[Final]
[Translation]
SECURITIES REGISTRATION STATEMENT
for NAV Sale
Annual Securities Report
(the Fourth Term)
From: October 1, 1997
To: September 30, 1998
AMENDMENT TO SECURITIES REGISTRATION STATEMENT
PUTNAM DIVERSIFIED INCOME TRUST
[Final]
[Translation]
SECURITIES REGISTRATION STATEMENT
for NAV Sale
PUTNAM DIVERSIFIED INCOME TRUST
SECURITIES REGISTRATION STATEMENT
To: Director of Kanto Local Finance Bureau
Filing Date
of SRS: February 5, 1999
Name of the Registrant Trust: PUTNAM DIVERSIFIED INCOME TRUST
Name of Trustees: George Putnam
William F. Pounds
John A. Hill
Jameson A. Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin, III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
Address of Principal Office: One Post Office Square
Boston, Massachusetts 02109
U.S.A.
Name and Title of Registration Agent: Harume Nakano
Attorney-at-Law
Signature [Harume Nakano]
(Seal)
Ken Miura
Attorney-at-Law
Signature [Ken Miura]
(Seal)
Address or Place of Business: Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Name of Liaison Contact: Harume Nakano
Ken Miura
Attorneys-at-Law
Place of Liaison Contact: Hamada & Matsumoto
Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Phone Number: 03-3580-3377
- ii -
Public Offering or Sale for Registration
Name of the Fund Making Public PUTNAM DIVERSIFIED INCOME TRUST
Offering or Sale of Foreign
Investment Fund Securities:
Type and Aggregate Amount of Up to 1 billion Class M Shares
Foreign Investment Fund Securities Up to the total amount obtained by
to be Publicly Offered or Sold: aggregating the respective net
asset value per Class M Share in
respect of 1 billion Class M Shares
(The Maximum amount expected to be
sold is 11.46 billion U.S. dollars
(approximately yen1,326 billion)).
Note 1: U.S.$ amount is translated into Japanese Yen at the
rate of U.S.$l.00=yen115.70 the mean of the exchange rate
quotations by The Bank of Tokyo-Mitsubishi, Ltd. for
buying and selling spot dollars by telegraphic transfer
against yen on 30th December, 1998.
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 the end of December, 1998 (U.S.$11.46) by 1
billion 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
[ ] including front and back pages.)
C O N T E N T S
Japanese This
OriginalEnglish
Translation
PART I. INFORMATION CONCERNING SECURITIES 1 1
PART II. INFORMATION CONCERNING ISSUER 4 6
I. DESCRIPTION OF THE FUND 4 6
II. OUTLINE OF THE TRUST 4 6
III. OUTLINE OF THE OTHER RELATED COMPANIES 4 6
IV. FINANCIAL CONDITION OF THE FUND 4 6
V. SUMMARY OF INFORMATION CONCERNING
FOREIGN INVESTMENT FUND SECURITIES 4 6
VI. MISCELLANEOUS 4 6
PART III. SPECIAL INFORMATION 6 8
I. OUTLINE OF THE SYSTEM OF INVESTMENT
TRUSTS IN MASSACHUSETTS 6 8
II. FINANCIAL CONDITIONS OF THE INVESTMENT
MANAGEMENT COMPANY 12 15
III. FORM OF FOREIGN INVESTMENT
FUND SECURITIES 12 15
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 1 billion Shares
BE OFFERED FOR SALE
(IN JAPAN)
4. TOTAL AMOUNT OF Up to the total amount obtained by aggregating
OFFERING PRICE: the respective net asset value
per Share in respect of 1
billion Shares
(The maximum amount expected to be
sold is 11.46 billion U.S.
dollars (approximately yen1,326
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 the end of
December, 1998 ($11.46) by the number of Shares to
be offered (1 billion).
Note 2: Dollar amount is translated for convenience at
the rate of $1.00=yen115.70 (the mean of the exchange
rate quotations by The Bank of Tokyo-Mitsubishi,
Ltd. for buying and selling spot dollars by
telegraphic transfer against yen on 30th December,
1998). The same applies hereinafter.
Note 3: In this document, money amounts and percentages
have been rounded. Therefore, there are cases in
which the amount of the "total column" is not equal
to the aggregate amount. Also, translation into yen
is made simply by multiplying the corresponding
amount by the conversion rate specified and rounded
up when necessary. As a result, in this document,
there are cases in which Japanese yen figures for
the same information differ from each other.
5. ISSUE PRICE: The Net Asset Value per Share next
calculated on a Fund Business
Day after the application for
purchase is received by the
Fund.
Note:A "Fund Business Day" means a day on which the New
York Stock Exchange is open for business.
6. SALES CHARGE: Subscription charge applicable
in Japan shall be 3.25% of the
Net Asset Value. (0.25% of the
Net Asset Value divided by (1-
0.0325) and rounded to the
nearest in the three decimal
places shall be retained by
Putnam Mutual Funds Corp. as the
Fund's Principal Underwriter.)
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: 22th February, 1999 (Monday)
To: 21st February, 2000 (Monday)
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" or "Distributor")
7-12, Nihonbashi-Kabuto-cho,
Chuo-ku, Tokyo
Shineiishino Securities Co., Ltd.
1-3, Onogaradori 6-chome, Chuo-ku,
Kobe-shi, Hyogo Prefecture
The Sakura Bank, Limited
3-1, Kudanminami 1-chome,
Chiyoda-ku, Tokyo
Note:The subscription is handled at the head office and
the branch offices in Japan of each of the above-
mentioned companies.
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] of the Annual
Securities Report set forth
below).
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 4 Fund
Business Days (hereinafter
referred to as "Payment Date")
from (and including) the
Application Day.
12. OUTLINE OF UNDERWRITING, ETC.:
(A) Yamatane undertakes to make a public offering of Shares
in accordance with an agreement dated 19th May, 1997 with
Putnam Mutual Funds Corp. 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
Sales Handling Companies (the "Sales Handling Companies")
to the Fund.
Note:Sales Handling Company means a securities agent
company and/or registration agent financial
institution which shall conclude the agreement with
a distributor concerning agency business of units of
the Fund, act as agent for a distributor for
subscription or redemption of units of the Fund from
investors and handle the business, etc. concerning
receipt of subscription money from investors or
payment of redemption proceeds to investors, etc.
(C) The Fund has appointed Yamatane as the Agent Company in
Japan.
Note:"The Agent Company" shall mean a financial
institution which, under a contract made with a
foreign issuer or a local underwriter 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 the Distributor or Sales
Handling Companies rendering such other services.
13. MISCELLANEOUS:
(A) Method of Subscription:
Distributor or Sales Handling Company shall provide
to the investors a Contract Concerning a Foreign
Securities Transactions Account and other prescribed
contracts ("Account Contract") and the investors submit
to the Distributor or Sales Handling Company an
application for requesting the opening of a transactions
account under the Contract. The subscription amount
shall be paid in yen in principal and the yen exchange
rate shall be the exchange rate which shall be based on
the foreign exchange rate quoted in the Tokyo Foreign
Exchange Market on the Trade Day of each subscription and
which shall be determined by such Distributor or Sales
Handling 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) PERFORMANCE INFORMATION
The following information provides some indication
of the fund's risks. The chart shows year-to-year
changes in the performance of one of the fund's classes
of shares, class A shares. The table following the chart
compares the fund's performance to that of three broad
measures of market performance. Of course, the fund's
past performance is not an indication of future
performance.
Calendar year total returns for class A shares (Class
A shares are not sold in Japan.)
30%
25%
20% 23.62%
15% 15.86% 18.92%
10% $12.27 8.84% 8.14%
5% 5.13% 4.98%
0% -1.90%
-5% -5.59%
- -10%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
Performance figures in the bar chart do not reflect
the impact of sales charges. If they did, performance
would be less than that shown. During the periods shown
in the bar chart, the highest return for a quarter was
6.95% (quarter ending 3/31/91) and the lowest return for
a quarter was -5.27% (quarter ending 9/30/98).
