, financial statements of
the Fund and Japanese translations thereof are
incorporated here]
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 1996 fiscal year
are presented in their entirety on in this SRS. The
Fund's annual report is available without charge upon
request.
Financial highlights (For a share outstanding throughout the
period)
December 14, 1994
(commencement of
Year ended operations) to
October 31 October 31
1996 1995
Class M
Net asset value, beginning of period $7.04 $6.50
Investment operations
Net investment income .44 .43
Net realized and unrealized gain (loss) on investments (.04)
.54
Total from investment operations .40 .97
Less distributions:
From net investment income (.45) (.43)
In excess of net investment income _ _
From net realized gain on investments _ _
From return of capital _ _
Total distributions (.45) (.43)
Net asset value, end of period $6.99 $7.04
Total investment return at net asset value (%) (a) 5.92
15.43 *
Net assets, end of period (in thousands)$18,937 $7,673
Ratio of expenses to average net assets (%) (b) 1.42
1.19 *
Ratio of net investment income to average net assets (%)
6.28 5.17 *
Portfolio turnover (%) 213.46 169.29
* Not annualized.
(a) Total investment return assumes dividend reinvestment and
does not reflect the effect of sales charges.
(b) The ratio of expenses to average net assets for the years
ended October 31, 1995 and thereafter includes amounts
paid through expense offset arrangements. Prior period
ratios exclude these amounts.
(c) Per share net investment income has been determined on
the basis of the weighted average number of shares
outstanding during the period.
[The following financial documents are omitted here.]
Statement of assets and liabilities October 31, 1996
Statement of operations Year ended October 31, 1996
Statement of changes in net assets
Financial highlights (For a share outstanding throughout the
period)
Notes to financial statements October 31, 1996
Portfolio of investments owned October 31, 1996
Statement of assets and liabilities October 31, 1995
Statement of operations Year ended October 31, 1995
Statement of changes in net assets
Financial highlights (For a share outstanding throughout the
period)
Notes to financial statements October 31, 1995
Report of independent accountants For the fiscal year ended
October 31, 1996
Report of independent accountants For the year ended October
31, 1995
Statement of assets and liabilities April 30, 1997
Statement of operations Period ended April 30, 1997
Statement of changes in net assets
Financial highlights (For a share outstanding throughout the
period)
Notes to financial statements April 30, 1997 (unaudited)
Portfolio of investments owned April 30, 1997 (unaudited)
2. CONDITION OF THE FUND
(a) Statement of Net Assets
(As of
the end of June, 1997) $
Yen
(in thousands)
a. Total Assets
2,037,049,535 232,936,614
b. Total Liabilities
319,048,037 36,483,143
c. Total Net Assets 1,718,001,498
196,453,471
(a-b)
d. Total Number of Shares Class A.
167,663,032 Shares Outstanding
Class B 53,834,838 Shares
Class M. 3,963,264 Shares
Class Y. 18,885,284 Shares
e. Net Asset Value Class A. 6.99
Yen799.31
per Share (c/d) Class B. 6.96
Yen795.88
Class M. 6.96
Yen795.88
Class Y. 7.00
