[Translation]
SECURITIES REGISTRATION STATEMENT
(including amendments filed on May 22,1997)
PUTNAM DIVERSIFIED INCOME TRUST
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SECURITIES REGISTRATION STATEMENT
To: Minister of Finance
Filing Date of SRS: May 12, 1997
Filing Date of the Amendment to SRS: May 22, 1997
Name of the Registrant Trust: PUTNAM DIVERSIFIED INCOME TRUST
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]
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(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
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
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PUBLIC OFFERING OR SALE FOR REGISTRATION
Name of the Fund Making Public PUTNAM DIVERSIFIED INCOME TRUST
Offering or Sale of Foreign
Investment Fund Securities:
Type and Aggregate Amount of Up to 31.78 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 31.78 million
Class M Shares
(The Maximum amount expected to be sold
is 383.9 million U.S. dollars ((Yen)
47.6 billion).
Note 1: U.S.$ amount is translated into Japanese Yen at the rate of
U.S.$l.00=(Yen)124.10 the mean of the exchange rate quotations by The
Bank of Tokyo-Mitsubishi, Ltd. for buying and selling spot dollars by
telegraphic transfer against yen on 31st March, 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 31st March,
1997 (U.S.$12.08) by 31.78 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 112 including front and back pages.)
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C O N T E N T S
Japanese This
Original English
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 9 10
3. MANAGEMENT STRUCTURE 20 27
4. INFORMATION CONCERNING THE EXERCISE
OF RIGHTS BY SHAREHOLDERS, ETC. 29 40
5. STATUS OF INVESTMENT FUND 32 45
II. OUTLINE OF THE TRUST 36 48
III. OUTLINE OF THE OTHER RELATED COMPANIES 70 78
IV. FINANCIAL CONDITION OF THE FUND 72 80
V. SUMMARY OF INFORMATION CONCERNING
FOREIGN INVESTMENT FUND SECURITIES 190 85
VI. MISCELLANEOUS 190 85
PART III. SPECIAL INFORMATION 191 86
I. OUTLINE OF THE SYSTEM OF INVESTMENT
TRUSTS IN MASSACHUSETTS 191 86
II. FINANCIAL CONDITIONS OF THE INVESTMENT
ADVISER AND MANAGEMENT COMPANY 197 92
III. FORM OF FOREIGN INVESTMENT
FUND SECURITIES 219 92
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ii
PART I. INFORMATION CONCERNING SECURITIES
1. NAME OF FUND: PUTNAM DIVERSIFIED INCOME TRUST
(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
RITIES CERTIFICATES: Shares)
Registered share certificate without par
value In Japan, Class M Shares (hereinafter
referred to as the "Shares") are for public
offering. No rating has been acquired.
3. NUMBER OF SHARES TO Up to 31.78 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
31.78 million Shares (The maximum amount
expected to be sold is 383.9 million U.S.
dollars ((Yen)47.6 billion).
Note 1: The maximum amount expected to be sold is the amount
calculated, for convenience, by multiplying the net asset
value per Share as of 31st March, 1997 ($12.08) by the number
of Shares to be offered (31.78 million).
Note 2: Dollar amount is translated for convenience at the rate of
$1.00=(Yen)124.10 (the mean of the exchange rate quotations by
The Bank of Tokyo-Mitsubishi, Ltd. for buying and selling spot
dollars by telegraphic transfer against yen on 31st March,
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.
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Note: A "Fund Business Day" means a day on which the New York Stock
Exchange is open for business.
6. SALES CHARGE: Sales charge (in Japan) is 3.25% of the Subscription
Amount
Note: 3.00% will be retained by the Distributor in Japan and 0.25%
by Putnam Mutual Funds Corp.
7. MINIMUM AMOUNT OR The minimum amount for purchase of
NUMBER OF SHARES Shares is 300 shares and in integral
FOR SUBSCRIPTION: multiples of 10 shares.
8. PERIOD OF SUBSCRIPTION: From: 28th May, 1997 (Wednesday)
To: 27th November, 1997 (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: Yamatane Securities Co., Ltd. (hereinafter
referred to as "Yamatane")
7-12, Nihonbashi-Kabuto-cho, 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 Yamatane within 4
business days in Japan from the day when
Yamatane confirms the execution of the order
(the "Trade Day") (see page 22).
The total issue price for each Application
Day will be transferred by Yamatane 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.
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12. OUTLINE OF UNDERWRITING, ETC.:
(A) Yamatane undertakes to make a public offering of 31.78 million Shares
in accordance with an agreement dated 19th May, 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, Yamatane 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 Yamatane 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 on and before 30th May, 1997
shall submit to a Handling Securities Company an Agreement Concerning
the Opening of a Foreign Securities Transactions Account ("Account
Agreement") or, in case of investors who shall not entrust the custody
of Shares with a Handling Securities Company shall submit to it an
Agreement Concerning Foreign Securities Transactions ("Transactions
Agreement"). Investors who subscribe to Shares on and after 1st June,
1997 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, in the case of subscriptions on and before 30th May, 1997,
the forward cable exchange rate for each Payment Date in Tokyo as of
the Trade Day or, in the case of subscriptions on and after 1st June,
1997, 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 transfer
agent for the Fund by Yamatane on the Payment Date.
(B) Expenses summary:
Expenses are one of several factors to consider when
investing. The following table summarizes your maximum transaction
costs from investing in class M shares of
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the Fund and expenses incurred in respect of class M shares in the most
recent fiscal year. The example shows the cumulative expenses
attributable to a hypothetical $1,000 investment in class M shares over
the specified periods.
Shareholder transaction expenses
Maximum sales charge imposed on purchases
(as a percentage of offering price) 3.25%
Deferred sales charge None
Annual Fund operating expenses
Management fees 0.55%
12b-1 fees 0.50%
Other expenses 0.23%
Total Fund operating expenses 1.28%
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 $45
3 years $72
5 years $100
10 years $182
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.
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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 Diversified Income Trust (the "Fund")
(2) Form of the Fund
Putnam Diversified Income Trust is a Massachusetts business
trust organized on August 11, 1988. 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. The Trustees may, without shareholder approval, create two or
more series of shares representing separate investment portfolios. Any
such series of shares may be further 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
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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.
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e. The Internal Revenue Code
The Fund intends to qualify as a "regulated
investment company" for federal income tax purposes and to
meet all other requirements that are necessary for it to be
relieved of federal taxes on income and gains it distributes
to shareholders.
f. Other laws
The Fund is subject to the provisions of other laws,
rules, and regulations applicable to the Fund or its
operations, such as, for example, various state laws regarding
the sale of the Fund's shares.
(B) Outline of the Supervisory Authorities
Among the regulatory authorities having jurisdiction over the
Fund or certain of its operations are the SEC and state regulatory
agencies or authorities.
a. The SEC has broad authority to oversee the
application and enforcement of the federal securities laws,
including the 1940 Act, the 1933 Act, and the 1934 Act, among
others, to the Fund. The 1940 Act provides the SEC broad
authority to inspect the records of investment companies, to
exempt investment companies or certain practices from the
provisions of the Act, and otherwise to enforce the provisions
of the Act.
b. State authorities typically have broad authority
to regulate the offering and sale of securities to their
residents or within their jurisdictions and the activities of
brokers, dealers, or other persons directly or indirectly
engaged in related activities.
(C) Objects and Basic Nature of the Fund:
The Fund seeks high current income consistent with the
preservation of capital. 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 11, 1988: Organization of the Fund as a
Massachusetts business trust.
Adoption of the Agreement and
Declaration of Trust.
September 7, 1988: 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.
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(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) YAMATANE 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.
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RELATED COMPANIES OF THE FUND
Trust
Putnam Diversified Income Trust
Investor
Trustees Servicing
(Agreement and Agreement
Declaration of Trust
Distribution Custodian
Agreement Agreement
Principal Custodian
Underwriter Investor
Servicing Agent
Putnam Mutual Putnam Fiduciary
Funds Corp. Trust Company
(acts as distributor) (acts as custodian and
investor servicing
agent of the Fund)
Japan Dealer
Sales Agreement
Agent Securities Management Contract
Company
Agreement
Distributor in Japan Investment
Agent Securities Company Management Company
Yamatane Securities Co., Ltd. Putnam Investment Management, Inc.
(forwarding of sales in Japan (acts as investment management of
and rendering of service as the Fund and investment adviser
agent securities company) concerning the Fund's assets)
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2. INVESTMENT POLICY
(A) Basic Policy for Investment and Objects of Investment:
The Fund seeks high current income consistent with preservation of
capital. 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 will allocate its investments among the following three
sectors of the fixed-income securities markets:
o a U.S. GOVERNMENT SECTOR, consisting primarily of debt obligations of
the U.S. government, its agencies and instrumentalities;
o a HIGH YIELD SECTOR, consisting of high yielding, lower-rated, higher
risk U.S. and foreign fixed-income securities; and
o an INTERNATIONAL SECTOR, consisting of obligations of foreign
governments, their agencies and instrumentalities, and other
fixed-income securities denominated in foreign currencies.
Investment Management Company believes that diversifying the Fund's
investments among these sectors, as opposed to investing in any one sector,
will better enable the Fund to preserve capital while pursuing its
objective of high current income. Historically, the markets for U.S.
government securities, high yielding corporate fixed-income securities, and
debt securities of issuers outside the U.S. have tended to behave
independently and have at times moved in opposite directions. For example,
U.S. government securities have generally been affected negatively by
inflationary concerns resulting from increased economic activity. High
yield corporate fixed-income securities, on the other hand, have generally
benefitted from increased economic activity due to improvement in the
credit quality of corporate issuers. The reverse has generally been true
during periods of economic decline. Similarly, U.S. government securities
have often been negatively affected by a decline in the value of the dollar
against foreign currencies, while the bonds of issuers outside the U.S.
held by U.S. investors have generally benefitted from such decline.
Investment Management Company believes that, when financial markets exhibit
such a lack of correlation, a pooling of investments among these markets
may produce greater preservation of capital over the long term than would
be obtained by investing exclusively in any one of the markets.
Investment Management Company will determine the amount of assets to
be allocated to each of the three market sectors in which the Fund will
invest based on its assessment of the returns that can be achieved from a
portfolio which is invested in all three sectors. In making this
determination, Investment Management Company will rely in part on
quantitative analytical techniques that measure relative risks and
opportunities
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of each market sector based on current and historical market data for each
sector, as well as on its own assessment of economic and market conditions.
Although there are no fixed limits on allocations among sectors, including
investments in the High Yield Sector, Investment Management Company will
continuously review this allocation of assets and make such adjustments as
it deems appropriate. Because of the importance of sector diversification
to the Fund's investment policies, Investment Management Company expects
that a substantial portion of the Fund's assets will normally be invested
in each of the three market sectors. See "Defensive strategies." The Fund's
assets allocated to each of these market sectors will be managed in
accordance with particular investment policies, which are described below.
At times, the Fund may hold a portion of its assets in cash and money
market instruments.
U.S. Government Sector
The Fund will invest assets allocated to the U.S. Government Sector
primarily in U.S. government securities. "U.S. government securities" are
debt securities issued or guaranteed by the U.S. government, by various of
its agencies, or by various instrumentalities established or sponsored by
the U.S. government. Some of these obligations are supported by the full
faith and credit of the United States. These obligations include U.S.
Treasury bills, notes and bonds, mortgage participation certificates
guaranteed by the Government National Mortgage Association ("Ginnie Mae"),
and Federal Housing Administration debentures.
Other U.S. government securities issued or guaranteed by federal
agencies or government-sponsored enterprises are not supported by the full
faith and credit of the United States. These securities include obligations
supported by the right of the issuer to borrow from the U.S. Treasury, such
as obligations of Federal Home Loan Banks, and obligations supported only
by the credit of the instrumentality, such as Federal National Mortgage
Association ("Fannie Mae") bonds.
In purchasing securities for the U.S. Government Sector, Investment
Management Company may take full advantage of the entire range of
maturities of U.S. government securities and may adjust the average
maturity of the investments held in the portfolio from time to time,
depending on its assessment of relative yields of securities of different
maturities and its expectations of future changes in interest rates. Under
normal market conditions, the Fund will invest at least 20% of its net
assets in U.S. government securities, and at least 65% of the assets
allocated to the U.S. Government Sector will be invested in U.S. government
securities.