Average Annual Total Returns (for periods ending
12/31/98)
Past 1 year Past 5 Past 10
years years
Class M -5.30% 4.35% 8.01%
Lehman Brothers 8.69% 7.27% 9.26%
Aggregate Bond Index
Solomon Non-U.S. 17.79% 8.26% 8.79%
World Government Bond
Index
First Boston High 0.58% 8.16% 10.74%
Yield Index
Unlike the bar chart, this performance information
reflects the impact of the current maximum initial sales
charges. The fund's performance is compared to the Lehman
Brothers Aggregate Bond Index, composed of securities
from Lehman Brothers Government / Corporate Index,
Mortgage-Backed Securities Index and the Asset-Backed
Securities Index; the Solomon Non-U.S. World Government
Bond Index, a market capitalization weighted benchmark
that tracks the performance of government bond markets
tracked by the Solomon Brothers World Government Bond
Index, excluding the United States; and the First Boston
High Yield Index an unmanaged index of lower-rated,
higher-yielding U.S. corporate bonds.
(C) FEES AND EXPENSES
This table summarizes the fees and expenses
investors may pay if they invest in the fund. Expenses
are based on the fund's last fiscal year.
Shareholder Fees
Class M
Shares
Maximum Sales Charge (Load) Imposed on 3.25%
Purchases
(as a percentage of the offering price)
Maximum Deferred Sales Charge (Load) (as a NONE
percentage of the original purchase price or
redemption proceeds, whichever is lower)
Annual Operating Expenses (expenses that are deducted
from fund assets)
Management Distribution Other Total Annual
Fund
Class M 0.53% 0.50% 0.19% 1.22%
(D) EXAMPLE
This example translates the "total annual fund
operating expenses" shown in the preceding table into
dollar amounts. By doing this, investors can more easily
compare the cost of investing in the fund to the cost of
investing in other mutual funds. The example makes
certain assumptions. It assumes that investors invest
$10,000 in the fund for the time periods shown and then
redeem all shares at the end of those periods. It also
assumes a 5% return on investor's investment each year
and that the fund's operating expenses remain the same.
The example is hypothetical; actual costs and returns may
be higher or lower.
1 year 3 years 5 years 10 years
Class M $445 $700 $974 $1,754
(E) Offerings other than in Japan:
Shares are simultaneously offered in the United
States of America.
PART II. INFORMATION CONCERNING ISSUER
I. DESCRIPTION OF THE FUND
The description in this item is same as the description
in I. DESCRIPTION OF THE FUND of the Securities Report
set forth below (the Securities Report mentioned below,
from page 1 to page 32)
II. OUTLINE OF THE TRUST
The description in this item is same as the description
in II. OUTLINE OF THE TRUST of the Securities Report set
forth below (Ditto, from page 33 to page 67)
III. OUTLINE OF THE OTHER RELATED COMPANIES
The description in this item is same as the description
in III. OUTLINE OF THE OTHER RELATED COMPANIES of the
Securities Report set forth below (Ditto, from page 68 to
page 69)
IV. FINANCIAL CONDITIONS OF THE FUND
The description in this item is same as the description
in IV. FINANCIAL CONDITIONS OF THE FUND of the Securities
Report set forth below (Ditto, from page 70 to page 183)
V. SUMMARY OF INFORMATION CONCERNING THE EXERCISE OF RIGHTS
BY HOLDERS OF FOREIGN INVESTMENT FUND SECURITIES
The description in this item is same as the description
in V. SUMMARY OF INFORMATION CONCERNING THE EXERCISE OF
RIGHTS BY HOLDERS OF FOREIGN INVESTMENT FUND SECURITIES
of the Securities Report set forth below (Ditto, page
207)
VI. MISCELLANEOUS
(1) The following documents in connection with the Fund were
filed with Director of Kanto Local Finance Bureau of MOF.
June 30, 1998: Semi-annual Report (during the Fourth term)
Amendment to Securities Registration Statement
July 1, 1998: Amendment to Semi-annual Report
August 4, 1998: Securities Registration Statement
August 13, 1998: Amendment to Securities Registration Statement
December 1, 1998:Amendment to Securities Registration Statement
(2) The ornamental design is used in cover page of the
Japanese Prospectus.
(3) 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.
(4) 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.
(a) The content of the summarized Preliminary
Prospectus may be publicized by leaflets, pamphlets,
direct mails (post cards and mails in envelopes) or at
newspapers, magazines and other books.
(b) The layout, quality of papers, printing colour,
design etc. of the Summarized Preliminary Prospectus
may vary etc. of the Summarized Preliminary Prospectus
may vary depending on manner of usage. Photos and
illustrations set forth in the attached may be used.
(c) For information of the Fund's achievements, the
changes of the total net asset value, the changes of
the net asset value per share and the fluctuation
rates since the establishment of the Fund or for the
latest 3 months, 6 months, one year, two years, three
years or five years and the likes, the achievements of
past distributions, the continuous changes of sum of
the net asset value and the achievements of past
distributions, may be set out in the figures or
graphs. Such information regarding the Fund's
achievement may be converted into and presented in yen
and the latest information available at anytime after
the filing of the Securities Registration Statement
and the same information represented in the form of
tables or graphs may be set forth. Further, Account
Contract and the associated bylaws in relation to the
subscription and payment, etc., of the Distributor or
Sales Handling companies may be presented.
(d) An example of dividend receivable corresponding
to a certain amount of purchase may be mentioned on
the basis of historical performance of the Fund. Such
amount of dividend and purchase may be converted to
Japanese yen and may be described as well.
(e) An example of delivery amount corresponding to a
certain number of shares applied may be mentioned on
the basis of the historical Net Asset Value. Such
amount of delivery may be converted to Japanese yen
and may be described as well.
PART III. SPECIAL INFORMATION
I. OUTLINE OF THE SYSTEM OF INVESTMENT TRUSTS IN
MASSACHUSETTS
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 entity 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 and
regulations. Most mutual funds are subject to these
laws. Among the more significant of these statutes are:
1. Investment Company Act of 1940
The Investment Company Act of 1940, as amended
(the "1940 Act"), in general, requires investment
companies to register as such with the U.S.
Securities and Exchange Commission (the "SEC"), and
to comply with a number of substantive regulations
of their operations. The 1940 Act requires an
investment company, among other things, to provide
periodic reports to its shareholders.
2. Securities Act of 1933
The Securities Act of 1933, as amended (the
"1933 Act"), regulates many sales of securities.
The Act, among other things, imposes various
registration requirements upon sellers of securities
and provides for various liabilities for failures to
comply with its provisions or in respect of other
specified matters.
3. Securities Exchange Act of 1934
The Securities Exchange Act of 1934, as amended
(the "1934 Act"), regulates a variety of matters
involving, among other things, the secondary trading
of securities, periodic reporting by the issuers of
securities, and certain of the activities of
transfer agents and brokers and dealers.
4. The Internal Revenue Code
An investment company is an entity subject to
federal income taxation under the Internal Revenue
Code. However, under the Code, an investment
company may be relieved of federal taxes on income
and gains it distributes to shareholders if it
qualifies as a "regulated investment company" under
the Code for federal income tax purposes and meets
all other necessary requirements.
5. Other laws
The Fund is subject to the provisions of other
laws, rules, and regulations applicable to the Fund
or its operations, such as, for example, various
state laws regarding the sale of the Fund's shares.
B. Outline of the Supervisory Authorities
Among the regulatory authorities having jurisdiction
over the Fund or certain of its operations are the SEC
and state regulatory agencies or authorities.
1. The SEC has broad authority to oversee the
application and enforcement of the federal
securities laws, including the 1940 Act, the 1933
Act, and the 1934 Act, among others, to the Fund.
The 1940 Act provides the SEC broad authority to
inspect the records of investment companies, to
exempt investment companies or certain practices
from the provisions of the Act, and otherwise to
enforce the provisions of the Act.
2. State authorities typically have broad
authority to regulate the activities of brokers,
dealers, or other persons directly or indirectly
engaged in activities related to the offering and
sale of securities to their residents or within
their jurisdictions.
C. 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 1940 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.
D. Ongoing Requirements
Under U.S. law, a fund is subject to numerous
ongoing requirements, including, but not limited to;
1. Updating its prospectus 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 p.m., New York time) each day the
Exchange is open.
B. Redemption
Shareholders may generally sell shares of a fund to
that fund any day the fund is open for business at the
net asset value next computed after receipt of the
shareholders' order. Under unusual circumstances, a fund
may suspend redemptions, or postpone payment for more
than seven says, if permitted by U.S. securities laws. A
fund may charge redemption fees as described in its
prospectus.