Yen800.45
(b) Names of Major Portfolio Holdings other than Equity Shares
(Top 30 Holdings)
(As of the end of
June, 1997)
U.S. Inve
Dollar st-
Kind of Inte Par Acquisi Current
ment
rest Value tion
Name of SecuritiesIssue Maturity Rate curr Cost Value
Ratio
(%)ency
(%)
2. GNMA U.S. 2024- 7 143,931 USD 146,919
149,363 8.69
Government 2027 ,277 ,075 ,954
U.S. 2024- 7 120,251 USD 103,112
102,778 5.98
Governmen 2027 ,498 ,547 ,510
t
3. FHGD U.S. 2025- 8 115,491 USD 96,187, 97,125,
5.65
Governmen 2027 1/2 ,403 152 620
t
4. U.S. Treasury U.S. 1999 6 92,135, USD 92,658, 92,624,
5.39
Bonds Governmen 3/8 000 790 237
t
5. U.S. Treasury U.S. 2005 10 72,532, USD 99,162,
91,480, 5.32
Bonds Governmen 3/4 000 226
985
t
6. GNMA U.S. 2024- 7 71,018, USD 65,890, 71,218,
4.15
Governmen 2027 1/2 584 938 440
t
7. U.S. Treasury U.S. 2019 8 51,642, USD 58,232,
58,912, 3.43
Bonds Governmen 1/8 000 831
161
t
8. UK Treasury Bonds Foreign2006 7 33,020, GBP 54,344,
56,401, 3.28
Bonds 1/2 000 959
148
9. Australia Foreign 2001 12 50,695, AUD 46,319,
46,430, 2.70
Bonds 000 895
499
10 FHGD U.S. 2011 5 42,710, USD 39,466,
37,974, 2.21
. Governmen 1/2 004 715
195
t
11 U.S. Treasury U.S. 2004 11 26,885, USD 34,783,
34,832, 2.03
. Bonds Governmen 5/8 000 409
744
t
12 United Mexican Brady 2019 6.35 29,409, USD 27,279,
27,350, 1.59
States Bonds Bonds 2 000
853 370
13 FHGD U.S. 2027 7 25,754, USD 25,614,
25,851, 1.50
. Governmen 1/2 864
017 444
t
14 Bulgaria Brady 2011 6.06 30,749, USD 22,022,
22,139, 1.29
. Bonds 3 000
544 280
15 South Africa Foreign 2010 13 88,047, ZAR 17,065,
17,782, 1.04
. (Republic of) Bonds 000
943
270
Bonds
6109098
0
U.S.
Inve
Dollar
stme
nt
Kind of Inte Par
Acquisi Current
Rati
rest Value
tion
o
Name of Securities Issue Maturity Rate curr
Cost Value
Rati
(%) ency
o
(%)
16 U.S. Treasury U.S. 2024 7 15,487, USD
16,439, 16,709,
0.97
. Bonds Governmen 1/2 000
704
079
t
17 Quebec (Province Foreign 2013 13 17,490, CAD 16,040,
16,450, 0.96
. of) Bonds Bonds 000 379
394
18 Enersis S.A. Corporate 2016 7.4 15,640, USD 15,040,
15,154, 0.88
. (Chile) Bonds 000
640
065
19 Petro-Canada Corporate 2021 9 12,500, USD 12,727,
14,844, 0.86
. (Canada) Bonds 1/4 000
125
250
20 National Health Corporate 2007 7.3 13,915, USD 12,869,
13,866, 0.81
. Bonds 000
927
437
21 FNMA U.S. 2005 7.4 14,100, USD 14,111,
13,313, 0.77
. Governmen 000
562
502
t
22 Russia Foreign 2020 zero 18,747, USD 12,162,
12,466, 0.73
. Bonds 000 116
755
23 Executive Risk Corporate 2027 8.67 12,055, USD 12,164,
1,980, 0.70
. Capital Trust 144A Bonds 5 000
523
259
24 WorldCom, Inc. Corporate 2007 7 11,460, USD 11,342,
11,719, 0.68
. Bonds 3/4 000
051 913
25 Time Warner Corporate 2008 7 11,560, USD 10,897,
11,412, 0.66
. Entertainment Inc.Bonds 1/4 000 113
148
26 Ford Motor Credit Corporate 2002 8.2 10,810, USD 11,290,
11,397, 0.66
. Corp. Bonds 000
072 956
27 News America Corporate2045 7 11,600, USD 10,654,
10,984, 0.64
. Holdings, Inc. Bonds 3/4 000
872 272
28 El Paso Electric Corporate 2001 7 10,850, USD 10,576,
10,962, 0.64
. Co. Bonds 3/4 000
140 515
29 Texas Utilities Corporate 2015 7.46 10,800, USD 10,800,
10,845, 0.63
. Co. Bonds 000
000 144
30 Advanta National Corporate 2001 7.02 11,105, USD 11,105,
10,818, 0.63
. Bank Bonds 000 000
491
20
0.00
.