The Fund may invest assets allocated to the U.S. Government Sector in
mortgage-backed securities, including collateralized mortgage obligations
("CMOs") and
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certain stripped mortgage-backed securities. CMOs and other mortgage-backed
securities represent a participation in, or are secured by, mortgage loans
and include:
o Certain securities or guaranteed by the U.S. government or one of its
agencies or instrumentalities;
o 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
o Securities issued by private issuers that represent an interest in or
are secure 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 assets
allocated to the U.S. Government Sector in both the interest-only or "IO"
class and the principal-only or "PO" class. See "Risk factors" below.
The Fund may also invest assets allocated to the U.S. Government
Sector 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 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.
With respect to assets allocated to the U.S. Government Sector, the
Fund will only invest in privately issued debt securities that are rated at
the time of purchase at least A by nationally recognized securities rating
agencies such as Standard & Poor's ("S&P") and Moody's Investor Services,
Inc. ("Moody's"), or in unrated securities that Investment Management
Company determines are of comparable quality. The Fund will not necessarily
dispose of a security if its rating is reduced below these levels, although
Investment Management Company will monitor the investment to determine
whether continued investment in the security will assist in meeting the
Fund's investment objective. To the extent a security is assigned a
different rating by one or more of the various ratings agencies, Investment
Management Company will use the highest rating assigned by any agency.
Risk Factors
MARKET RISK. U.S. government securities are considered among the
safest of fixed income investments, but their values, like those of other
debt securities, will fluctuate with changes in interest rates. Changes in
the value of portfolio securities will not affect interest income from
those securities but will be reflected in the Fund's net
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asset value. Thus, a decrease in interest rates will generally result in an
increase in the value of such securities. Conversely, during periods of
rising interest rates, the value of Fund shares will generally decline. The
magnitude of these fluctuations will generally be greater for securities
with longer maturities, and the Fund expects that its portfolio will
normally be weighted towards longer maturities. Because of their added
safety, the yields available from U.S. government securities are generally
lower than the yields available from comparable corporate debt securities.
DEFAULT RISK. While certain U.S. government securities, such as U.S.
Treasury obligations and Ginnie Mae certificates, are backed by the full
faith and credit of the U.S. government, other securities in which the Fund
may invest are subject to varying degrees of risk of default. These risk
factors include the creditworthiness of the issuer and, in the case of
mortgage-backed and asset-backed securities, the ability of the underlying
mortgagors or other borrowers to meet their obligations.
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 or other
assets.
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.
Prepayments may cause losses in securities purchased at a premium. 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
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above their par value. 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.
High Yield Sector
The Fund will invest assets allocated to the High Yield Sector
primarily in high yielding, lower-rated, higher risk U.S. and foreign
fixed-income securities, including debt securities, convertible securities
and preferred stocks. As described below, however, under certain
circumstances the Fund may invest all or any part of the High Yield Sector
portfolio in higher-rated and unrated fixed-income securities. The Fund
will not necessarily invest in the highest yielding securities available if
in Investment
<PAGE>
-15-
Management Company's opinion the differences in yield are not sufficient to
justify the higher risks involved.
Differing yields on fixed-income securities of the same maturity are a
function of several factors, including the relative financial strength of
the issuers. Higher yields are generally available from securities in the
lower categories of recognized rating agencies, such as: Baa or lower by
Moody's, or BBB or lower by S&P. The High Yield Sector may invest in any
security which is rated, at the time of purchase, at least Caa or CCC by
any rating agency or in any unrated security which Investment Management
Company determines is of comparable quality, although up to 5% of the net
assets of the Fund may be invested in securities rated below such quality,
or in unrated securities which Investment Management Company determines are
of comparable quality. Securities rated below Caa or CCC are of poor
standing and may be in default. To the extent a security is assigned a
different rating by one or more of the various ratings agencies, Investment
Management Company will use the highest rating assigned by any agency.
The Fund may invest assets allocated to the High Yield Sector in
lower-rated securities of foreign corporate and governmental issuers
denominated either in U.S. dollars or in foreign currencies. For a
discussion of the risks associated with foreign investing, see
"International Sector" below.
Risk Factors
The values of fixed-income securities fluctuate in response to changes
in interest rates. A decrease in interest rates will generally result in an
increase in the value of the Fund assets. Conversely, during periods of
rising interest rates, the value of the Fund assets will generally decline.
The magnitude of these fluctuations generally is greater for securities
with longer maturities. However, the yields on such-securities are also
generally higher. In addition, the values of fixed-income securities are
affected by changes in general economic and business conditions affecting
the specific industries of their issuers.
Changes by recognized rating services in their ratings of a
fixed-income security and changes in the ability of an issuer to make
payments of interest and principal may also affect the value of these
investments. Changes in the value of portfolio securities generally will
not affect income derived from these securities, but will affect the Fund's
net asset value.
The Fund will not necessarily dispose of a security when its rating is
reduced below its rating at the time of purchase. However, Investment
Management Company will monitor the investment to determine whether
continued investment in the security will assist in meeting the Fund's
investment objective.
<PAGE>
-16-
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 lower ratings of certain securities held in the High Yield Sector
reflect a greater possibility that adverse changes in the financial
condition of the issuer or in general economic conditions, or both, or an
unanticipated rise in interest rates, may impair the ability of the issuer
to make payments of interest and principal.
The inability (or perceived inability) of issuers to make timely
payments of interest and principal would likely make the values of
securities held by the Fund more volatile and could limit the Fund's
ability to sell its securities at prices approximating the values placed on
such securities. In the absence of a liquid trading market for its
portfolio securities, the Fund at times may be unable to establish the fair
value of such securities.
The rating assigned to a security by a rating agency does not reflect
an assessment of the volatility of the security's market value or of the
liquidity of an investment in the security.
The table below shows the percentages of 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 of comparable
as percentage of quality, as percentage of net
Rating net assets assets
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
"AAA" 44.71% 0.18%
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
"AA" 10.24% --
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
"A" 0.03% 0.03%
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
"BBB" 0.90% --
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
"BB" 10.07% 1.67%
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
"B" 22.14% 0.76%
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
"CCC" 2.41% 0.13%
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
"CC" -- --
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
"C" -- --
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
"D" -- --
- ----------------------------------------------------------------------------
- ----------------------------------------------------------------------------
Total 90.50% 2.77%
- ----------------------------------------------------------------------------
Investment Management Company seeks to minimize the risks of investing
in lower-rated securities through careful investment analysis. When the
Fund invests in
<PAGE>
-17-
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.
Investment Management Company believes that opportunities to earn high
yields may exist from time to time in securities which are illiquid and
which may be considered speculative. The sale of these securities is
usually restricted under U.S. securities laws. As a result of illiquidity,
the Fund may not be able to sell these securities when Investment
Management Company considers it desirable to do so or may have to sell them
at less than fair market value.
At times, a substantial portion of the Fund assets allocated to the
High Yield Sector 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 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.
The Fund at times may invest assets allocated to the High Yield Sector
in so-called "zero-coupon" bonds and "payment-in-kind" bonds. Zero-coupon
bonds are issued at a significant discount from their principal amount and
pay interest only at maturity rather than at intervals during the life of
the security. Payment-in-kind bonds allow the issuer, at its option, to
make current interest payments on the bonds either in cash or in additional
bonds. Both zero-coupon bonds and payment-in-kind bonds allow an issuer to
avoid the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than bonds paying
interest in cash currently. The values of zero-coupon bonds and
payment-in-kind bonds are also subject to greater fluctuation in response
to changes in market interest rates than bonds that pay interest in cash
currently.
<PAGE>
-18-
Even though such bonds do not pay current interest in cash, the Fund
nonetheless is required to accrue interest income on these investments and
to distribute the interest income on a current basis. Thus, the Fund could
be required at times to liquidate other investments in order to satisfy its
distribution requirements.
The Fund may invest assets allocated to the High Yield Sector in
participations and assignments of fixed and floating rate loans made by
financial institutions to governmental or corporate borrowers.
Participations and assignments involve the additional risk that an
institution's insolvency could delay or prevent the flow of payments on the
underlying loan to the Fund. The Fund may have limited rights to enforce
the terms of the underlying loan, and the liquidity of loan participations
and assignments may be limited.
INTERNATIONAL SECTOR
The Fund will invest the assets allocated to the International Sector
in debt obligations and other fixed-income securities denominated in
non-U.S. currencies. These securities include:
o debt obligations issued or guaranteed by non-U.S., national,
provincial, state, or other governments with taxing authority, or by
their agencies or instrumentalities;
o debt obligations of supranational entities (described below); and
o debt obligations and other fixed-income securities of non-U.S. and
U.S. corporate issuers.
When investing in the International Sector, the Fund will purchase
only debt securities of issuers whose long-term debt obligations are rated
A or better at the time of purchase by ratings agencies or unrated
securities that Investment Management Company determines are of comparable
quality. To the extent a security is assigned a different rating by one or
more ratings agencies, Investment Management Company will use the highest
rating assigned by any agency. The Fund may, however, make investments in
non-U.S. debt securities rated below A with respect to assets allocated to
the High Yield Sector.
In the past, yields available from securities denominated in foreign
currencies have often been higher than those of securities denominated in
U.S. dollars. Although the Fund has the flexibility to invest in any
country where Investment Management Company sees potential for high income,
it presently expects to invest primarily in securities of issuers in
industrialized Western European countries (including Scandinavian
countries) and in Canada, Japan, Australia, and New Zealand. Investment
Management Company will consider expected changes in non-U.S.
<PAGE>
-19-
currency exchange rates in determining the anticipated returns of
securities denominated in non-U.S. currencies.
The obligations of non-U.S. governmental entities, including
supranational issuers, have various kinds of government support.
Obligations of non-U.S. governmental entities include obligations issued or
guaranteed by national, provincial, state or other governments with taxing
power or by their agencies. These obligations may or may not be supported
by the full faith and credit of a non-U.S. government.
Supranational entities include international organizations designated
or supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the World Bank), the European Steel and Coal Community, the
Asian Development Bank, and the Inter-American Development Bank. The
governmental members or "stockholders" usually make initial capital
contributions to the supranational entity and in many cases are committed
to make additional capital contributions if the supranational entity is
unable to repay its borrowing. Each supranational entity's lending
activities are limited to a percentage of its total capital (including
"callable capital" contributed by members at the entity's call), reserves,
and net income.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Fund may engage in foreign
currency exchange transactions to protect against uncertainty in the level
of future exchange rates. Investment Management Company may engage in
foreign currency exchange transactions in connection with the purchase and
sale of portfolio securities ("transaction hedging") and to protect the
value of specific portfolio positions ("position hedging").
The Fund may engage in "transaction hedging" to protect against a
change in the foreign currency exchange rate between the date on which the
Fund contracts to purchase or sell the security and the settlement date, or
to "lock in" the U.S. dollar equivalent of a dividend or interest payment
in a foreign currency. The Fund may purchase or sell a foreign currency on
a spot (or cash) basis at the prevailing spot rate in connection with the
settlement of transactions in portfolio securities denominated in that
foreign currency.
If conditions warrant, for transaction hedging purposes the Fund may
also enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and purchase and sell foreign currency
futures contracts. A foreign currency forward contract is a negotiated
agreement to exchange currency at a future-time at a rate or rates that may
be higher or lower than the spot rate. Foreign currency futures contracts
are standardized exchange-traded contracts and have margin requirements. In
addition, for transaction hedging purposes the Fund may also purchase
exchange-listed and over-the-
<PAGE>
-20-
counter call and put options on foreign currency futures contracts and on
foreign currencies.
The Fund may engage in "position hedging" to protect against a decline
in the value relative to the U.S. dollar of the currencies in which its
portfolio securities are denominated or quoted (or an increase in the value
of the currency in which the securities the Fund intends to buy one
denominated, when the Fund holds cash and short-term investments). For
position hedging purposes, the Fund may purchase or sell foreign currency
futures contracts, foreign currency forward contracts and options on
foreign currency futures contracts and on foreign currencies on exchanges
or in over-the-counter markets. In connection with position hedging, the
Fund may also purchase or sell foreign currencies on a spot basis.
The Fund's currency hedging transactions may call for the delivery of
one foreign currency in exchange for another foreign currency and may at
times not involve currencies in which its portfolio securities are then
denominated. Investment Management Company will engage in such "cross
hedging" activities when it believes that such transactions provide
significant hedging opportunities for the Fund. Cross hedging transactions
by the Fund involve the risk of imperfect correlation between changes in
the value of the currencies to which such transactions relate and changes
in the value of the currency or other asset or liability which is the
subject of the hedge.
The decision as to whether and to what extent the Fund will engage in
foreign currency exchange transactions will depend on a number of factors,
including prevailing market conditions, the composition of the Fund's
portfolio and the availability of suitable transactions. Accordingly, there
can be no assurance that the Fund will engage in foreign currency exchange
transactions at any given time or form time to time.