C. Transfer agency
The transfer agent for a fund typically processes
the transfer of shares, redemption of shares, and payment
and/or reinvestment of distributions.
V. Shareholder Information, Rights and Procedures for the
Exercise of Such Rights
A. Voting Rights
Voting rights vary from fund to fund. In the case
of many funds organized as Massachusetts business trusts,
shareholders are entitled to vote on the election of
trustees, approval of investment advisory agreements,
underwriting agreements, and distribution plans (or
amendments thereto), certain mergers or other business
combinations, and certain amendments to the declaration
of trust. Shareholder approval is also required to
modify or eliminate a fundamental investment policy.
B. Dividends
Shareholders are typically entitled to receive
dividends when and if declared by a fund's trustees. In
declaring dividends, the trustees will normally set a
record date, and all shareholders of record on that date
will be entitled to receive the dividend paid.
C. Dissolution
Shareholders would normally be entitled to receive
the net assets of a fund which were liquidated in
accordance with the proportion of the fund's outstanding
shares he owns.
D. Transferability
Shares of a fund are typically transferable without
restriction.
E. Right to Inspection
Shareholders of a Massachusetts business trust have
the right to inspect the records of the trust as provided
in the declaration of trust or as otherwise provided by
applicable law.
VI. U.S. Tax Matters
The Fund intends to qualify each year as a regulated
investment company under Subchapter M of the United States
Internal Revenue Code of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its
tax liability determined under Subchapter M, the Fund will not
be subject to U.S. federal income tax on any of its net
investment income or net realized capital gains that are
distributed to its shareholders. In addition, as a
Massachusetts business trust, the Fund under present
Massachusetts law is not subject to any excise or income taxes
in Massachusetts.
In order to qualify as a "regulated investment company"
and to receive the favorable tax treatment accorded regulated
investment companies and their shareholders, the Fund must,
among other things, (a) derive at least 90% of its gross
income from dividends, interest, payments with respect to
certain securities loans, and gains from the sale of stock,
securities and foreign currencies, or other income (including
but not limited to gains from options, futures, or forward
contracts) derived with respect to its business of investing
in such stock, securities, or currencies; (b) distribute with
respect to each taxable year at least 90% of the sum of its
taxable net investment income, its net tax-exempt income, and
the excess, if any, of its net short-term capital gains over
net long-term capital losses for such year; (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,
securities of other regulated investment companies and other
securities limited generally with respect to any one issuer to
not more than 5% of the total assets of the 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 (other than those of the U.S.
Government or other regulated investment companies) of any one
issuer or of two or more issuers which the Fund controls and
which are engaged in the same, similar or related trades or
businesses.
If the Fund qualifies as a regulated investment company
that is accorded special tax treatment, the Fund will not be
subject to federal income tax on income paid to its
shareholders in the form of dividends (including capital gain
dividends).
If the Fund failed to qualify as a regulated investment
company accorded special tax treatment in any taxable year,
the Fund would be subject to tax on its taxable income at
corporate rates, and all distributions from earnings and
profits, including any distributions of net tax-exempt income
and net long-term capital gains, would be taxable to
shareholders as ordinary income. In addition, the Fund could
be required to recognize unrealized gains, pay substantial
taxes and interest and make substantial distributions before
requalifying as a regulated investment company that is
accorded special tax treatment.
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 designated by
the Fund as deriving from net gains on securities held for
more than one year 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 or 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 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 sale, exchange or redemption of Fund shares may give
rise to a gain or loss. In general, any gain or loss realized
upon a taxable disposition of shares will be treated as long-
term capital gain or loss if the shares have been held for
more than 12 months, and otherwise as short-term capital gain
or loss. However, any loss realized upon a taxable
disposition of shares held for six months or less will be
treated as long-term, rather than short-term, to the extent of
any long-term capital gain distributions received by the
shareholder with respect to the shares. All or a portion of
any loss realized upon a taxable disposition of Fund shares
will be disallowed if other shares of the Fund are purchased
within 30 days before or after the disposition. In such a
case, the basis of the newly purchased shares will be adjusted
to reflect the disallowed loss.
Special tax rules apply to investments through 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 Internal Revenue Service recently revised its
regulations affecting the application to foreign investors of
the back-up withholding and withholding tax rules described
above. The new regulations generally will be effective for
payment made after December 31, 1999 (although transition
rules will apply). In some circumstances, the new rules will
increase the certification and filing requirements imposed on
foreign investors in order to qualify for exemption from the
31% back-up withholding tax rates under income tax treaties.
Foreign investors in a fund should consult their tax advisors
with respect to the potential application of these new
regulations.
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), the possibility that
a non-U.S. investor may be subject to U.S. tax on capital gain
distributions and gains realized upon the sale of fund shares
if the investor is present in the United States for more than
182 days during the taxable year (and certain other conditions
apply), or the possibility that a non-U.S. investor may be
subject to U.S. tax on income from the fund that is
"effectively connected" with a U.S. trade or business carried
on by such an investor. Shareholders residing in Japan should
consult "Tax Treatment of Shareholders in Japan"on page 38 of
the Annual Report.
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 foreign state or local 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.
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 principal underwriter are generally governed by a
number of legal regimes, including, for example, the 1940
Act, the 1933 Act, the 1934 Act, and state laws.
D. Transfer Agent
A transfer agent performs certain bookkeeping, data
processing, and administrative services pertaining to the
maintenance of shareholder accounts. A transfer agent
may also handle the payment of any dividends declared by
the trustees of a fund.
E. Custodian
A custodian's responsibilities may include, among
other things, safeguarding and controlling a fund's cash
and securities, handling the receipt and delivery of
securities, and collecting interest and dividends on a
fund's investments.
II. FINANCIAL CONDITION OF THE INVESTMENT MANAGEMENT COMPANY
The description in this item is same as the description
in II. FINANCIAL CONDITION OF THE INVESTMENT MANAGEMENT
COMPANY of the Securities Report set forth below (Ditto,
from page 184 to page 208)
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
[Final]
[Translation]
Annual Securities Report
(the Fourth Term)
From: October 1, 1997
To: September 30, 1998
PUTNAM DIVERSIFIED INCOME TRUST
Annual Securities Report
(the Fourth Term)
From: October 1, 1997
To: September 30, 1998
To: Director of Kanto Local Finance Bureau
Filing Date of SRS: February 5, 1999
Name of the Registrant Trust: PUTNAM DIVERSIFIED INCOME TRUST
Name of Trustees: George Putnam
William F. Pounds
John A. Hill
Jameson A. Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin, III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
Address of Principal Office: One Post Office Square
Boston, Massachusetts 02109
U.S.A.
Name and Title of Registration Agent: Harume Nakano
Attorney-at-Law
Signature [Harume Nakano]
(Seal)
Ken Miura
Attorney-at-Law
Signature [Ken Miura]
(Seal)
Address or Place of Business: Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Name of Liaison Contact: Harume Nakano
Ken Miura
Attorneys-at-Law
Place of Liaison Contact: Hamada & Matsumoto
Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Phone Number: 03-3580-3377
- ii -
Places where a copy of this Annual Securities Report
is available for Public Inspection
Not applicable.
(Total number of pages of this Annual Securities Report in
Japanese is
106 including front and back pages.)
C O N T E N T S
Japanese This
OriginalEnglish
Translation
I. DESCRIPTION OF THE FUND 1 1
l. GENERAL INFORMATION 1 1
2. INVESTMENT POLICY 6 7
3. MANAGEMENT STRUCTURE 12 15
4. INFORMATION CONCERNING THE EXERCISE
OF RIGHTS BY SHAREHOLDERS, ETC. 21 29
5. STATUS OF INVESTMENT FUND 24 33
II. OUTLINE OF THE TRUST 28 37
III. OUTLINE OF THE OTHER RELATED COMPANIES 59 72
IV. FINANCIAL CONDITION OF THE FUND 61 74
V. FINANCIAL CONDITIONS OF THE INVESTMENT
MANAGEMENT COMPANY 184 80
VI. SUMMARY OF INFORMATION CONCERNING
FOREIGN INVESTMENT FUND SECURITIES 209 81
VII. REFERENCE INFORMATION 209 81
Note 1: U.S.$ amount is translated into Japanese
Yen at the rate of U.S.$l.00 = yen115.70 the mean of
the exchange rate quotations by The Bank of Tokyo-
Mitsubishi, Ltd. for buying and selling spot
dollars by telegraphic transfer against yen on 30th
December, 1998.