21 0.00
.
V. SUMMARY OF INFORMATION CONCERNING FOREIGN INVESTMENT
TRUST SECURITIES
1. Transfer of the Shares
The transfer agent for the registered share
certificates is Putnam Fiduciary Trust Company, P.O.Box
41203, Providence, RI 02940-1203, U. S. A.
The Japanese investors who entrust the custody of
their shares to a Handling Securities Company shall have
their shares transferred under the responsibility of such
company, and the other investors shall make their own
arrangements.
No fee is chargeable for the transfer of shares.
2. The Closing Period of the Shareholders' Book
No provision is made.
3. There are no annual shareholders' meetings. Special
shareholders' meeting may be held from time to time
as
required by the Agreement and Declaration of Trust and
the Investment Company Act of 1940.
4. No special privilege is granted to Shareholders.
The acquisition of Shares by any person may be
restricted.
VI. MISCELLANEOUS
(1) The ornamental design is used in cover page of the
Japanese Prospectus.
(2) The following must be set forth in the Prospectus.
Outline of the Prospectus will be included at the
beginning of the Prospectus, summarizing the content of
Part I., Information on the securities, "I. Descriptions
of the Fund", "III. Outline of Other Related Companies"
and "IV. Finanacial Condition of the Fund" in Part II,
Information on the Issuer, of the SRS.
(3) Summarized Preliminary Prospectus will be used.
Attached document (Summarized Preliminary Prospectus)
will be used pursuant to the below, as the document
(Summarized Preliminary Prospectus) as set forth at Item
1.(1)(b), of Article 12 of the Ordinance Concerning the
Disclosure of the Content, etc. of the Specified
Securities.
For information of the achievement, the average of the
annual yield calculated in respect of immediately
preceding seven days and/or any one month may be added in
percentage up to one decimal places (rounding down to
second decimal places).
PART III. SPECIAL INFORMATION
Below is an outline of certain general information about open-
end U.S. investment companies. This outline is not intended
to provide comprehensive information about such investment
companies or the various laws, rules or regulations applicable
to them, but provides only a brief summary of certain
information which may be of interest to investors. The
discussion below is qualified in its entirely by the complete
registration statement of the fund and the full text of any
referenced statutes and regulations.
I. Massachusetts Business Trusts
A. General Information
Many investment companies are organized as
Massachusetts business trusts. A Massachusetts business
trust is organized pursuant to a declaration of trust,
setting out the general rights and obligations of the
shareholders, trustees, and other related parties.
Generally, the trustees of the trust oversee its
business, and its officers and agents manage its day-to-
day affairs.
Chapter 182 of the Massachusetts General Laws
applies to certain "voluntary associations", including
many Massachusetts business trusts. Chapter 182 provides
for, among other things, the filing of the declaration of
trust with the Secretary of State of the Commonwealth of
Massachusetts and the filing by the trust of an annual
statement regarding, among other things, the number of
its shares outstanding and the names and addresses of its
trustees.
B. Shareholder Liability
Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the
obligations of a trust. Typically, a declaration of
trust disclaims shareholder liability for acts or
obligations of the trust and provides for indemnification
out of trust property for all loss and expense of any
shareholder held personally liable for the obligations of
a trust. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is
limited to circumstances in which a particular trust
would be unable to meet its obligations.
II. United States Investment Company Laws and Enforcement
A. General
In the United States, pooled investment management
arrangements which offer shares to the public are
governed by a variety of federal statutes ant
regulations. Most mutual funds are subject to these
laws. Among the more significant of these statutes are:
1. 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.
2. 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.
3. 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.
4. The Internal Revenue Code
An investment company is an entity subject to
federal income taxation under the Internal Revenue
Code. However, under the Code, an investment
company may be relieved of federal taxes on income
and gains it distributes to shareholders if it
qualifies as a "regulated investment company" under
the Code for federal income tax purposes and meets
all other necessary requirements.