For a further discussion of the risks associated with purchasing and
selling futures contracts and options, see "Financial futures and options."
RISK FACTORS. Foreign investments involve certain risks that are not
present with respect to domestic securities. Because the Fund intends to
purchase securities for the International Sector that are denominated in
non-U.S. currencies, a change in the value of any such currency against the
U.S. dollar will result in a change in the U.S. dollar value of the Fund's
assets and the Fund's income available for distribution. In addition,
although a portion of the Fund's investment income may be received or
realized in such currencies, the Fund will be required to compute and
distribute its income in U.S. dollars. Therefore, if the exchange rate for
any such currency declines after the Fund's income has been earned and
translated into U.S. dollars but before payment, the Fund could be required
to liquidate portfolio securities to make such distributions.
The values of foreign investments and the investment income derived
from them may also be affected favorably or unfavorably by exchange control
regulations.
<PAGE>
-21-
Although the Fund will invest only in securities denominated in foreign
currencies that are fully exchangeable into U.S. dollars without legal
restriction at the time of investment, there is no assurance that currency
controls will not be imposed subsequently. In addition, the values of
foreign fixed-income investments will fluctuate in response to changes in
U.S. and foreign interest rates.
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 with those in the United 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 those in the United States.
Non-U.S. settlement procedures and trade regulations may involve certain
risks (such as delay in payment or delivery of securities or in the
recovery of Fund assets held abroad) and expenses not present in the
settlement of U.S. investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, confiscatory taxation, political or financial
instability and diplomatic developments that could affect the value of
investments in certain foreign countries.
Legal remedies available to investors in certain foreign countries may
be more limited than those available with respect to investments in the
United States or in other foreign countries. The laws of some foreign
countries may limit investments in securities of certain issuers located in
those foreign countries. Special tax considerations apply to foreign
securities.
The risks described above are typically increased for investments in
securities principally traded in, or issued by issuers located in,
underdeveloped and developing nations, which are sometimes referred to as
"emerging markets."
Income received by the Fund from sources within foreign countries may
be reduced by withholding and other taxes imposed by such countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. Any such taxes paid by the Fund will reduce its net
income available for distribution to shareholders.
DEFENSIVE STRATEGIES
At times, Investment Management Company may judge that conditions in
the securities markets make pursuing the Fund's basic investment strategy
inconsistent with the best interests of its shareholders. At such times,
Investment Management Company may temporarily use alternative strategies,
primarily designed to reduce fluctuations in the value of the Fund's
assets. In implementing these "defensive" strategies, depending on the
circumstances, the Fund may shift its portfolio emphasis to higher-rated
<PAGE>
-22-
securities in the High Yield Sector, hedge currency risks in the
International Sector, reduce the average maturity of its holdings in any or
all of the Sectors, or invest in any other securities which Investment
Management Company considers consistent with such defensive strategies.
Under unusual market conditions, the Fund could invest up to 100% of its
assets in short-term U.S. government securities when the risks of investing
in the other Sectors are perceived to outweigh the possible benefits of
sector diversification. The Fund may also increase the portion of its
assets invested in cash or money market instruments for such defensive
purposes or for liquidity purposes. It is impossible to predict when, or
for how long, the Fund will use these alternative strategies.
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
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.
FINANCIAL FUTURES AND OPTIONS
The Fund may buy and sell futures contracts on U.S. government
securities, foreign fixed-income securities and on foreign currencies. A
futures contract is a contract to buy or sell a certain amount of a
particular U.S. government security, foreign fixed-income security or
foreign currency at an agreed price on a specified future date. Depending
on the change in the value of the security or currency between the time the
Fund enters into and terminates a futures contract, the Fund realizes a
gain or loss. The Fund may purchase and sell call and put options on
futures contracts or on securities it is permitted to purchase in addition
to or as an alternative to purchasing and selling futures contracts. The
Fund may engage in futures and options transactions for hedging purposes
and for nonhedging purposes, such as to adjust its exposure to relevant
markets or as a substitute for direct investment.
The use of futures and options involves certain special risks. Futures
and options transactions involve costs and may result in losses.
The successful use of futures and related options will usually depend
on Investment Management Company's ability to forecast interest rate and
market movements correctly. The use of futures and options strategies also
involves the risk of
<PAGE>
-23-
imperfect correlation between movements in the prices of futures and
options and movements in the prices of the underlying securities or
currencies or in the values of the securities or currencies that are the
subject of a hedge. The successful use of futures and options also depends
on the availability of a liquid secondary market to enable the Fund to
close its positions on a timely basis. There can be no assurance that such
a market will exist at a particular time. The Fund's ability to terminate
option positions established in the over the-counter market may be more
limited than for exchange-traded options and may also involve the risk that
securities dealers participating in such transactions would fail to meet
their obligations to the Fund.
Because the markets for futures and options on foreign fixed-income
securities and foreign currencies are relatively new and still developing
and are subject to certain regulatory constraints, the Fund's ability to
engage in such transactions may be limited. The use of futures and options
transactions for purposes other than hedging entails greater risks. Certain
provisions of the Internal Revenue Code and certain regulatory requirements
may limit the Fund's ability to engage in futures and options transactions.
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 such securities in
calculating its net investment income. As a result, the purchase of premium
securities provides the Fund a higher level of investment income
distributable to shareholders on a current basis than if the Fund purchased
securities bearing current market rates of interest. Because the value of
premium securities tends to approach the principal amount as they approach
maturity (or call price in the case of securities approaching their first
call date), the purchase of such securities may increase the 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 the
Fund shares. As a result, an investor who purchases shares of the Fund
during such periods would initially receive higher taxable monthly
distributions (derived from the higher coupon rates payable on the Fund's
investments) than might be available from alternative investments bearing
current market interest rates, but the investor may face an increased risk
of capital loss as these higher coupon securities approach maturity (or
first call date). In evaluating the potential performance of an
<PAGE>
-24-
investment in the Fund, investors may find it useful to compare the Fund's
current dividend rate with the "yield," which is computed on a
yield-to-maturity basis in accordance with SEC regulations and which
reflects amortization of market premiums.
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 U.S. government securities, foreign
fixed-income securities and foreign currencies. The Fund receives a premium
from writing a call or put option, which increases the Fund's 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 or currency 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 or currency from the
option holder at a price above the current market price of the security or
currency. 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 or
currency. Because the markets for options on foreign fixed-income
securities and foreign currencies are relatively new and still developing
and are subject to certain regulatory constraints, the Fund's ability to
engage in such transactions may be limited. The aggregate value of the
securities and foreign currencies underlying the options may not exceed 25%
of the Fund's 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.
<PAGE>
-25-
DERIVATIVES
Certain of the instruments in which the Fund may invest, such as
futures contracts, 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:
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, except that the Fund may borrow amounts not exceeding
15% of the value (taken at the lower of cost or current value) of its total
assets (not including the amount borrowed) at the time the borrowing is
made for temporary purposes (including repurchasing its shares while
effecting an orderly liquidation of portfolio securities) or for emergency
purposes.
(4) Issue any class of securities which is senior to the Fund's shares
of beneficial interest, except for permitted borrowings.
(5) 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.
(6) Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by
interests in real estate, and securities 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.
(7) Purchase or sell commodities or commodity contracts, except that the
Fund may purchase and sell financial futures contracts and options and may
enter into foreign exchange contracts and other financial transactions not
involving physical commodities.
(8) 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 the federal securities laws.
(9) Invest more than 25% of the value of its total assets in any one
industry. (Securities of the U.S. Government, its agencies, or
instrumentalities, or of any non-
<PAGE>
-26-
U.S. government, its agencies, or instrumentalities, securities of
supranational entities, and securities backed by the credit of a
governmental entity are not considered to represent industries.)
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 borrow money in excess of 10% of the value (taken at
current value) of its total assets (not including the amount borrowed) at
the time the borrowing is made and then only for temporary purposes (
including repurchasing its shares while effecting an orderly liquidation of
portfolio securities) or for emergency purposes;
3. 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;
4. 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;
5. 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;
6. 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
<PAGE>
-27-
System). This restriction shall not be applicable to bonds 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 three standards occurs, the Fund
will, promptly after discovery of the violation, take such action as may be
necessary to cause the violation to cease, which shall be the only
obligation of the Fund and the only remedy in respect of the violation.
Although certain of the Fund's fundamental investment restrictions
permit the Fund to borrow money to a limited extent, the Fund does not
currently intend to do so and did not do so last year.
All percentage limitations on investments (other than those contained
in nonfundamental investment restriction number (1) above) will apply at
the time of the making of an investment and shall not be considered
violated unless an excess or deficiency occurs or exists immediately after
and as a result of such investment.
The Investment Company Act of 1940 provides that a "vote of a majority
of the outstanding voting securities" of the Fund means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of the
Fund, or (2) 67% or more of the shares present at a meeting if more than
50% of the outstanding shares are represented at the meeting in person or
by proxy.
The Fund may invest up to 80% of its assets in securities of non-U.S.
issuers, although the Fund has not historically invested that high a
percentage of its assets in non-U.S. securities.
(C) Distribution Policy:
The Fund distributes net investment income and any net realized
short-term capital gains at least monthly. Distributions from any net
realized long-term capital gains are made at least annually after applying
any available capital loss carryovers. The Fund normally pays distributions
on the 20th day of each month to Japanese investors who hold shares as of
10th day of each month.
3. MANAGEMENT STRUCTURE
(A) Outline of Management of Assets, etc.:
A. Valuation of assets:
The Fund determines the net asset value per share of each class of
shares once each day the New York Stock Exchange (the "Exchange") is open.
Currently, the Exchange is closed Saturdays, Sundays and the following U.S.
holidays: New Year's Day, Presidents' Day, Good Friday, Memorial Day, the
Fourth of July, Labor Day, Thanksgiving and Christmas. The Fund determines
net asset value as of the close of regular trading on the Exchange,
currently 4:00 p.m. However, equity options held by the Fund are priced as
of the close of trading at 4:10 p.m., and futures contracts on
<PAGE>
-28-
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 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
<PAGE>
-29-
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 procedures
approved by the Trustees.
B. Management Fee, etc.:
(1) Management Fee:
(a) Management and Agent Securities Company Fees
Under a Management Contract dated January 20, 1997, the Fund pays
a quarterly fee to Investment Management Company based on the average
net assets of the Fund, as determined at the close of each business
day during the quarter, at an annual rate of 0.70% of the first $500
million of average net assets, 0.60% of the next $500 million, 0.55%
of the next $500 million, 0.50% of the next $5 billion, 0.475% of the
next $5 billion, 0.455 % of the next $5 billion, 0.440% of the next $5
billion and 0.430% thereafter.
For the fiscal years ending on September 30, 1996, 1995 and 1994
the Fund paid $20,286,489, $17,596,123 and $14,880,234, 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 September 30, 1996, the Fund paid
$6,086,760 as a custodian fee and investor servicing agent fee.
<PAGE>
-30-
(c) Fee on Class M Distribution Plan
The Class M distribution plan provides for payments by the Fund
to Putnam Mutual Funds at the annual rate of up to 1.00% of average
net assets attributable to Class M shares. The Trustees currently
limit payments under the Class M plan to the annual rate of 0.50% of
such assets.
Payments under the plans are intended to compensate Putnam Mutual
Funds Corp. for services provided and expenses incurred by it as
principal underwriter of Fund's shares, including the payments to
dealers mentioned below. Payments to dealers are subject to the
continuation of the class M distribution plan and the terms of an
agreement between Yamatane and Putnam Mutual Funds Corp.
The payments to dealers are based on the average net asset value
of Class M shares attributable to shareholders for whom Yamatane and
other dealers are designated as the dealer of record. Putnam Mutual
Funds Corp. makes the payments quarterly at an annual rate of 0.25% of
such average net asset value of Class M shares.
Putnam Mutual Funds Corp. also pays to Yamatane and other
dealers, as additional compensation with respect to the sale of Class
M shares, 0.15% of such average net asset value of Class M shares. For
Class M shares, the total annual payment to Yamatane and other dealers
equals 0.40% of such average net asset value. Putnam Mutual Funds
Corp. makes quarterly payments to qualifying dealers.
For the fiscal year ending on September 30, 1996, the Fund paid
the fees on the distribution plan of $4,242,445 for Class A shares,
$19,804,746 for Class B shares and $153,347 for the Class M shares,
respectively.