Note 2: In this report, money amounts and
percentages have been rounded. Therefore, there
are cases in which the amount for the "total"
column is not equal to the aggregate amount. Also,
conversion into other currencies is done simply by
multiplying the corresponding amount by the
conversion rate specified and rounded up when
necessary. As a result, in this report, there are
cases in which figures for the same information
differ from each other.
Note 3: In this report, "fiscal year" refers to a
year from October 1 to September 30 of the
following year.
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. 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, shareholders would receive the net assets of
the Fund. The Fund may suspend the sale of shares at any
time and may refuse any order to purchase shares.
Although the Fund is not required to hold annual meetings
of its shareholders, shareholders holding at least 10% of
the outstanding shares entitled to vote have the right to
call a meeting to elect or remove Trustees, or to take
other actions as provided in the Agreement and
Declaration of Trust.
If a shareholder owns fewer shares than the minimum
set by the Trustees (presently 20 shares), the Fund may
choose to redeem the shareholders' shares. Shareholders
will receive at least 30 days' written notice before the
Fund redeems shareholders' shares, and shareholders may
purchase additional shares at any time to avoid a
redemption. The Fund may also redeem shares if
shareholders own shares above a maximum amount set by the
Trustees. There is presently no maximum, but the
Trustees may at any time, establish one, which could
apply to both present and future shareholders.
YEAR 2000 ISSUES. The fund could be adversely
affected if the computer systems used by Putnam
Management and the fund's other service providers do not
properly process and calculate the date-related
information relating to the end of this century and the
beginning of the next. While year 2000-related computer
problems could have a negative effect on the fund, both
in its operations and in its investments, Putnam
Management is working to avoid such problems and to
obtain assurances from service providers that they are
taking similar steps. No assurances, though, can be
provided that the fund will not be adversely impacted by
these matters.
(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 U.S. Internal Revenue Code of 1986, as
amended.
The following is a broad outline of certain of the
principal statutes regulating the operations of the Fund
in the U.S.:
a. Massachusetts General Laws, Chapter 182 -
Voluntary Associations and Certain Trusts
Chapter 182 provides in part as follows:
A copy of the declaration of trust must be
filed with the Secretary of State of the
Commonwealth of Massachusetts and with the Clerk of
the City of Boston. Any amendment of the
declaration of trust must be filed with the
Secretary and the Clerk within thirty days after the
adoption of such amendment.
A trust must annually file with the Secretary
of State on or before June 1 a report providing the
name of the trust, its address, number of shares
outstanding and the names and addresses of its
trustees.
Penalties may be assessed against the trust for
failure to comply with certain of the provisions of
Chapter 182.
b. Investment Company Act of 1940
The Investment Company Act of 1940, as amended
(the "1940 Act"), in general, requires investment
companies to register as such with the U.S.
Securities and Exchange Commission (the "SEC"), and
to comply with a number of substantive regulations
of their operations. The 1940 Act requires an
investment company, among other things, to provide
periodic reports to its shareholders.
c. Securities Act of 1933
The Securities Act of 1933, as amended (the
"1933 Act"), regulates many sales of securities. The
Act, among other things, imposes various
registration requirements upon sellers of securities
and provides for various liabilities for failures to
comply with its provisions or in respect of other
specified matters.
d. Securities Exchange Act of 1934
The Securities Exchange Act of 1934, as amended
(the "1934 Act"), regulates a variety of matters
involving, among other things, the secondary trading
of securities, periodic reporting by the issuers of
securities, and certain of the activities of
transfer agents and brokers and dealers.
e. The Internal Revenue Code of 1986
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 activities of brokers,
dealers, or other persons directly or indirectly
engaged in activities related to the offering and
sale of securities to their residents or within
their jurisdictions.
(C) Objectives and Basic Nature of the Fund:
GOAL
The fund seeks as high a level of current income as
Putnam Management believes is consistent with
preservation of capital.
MAIN INVESTMENT STRATEGIES-MULTI-SECTOR FIXED-INCOME
SECURITIES
Under normal market conditions, the fund will invest
mostly in bonds and other debt securities, and, to a
lesser degree, preferred stocks. These investments are
commonly known as fixed-income securities. The fund
invests in the following three sectors of the fixed-
income securities markets:
U.S. GOVERNMENT AND INVESTMENT GRADE SECTOR: consisting
primarily of debt obligations of the U.S. government, its
agencies and instrumentalities,
HIGH YIELD SECTOR: consisting of high-yielding, lower-
rated, higher risk U.S. and non-U.S.fixed-income
securities, and
INTERNATIONAL SECTOR: consisting of obligations of non-
U.S.governments, their agencies and instrumentalities,
and other fixed-income securities denominated in non-
U.S.currencies.
MAIN RISKS
The main risks that could adversely affect the value of
this fund's shares and the total return on your
investment include
*The risk that movements in the securities markets will
reduce the value of the fund's investments. The value of
the fund's debt investments are particularly likely to
fall if interest rates rise. Interest rate risk is
highest for investments with long maturities.
*The risk that the companies whose debt the fund
purchases will fail to make timely payments of interest
and principal. This credit risk is higher for corporate
debt than for U.S. Government debt and is higher still
for debt of below investment-grade quality. BECAUSE THE
FUND INVESTS SUBSTANTIALLY IN JUNK BONDS THIS RISK IS
HEIGHTENED FOR THE FUND. INVESTORS SHOULD CAREFULLY
CONSIDER THE RISKS ASSOCIATED WITH AN INVESTMENT IN THE
FUND
*The risk that mortgages underlying the fund's
investments in mortgage-backed securities may be prepaid.
This might force the fund to reinvest the proceeds from
prepayments in investments offering a lower yield. With
respect to these investments, the fund therefore might
not benefit from any increase in value as a result of
declining interest rates. Similarly, rising interest
rates may cause prepayments to fall. This would
effectively extend the fund's maturity and increase its
interest rate risk at times when that is least desirable-
during periods of rising interest rates.
*The risk of investing outside the United States, such as
currency fluctuations, economic or financial instability,
lack of timely or reliable financial information or
unfavorable political or legal developments in foreign
markets. These risks are increased when investing in
emerging markets.
You can lose money by investing in the fund. The fund
may not achieve its goals, and is not intended as a
complete investment program. An investment in the fund
is NOT a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation
or any other government agency.
(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.
(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 Company") engages in forwarding
the purchase or repurchase orders for the Shares in
Japan and also acts as the agent company.
Related Companies of the Fund
Trust
Putnam Diversified Income Trust
Trustees
(Agreement and Declaration of Trust)
Investor
Distribution Custodian Servicing
Agreement Agreement Agreement
Custodian
Principal Investor
Underwriter 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 Company Management Contract
Agreement
Distributor in Japan Investment
Agent 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 advisor
agent company) concerning the Fund's assets)
2. INVESTMENT POLICY
(A) Basic Policy for Investment and Objectives of Investment:
The Fund's main investment strategies and related risks.
Any investment carries with it some level of risk that
generally reflects its potential for reward. The fund
pursues its goal of high current income by investing
mainly in fixed-income securities in the following three
sectors;
U.S. GOVERNMENT AND INVESTMENT GRADE SECTOR: INCLUDES
- U.S. GOVERNMENT SECURITIES: U.S. TREASURY BILLS,
NOTES AND BONDS; MORTGAGE PARTICIPATION CERTIFICATES
GUARANTEED BY THE GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION ("GINNIE MAE"), FEDERAL HOUSING
ADMINISTRATION DEBENTURES, FEDERAL NATIONAL MORTGAGE
ASSOCIATION ("FANNIE MAE") BONDS AND FEDERAL HOME LOAN
BANK DEBT, WHICH ARE ALSO KNOWN AS MORTGAGE BACKED
SECURITIES.
- OTHER TYPES OF DEBT SECURITIES, SUCH AS PRIVATELY
ISSUED DEBT SECURITIES THAT ARE INVESTMENT GRADE AT THE
TIME OF PURCHASE.