5. 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.
1. 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.
2. 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.
B. Offering Shares to the Public
An investment company ("investment company" or fund)
offering its shares to the public must meet a number of
requirements, including, among other things, registration
as an investment company under the 194o Act; registration
of the sale of its shares under the 1933 Act;
registration of the fund, the sale of its shares, or
both, with state securities regulators; delivery of a
current prospectus to current or prospective investors;
and so forth. Many of these requirements must be met not
only at the time of the original offering of the fund's
shares, but compliance must be maintained or updated from
time to time throughout the life of the fund.
C. Ongoing Requirements
Under U.S. law, a fund is subject to numerous
ongoing requirements, including, but not limited to;
1. Updating its registration statement if it
becomes materially inaccurate or misleading;
2. Annual update of its registration statement;
3. Filing semi-annual and annual financial reports
with the SEC and distributing them to shareholders;
4. Annual trustee approval of investment advisory
arrangements, distribution plans, underwriting
arrangements, errors and omissions/director and
officer liability insurance, foreign custody
arrangements, and auditors;
5. Maintenance of a code of ethics; and
6. Periodic board review of certain fund
transactions, dividend payments, and payments under
a fund's distribution plan.
III. Management of a Fund
The board of directors or trustees of a fund are
responsible for generally overseeing the conduct of a fund's
business. The officers and agents of a fund are generally
responsible for the day-to-day operations of a fund. The
trustees and officers of a fund may or may not receive a fee
for their services.
The investment adviser to a fund is typically responsible
for implementing the fund's investment program. The adviser
typically receives a fee for its services based on a
percentage of the net assets of a fund. Certain rules govern
the activities of investment advisers and the fees they may
charge. In the United States, investment advisers to
investment companies must be registered under the Investment
Advisers Act of 1940, as amended.
IV. Share Information
A. Valuation
Shares of a fund are generally sold at the net asset
value next determined after an order is received by a
fund, plus any applicable sales charges. A fund normally
calculates its net asset value per share by dividing the
total value of its assets, less liabilities, by the
number of its shares outstanding. Shares are typically
valued as of the close of regular trading on the New York
Stock Exchange (4:00) each day the Exchange is open.
B. Redemption
Shareholders may generally sell shares of a fund to
that fund any day the fund is open for business at the
net asset value next computed after receipt of the
shareholders' order. Under unusual circumstances, a fund
may suspend redemptions, or postpone payment for more
than seven says, if permitted by U.S. securities laws. A
fund may charge redemption fees as described in its
prospectus.
C. Transfer agency
The transfer agent for a fund typically processes
the transfer of shares, redemption of shares, and payment
and/or reinvestment of distributions.
V. Shareholder Information, Rights and Procedures for the
Exercise of Such Rights
A. Voting Rights
Voting rights vary from fund to fund. In the case
of many funds organized as Massachusetts business trusts,
shareholders are entitled to vote on the election of
trustees, approval of investment advisory agreements,
underwriting agreements, and distribution plans (or
amendments thereto), certain mergers or other business
combinations, and certain amendments to the declaration
of trust. Shareholder approval is also required to
modify or eliminate a fundamental investment policy.
B. Dividends
Shareholders are typically entitled to receive
dividends when and if declared by a fund's trustees. In
declaring dividends, the trustees will normally set a
record date, and all shareholders of record on that date
will be entitled to receive the dividend paid.
C. Dissolution
Shareholders would normally be entitled to receive
the net assets of a fund which were liquidated in
accordance with the proportion of the fund's outstanding
shares he owns.
D. Transferability
Shares of a fund are typically transferable without
restriction.
E. Right to Inspection
Shareholders of a Massachusetts business trust have
the right to inspect the records of the trust as provided
in the declaration of trust or as otherwise provided by
applicable law.