(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 $42,088 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
<PAGE>
-31-
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
<TABLE>
<CAPTION>
Pension on Estimated Total
Aggregate retirement annual benefits compensation
compensation benefits accrued from all from all
from the as part of Putnam funds Putnam
Trustees/Year fund (1) fund expenses (2) upon retirement (3) funds (4)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jameson A. Baxter/1994 (5) $5,313 $0 $76,499 $172,291
Hans H. Estin/1972 5,282 0 77,333 171,291
John A. Hill/1985 (5) 5,270 0 77,416 170,791
Ronald J. Jackson/1996 (5)(6) 1,678 0 77,333 94,807
Elizabeth T. Kennan/1992 5,282 0 76,999 171,291
Lawrence J. Lasser/1992 5,236 0 77,083 169,791
Robert E. Patterson/1984 5,601 0 79,999 182,291
Donald S. Perkins/1982 5,250 0 76,833 170,291
William F. Pounds/1971 (7) 5,948 0 81,833 197,292
George Putnam/1957 5,282 0 77,333 171,291
George Putnam, III/1984 5,282 0 77,333 171,291
A.J.C. Smith/1986 5,236 0 76,249 169,791
W. Nicholas Thorndike/1992 5,576 0 79,833 181,291
</TABLE>
(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 Mr. Hill and Mr. Jackson as of September 30, 1996 were
$6,969 and $1,757, respectively. The total amounts of deferred
compensation payable by the Putnam funds to Ms. Baxter, Mr. Hill and
Mr. Jackson as of December 31, 1996 were $54,002, $205,377 and
$75,102, 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.
<PAGE>
-32-
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 that
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 to receive 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 $451,354, $683,248
and $124,214 in brokerage commissions, respectively. During fiscal
1996 the Fund paid $104,117 on transactions with an aggregate
principal value of $307,445,042 (43.16% 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 September 30, 1996, the Fund paid
$26,510,414 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.
<PAGE>
-33-
They can buy Fund shares three ways - through most investment dealers,
through Putnam Mutual Funds Corp. or through a systematic investment
plan.
BUYING SHARES THROUGH PUTNAM MUTUAL FUNDS CORP. Complete an order
form and write a check for the amount shareholders wish to invest,
payable to the Fund. Return the completed form and check to Putnam
Mutual Funds Corp., which will act as investor's agent in purchasing
shares through investor's designated investment dealer.
BUYING SHARES THROUGH SYSTEMATIC INVESTING. Investors can make
regular investments of $25 or more per month through automatic
deductions from investor's bank checking or savings account.
Application forms are available from investor's investment dealer or
through Investor Servicing Agent.
Shares are sold at the public offering price based on the net
asset value next determined after Investor Servicing Agent receives
shareholders' order. In most cases, in order to receive that day's
public offering price, Investor Servicing Agent must receive
shareholders' order before the close of regular trading on the New
York Stock Exchange. If shareholders buy shares through their
investment dealer, the dealer must receive the shareholders' order
before the close of regular trading on the New York Stock Exchange to
receive that day's public offering price.
U.S. OFFERING PRICE AND SALES CHARGES
The public offering price of class M shares is the net asset
value plus a sales charge that varies depending on the size of
investor's purchase. The Fund receives the net asset value. The sales
charge is allocated between an investor's investment dealer and Putnam
Mutual Funds Corp. as shown in the following table, except when Putnam
Mutual Funds Corp., and its discretion, allocates the entire amount to
the investor's investment dealer.
Sales charge as
a percentage of: Amount of sales
--------------------------- charge reallowed
Net to dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) 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
<PAGE>
-34-
An investor may be eligible to buy class M shares at reduced
sales charges.
Sales charges will not apply to class M shares purchased with
redemption proceeds received within the prior 90 days from non-Putnam
mutual funds on which the investor paid a front-end or a contingent
deferred sales charge or to class M shares purchased by
participant-directed qualified retirement plans with at least 50
eligible employees. The Fund may also sell class M shares at net asset
value to members of qualified groups.
b. Sales in Japan
In Japan, Shares of the Fund are offered on any 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. Investors shall submit an Account Agreement or Transaction
Agreement (together with the Account Agreement referred to herein as
the "Agreements"). Provided, however, that on and after June 1, 1997,
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 300
shares and in integral multiples of 10 shares.
The issue price for Shares during the Subscription period shall
be, in principle, the Net Asset Value per Share next calculated on the
day on which the Fund has received such application. The Trade Day in
Japan is the day when the Handling Securities Company confirms the
execution of the order (ordinarily the business day in Japan next
following the placement of orders), and the payment and delivery shall
be made on the fourth Business Day after and including the Trade Day.
The sales charge shall be 3.25% of the amount of subscriptions, of
which 3.00% may be retained by the distributor in Japan and 0.25% may
be retained by the Principal Underwriter. For fiscal 1995 and 1996,
Putnam Mutual Funds Corp. received $230,128 and $450,874,
respectively, in sales charges for Class M shares, of which it
retained $17,388 and $43,472, respectively.
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, in the case of
<PAGE>
-35-
subscriptions on and before 30th May, 1997, the forward cable exchange
rate for each Payment Day in Tokyo as of the Trade Day or, in the case
of subscriptions on and after 1st June, 1997, 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 (Yen)500,000,000 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 from his
account
<PAGE>
-36-
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 10 shares.
The price a shareholder in Japan will receive is the next net
asset value calculated after the Fund receives the repurchase request
from Yamatane, 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 Agreements (on and after June 1, 1997, 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.
<PAGE>
-37-
(3) Suspension of Repurchase:
The Fund may suspend shareholders' right of redemption, or
postpone payment for more than seven days, if the New York Stock
Exchange is closed for other than customary weekends or holidays, or
if permitted by the rules of the Securities and Exchange Commission
during periods when trading on the Exchange is restricted or during
any emergency which makes it impracticable for the Fund to dispose of
its securities or to determine fairly the value of its net assets, or
during any other period permitted by order of the Commission for
protection of investors.
(4) Custody of Shares:
Share certificates shall be held by Shareholders at their own
risk.
The custody of the Share certificates (if issued) sold to
Japanese Shareholders shall, unless otherwise instructed by the
Shareholder, be held, in the name of the custodian, by the custodian
of Yamatane. 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 30th
September.
(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
<PAGE>
-38-
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 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 class M, 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 period ended September 30,
1996 and the period since the inception of Class M shares (December 1,
1994) through
<PAGE>
-39-
September 30, 1996, the average annual total return for Class M shares
of the Fund was 6.56% and 10.63%, respectively. The 30-day yield for
Class M shares of the Fund for the period ended September 30, 1996 was
6.79%.
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 the 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 Fund
is required to send to its shareholders annual and semi-annual reports
containing financial information.
(ii) Disclosure to the SEC
The Fund has filed a registration statement with the SEC on Form
N-1A; the Fund updates that registration statement periodically in
accordance with 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 Trust and the agreements with
major related companies as attachments thereto. The said documents are
made available for public inspection for the investors and any other
persons who desire at the Ministry of Finance.
The Handling Securities Companies of the Shares shall deliver to
the investors prospectuses the contents of which are substantially
identical with Part I and Part II of the securities registration
statements. For the purpose of disclosure of the financial conditions,
etc., the Trustees shall submit to the Minister of Finance of Japan
securities reports within 6 months of the end of
<PAGE>
-40-
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:
The Shareholders shall be registered in order to exercise directly the
rights of their Shares. Therefore, the Shareholders in Japan who entrust
the custody of their Shares to the Handling Securities Company cannot
exercise directly their rights, because they are not registered.
Shareholders in Japan may have the Handling Securities Companies exercise
their rights on their behalf in accordance with the Account Agreement with
the Handling Securities Companies.
<PAGE>
-41-
The Shareholders in Japan who do not entrust the custody of their
Shares to the Handling Securities Companies may exercise their rights in
accordance with their own arrangement under their own responsibility.
The major rights enjoyed by the investors are as follows:
(i) Voting rights
Each share has one vote, with fractional shares voting
proportionally. Shares of each class will vote together as a single
class except when otherwise required by law or as determined by the
Trustees. Although the Fund is not required to hold annual meetings of
its shareholders, shareholders holding at least 10% of the outstanding
shares entitled to vote have the right to call a meeting to elect or
remove Trustees, or to take other actions as provided in the Agreement
and Declaration of Trust.
(ii) Repurchase rights
Shareholders are entitled to request repurchase of Shares at
their Net Asset Value at any time.
(iii) Rights to receive dividends
Shareholders are entitled to receive any distribution from net
investment income and any net realized short-term capital gains at
least monthly and any net realized long-term capital gains at least
annually after applying any available capital loss carryovers.
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 the shareholders' meeting.
<PAGE>
-42-
(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 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
<PAGE>
-43-
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
<PAGE>
-44-
(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
<PAGE>
-45-
5. Status of the Investment Fund
(A) Diversification of Investment Fund:
<TABLE>
<CAPTION>
(As of the end of March, 1997)
- ----------------------------------------------------------------------------------------
Types of Assets Name of Total Investment
Country U.S. Dollars Ratio (%)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Corporate Bonds United States 1,225,070,861 28.84
Mexico 47,487,515 1.12
Canada 37,812,750 0.89
United Kingdom 27,046,388 0.64
Luxembourg 15,983,500 0.38
Netherlands 11,182,500 0.26
Indonesia 10,002,063 0.24
Bermuda 9,917,050 0.23
Columbia 8,556,000 0.20
Brazil 7,770,461 0.18
China 7,464,125 0.18
Australia 7,402,200 0.17
Greece 5,760,563 0.14
Argentina 5,268,206 0.12
India 4,625,250 0.11
- ------------------------------------ ------------------------------------
Sub-total 1,431,349,432 33.70
- ----------------------------------------------------------------------------------------
US Government Obligations United States 1,050,397,236 24.73
- ----------------------------------------------------------------------------------------
Foreign Government Germany 390,593,503 9.20
United Kingdom 262,524,769 6.18
France 247,764,979 5.83
Australia 51,049,775 1.20
Denmark 49,048,101 1.16
Canada 17,445,308 0.41
Russia 15,904,703 0.37
South Africa 2,682,177 0.06
Morocco 1,919,475 0.05
- ------------------------------------ ------------------------------------
Sub-total 1,038,932,790 24.46
- ----------------------------------------------------------------------------------------
Short-term
(Short-term Paper) United States 353,952,813 8.35
(Repurchase Agreement) United States 89,653,000 2.11
- ------------------------------------ ------------------------------------
Sub-total 443,605,813 10.46
- ----------------------------------------------------------------------------------------
Brady Bonds Argentina 38,163,456 0.90
Brazil 24,456,448 0.57
Mexico 22,865,970 0.54
Venezuela 5,028,571 0.12
Ecuador 2,494,531 0.06
Bulgaria 1,837,481 0.04
- ------------------------------------ ------------------------------------
Sub-total 94,846,457 2.23
- ----------------------------------------------------------------------------------------
Preferred stock United States 89,997,481 2.12
- ----------------------------------------------------------------------------------------
Units United States 52,875,301 1.25
United Kingdom 8,551,400 0.20
Australia 1,716,800 0.04
- ------------------------------------ ------------------------------------
Sub-total 63,143,501 1.49
- ----------------------------------------------------------------------------------------
Common stock United States 50,102,971 1.18
- ----------------------------------------------------------------------------------------
Asset-Backed Securities United States 40,393,707 0.95
- ----------------------------------------------------------------------------------------
Collateralized Mortgage Obligations United States 34,167,238 0.80
- ----------------------------------------------------------------------------------------
Convertible bonds United States 30,741,801 0.72
- ----------------------------------------------------------------------------------------
Convertible Preferred Stocks United States 12,923,923 0.30
- ----------------------------------------------------------------------------------------
Warrants United States 5,445,537 0.13
- ----------------------------------------------------------------------------------------
Options, Futures and Germany 1,501,740 0.03
Other Derivatives Japan 312,630 0.01
- ------------------------------------ ------------------------------------
Sub-total 1,814,370 0.04
- ----------------------------------------------------------------------------------------
Cash, Deposit and Other Assets -139,997,135 -3.31
(After deduction of liabilities)
- ----------------------------------------------------------------------------------------
Total 4,247,865,122 100.00
(Net Asset Value) ([Yen]527,160 million)
- ----------------------------------------------------------------------------------------
</TABLE>
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.