Under normal market conditions, at least 65% of the U.S.
Government and Investment Grade Sector will be invested
in U.S. government securities and the fund will invest
20% of its net assets in U.S. government securities.
Some of the U.S. government securities are supported by
the full faith and credit of the United States, others
are supported only by the credit of a government entity.
HIGH YIELD SECTOR: INCLUDES
- high yielding, lower-rated, higher risk U.S. and non-
U.S. corporate fixed-income securities, such as debt
securities, convertible securities and preferred stock,
rated at the time of purchase at least CCC (or its
equivalent) by a nationally recognized securities rating
agency, or if unrated of comparable quality.
The fund may invest up to 5% of its net assets in
securities rated below CCC or Caa, or, if unrated, of
comparable quality.
INTERNATIONAL SECTOR: INCLUDES
- DEBT OBLIGATIONS ISSUED OR GUARANTEED BY NON-U.S.,
NATIONAL, PROVINCIAL, STATE, OR OTHER GOVERNMENTS WITH
TAXING AUTHORITY, OR BY THEIR AGENCIES OR
INSTRUMENTALITIES;
- DEBT OBLIGATIONS OF SUPRANATIONAL ENTITIES, SUCH AS
INTERNATIONAL ORGANIZATIONS DESIGNATED OR SUPPORTED BY
GOVERNMENT ENTITIES TO PROMOTE ECONOMIC RECONSTRUCTION OR
DEVELOPMENT, INTERNATIONAL BANKING INSTITUTIONS AND
RELATED GOVERNMENT AGENCIES; AND
- DEBT OBLIGATIONS AND OTHER FIXED-INCOME SECURITIES
OF NON-U.S. AND U.S. CORPORATE ISSUERS.
Although the fund has the flexibility to invest in any
country where Putnam Management sees potential for high
income, it presently expects to invest primarily in the
securities of companies in industrialized Western
European countries (including Scandinavian countries),
and in Canada, Japan, Australia and New Zealand.
Although there are no fixed limits on allocations among
sectors, including investments in the High Yield Sector,
Putnam Management 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, Putnam
Management expects that a substantial portion of the
fund's assets will normally be invested in each of the
three market sectors.
Putnam Management will consider, among other things, the
risks and opportunities of each market sector and
economic and market conditions when deciding the amount
of the fund's assets to allocate to each of the three
market sectors in which the fund invests. A description
of the risks associated with the fund's main investment
strategies follows.
FIXED-INCOME INVESTMENTS. The value of a fixed-income
investment may fall as a result of factors directly
relating to the issuer of the security, such as decisions
made by its management or a reduction in its credit
rating. An investment's value may also fall because of
factors affecting not just the issuer, but other issuers,
such as increases in production costs. The value of an
investment may also be affected by general changes in
financial market conditions, such as changing interest
rates or currency exchange rates.
INTEREST RATE RISK. The values of fixed income
investments usually rise and fall in response to changes
in interest rates. Declining interest rates will
generally raise the value of existing bonds, and rising
interest rates will generally lower the value of existing
bonds. Changes in the values of fixed income investments
usually will not affect the amount of income the fund
receives from them, but will affect the value of the
fund's shares. Interest rate risk is often greater for
investments 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.
CREDIT RISK. Investors normally expect to be compensated
in proportion to the risk they are assuming. Thus, fixed
income investments of companies with relatively weaker
credit prospects usually offer higher yields than those
of companies with better credit prospects. Higher-rated
investments generally offer lower credit risk, but not
necessarily lower interest rate risk. The value of a
higher-rated investment still fluctuates in response to
changes in interest rates.
The fund may invest substantially in debt investments
rated, at the time of purchase, as low as CCC (or its
equivalent) by a nationally recognized securities rating
agency, and unrated investments that Putnam Management
determines are of comparable quality. The fund will not
necessarily sell an investment if its rating is reduced.
Securities rated CCC (and comparable unrated securities)
are vulnerable to default and, in the event of adverse
business, financial, or economic conditions, are not
likely to have the capacity to pay interest and
principal. Securities rated lower than Baa or BBB (and
comparable unrated securities) are sometimes referred to
as "junk bonds."
Although Putnam Management considers credit ratings in
making investment decisions, it performs its own
investment analysis and does not rely only on ratings
assigned by the rating agencies. When the fund buys debt
of a company with poor credit prospects, the achievement
of the fund's goals depends more on Putnam Management's
ability than would be the case if the fund were buying
debt of a company with better credit prospects.
Although U.S. government investments are generally
considered to have the least credit risk---the risk that
the issuer will fail to make timely payments of interest
and principal---they are not completely free of credit
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. These risk
factors include the creditworthiness of the issuer and,
in the case of mortgage-backed securities, the ability of
the underlying mortgagors or other borrowers to meet
their obligations. In addition, the values of these
investments will still fluctuate in response to changes
in interest rates.
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.
PREPAYMENT RISK. Traditional debt investments typically
pay a fixed rate of interest until maturity, when the
entire principal amount is due. By contrast, payments on
mortgage-backed investments typically include both
interest and a partial payment of principal. Principal
may also be prepaid voluntarily, or as a result of
refinancing or foreclosure. The fund may have to invest
the proceeds from prepaid investments under less
attractive terms and yields.
Prepayments are particularly common during periods of
declining interest rates, when property owners seek to
refinance their mortgages at more favorable terms; the
reverse is true during periods of rising interest rates.
Mortgage-backed investments are therefore less likely to
increase in value during periods of declining interest
rates than other debt of comparable maturities, although
they may have a similar or even higher risk of decline in
value during periods of rising interest rates and can
increase the volatility of the fund.
NON-U.S. INVESTMENTS. The fund may invest without limit
in securities of non-U.S. issuers. Non-U.S. investments
involve certain special risks, including
Unfavorable changes in currency exchange rates: Non-
U.S. investments are normally issued and traded in non-
U.S. currencies. As a result, their values may be
affected by changes in the exchange rates between
particular non-U.S. currencies and the U.S. dollar.
Political and economic developments: Non-U.S.
investments may be subject to the risks of seizure by a
non-U.S. government, imposition of restrictions on the
exchange or transport of non-U.S. currency, and tax
increases.
Unreliable or untimely information: There may be
less information publicly available about a non-U.S.
company than about most U.S. companies, and non-U.S.
companies are usually not subject to accounting, auditing
and financial reporting standards and practices
comparable to those in the United States.
Limited legal recourse: Legal remedies for investors
such as the fund may be more limited than those available
in the United States.
Limited markets: Certain non-U.S. investments may be
less liquid (harder to buy and sell) and more volatile
than U.S. investments, which means the fund may at times
be unable to sell these non-U.S. investments at desirable
prices. For the same reason, the fund may at times find
it difficult to value its foreign investments.
Trading practices: Brokerage commissions and other
fees are generally higher for non-U.S. investments than
for U.S. investments. The procedures and rules for
settling non-U.S. transactions may also involve delays in
payment, delivery or recovery of money or investments.
Dividends or interest on, or proceeds from the sale of,
non-U.S. securities may be subject to non-U.S.
withholding taxes.
Certain of these risks may also apply to some extent to
U.S.-traded investments that are denominated in non-U.S.
currencies, investments in U.S. companies that are traded
in non-U.S. markets, or to investments in U.S. companies
that have significant non-U.S. operations. Special U.S.
tax considerations may apply to the fund's non-U.S.
investments.
DERIVATIVES. The fund may engage in a variety of
transactions involving derivatives, such as futures,
options, warrants and swaps. Derivatives are financial
instruments whose value depends upon, or is derived from,
the value of an underlying investment, pool of
investments, index or currency. The fund's return on a
derivative typically depends on the change in the value
of the investment, index or currency specified in the
derivative instrument.
The fund may use derivatives both for hedging and
non-hedging purposes. Derivatives involve special risks
arid may result in losses. The fund will be dependent on
Putnam Management's ability to analyze and manage these
sophisticated instruments. The prices of derivatives may
move in unexpected ways, especially in abnormal market
conditions. Some derivatives are leveraged and therefore
may magnify or otherwise increase investment losses to
the fund. The fund's use of derivatives may also
increase the amount of taxes payable by shareholders.