VI. U.S. Tax Matters
The Fund intends to qualify each year as a regulated
investment company under Subchapter M of the United States
Internal Revenue Code of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its
tax liability determined under Subchapter M, the Fund will not
be subject to U.S. federal income tax on any of its net
investment income or net realized capital gains that are
distributed to its shareholders. In addition, as a
Massachusetts business trust, the Fund under present
Massachusetts law is not subject to any excise or income taxes
in Massachusetts.
In order to qualify as a "regulated investment company",
the Fund must, among other things, (a) derive at least 90% of
its gross income from dividends, interest, payments with
respect to securities loans, gains from the sale or other
dispositions of stock, securities, or foreign currencies, and
other income (including gains from options, futures, or
forward contracts) derived with respect to its business of
investing in such stock, securities, or currencies; (b) derive
less than 30% of its gross income from the sale or other
disposition of certain assets (including stock and securities)
held less than three months; (c) diversify its holdings so
that, at the close of each quarter of its taxable year, (i) at
least 50% of the value of its total assets consists of cash,
cash items, U.S. Government Securities, and other securities
limited generally with respect to any one issuer to not more
than 5% of the total assets of a fund and not more than 10% of
the outstanding voting securities of such issuer, and (ii) not
more than 25 % of the value of its assets is invested in the
securities of any issuer (other than U.S. Government
Securities). In order to receive the favorable tax treatment
accorded regulated investment companies and their
shareholders, moreover, a fund must in general distribute with
respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income (if
any), and the excess, if any, of its net short-term capital
gains over net long-term capital losses for such year. To
satisfy these requirements, a fund may engage in investment
techniques that affect the amount, timing and character of its
income and distributions.
If the Fund fails to distribute in a calendar year
substantially all of its ordinary income for such year and
substantially all of its capital gain net income for the one-
year period ending October 31 (or later if the fund is
permitted so to elect and so elects), plus any retained amount
from the prior year, the fund will be subject to a 4% excise
tax on the undistributed amounts. A dividend paid to
shareholders by the Fund in January of a year generally is
deemed to have been paid by the Fund on December 31 of the
preceding year, if the dividend was declared and payable to
shareholders of record on a date in October, November or
December of that preceding year. The Fund intends generally
to make distributions sufficient to avoid imposition of the 4%
excise tax.
Fund distributions will be taxable to shareholders as
ordinary income, except that any distributions of net long-
term capital gains will be taxable as such, regardless of how
long a shareholder has held shares in the Fund.
Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions. Shareholders who are not subject to U.S.
federal income tax on their income generally will not have to
pay such tax on amounts distributed to them.
Distributions from capital gains are made after applying
any available capital loss carryovers.
The Fund's transactions in foreign currencies, foreign
currency-denominated debt securities and certain foreign
currency options, futures contracts and forward contracts (and
similar instruments) may give rise to ordinary income or loss
to the extent such income or loss results from fluctuations in
the value of the foreign currency concerned.
Investment by the Fund in "passive foreign investment
companies" could subject the Fund to a U.S. federal income tax
or other charge on the proceeds from the sale of its
investment in such a company; however, this tax can be avoided
by making an election to mark such investments to market
annually or to treat the passive foreign investment company as
a "qualified electing fund".
A "passive foreign investment company" is any foreign
corporation: (i) 75 percent of more of the income of which for
the taxable year is passive income, or (ii) the average
percentage of the assets of which (generally by value, but by
adjusted tax basis in certain cases) that produce or are held
for the production of passive income is at least 50 percent.
Generally, passive income for this purpose means dividends,
interest (including income equivalent to interest), royalties,
rents, annuities, the excess of gains over losses from certain
property transactions and commodities transactions, and
foreign currency gains. Passive income for this purpose does
not include rents and royalties received by the foreign
corporation from active business and certain income received
from related persons.