<PAGE>
-46-
(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
March, 1997 is as follows:
Total Net Asset Value Net Asset Value per Share
- --------------------------------------------------------------------------------
Dollar Yen
(thousands) (millions) Dollar Yen
- --------------------------------------------------------------------------------
lst Fiscal Year 14,751 1,831 11.97 1,485
(September 30, 1995)
- --------------------------------------------------------------------------------
2nd Fiscal Year 46,327 5,749 12.27 1,523
(September 30, 1996)
================================================================================
1996 End of April 34,310 4,258 12.08 1,449
May 36,848 4,573 12.03 1,493
June 38,792 4,814 12.05 1,495
July 40,945 5,081 12.04 1,494
August 43,071 5,345 12.03 1,493
September 46,327 5,749 12.27 1,523
October 49,272 6,115 12.37 1,535
November 52,782 6,550 12.53 1,555
December 55,434 6,879 12.43 1,543
1997 End of January 58,231 7,226 12.41 1,540
February 62,961 7,813 12.41 1,540
March 64,356 7,987 12.08 1,499
- --------------------------------------------------------------------------------
(Note) Operations of Class M Shares were commenced on December 1, 1994.
(2) Record of Distributions Paid
- -----------------------------------------------------
Amount of Dividend
Period paid per Share
- -----------------------------------------------------
1st Fiscal Year
(12/1/94 - 9/30/95) $0.65 ([Yen]80.67)
- -----------------------------------------------------
2nd Fiscal Year
(10/1/95 - 9/30/96) $0.87 ([Yen]107.97)
- -----------------------------------------------------
<PAGE>
-47-
(Note) Record of distribution paid from October 1996 to March 1997 are as
follows:
- ------------------------------------------
Dividend
- ------------------------------------------
Month/Year Dollar Yen
- ------------------------------------------
1996 End of October 0.069 8.563
November 0.069 8.563
December 0.086 10.673
1997 End of January 0.068 8.439
February 0.069 8.563
March 0.069 8.563
- ------------------------------------------
(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:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Number of Number of Shares Number of Outstanding
Shares Sold Repurchased Shares
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
1st Fiscal Year 1,363,277 131,265 1,232,012
(12/1/94-9/30/95) (0) (0) (0)
- -------------------------------------------------------------------------------------------------------
2nd Fiscal Year 3,470,806 925,979 3,776,839
(10/1/95-9/30/96) (0) (0) (0)
- -------------------------------------------------------------------------------------------------------
</TABLE>
Note: The number of Shares sold, repurchased and outstanding in the
parentheses represents those sold, repurchased and outstanding in
Japan. The Share will be sold in Japan from May 28, 1997.
<PAGE>
-48-
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 11, 1988.
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 11, 1988: Organization of the Fund as a Massachusetts
business trust.
Adoption of the Agreement and Declaration of
Trust.
September 7, 1988: 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,
<PAGE>
-49-
without shareholder approval, divide the shares of any series into two or
more classes, with such preferences and special or relative rights and
privileges as the Trustees may determine.
Under the Agreement and Declaration of Trust the shareholders shall
have power, as and to the extent provided therein, to vote only (i) for the
election of Trustees, to the extent provided therein (ii) for the removal
of Trustees, to the extent provided therein (iii) with respect to any
investment adviser, to the extent provided therein (iv) with respect to any
termination of the Trust, to the extent provided therein (v) with respect
to certain amendments of the Agreement and Declaration of Trust, (vi) to
the same extent as the stockholders of a Massachusetts business corporation
as to whether or not a court action, proceeding, or claim should or should
not be brought or maintained derivatively or as a class action on behalf of
the Trust or the shareholders, and (vii) with respect to such additional
matters relating to the Trust as may be required by the Agreement and
Declaration of Trust, the Bylaws of the Trust, or any registration of the
Trust with the Securities and Exchange Commission (or any successor agency)
or any state, or as the Trustees may consider necessary or desirable.
Certain of the foregoing actions may, in addition, be taken by the Trustees
without vote of the shareholders of the Trust.
On any matter submitted to a vote of shareholders, all shares of the
Trust then entitled to vote are voted in the aggregate as a single class
without regard to series or classes of shares, except (1) when required by
the Investment Company Act of 1940, as amended, or when the Trustees hall
have determined that the matter affects one or more series or classes of
shares materially differently, share are voted by individual series or
class; and (2) when the Trustees have determined that the matter affects on
the interests of one or more series or classes, then only shareholders of
such series or classes are entitled to vote thereon. There is no cumulative
voting.
Meetings of shareholders may be called by the Clerk whenever ordered
by the Trustees, the Chairman of the Trustees, or requested in writing by
the holder or holders of at least one-tenth of the outstanding shares
entitled to vote at the meeting. Written notice of any meeting of
shareholders must be given by mailing the notice at least seven days before
the meeting. Thirty percent of shares entitled to 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
<PAGE>
-50-
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.
<PAGE>
-51-
(G) Information Concerning Major Shareholders
Not applicable.
(H) Information Concerning Directors, Officers and Employees
(1) Trustees and Officers of the Trust
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Name Office and Title Resume Shares Owned
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
George Putnam Chairman and President present: Chairman and Director of Class A
Putnam Management and Putnam 5,197
Mutual Funds Corp.
Director, Marsh & McLennan
Companies, Inc.
- -----------------------------------------------------------------------------------------------------------------
William F. Pounds Vice Chairman present: Professor of Management, Class A
Alfred P. Sloan School of 887
Management, Massachusetts
Institute of Technology
- -----------------------------------------------------------------------------------------------------------------
Jameson Adkins Baxter Trustee present: President, Baxter Associates, Class A
Inc. 361
- -----------------------------------------------------------------------------------------------------------------
Hans H. Estin Trustee present: Vice Chairman, North American Class A
Management Corp. 213
- -----------------------------------------------------------------------------------------------------------------
John A. Hill Trustee present: Chairman and Managing Class A
Director, First Reserve 1,267
Corporation
- -----------------------------------------------------------------------------------------------------------------
Ronald J. Jackson Trustee present: Former Chairman, President and Class A
Chief Executive Officer of 437
Fisher-Price, Inc.,
Director of Safety 1st, Inc.,
Trustee of Salem Hospital and
the Peabody Essex Museum
- -----------------------------------------------------------------------------------------------------------------
Elizabeth T. Kennan Trustee present: President Emeritus and Class A
Professor, Mount Holyoke 276
College
- -----------------------------------------------------------------------------------------------------------------
Lawrence J. Lasser Trustee and Vice present: President, Chief Executive Class A
President Officer and Director of Putnam 129
Investments, Inc. and Putnam
Management
Director, Marsh & McLennan
Companies, Inc.
- -----------------------------------------------------------------------------------------------------------------
Robert E. Patterson Trustee present: Executive Vice President and Class A
Director of Acquisitions, 508
Cabot Partners Limited
Partnership
- -----------------------------------------------------------------------------------------------------------------
<PAGE>
-52-
- -----------------------------------------------------------------------------------------------------------------
Donald S. Perkins Trustee present: Director of various Class A
corporations, including 3,035
Cummins Engine Company, Lucent
Technologies, Inc., Springs
Industries, Inc. and Time
Warner Inc.
- -----------------------------------------------------------------------------------------------------------------
George Putnam, III Trustee present: President, New Generation Class A
Research, Inc. 2,618
- -----------------------------------------------------------------------------------------------------------------
A.J.C. Smith Trustee present: Chairman and Chief Executive Class A
Officer, Marsh & McLennan 208
Companies, Inc.
- -----------------------------------------------------------------------------------------------------------------
W. Nicholas Thorndike Trustee present: Director of various Class A
corporations and charitable 139
organizations, including Data
General Corporation, Bradley
Real Estate, Inc. and
Providence Journal Co.
Trustee of Massachusetts
General Hospital and Eastern
Utilities Associations
- -----------------------------------------------------------------------------------------------------------------
Charles E. Porter Executive Vice present: Managing Director of Putnam 0
President Investments, Inc. and Putnam
Management
- -----------------------------------------------------------------------------------------------------------------
Patricia C. Flaherty Senior Vice President present: Senior Vice President of 0
Putnam Investments, Inc. and
Putnam Management
- -----------------------------------------------------------------------------------------------------------------
William N. Shiebler Vice President present: Director and Senior Managing 1,194
Director of Putnam
Investments, Inc.
President and Director of
Putnam Mutual Funds
- -----------------------------------------------------------------------------------------------------------------
Gordon H. Silver Vice President present: Director and Senior Managing Class A
Director of Putnam 0
Investments, Inc. and Putnam
Management
- -----------------------------------------------------------------------------------------------------------------
Paul M. O'Neil Vice President present: Vice President of Putnam 0
Investments, Inc. and Putnam
Management
- -----------------------------------------------------------------------------------------------------------------
John D. Hughes Vice President and present Senior Vice President of Class A
Treasurer Putnam Management 0
- -----------------------------------------------------------------------------------------------------------------
Beverly Marcus Clerk and Assistant N/A Class A
Treasurer 0
- -----------------------------------------------------------------------------------------------------------------
Gary N. Coburn Vice President present Senior Managing Director of Class A
Putnam Investments, Inc. and 15,024
Putnam Management
- -----------------------------------------------------------------------------------------------------------------
John R. Verani Vice President present Senior Vice President of Class A
Putnam Investment, Inc. and 0
Putnam Management
- -----------------------------------------------------------------------------------------------------------------
Gail S. Attridge Vice President present Senior Vice President of Class A
Putnam Investments, Inc. and 0
Putnam Management
- -----------------------------------------------------------------------------------------------------------------
<PAGE>
-53-
- -----------------------------------------------------------------------------------------------------------------
Kenneth J. Taubes Vice President present Senior Vice President of Class A
Putnam Investments, Inc. and 0
Putnam Management
- -----------------------------------------------------------------------------------------------------------------
Michael Martino Vice President present Managing Director of Putnam Class A
Investments, Inc. and Putnam 0
Management.
- -----------------------------------------------------------------------------------------------------------------
Jin W. Ho Vice President present Managing Director of Putnam Class A
Investments, Inc. and Putnam 0
Management
- -----------------------------------------------------------------------------------------------------------------
William J. Curtin Vice President present Managing Director of Putnam Class A
Investments, Inc. and Putnam 0
Management
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
(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 September 30. The Trust is established for an
indefinite period and may be dissolved at any time by vote of the
shareholders holding at least two-thirds of the shares entitled to
vote or by the Trustees by written notice to shareholders.
<PAGE>
-54-
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 $139 billion in
assets in nearly 8 million shareholder accounts at the end of March, 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.
<PAGE>
-55-
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 March, 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 High Yield
Securities Taxable Investment Grade and Global Fixed Income Group), provide
a continuous investment program for the Fund and place all orders for the
purchase and sale of portfolio securities.
<PAGE>
-56-
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:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Names Year Business Experience
(at least 5 years)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Jin W. Ho 1996 Employed as an investment professional by Putnam Investment Management, Inc.
Managing Director since 1983.
- -------------------------------------------------------------------------------------------------------------------
D. William Kohli 1994 Employed as an investment professional by Putnam Investment Management, Inc.
Managing Director since 1994.
Prior to September, 1994, Mr. Kohli was Executive Vice President and
Co-Director of Global Bond Management and, prior to October, 1993, Senior
Portfolio Manager at Franklin Advisors/Templeton Investment Counsel.
- -------------------------------------------------------------------------------------------------------------------
Michael Martino 1994 Employed as an investment professional by Putnam Investment Management, Inc.
Managing Director since 1994.
Prior to January, 1994, Mr. Martino was employed by Back Bay Advisors as
Executive Vice President and Chief Investment Officer.
- -------------------------------------------------------------------------------------------------------------------
Gail S. Attridge 1997 Employed as an investment professional by Putnam Investment Management, Inc.
Senior Vice President since 1993.
Prior to November, 1993, Ms. Attridge was an Analyst at Keystone Custody
International.
- -------------------------------------------------------------------------------------------------------------------
Kenneth J. Taubes 1997 Employed as an investment professional by Putnam Investment Management, Inc.
Senior Vice President since 1991.
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-57-
(G) Information Concerning Major Stockholders
As of the end of March, 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:
<TABLE>
<CAPTION>
List of Officers and Directors of Putnam Investment Management, Inc. (as of March 31, 1997 )
---------------------------------------------------------------------------------------------------
Position with Putnam
Investment Management,
Name Inc. Other Business Affiliation
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
<S> <C> <C>
Putnam, George Chairman Chairman of Putnam Mutual Funds Corp.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Lasser, Lawrence President and Director
J.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Silver, Gordon H. Director and Senior Putnam Fiduciary Trust Company
Managing Director Senior Administrative Officer and Director of
Putnam Mutual Funds Corp.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Jamieson, Director and Senior Treasurer of Putnam Mutual Funds Corp.