Other risks arise from the potential inability to
terminate or sell derivatives positions. A liquid
secondary market may not always exist for the fund's
derivative positions at any time. In fact, many over-the-
counter instruments will not be liquid. Over-the-counter
instruments also involve the risk that the other party
will not meet its obligations to the fund.
PREMIUM INVESTMENTS. The fund may invest in so-called
"premium" investments offering interest rates higher than
prevailing market rates. In addition, during times of
declining interest rates, many of the fund's investments
may offer interest rates that are higher than current
market rates, regardless of whether the fund bought them
at a premium. When the fund holds premium investments,
shareholders are likely to receive higher dividends (but
will bear a greater risk that the value of the fund's
shares will fall) than they would if the fund held
investments offering current market rates of interest.
However, the fund typically pays more for a premium
investment than its face value, and this higher price is
not factored into calculations of the fund's net
investment income. Premium investments involve a greater
risk of loss, because their values tend to decline
towards the face value over time.
Investors may find it useful to compare the fund's yield,
which reflects amortization of market premiums, with its
current dividend rate, which does not reflect that
amortization.
FREQUENT TRADING. The fund may buy or sell investments
relatively often, which involves higher brokerage
commissions and other expenses, and may increase the
amount of taxes payable by shareholders.
OTHER INVESTMENTS. In addition to the main investment
strategies described above, the fund may also make other
types of investments, such as investments in
collateralized mortgage obligations (CMOs), stripped
mortgage-backed securities, asset-backed securities and
equity securities and, therefore may be subject to other
risks.
ALTERNATIVE STRATEGIES. At times Putnam Management may
judge that market conditions make pursuing the fund's
investment strategies inconsistent with the best
interests of its shareholders. Putnam Management may
then temporarily use alternative strategies, including
investing solely in U.S. or non- U.S. government
securities, that are mainly designed to limit the fund's
losses. Although Putnam Management has the flexibility
to use these strategies, it may choose not to for a
variety of reasons, even in very volatile market
conditions. These strategies may cause the fund to miss
out on investment opportunities, and may prevent the fund
from achieving its goal.
CHANGES IN POLICIES. The fund's Trustees may change the
fund's goal, investment strategies and other policies
without shareholder approval, except as otherwise
indicated.
(B) Investment Restrictions:
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-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 than 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 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 six 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. This undertaking will remain in effect as
long as shares of the fund are qualified for offer or
sale in Japan and such undertaking is required by the
Japanese Securities Dealers Association as a condition of
such qualification.
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 pursuant to nonfundamental investment restriction
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.
(C) Distribution Policy:
The Fund distributes net investment income and any
net realized short-term capital gains at least monthly.
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, Martin Luther King, Jr.
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., New
York time. However, equity options held by the Fund are
priced as of the close of trading at 4:10 p.m., New York
time, and futures contracts on U.S. government and other
fixed-income securities and index options held by the
Fund are priced as of their close of trading at 4:15
p.m., New York time.
Investments for which market quotations are readily
available are stated 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.
Short-term investments having remaining maturities of 60
days or less are valued at amortized cost, which
approximates market value. Other investments are valued
at their fair market value following procedures approved
by the Trustees. Liabilities are deducted from the total
value of assets, and the resulting amount is divided by
the number of shares of the class outstanding to
determine net asset value per share.
Market quotations are not considered to be readily
available for long-term corporate bonds and notes,
certain preferred stocks, tax-exempt securities, and
certain non-U.S. securities. These investments are
valued at fair market value on the basis of valuations
furnished by a pricing service, approved by the Trustee,
or dealers, 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
that 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 following 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
non-U.S. securities) is substantially completed each day
at various times prior to the close of the Exchange. The
values of these securities used in determining the net
asset value of the Fund's shares are computed as of such
times. Also, because of the amount of time required to
collect and process trading information as to large
numbers of securities issues, the values of certain
securities (such as convertible bonds, U.S. government
securities, and tax-exempt securities) are determined
based on market quotations collected earlier in the day
at the latest practicable time prior to the close of the
Exchange. Occasionally, events affecting the value of
such securities may occur between such times and the
close of the Exchange which will not be reflected in the
computation of the Fund's net asset value. If events
materially affecting the value of such securities occur
during such period, then these securities will be valued
at their fair value following procedures approved by the
Trustees.
B. Management Fee, etc.:
(1) Management Fee:
(a) Management 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 year ending on September 30,
1998 the Fund paid $28,525,765 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,
1998, the Fund paid $8,217,900 as a custodian fee
and investor servicing agent fee.
(c) Fee on Class M Distribution Plan
The Class M distribution plan provides for
payments by the Fund to Putnam Mutual Funds 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,
1998, the Fund paid fees under the distribution plan
of $4,669,378 for the Class M shares.
(d) Other Expenses:
The Fund pays all expenses not assumed by
Investment Management Company, including Trustees'
fees, auditing, legal, custodial, investor servicing
and shareholder reporting expenses, and payments
under its distribution plans (which are in turn
allocated to the relevant class of shares). The
Fund also reimburses Investment Management Company
for the compensation and related expenses of certain
Fund officers and their staff who provide
administrative services. The total reimbursement is
determined annually by the Trustees and was $34,794
for Fiscal 1998.
Each Trustee receives a fee for his or her
services. Each Trustee also receives fees for
serving as Trustee of other Putnam funds. The
Trustees periodically review their fees to assure
that such fees continue to be appropriate in light
of their responsibilities as well as in relation to
fees paid to trustees of other mutual fund
complexes. The Trustees meet monthly over a two-day
period, except in August. The Compensation
Committee, which consists solely of Trustees not
affiliated with the Investment Management Company
and is responsible for recommending Trustee
compensation, estimates that Committee and Trustee
meeting time together with the appropriate
preparation requires the equivalent of at least
three business days per Trustee meeting. The
following table shows the year each Trustee was
first elected a Trustee of the Putnam funds, the
fees paid to each Trustee by the fund for fiscal
1998 and the fees paid to each Trustee by all of the
Putnam funds during calendar 1998:
COMPENSATION TABLE
Pension on Estimated Total
Aggregate retirement annual benefits
compensation
compensation benefits accrued from
all from all
from the as part of fund Putnam
funds Putnam
Trustees/Year fund (1) expenses upon retirement (2)
funds (3)
Jameson A. Baxter/1994 (4)$4,560$1,030 $95,000 $207,000
Hans H. Estin/1972 4,020 2,064 95,000 182,500
John A. Hill/1985 (4) 3,976 775 115,000 200,500
Ronald J. Jackson/1996 (4)4,416 533 95,000 200,500
Paul L. Joskow/1997* 3,722 65 95,000 180,500
Elizabeth T. Kennan/19924,416 1,110 95,000 200,500
Lawrence J. Lasser/1992*3,931 830 95,000 178,500
John H. Mullin III/19973,676 101 95,000 180,500
Robert E. Patterson/19843,998 620 95,000 181,500
Donald S. Perkins/1982*4,020 2,232 95,000 182,500
William F. Pounds/1971 (5)4,7222,320 115,000 215,000
George Putnam/1957* 3,954 2,359 95,000 179,500
George Putnam, III/1984*3,998 408 95,000 181,500
A.J.C. Smith/1986* 3,889 1,391 95,000 176,500
W. Thomas Stephens/1997(4)4,007 94 95,000 181,500
W. Nicholas Thorndike/19924,0201,592 95,000 182,500
(1) Includes an annual retainer and an attendance fee
for each meeting attended.
(2) 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 1997.
(3) As of December 31, 1998, there were 113 funds in the
Putnam family.
(4) Includes compensation deferred pursuant to a Trustee
Compensation Deferral Plan. The total amounts of
deferred compensation payable by the fund to Ms.
Baxter, Mr. Hill, Mr. Jackson, Mr. Joskow, Mr.
Mullin and Mr. Stephens as of September 30, 1998
were $7,782, $17,570, $10,738, $2,859, $2,712 and
$4,001, respectively, including income earned on
such amounts.
(5) Includes additional compensation for service as Vice
Chairman of the Putnam funds.
* Is or may be deemed to be an "interested person"
as defined in the Invesment Company Act of 1940 of
the Fund, the Investment Management Company or
Putnam Mutual Funds Corp.
Under a Retirement Plan for Trustees of the
Putnam funds (the "Plan") each Trustee who retires
with at least five years of service as a Trustee of
the funds is entitled to receive an annual
retirement benefit equal to one-half of the average
annual compensation paid to such Trustee for the
last three years of service prior to retirement.