The sale, exchange or redemption of Fund shares may give
rise to a gain or loss. In general, any gain or loss realized
upon a taxable disposition of shares will be treated as long-
term capital gain or loss if the shares have been held for
more than 12 months, and otherwise as short-term capital gain
or loss. However, any loss realized upon a taxable
disposition of shares held for six months or less will be
treated as long-term, rather than short-term, to the extent of
any long-term capital gain distributions received by the
shareholder with respect to the shares. All or a portion of
any loss realized upon a taxable disposition of Fund shares
will be disallowed if other shares of the Fund are purchased
within 30 days before or after the disposition. In such a
case, the basis of the newly purchased shares will be adjusted
to reflect the disallowed loss.
Special tax ruled apply to investments though defined
contribution plans and other tax-qualified plans.
Shareholders should consult their tax adviser to determine the
suitability of shares of the Fund as an investment through
such plans and the precise effect of an investment on their
particular tax situation.
The Fund generally is required to withhold and remit to
the U.S. Treasury 31% of the taxable dividends and other
distributions paid to any individual shareholder who fails to
furnish the Fund with a correct taxpayer identification number
(TIN), who has under-reported dividends or interest income, or
who fails to certify to the fund that he or she is not subject
to such withholding. Shareholders who fail to furnish their
correct TIN are subject to a penalty of $50 for each such
failure unless the failure is due to reasonable cause and not
wilful neglect. An individual's taxpayer identification
number is his or her social security number.
The Fund's investment in securities issued at a discount
and certain other obligations will (and investments in
securities purchased at a discount may) require the Fund to
accrue and distribute income not yet received. In order to
generate sufficient cash to make the requisite distributions,
the Fund may be required to sell securities in its portfolio
that it otherwise would have continued to hold.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and related regulations
currently in effect. For the complete provisions, reference
should be made to the pertinent Code sections and regulations.
The Code and regulations are subject to change by legislative
or administrative actions. Dividends and distributions also
may be subject to state taxes. Shareholders are urged to
consult their tax advisers regarding specific questions as to
U.S. federal, state or local taxes. The foregoing discussion
relates solely to U.S. federal income tax law. Non-U.S.
investors should consult their tax advisers concerning the tax
consequences of ownership of shares of the fund, including the
possibility that distributions may be subject to a 30% United
States withholding tax (or a reduced rate of withholding
provided by treaty). Shareholders [residing in Japan?] should
consult "Tax Treatment of [Shareholders in Japan]", above.
VII. Important Participants in Offering of Mutual Fund Shares
A. Investment Company
Certain pooled investment vehicles qualify as
investment companies under the 1940 Act. There are open-
end investment companies (those which offer redeemable
securities) and closed-end investment companies (any
others).
B. Investment Adviser/Administrator
The investment adviser is typically responsible for
the implementation of an investment company's investment
program. It, or another affiliated or unaffiliated
entity, may also perform certain record keeping and
administrative functions.
C. Underwriter
An investment company may appoint one or more
principal underwriters for its shares. The activities of
such a principally underwriter are generally governed by
a number of legal regimes, including, for example, the
1940 Act, the 1933 Act, the 1934 Act, and state laws.
D. Transfer Agent
A transfer agent performs certain bookkeeping, data
processing, and administrative services pertaining to the
maintenance of shareholder accounts. A transfer agent
may also handle the payment of any dividends declared by
the trustees of a fund.
E. Custodian
A custodian's responsibilities may include, among
other things, safeguarding and controlling a fund's cash
and securities, handling the receipt and delivery of
securities, and collecting interest and dividends on a
fund's investments.
II. FINANCIAL CONDITIONS OF THE INVESTMENT MANAGEMENT COMPANY
[Omitted, in Japanese version, financial statements of
the Investment Management Company and Japanese
translations thereof are incorporated here.]
III. FORM OF FOREIGN INVESTMENT FUND SECURITIES
Main items to be set forth on the share certificate of
the Fund (if issued) are as follows:-
(1) Front
a. Name of the Fund
b. Number of shares represented
c. Signatures of the Chairman and Transfer Agent
d. Description stating that the Declaration of Trust
applies to shareholders and assignees therefrom
(2) Back
a. Space for endorsement
b. Description concerning delegation of transfer agency