Douglas B. Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Moran, Timothy P. Managing Director Treasurer, Director and Security Officer of Putnam
Fiduciary Trust Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Burke, Robert W. Director and Senior Senior Managing Director of Putnam Mutual Funds
Managing Director Corp.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Carman, Peter Director and Senior
Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Coburn, Gary N. Senior Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Ferguson, Ian C. Senior Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Spiegel, Steven Director and Senior Senior Managing Director of Putnam Mutual Funds
Managing Director Corp.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
<PAGE>
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---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Anderson, Blake Managing Director
E.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Bankart, Alan J. Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Bogan, Thomas Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Browchuk, Brett Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Collman, Managing Director Managing Director of Putnam Mutual Funds Corp.
Kathleen M.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Curtin, Managing Director
William J.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
D'Alelio, Edward Managing Director
H.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
DeTore, John A. Managing Director Managing Director of Putnam Fiduciary Trust Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Durgarian, Managing Director Director and Managing Director of Putnam Fiduciary
Karnig H. Trust Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Esteves, Irene M. Senior Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Ho, Jin W. Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Hurley, William Managing Director Managing Director of Putnam Mutual Funds Corp.
J.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Jacobs, Jerome J. Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Kearney, Mary E. Managing Director Managing Director of Putnam Mutual Funds Corp.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Kohli, D. William Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Kreisel, Anthony Managing Director
I.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Landes, William Managing Director
J.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
<PAGE>
-59-
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Maloney, Kevin J. Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Martino, Michael Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Maxwell, Scott M. Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
McGue, William F. Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
McMullen, Carol Managing Director
C.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Miller, Daniel L. Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Montgomery, Managing Director
Kenneth
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Morgan Jr., John Managing Director Managing Director of Putnam Fiduciary Trust Company
J.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Mullaney, Managing Director
Michael A.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
O'Donnell Jr., Managing Director
C. Patrick
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Peacher, Stephen Managing Director
C.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Porter, Charles Managing Director
E.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Reilly, Thomas V. Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Scott, Justin M. Managing Director Managing Director of Putnam Fiduciary Trust Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Talanian, John C. Managing Director Managing Director of Putnam Mutual Funds Corp.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Woolverton, Managing Director Managing Director of Putnam Mutual Funds Corp.
William H.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Asher, Steven E. Senior Vice President Senior Vice President of Putnam Mutual Funds Corp.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
<PAGE>
-60-
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Baumback, Robert Senior Vice President
K.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Beck, Robert R. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Bousa, Edward P. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Bresnahan, Senior Vice President Senior Vice President of Putnam Mutual Funds Corp.
Leslee R.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Burns, Cheryl A. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Cassaro, Joseph Managing Director
A.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Chapman, Susan Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Cotner, Beth C. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Curran, J. Peter Senior Vice President Senior Vice President of Putnam Mutual Funds Corp.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Dalferro, John R. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Daly, Kenneth L. Senior Vice President Senior Vice President of Putnam Mutual Funds Corp.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
England, Richard Senior Vice President
B.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Fitzgerald, Senior Vice President
Michael T.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Flaherty, Senior Vice President Senior Vice President of Putnam Mutual Funds Corp.
Patricia C.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Francis, Senior Vice President
Jonathan H.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Frucci, Richard Senior Vice President Senior Vice President of Putnam Fiduciary Trust
M. Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Fullerton, Brian Senior Vice President Senior Vice President of Putnam Mutual Funds Corp.
J.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
<PAGE>
-61-
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Gillis, Roland Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Goodwin, Kim C. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Grant, J. Peter Senior Vice President Senior Vice President of Putnam Fiduciary Trust
Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Grim, Daniel J. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Haagensen, Paul Senior Vice President
E.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Halperin, Senior Vice President
Matthew C.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Han, Billy P. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Healey, Deborah Senior Vice President
R.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Joseph, Joseph P. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Joyce, Kevin M. Senior Vice President Senior Vice President of Putnam Mutual Funds Corp.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Kamshad, Omid Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Kay, Karen R. Senior Vice President Clerk, Director and Senior Vice President of
Putnam Fiduciary Trust Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
King, David L. Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Kirson, Steven L. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Leichter, Senior Vice President
Jennifer E.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Lindsey, Jeffrey Senior Vice President
R.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Lukens, James W. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
<PAGE>
-62-
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Manning, Howard Senior Vice President
K.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Matteis, Andrew Senior Vice President
S.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
McAuley, Senior Vice President
Alexander J.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
McDonald, Senior Vice President
Richard E.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Meehan, Thalia Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Mikami, Darryl Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Mockard, Jeanne Senior Vice President
L.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Morgan, Kelly A. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Mufson, Michael Senior Vice President
J.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Mullin, Hugh H. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Netols, Jeffrey Senior Vice President Senior Vice President of Putnam Fiduciary Trust
W. Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Nguyen, Triet M. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Paine, Robert M. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Pohl, Charles G. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Pollard, Mark D. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Powers, Neil J. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Quinton, Keith P. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
<PAGE>
-63-
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Ray, Christopher Senior Vice President
A.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Reeves, William Senior Vice President
H.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Regan, Anthony W. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Rosalanko, Senior Vice President
Thomas J.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Ruys de Perez, Senior Vice President Senior Vice President of Putnam Fiduciary Trust
Charles A. Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Schwister, Jay E. Senior Vice President Senior Vice President of Putnam Fiduciary Trust
Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Senter, Max S. Senior Vice President Senior Vice President of Putnam Fiduciary Trust
Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Silver, Jennifer Managing Director Senior Vice President of Putnam Fiduciary Trust
K. Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Simon, Sheldon N. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Smith Jr., Leo J. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Smith, Margaret Senior Vice President
D.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Soja, Joanne Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Storkerson, John Senior Vice President Senior Vice President of Putnam Fiduciary Trust
K. Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Strumpf, Casey Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Sullivan, Roger Senior Vice President
R.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Swanberg, Senior Vice President
Charles H.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Swift, Robert Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
<PAGE>
-64-
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Taubes, Kenneth Senior Vice President Senior Vice President of Putnam Fiduciary Trust
J. Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Thomas, David K. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Thomsen, Senior Vice President Senior Vice President of Putnam Fiduciary Trust
Rosemary H. Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Tibbetts, Senior Vice President Senior Vice President of Putnam Mutual Funds Corp.
Richard B.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Till, Hilary F. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Van Vleet, Senior Vice President
Charles C.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Verani, John R. Senior Vice President Senior Vice President of Putnam Fiduciary Trust
Company
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Weinstein, Senior Vice President
Michael R.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Weiss, Manuel Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Schultz, Senior Vice President
Mitchell D.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Wheeler, Diane Senior Vice President
D.F.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Wyke, Richard P. Senior Vice President
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Zukowski, Gerald Senior Vice President
S.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Haslett, Thomas Managing Director
R.
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Zieff, William Managing Director
---------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------
Svensson, Lisa A. Senior Vice President
---------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-65-
(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 March, 1997, Investment Management Company
managed, advised, and/or administered the following 100 funds and fund
portfolios (having an aggregate net asset value of approximately
$138.5 billion):
<PAGE>
-66-
<TABLE>
<CAPTION>
(As of the end of March, 1997)
- -------------------------------------------------------------------------------------------------------------------------------
Net Asset
Total Net Value
Name Month/Date/Year Principal Asset Value per share
Established Characteristics ($ million) ($)
===============================================================================================================================
<S> <C> <C> <C> <C>
The George Putnam Fund of Boston; A 11/5/37 Open/Equity 2,062.0 16.62
- ------------------------------------------------------------------------------------------------------------------------------
The George Putnam Fund of Boston; B 4/24/92 Open/Equity 677.0 16.52
- ------------------------------------------------------------------------------------------------------------------------------
The George Putnam Fund of Boston; M 12/1/94 Open/Equity 132.0 16.51
- ------------------------------------------------------------------------------------------------------------------------------
The George Putnam Fund of Boston; Y 1/1/94 Open/Equity 286.0 16.64
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Arizona Tax Exempt Income Fund; A 1/30/91 Open/Bond 121.0 8.94
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Arizona Tax Exempt Income Fund; B 7/15/93 Open/Bond 27.0 8.93
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Arizona Tax Exempt Income Fund; M 7/3/95 Open/Bond 0.5 8.95
- ------------------------------------------------------------------------------------------------------------------------------
Putnam American Government Income Fund; A 3/1/85 Open/Bond 1,627.0 8.37
- ------------------------------------------------------------------------------------------------------------------------------
Putnam American Government Income Fund; B 5/20/94 Open/Bond 26.0 8.33
- ------------------------------------------------------------------------------------------------------------------------------
Putnam American Government Income Fund; M 2/14/95 Open/Bond 1.0 8.37
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asia Pacific Growth Fund; A 2/20/91 Open/Equity 365.0 12.81
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asia Pacific Growth Fund; B 6/1/93 Open/Equity 200.0 12.64
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asia Pacific Growth Fund; M 2/1/95 Open/Equity 9.0 12.74
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Balanced Portfolio; A 2/7/94 Open/Balanced 493.0 10.53
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Balanced Portfolio; B 2/11/94 Open/Balanced 331.0 10.49
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Balanced Portfolio; C 9/1/94 Open/Balanced 45.0 10.45
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Balanced Portfolio; M 2/6/95 Open/Balanced 27.0 10.53
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Balanced Portfolio; Y 7/14/94 Open/Balanced 192.0 10.54
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Conservative Portfolio; A 2/7/94 Open/Balanced 264.0 9.56
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Conservative Portfolio; B 2/18/94 Open/Balanced 112.0 9.53
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-67-
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Conservative Portfolio; C 9/1/94 Open/Balanced 22.0 9.52
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Conservative Portfolio; M 2/7/95 Open/Balanced 8.0 9.54
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Conservative Portfolio; Y 7/14/94 Open/Balanced 13.0 9.57
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Growth Portfolio; A 2/8/94 Open/Balanced 305.0 11.33
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Growth Portfolio; B 2/16/94 Open/Balanced 254.0 11.22
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Growth Portfolio; C 9/1/94 Open/Balanced 43.0 11.15
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Growth Portfolio; M 2/1/95 Open/Balanced 22.0 11.23
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Asset Allocation: Growth Portfolio; Y 7/14/94 Open/Balanced 187.0 11.38
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Balanced Retirement Fund; A 4/19/85 Open/Balanced 523.0 10.39
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Balanced Retirement Fund; B 2/1/94 Open/Balanced 51.0 10.32
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Balanced Retirement Fund; M 3/17/95 Open/Balanced 5.0 10.35