This retirement benefit is payable during a
Trustee's lifetime, beginning the year following
retirement, for a number of years equal to such
Trustee's years of service. A death benefit is also
available under the Plan which assures that the
Trustee and his or her beneficiaries will receive
benefit payments for the lesser of an aggregate
period of (i) ten years or (ii) such Trustee's total
years of service.
The Plan Administrator (a committee comprised
of Trustees 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 1996,
1997 and 1998, the Fund paid $124,214, $138,679 and
343,432 in brokerage commissions, respectively.
During fiscal 1998 the Fund paid $1,561,795 on
transactions with an aggregate principal value of
$2,629 (0.04% 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,
1998, the Fund paid $34,928,472 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 U.S. can open a fund
account with as little as $500 and make additional
investments at any time with as little as $50. The
Fund sells its shares at the offering price, which
is the NAV plus any applicable sales charge.
Investors' financial advisor or Putnam Investor
Services generally must receive their completed buy
order before the close of regular trading on the New
York Stock Exchange for investors' shares to be
bought at that day's offering price.
Investors residing in the U.S. can buy shares
- Through a financial advisor
Your advisor will be responsible for furnishing
all necessary documents to Putnam Investor Services,
and may charge you for his or her services.
- Through systematic investing
Investors can make regular investments of $25
or more per month through automatic deductions from
investors' bank checking or savings account.
Application forms are available through investor's
advisor or Putnam Investor Services at 1-800-225-
1581.
Investors may also complete an order form and
write a check for the amount they wish to invest,
payable to the Fund. Return the check and completed
form to Putnam Mutual Funds.
The Fund may periodically close to new
purchases of shares or refuse any order to buy
shares if the Fund determines that doing so would be
in the best interests of the Fund and its
shareholders.
Class M shares
- Initial sales charge of up to 3.25%
- Lower sales charges for larger investments of
$50,000 or more
- No deferred sales charge
- Lower annual expenses, and higher dividends,
than class B shares because of lower 12b-1 fee
- Higher annual expenses, and lower dividends,
than class A shares because of higher 12b-1 fee
- No conversion to class A shares, so future 12b-
1 fee does not decrease
Initial sales charges for class M shares
Sales charge as a
percentage of:
Net
Amount of purchase amount Offering
at offering price ($) invested price *
Under 50,000 3.36 % 3.25%
50,000 but under 100,000 2.30 2.25
100,000 but under 250,000 1.52 1.50
250,000 but under 500,000 1.01 1.00
500,000 but under 1,000,000 NONE NONE
* Offering price includes sales charge.
Deferred sales charges will be based on the
lower of the shares' cost and current NAV. Shares
not subject to any charge will be redeemed first,
followed by shares held longest. Investors may sell
shares acquired by reinvestment of distributions
without a charge at any time.
Distribution (12b-1) plans
The Fund has adopted distribution plans to pay
for the marketing of Fund shares and for services
provided to shareholders. The plans provide for
payments at annual rates (based on average net
assets) of up to 1.00% on class M shares. The
Trustees currently limit payments on class M shares
to 0.50% of average net assets. Because these fees
are paid out of the Fund's assets on an ongoing
basis, they will increase the cost of investors'
investments.
An investor may be eligible to buy Class M
Shares at reduced sales charges. For fiscal 1998,
Putnam Mutual Funds Corp. received $33,542,748 in
sales charges for Class M Shares, of which it
retained $2,557,007.
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,
Distributor or Sales Handling Company shall provide
to the investors a Contract Concerning a Foreign
Securities Transactions Account and other prescribed
contract (the "Account Contract") and receive from
such investors an application for requesting the
opening of a transactions account under the Account
Contract. The purchase shall be made in the minimum
initial 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 Distributor
or Sales Handling 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.
The Investors having entrusted Distributor or
Sales Handling 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 principal and the applicable exchange rate
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
Distributor or Sales Handling Company. The payment
may be made in dollars to the extent that the
Distributor or Sales Handling Companies can agree.
In addition, Distributor or Sales Handling
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 yen100,000,000 or the Shares
otherwise cease to comply with the "Standards of
Selection of Foreign Investment Fund Securities" in
the "Regulations Concerning the Transactions of
Foreign Securities" established by the Association.
(2) Repurchase of Shares:
a. Repurchase in the United States
Investors residing in the U.S. can sell their
shares back to the Fund any day the New York Stock
Exchange is open, either through investors'
financial advisor or directly to the Fund. Payment
for redemptions may be delayed until the Fund
collects the purchase price of shares which may take
up to 15 calendar days after the purchase date.
SELLING SHARES THROUGH INVESTORS' FINANCIAL ADVISOR
Investors' advisor must receive investors'
request in proper form before the close of regular
trading on the New York Stock Exchange for them to
receive that day's NAV, less any applicable deferred
sales charge. Investors' advisor will be responsible
for furnishing all necessary documents to Putnam
Investor Services on a timely basis and may charge
them for his or her services.
SELLING SHARES DIRECTLY TO THE FUND
Putnam Investor Services must receive
investors' request in proper form before the close
of regular trading on the New York Stock Exchange in
order to receive that day's NAV, less any applicable
sales charge.
BY MAIL
Send a signed letter of instruction to Putnam
Investor Services. If investors have certificates
for the shares investors want to sell, investors
must include them along with completed stock power
forms.
BY TELEPHONE
Investors may use Putnam's Telephone redemption
Privilege to redeem shares valued at less than
$100,000 unless investors have notified Putnam
Investor Services of an address change within the
preceding 15 days. Unless investors indicate
otherwise on the account application, Putnam
Investor Services will be authorized to accept
redemption and transfer instructions received by
telephone.
The Telephone Redemption Privilege is not
available if there are certificates for investor's
shares. The Telephone Redemption Privilege may be
modified or terminated without notice.
ADDITIONAL DOCUMENTS
If investors
- sell shares with a value of $100,000 or more,
- want investors' redemption proceeds sent to an
address other than the investor's address as it
appears on Putnam's records, or
- have notified Putnam of a change in address
within the preceding 15 days, the signatures of
registered owners or their legal representatives
must be guaranteed by a bank, broker-dealer or
certain other financial institutions. Stock power
forms are available from investors' financial
advisor, Putnam Investor Services and many
commercial banks.
Putnam Investor Services usually requires
additional documents for the sale of shares by a
corporation, partnership, agent or fiduciary, or a
surviving joint owner. Contact Putnam Investor
Services for details.
WHEN WILL THE FUND PAY INVESTORS?
The Fund generally sends investors payment for
investor's shares the business day after investor's
request is received. Under unusual circumstances,
the Fund may suspend redemptions, or postpone
payment for more than seven days as permitted by
federal securities laws.
REDEMPTION BY THE FUND
If investor owns fewer shares than the minimum
set by the Trustees (presently 20 shares), the Fund
may redeem investors shares without investors'
permission and send investors the proceeds. The
Fund may also redeem shares if an investor owns more
shares than a maximum amount set by the Trustees.
There is presently no maximum, but the Trustees
could set a maximum that would apply to both present
and future shareholders.
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 Distributor or Sales Handling 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
in 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.
The payment of the price shall be made in yen
through the Distributor or Sales Handling Companies
pursuant to the Agreements (on and after June 1,
1997, the Contracts) or, if the Distributor or Sales
Handling Companies agree, in dollars. The payment
for repurchase proceeds shall be made on the fourth
business day of securities companies in Japan after
and including the Trade Day.
(3) Suspension of Repurchase:
The Fund may suspend shareholders' right of
redemption, or postpone payment for more than seven
days, if the New York Stock Exchange is closed for
other than customary weekends or holidays, or if
permitted by the rules of the 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 Distributor or Sales
Handling 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 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 and 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 tax purposes. U.S. Securities and
Exchange Commission regulations require that net
investment income be calculated on a "yield-to-
maturity" basis, which has the effect of amortizing
any premiums or discounts in the current market
value of fixed-income securities. The current
dividend rate is based on net investment income as
determined for tax purposes, which may not reflect
amortization in the same manner. Yield is based on
the price of the shares, including the maximum
initial sales charge.