- ------------------------------------------------------------------------------------------------------------------------------
Putnam California Tax Exempt Income Fund; A 4/29/83 Open/Bond 3,048.0 8.37
- ------------------------------------------------------------------------------------------------------------------------------
Putnam California Tax Exempt Income Fund; B 1/4/93 Open/Bond 535.0 8.36
- ------------------------------------------------------------------------------------------------------------------------------
Putnam California Tax Exempt Income Fund; M 2/14/95 Open/Bond 12.0 8.36
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Asia Pacific Growth Fund 5/1/95 Open/Equity 127.0 10.35
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Diversified Income Fund 9/15/93 Open/Bond 515.0 10.39
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Global Growth Fund 5/1/90 Open/Equity 1,404.0 16.27
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Global Asset Allocation Fund 2/1/88 Open/Balanced 794.0 16.04
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Growth and Income Fund 2/1/88 Open/Balanced 6,208.0 23.43
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT High Yield Fund 2/1/88 Open/Bond 801.0 11.92
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Money Market Fund 2/1/88 Open/Bond 512.0 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT New Opportunities Fund 5/2/94 Open/Equity 1,647.0 15.87
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-68-
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT U.S. Government and High Quality Bond Fund 2/1/88 Open/Bond 759.0 12.25
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Utilities Growth and Income Fund 5/1/92 Open/Balanced 653.0 13.34
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Voyager Fund 2/1/88 Open/Equity 3,211.0 29.30
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Capital Appreciation Fund; A 8/5/93 Open/Equity 420.0 17.19
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Capital Appreciation Fund; B 11/2/94 Open/Equity 413.0 17.06
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Capital Appreciation Fund; M 1/22/96 Open/Equity 25.0 17.08
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Convertible Income-Growth Trust; A 6/29/72 Open/Balanced 976.0 20.35
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Convertible Income-Growth Trust; B 7/15/93 Open/Balanced 184.0 20.19
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Convertible Income-Growth Trust; M 3/13/95 Open/Balanced 11.0 20.24
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Equity Trust; A 7/1/94 Open/Equity 195.0 11.50
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Equity Trust; B 7/2/94 Open/Equity 227.0 11.42
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Equity Trust; M 7/3/95 Open/Equity 15.0 11.45
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Trust; A 10/3/88 Open/Bond 1,960.0 12.11
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Trust; B 3/1/93 Open/Bond 2,220.0 12.06
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Trust; M 12/1/94 Open/Bond 64.0 12.08
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Trust ; Y 7/11/96 Open/Bond 3.0 12.11
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Equity Income Fund; A 6/15/77 Open/Balanced 643.0 13.48
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Equity Income Fund; B 9/13/93 Open/Balanced 284.0 13.42
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Equity Income Fund; M 12/2/94 Open/Balanced 29.0 13.43
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Europe Growth Fund; A 9/7/90 Open/Equity 233.0 17.35
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Europe Growth Fund; B 2/1/94 Open/Equity 196.0 17.02
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Europe Growth Fund; M 12/1/94 Open/Equity 12.0 17.27
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-69-
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Florida Tax Exempt Income Fund; A 8/24/90 Open/Bond 237.0 9.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Florida Tax Exempt Income Fund; B 1/4/93 Open/Bond 56.0 9.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Florida Tax Exempt Income Fund; M 5/1/95 Open/Bond 1.0 9.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Federal Income Trust; A 6/2/86 Open/Bond 355.0 9.80
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Federal Income Trust; B 6/6/94 Open/Bond 9.0 9.76
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Federal Income Trust; M 4/12/95 Open/Bond 0.9 9.80
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Governmental Income Trust; A 6/1/87 Open/Bond 326.0 13.87
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Governmental Income Trust; B 2/1/94 Open/Bond 41.0 13.84
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Governmental Income Trust; M 3/17/95 Open/Bond 2.0 13.83
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Growth Fund; A 9/1/67 Open/Equity 2,352.0 10.94
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Growth Fund; B 4/27/92 Open/Equity 1,461.0 10.63
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Growth Fund; M 3/1/95 Open/Equity 32.0 10.88
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Growth Fund; Y 6/15/94 Open/Equity 86.0 11.07
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Growth and Income Fund II; A 1/5/95 Open/Balanced 741.0 12.53
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Growth and Income Fund II; B 1/5/95 Open/Balanced 885.0 12.46
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Growth and Income Fund II; M 1/5/95 Open/Balanced 110.0 12.49
- ------------------------------------------------------------------------------------------------------------------------------
The Putnam Fund for Growth and Income; A 11/6/57 Open/Balanced 13,292.0 18.39
- ------------------------------------------------------------------------------------------------------------------------------
The Putnam Fund for Growth and Income; B 4/27/92 Open/Balanced 10,555.0 18.21
- ------------------------------------------------------------------------------------------------------------------------------
The Putnam Fund for Growth and Income; M 5/1/95 Open/Balanced 206.0 18.31
- ------------------------------------------------------------------------------------------------------------------------------
The Putnam Fund for Growth and Income; Y 6/15/94 Open/Balanced 432.0 18.41
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield Advantage Fund; A 3/25/86 Open/Bond 1,120.0 9.47
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield Advantage Fund; B 5/16/94 Open/Bond 750.0 9.44
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-70-
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield Advantage Fund; M 12/1/94 Open/Bond 930.0 9.46
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield Trust; A 2/14/78 Open/Bond 3,116.0 12.24
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield Trust; B 3/1/93 Open/Bond 1,183.0 12.19
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield Trust; M 7/3/95 Open/Bond 23.0 12.23
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Health Sciences Trust; A 5/28/82 Open/Equity 1,374.0 46.74
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Health Sciences Trust; B 3/1/93 Open/Equity 390.0 45.81
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Health Sciences Trust; M 7/3/95 Open/Equity 14.0 46.54
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Income Fund; A 11/1/54 Open/Bond 1,116.0 6.85
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Income Fund; B 3/1/93 Open/Bond 356.0 6.82
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Income Fund; M 12/14/94 Open/Bond 23.0 6.82
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Income Fund; Y 2/12/94 Open/Bond 136.0 6.86
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Intermediate U.S. Government Income Fund; A 2/16/93 Open/Bond 137.0 4.80
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Intermediate U.S. Government Income Fund; B 2/16/93 Open/Bond 62.0 4.80
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Intermediate U.S. Government Income Fund; M 4/3/95 Open/Bond 4.0 4.80
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International New Opportunities Fund; A 1/3/95 Open/Equity 692.0 12.63
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International New Opportunities Fund; B 7/21/95 Open/Equity 855.0 12.53
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International New Opportunities Fund; M 7/21/95 Open/Equity 75.0 12.58
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund; A 12/1/25 Open/Equity 1,370.0 9.25
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund; B 3/1/93 Open/Equity 189.0 9.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund; M 12/2/94 Open/Equity 13.0 9.17
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Investors Fund; Y 11/30/96 Open/Equity 0.3 9.26
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Massachusetts Tax Exempt Income Fund; A 10/23/89 Open/Bond 271.0 9.21
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-71-
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Massachusetts Tax Exempt Income Fund; B 7/15/93 Open/Bond 81.0 9.20
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Massachusetts Tax Exempt Income Fund; M 5/12/95 Open/Bond 3.0 9.20
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Michigan Tax Exempt Income Fund; A 10/23/89 Open/Bond 139.0 9.01
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Michigan Tax Exempt Income Fund; B 7/15/93 Open/Bond 34.0 9.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Michigan Tax Exempt Income Fund; M 4/17/95 Open/Bond 0.7 9.01
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Minnesota Tax Exempt Income Fund; A 10/23/89 Open/Bond 97.0 8.85
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Minnesota Tax Exempt Income Fund; B 7/15/93 Open/Bond 34.0 8.82
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Minnesota Tax Exempt Income Fund; M 4/3/95 Open/Bond 1.0 8.84
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Money Market Fund; A 10/1/76 Open/Bond 2,393.0 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Money Market Fund; B 4/27/92 Open/Bond 547.0 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Money Market Fund; M 12/8/94 Open/Bond 55.0 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Municipal Income Fund; A 5/22/89 Open/Bond 795.0 8.87
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Municipal Income Fund; B 1/4/93 Open/Bond 474.0 8.86
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Municipal Income Fund; M 12/1/94 Open/Bond 12.0 8.86
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Jersey Tax Exempt Income Fund; A 2/20/90 Open/Bond 225.0 8.92
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Jersey Tax Exempt Income Fund; B 1/4/93 Open/Bond 80.0 8.91
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Jersey Tax Exempt Income Fund; M 5/1/95 Open/Bond 0.4 8.92
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New York Tax Exempt Income Fund; A 9/2/83 Open/Bond 1,757.0 8.68
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New York Tax Exempt Income Fund; B 1/4/93 Open/Bond 222.0 8.67
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New York Tax Exempt Income Fund; M 4/10/95 Open/Bond 1.0 8.68
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New York Tax Exempt Opportunities Fund; A 11/7/90 Open/Bond 158.0 8.79
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New York Tax Exempt Opportunities Fund; B 2/1/94 Open/Bond 47.0 8.78
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-72-
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New York Tax Exempt Opportunities Fund; M 2/10/95 Open/Bond 2.0 8.77
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Natural Resources Fund; A 7/24/80 Open/Equity 210.0 18.98
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Natural Resources Fund; B 2/1/94 Open/Equity 110.0 18.73
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Natural Resources Fund; M 7/3/95 Open/Equity 5.0 18.90
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Opportunities Fund; A 8/31/90 Open/Equity 5,979.0 37.28
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Opportunities Fund; B 3/1/93 Open/Equity 5,201.0 36.19
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Opportunities Fund; M 12/1/94 Open/Equity 284.0 36.86
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Opportunities Fund; Y 7/19/94 Open/Equity 176.0 37.55
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Ohio Tax Exempt Income Fund; A 10/23/89 Open/Bond 185.0 8.88
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Ohio Tax Exempt Income Fund; B 7/15/93 Open/Bond 46.0 8.87
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Ohio Tax Exempt Income Fund; M 4/3/95 Open/Bond 0.7 8.88
- ------------------------------------------------------------------------------------------------------------------------------
Putnam OTC & Emerging Growth Fund; A 11/1/82 Open/Equity 1,653.0 12.26
- ------------------------------------------------------------------------------------------------------------------------------
Putnam OTC & Emerging Growth Fund; B 7/15/93 Open/Equity 771.0 11.84
- ------------------------------------------------------------------------------------------------------------------------------
Putnam OTC & Emerging Growth Fund; M 12/2/94 Open/Equity 111.0 12.09
- ------------------------------------------------------------------------------------------------------------------------------
Putnam OTC & Emerging Growth Fund; Y 7/12/96 Open/Equity 78.0 12.29
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Growth Fund; A 2/28/91 Open/Equity 495.0 15.58
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Growth Fund; B 6/1/94 Open/Equity 316.0 15.38
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Growth Fund; M 12/1/94 Open/Equity 40.0 15.52
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Growth Fund; Y 7/12/96 Open/Equity 66.0 15.59
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Pennsylvania Tax Exempt Income Fund; A 7/21/89 Open/Bond 185.0 9.10
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Pennsylvania Tax Exempt Income Fund; B 7/15/93 Open/Bond 75.0 9.09
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Pennsylvania Tax Exempt Income Fund; M 7/3/95 Open/Bond 0.7 9.11
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-73-
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Preferred Income Fund; A 1/4/84 Open/Bond 112.0 8.77
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Preferred Income Fund; M 4/20/95 Open/Bond 6.0 8.75
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax - Free Income Trust Tax - Free High Yield Fund; A 9/20/93 Open/Bond 573.0 14.07
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax - Free Income Trust Tax - Free High Yield Fund B 9/9/85 Open/Bond 1,402.0 14.07
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax - Free Income Trust Tax - Free High Yield Fund M 12/29/94 Open/Bond 16.0 14.06
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax - Free Income Trust Tax - Free Insured Fund; A 9/30/93 Open/Bond 202.0 14.84
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax - Free Income Trust Tax - Free Insured Fund; B 9/9/85 Open/Bond 335.0 14.86
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax - Free Income Trust Tax - Free Insured Fund; M 6/1/95 Open/Bond 0.8 14.84
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax Exempt Income Fund; A 12/31/76 Open/Bond 2,018.0 8.77
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax Exempt Income Fund; B 1/4/93 Open/Bond 241.0 8.77
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax Exempt Income Fund; M 2/16/95 Open/Bond 7.0 8.79
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax Exempt Money Market Fund 10/26/87 Open/Bond 121.0 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam U.S. Government Income Trust; A 2/8/84 Open/Bond 2,249.0 12.61
- ------------------------------------------------------------------------------------------------------------------------------
Putnam U.S. Government Income Trust; B 4/27/92 Open/Bond 1,353.0 12.57
- ------------------------------------------------------------------------------------------------------------------------------
Putnam U.S. Government Income Trust; M 2/6/95 Open/Bond 8.0 12.61
- ------------------------------------------------------------------------------------------------------------------------------
Putnam U.S. Government Income Trust; Y 4/11/94 Open/Bond 3.0 12.61
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Utilities Growth and Income Fund; A 11/19/90 Open/Balanced 605.0 11.12
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Utilities Growth and Income Fund; B 4/27/92 Open/Balanced 618.0 11.07
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Utilities Growth and Income Fund; M 3/1/95 Open/Balanced 7.0 11.12
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Vista Fund; A 6/3/68 Open/Equity 1,852.0 9.80
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Vista Fund; B 3/1/93 Open/Equity 865.0 9.49
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Vista Fund; M 12/1/94 Open/Equity 58.0 9.68
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-74-
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Vista Fund; Y 3/28/95 Open/Equity 172.0 9.87
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund II; A 4/14/93 Open/Equity 351.0 14.22
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund II; B 10/2/95 Open/Equity 322.0 14.05
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund II; M 10/2/95 Open/Equity 37.0 14.12
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund; A 4/1/96 Open/Equity 8,460.0 15.30
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund; B 4/27/92 Open/Equity 4,275.0 14.62
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund; M 12/1/94 Open/Equity 136.0 15.11
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Voyager Fund; Y 4/1/94 Open/Equity 870.0 15.45
- ------------------------------------------------------------------------------------------------------------------------------
Putnam California Investment Grade Municipal Trust 11/27/92 Closed/Bond 68.0 14.74
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Convertible Opportunities and Income Trust 6/29/95 Closed/Bond 95.0 25.63
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Dividend Income Fund 9/28/89 Closed/Bond 120.0 11.08
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Income Convertible and Bond Fund 7/9/87 Closed/Bond 130.0 9.77
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Intermediate Government Income Trust 6/27/88 Closed/Bond 528.0 8.21
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Investment Grade Municipal Trust 10/26/89 Closed/Bond 238.0 11.57
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Investment Grade Municipal Trust II 11/27/92 Closed/Bond 182.0 13.65
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Investment Grade Municipal Trust III 11/29/93 Closed/Bond 52.0 12.86
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Managed High Yield Trust 6/25/93 Closed/Bond 103.0 13.73
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Managed Municipal Income Trust 2/24/89 Closed/Bond 443.0 9.71
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Master Income Trust 12/28/87 Closed/Bond 477.0 8.98
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Master Intermediate Income Trust 4/29/88 Closed/Bond 326.0 8.47
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Municipal Opportunities Trust 5/28/93 Closed/Bond 219.0 13.58
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New York Investment Grade Municipal Trust 11/27/92 Closed/Bond 38.0 13.45
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-75-
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Premier Income Trust 2/29/88 Closed/Bond 1,204.0 8.58
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Tax - Free Heath Care Fund 6/29/92 Closed/Bond 199.0 14.41
- ------------------------------------------------------------------------------------------------------------------------------
Putnam American Renaissance Fund; A 10/2/95 Open/Equity 4.0 10.34
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Trust II; A 2/19/95 Open/Bond 39.0 8.34
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Trust II; B 2/19/96 Open/Bond 57.0 8.34
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Diversified Income Trust II; M 2/19/96 Open/Bond 6.0 8.34
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Equity Fund 97 12/30/96 Open/Equity 3.0 7.35
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield Total Return Fund; A 1/1/97 Open/Bond 6.0 8.28
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield Total Return Fund; B 1/1/97 Open/Bond 7.0 8.27
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield Total Return Fund; M 1/1/97 Open/Bond 0.8 8.28
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth and Income 1/1/97 Open/Balanced 43.0 10.47
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT International New Opportunities Fund 1/1/97 Open/Equity 45.0 10.17
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT International Growth Fund 1/1/97 Open/Equity 26.0 10.32
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Balanced Fund 10/2/95 Open/Balanced 2.0 9.71
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Emerging Markets Fund; A 10/2/95 Open/Equity 27.0 11.17
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Emerging Markets Fund; B 10/2/95 Open/Equity 20.0 11.14
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Emerging Markets Fund; M 10/2/95 Open/Equity 2.0 11.15
- ------------------------------------------------------------------------------------------------------------------------------
Putnam California Tax Exempt Money Market Fund 10/26/87 Open 48.0 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam High Yield Municipal Trust 5/25/89 Closed 198.0 9.12
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New York Tax Exempt Money Market Fund 10/26/87 Open 46.0 1.00
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Growth and Income Fund; A 8/1/96 Open 89.0 9.75
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Growth and Income Fund; B 8/1/96 Open 93.0 9.71
- ------------------------------------------------------------------------------------------------------------------------------
<PAGE>
-76-
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Growth and Income Fund; M 8/1/96 Open 10.0 9.73
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Research Fund 10/2/95 Open 9.0 10.82
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Value Fund; A 1/3/95 Open 304.0 12.97
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Value Fund; B 2/26/96 Open 278.0 12.89
- ------------------------------------------------------------------------------------------------------------------------------
Putnam New Value Fund; M 2/26/96 Open 33.0 12.92
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Global Growth and Income Fund 1/3/95 Open 2.5 10.48
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Fund 12/28/95 Open 3.3 8.82
- ------------------------------------------------------------------------------------------------------------------------------
Putnam Japan Fund 12/28/95 Open 2.5 6.33
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Voyager Fund; A 12/28/95 Open 21.0 10.33
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Voyager Fund; B 10/30/96 Open 15.0 10.31
- ------------------------------------------------------------------------------------------------------------------------------
Putnam International Voyager Fund; M 10/30/96 Open 2.0 10.32
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT New Value Fund 1/2/97 Open 57.0 10.20
- ------------------------------------------------------------------------------------------------------------------------------
Putnam VT Vista Fund 1/2/97 Open 46.0 9.39
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-77-
(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.
<PAGE>
-78-
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.$27,348,783 as of the end of March, 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.$120,909,823 as of the end of March, 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) Yamatane Securities Co., Ltd. (Distributor in Japan and Agent Securities
Company)
(1) Amount of Capital
[Yen]14.8 billion as of the end of March, 1997
(2) Description of Business
Yamatane Securities Co., Ltd. is a diversified securities company in
Japan. Also, it engages the fund units for the investment trust funds
of Asahi Investment Trust Management Co., Ltd., Sakura Investment
Trust Management Co., Ltd., Nissei Investment Trust Management Co.,
Ltd., NCG Investment Trust Management Co., Ltd. and Nomura Investment
Trust Management Co., Ltd., and acts as the Agent Securities Company
and engages in handling the sales and repurchase for Fidelity Funds
International Fund.
(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.
<PAGE>
-79-
(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:
<TABLE>
<CAPTION>
(as of the filing date)
------------------------------------------------------------------------------------------------------
Name of Officer Investment Transfer Agent and
or Trustee Management Shareholder Service Agent
Fund Company
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
George Putnam Chairman and Trustee Chairman and Director None
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Charles E. Porter Executive Vice President Managing Director None
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Patricia C. Senior Vice President Senior Vice President None
Flaherty
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Lawrence J. Trustee and Vice President and CEO None
Lasser President
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Gordon H. Silver Vice President Senior Managing Director Director
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Gary N. Coburn Vice President Senior Managing Director None
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Edward H. Vice President Managing Director None
D'Alelio
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Jin W. Ho Vice President Managing Director None
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
John R. Verani Vice President Senior Vice President None
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Paul M. O'Neil Vice President Vice President None
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Gail S. Attridge Vice President Senior Vice President None
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
D. William Kohli Vice President Managing Director None
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Michael Martino Vice President Managing Director None
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Kenneth J. Taubes Vice President Senior Vice President None
------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-80-
IV. FINANCIAL CONDITION OF THE FUND
1. FINANCIAL STATEMENTS
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.
<PAGE>
-81-
Financial highlights (for a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
December 1, 1994
(commencement of
Year ended operations) to
September 30 September 30
- ----------------------------------------------------------------------------------------------------------
1996 1995
- ----------------------------------------------------------------------------------------------------------
Class M
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $11.97 $11.34
- ----------------------------------------------------------------------------------------------------------
Investment operations
- ----------------------------------------------------------------------------------------------------------
Net investment income .86 .78
Net realized and unrealized gain (loss) on investments .31 .63
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 1.17 1.41
- ----------------------------------------------------------------------------------------------------------
Distributions to shareholders
From net investment income (.87) (.65)
In excess of net investment income -- --
From net realized gain on investments -- --
In excess of net realized gain on investments -- --
Return of Capital -- (.13)
- ----------------------------------------------------------------------------------------------------------
Total distributions (.87) (.78)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $12.27 $11.97
- ----------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%) (a) 10.12 12.90 (b)
- ----------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $46,327 $14,751
- ----------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%) (b) 1.28 1.07 (*)
Ratio of net investment income to average net assets (%) 7.09 6.30 (*)
Portfolio turnover (%) 304.39 235.88
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(*) 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 periods ended on or after
September 30, 1995 includes amounts paid through expense offset
arrangements. Prior period ratios exclude these amounts.
<PAGE>
-82-
2. CONDITION OF THE FUND
(a) Statement of Net Assets
(As of the end of March, 1997)
- --------------------------------------------------------------------------------
$ [Yen]
- --------------------------------------------------------------------------------
(in thousands)
a. Total Assets 4,556,834,339 565,503,141
- --------------------------------------------------------------------------------
b. Total Liabilities 308,969,217 38,343,080
- --------------------------------------------------------------------------------
c. Total Net Assets 4,247,865,122 527,160,062
(a-b)
- --------------------------------------------------------------------------------
d. Total Number of Shares Class A. 160,759,306 Shares
Outstanding
Class B. 184,077,662 Shares
Class M. 5,326,139 Shares
Class Y. 1,420,097 Shares
- --------------------------------------------------------------------------------
e. Net Asset Value Class A. 12.11 [Yen]1,503
per Share (c/d)
Class B. 12.06 [Yen]1,497
Class M. 12.08 [Yen]1,499
Class Y. 12.11 [Yen]1,503
- --------------------------------------------------------------------------------
<PAGE>
-83-
(b) Names of Major Portfolio Holdings other than Equity Shares (Top 30
Holdings)
<TABLE>
<CAPTION>
(As of the end of March, 1997)
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Dollar
----------------------
Kind of Interest Par Value Acquisition Current Investment
Name of Securities Issue Maturity Rate (%) (1,000) currency Cost Value Ratio (%)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1. GNMA U.S. Government 2024-2027 7 1/2 227,486 USD 28,235,450 22,873,650 5.25
2. Germany bonds Foreign Bonds 11/20/2001 4 3/4 240,185 DEM 41,325,468 43,451,781 3.38
3. GNMA U.S. Government 2024-2026 7 138,734 USD 36,269,030 32,317,266 3.11
4. UK T-bonds Foreign Bonds 12/7/2006 7 1/2 80,385 GBP 33,231,537 30,513,086 3.07
5. U.S. T-bonds U.S. Government 11/15/2026 6 1/2 116,795 USD 15,481,056 07,523,813 2.53
6. U.S. T-notes U.S. Government 10/15/2006 6 1/2 101,342 USD 02,565,230 98,191,277 2.31
7. France Treasury bill Foreign Bonds 10/12/2001 5 1/2 519,505 FRF 01,047,475 94,990,996 2.24
8. Germany bonds Foreign Bonds 2/21/2001 5 1/4 153,520 DEM 02,973,114 93,889,022 2.21
9. FNMA U.S. Government 2026-2027 7 1/2 92,465 USD 91,354,683 90,731,488 2.14
10. France Treasury bill Foreign Bonds 10/12/2000 7 470,710 FRF 99,354,925 90,572,479 2.13
11. GNMA U.S. Government 2026-2027 8 82,852 USD 84,476,856 83,188,375 1.96
12. UK T-bonds Foreign Bonds 6/7/2002 7 49,830 GBP 81,027,164 80,470,048 1.89
13. FHLMA U.S. Government 4/16/2027 8 1/2 74,495 USD 77,093,502 76,333,537 1.80
14. Germany bonds Foreign Bonds 1/21/2002 8 109,590 DEM 76,174,462 73,822,867 1.74
15. France Treasury bill Foreign Bonds 10/12/1998 4 1/2 346,560 FRF 67,548,079 62,201,504 1.46
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-84-
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
U.S. Dollar
----------------------
Kind of Interest Par Value Acquisition Current Investment
Name of Securities Issue Maturity Rate (%) (1,000) Cost Value Ratio (%)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
16. FNMA U.S. Government 2026 8 61,091 USD 61,096,899 61,320,087 1.44
17. UK T-bonds Foreign Bonds 8/10/1999 6 32,100 GBP 51,045,129 51,541,635 1.21
18. Australia bonds Foreign Bonds 1/15/2001 8 3/4 62,140 AUD 50,579,654 51,049,775 1.20
19. Germany bonds Foreign Bonds 1/3/2005 7 3/8 58,230 DEM 38,994,611 38,374,126 0.90
20. Argentina deb Brady Bonds 3/31/2005 6 3/4 42,700 USD 38,975,231 38,163,456 0.90
21. FHLMC U.S. Government 2026 8 1/2 31,745 USD 32,855,916 32,528,310 0.77
22. U.S. T-bonds U.S. Government 8/15/2019 8 1/8 28,845 USD 32,770,694 31,648,446 0.75
23. Germany bonds Foreign Bonds 4/26/2006 6 1/4 46,565 DEM 32,002,265 28,561,348 0.67
24. Sears Credit Account
Master Trust Asset-Backed 2/12/2004 6.05 29,845 USD 29,770,388 28,427,363 0.67
25. Midland Funding Corp.
deb. Ser. A Corporate 7/23/2005 11 3/4 24,320 USD 23,878,238 27,623,872 0.65
26. Denmark bonds Foreign Bonds 11/15/2001 8 147,185 DKK 25,976,679 25,513,949 0.60
27. Brazil (Republic of) FRB Brady Bonds 4/15/2014 8 32,883 USD 24,693,472 24,456,448 0.58
28. Denmark bonds Foreign Bonds 3/15/2006 8 137,635 DKK 25,236,169 23,534,152 0.55
29. United Mexican States Brady Bonds 12/31/2019 6 1/4 32,434 USD 23,642,056 22,865,970 0.54
30. Terex Corp. Corporate 3/15/2002 13 1/4 16,710 USD 14,872,982 18,381,000 0.43
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-85-
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).
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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.
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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.
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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.
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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
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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.
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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
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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