"Total return" for the one-, five- and ten-year
periods (or for the life of the Fund, if shorter)
through the most recent calendar quarter represents
the average annual compounded rate of return on an
investment of $1,000 in the Fund invested at the
maximum public offering price. Total return may
also be presented for other periods or based on
investment at reduced sales charge levels. Any
quotation of investment performance not reflecting
the maximum initial sales charge or contingent
deferred sales charge would be reduced if the sales
charge were used. For the one, five-year period
ended September 30, 1998 and the period since the
inception of the Fund through September 30, 1998,
the average annual total return at public offering
price (POP) for Class M shares of the Fund was -
5.19%, 4.94% and 8.17%, respectively. The 30-day
yield for Class M shares of the Fund for the period
ended September 30, 1998 was 7.31%.
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:
(i) Disclosure Required under the Securities and
Exchange Law:
When the Fund intends to offer the Shares
amounting to more than 100 million yen in Japan, it
shall submit to the Director of Kanto Local Finance
Bureau of the Ministry of Finance 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 Kanto Local
Finance Bureau of the Ministry of Finance.
The Distributor or Sales Handling 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 Director of Kanto Local
Finance Bureau of the Ministry of Finance securities
reports within 6 months of the end of each fiscal
year, semi-annual reports within 3 months of the end
of each semi-annual period and extraordinary reports
from time to time when changes occur as to material
subjects of the Fund. These documents are available
for public inspection for the investors and any
other persons who desire at Kanto Local Finance
Bureau of the Ministry of Finance.
(ii) Notifications, etc. under the Law Concerning
Securities Investment Trusts and Securities
Investment Companies
If the Management Company conducts business of
offering for sale of units of the Fund, etc., it
must file in advance the prescribed matters on the
Fund with the Commissioner of Financial Supervisory
Agent under the Law Concerning Securities Investment
Trusts and Securities Investment Companies (the Law
No.198, 1951) (hereinafter referred to the
"Investment Trusts Law"). In addition, if the
Management Company amends the Management Regulations
of the Fund, it must file in advance such amendment
and the details thereof with the Commissioner of
Financial Supervisory Agent. Further, the
Management Company must prepare the Management
Report on the prescribed matters concerning the
assets of the Fund under the Investment Trusts Law
immediately after the end of each calculation period
of the Fund and must file such Report with the
Commissioner of Financial Supervisory Agent.
b. Disclosure to Japanese Shareholders:
If the Management Company makes any amendment
to the Management Regulations of the Fund, the
substance of which is important, it must give in
advance public notice concerning its intention to
make such amendment and the substance of such
amendment at least 30 days prior to such amendment,
and must deliver the written documents containing
the above matters to the unitholders known in Japan.
Provided, however, that if the said written
documents are delivered to all the unitholders in
Japan, the relevant public notice is not required to
be given.
The Japanese Shareholders will be notified of
the material facts which would change their position
and of notices from the Trustees, through the
Distributor or Sales Handling Companies.
The above-described Management Report on the
Fund will be sent to the unitholders known in Japan.
(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 Distributor or Sales Handling Company
cannot exercise directly their rights, because they are
not registered. Shareholders in Japan may have the
Distributor or Sales Handling Companies exercise their
rights on their behalf in accordance with the Account
Agreement with the Distributor or Sales Handling
Companies.
Shareholders in Japan who do not entrust the custody
of their Shares to the Distributor or Sales Handling
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 generally receive distributions
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.
Shareholders may choose from 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 and net short-term capital gains in cash
while reinvesting net-long term 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.
(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 Paying Handling
Companies will prepare a report concerning
distributions and file such report with the Japanese
tax authorities.
c. Net investment returns such as dividends, etc.
and distributions of short-term net realized capital
gain, among distributions on Shares of the Fund,
will be, in principle, subject to withholding of U.
S. federal income tax at the rate of 15% and the
amount obtained after such deduction will be paid in
Japan.
Distributions of long-term net realized capital
gain will not be subject to withholding of U. S.
federal income tax and the full amount thereof will
be paid in Japan. The amount subject to withholding
of U. S. federal income tax may be deducted from the
tax levied on a foreign entity in Japan.
The Japanese withholding tax imposed on
distributions as referred to in a. and b. above will
be collected by way of so-called "difference
collecting method". In this method only the
difference between the amount equivalent to 20% of
the distributions before U.S. withholding tax and
the amount of U.S. withholding tax withheld in the
U.S. will be collected in Japan.
(2) The provisions of Japanese tax laws giving the
privilege of a certain deduction from taxable income to
corporations, which may apply to dividends paid by a
domestic corporation, shall not apply.
(3) Capital gains and losses arising from purchase and
repurchase of the Shares shall be treated in the same way
as those arising from purchase and sale of a domestic
investment trust. The distribution of the net
liquidation assets shall be also treated in the same way
as those arising from liquidation of a domestic
investment trust.
(4) The Japanese securities transaction tax will not be
imposed so far as the transactions concerned are
conducted outside Japan. Such tax, however, is
applicable to dealers' transactions for their own account
and to privately negotiated transactions conducted in
Japan.
(C) Foreign Exchange Control in U.S.A.:
In U.S.A., there are no foreign exchange control
restrictions on remittance of dividends, repurchase
money, etc. of the Shares to Japanese Shareholders.
(D) Agent in Japan:
Hamada & Matsumoto
Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
The foregoing law firm is the true and lawful agent
of the Fund to represent and act for the Fund in Japan
for the purpose of;
(1) the receipt of any and all communications, claims,
actions, proceedings and processes as to matters
involving problems under the laws and the rules and
regulations of the JSDA and
(2) representation in and out of court in connection
with any and all disputes, controversies or differences
regarding the transactions relating to the public
offering, sale and repurchase in Japan of the Shares of
the Fund.
The agent for the registration with the Director of
Kanto Local Finance Bureau of Japanese Ministry of
Finance of the initial public offering concerned as well
as for the continuous disclosure is each of the following
persons:
Harume Nakano
Ken Miura
Attorneys-at-law
Hamada & Matsumoto
Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki, 3-chome
Chiyoda-ku, Tokyo
(E) Jurisdiction:
Limited only to litigation brought by Japanese
investors regarding transactions relating to (D)(2)
above, the Fund has agreed that the following court has
jurisdiction over such litigation and the Japanese law is
applicable thereto:
Tokyo District Court
1-4, Kasumigaseki 1-chome
Chiyoda-ku, Tokyo
5. STATUS OF INVESTMENT FUND
5. Status of the Investment Fund
(A) Diversification of Investment Fund: (As of the end of December, 1998)
Types of Assets Name of Country Total Investment
U.S. Dollars Ratio (%)
Corporate Bonds United States 1,776,321,596 35.82
Canada 50,009,750 1.01
Mexico 48,857,468 0.99
Netherlands 47,107,498 0.95
United Kingdom 38,221,775 0.77
Indonesia 24,351,774 0.49
Bermuda 18,201,755 0.37
Luxembourg 15,995,000 0.32
China 11,935,100 0.24
Japan 9,849,268 0.20
Brazil 5,774,063 0.12
Cayman Islands 5,365,200 0.11
Argentina 4,930,300 0.10
Israel 2,340,900 0.05
Columbia 1,843,000 0.04
Porland 1,841,800 0.04
Greece 1,704,000 0.03
Australia 667,102 0.01
Sub-total 2,065,317,349 41.64
U.S. Government United States 1,060,544,926 21.38
Obligations
Foreign Government United States 269,068,002 5.43
Bonds
Netherlands 135,540,409 2.73
Germany 79,692,148 1.61
France 76,476,537 1.54
Canada 62,380,998 1.26
Sweden 30,657,819 0.62
Spain 16,084,759 0.32
Italy 14,819,960 0.30
China 7,035,435 0.14
Russia 1,342,212 0.03
Sub-total 693,098,279 13.97
Collateralized United States 472,804,309 9.53
Mortgage Obligations
Brady Bonds Mexico 80,505,152 1.62
Brazil 53,386,100 1.08
Peru 44,530,538 0.90
Bulgaria 44,118,000 0.89
Venezuela 18,365,375 0.37
Panama 12,784,200 0.26
France 3,097,568 0.06
Sub-total 256,786,933 5.18
Preferred Stock United States 144,713,610 2.92
Canada 17,921,520 0.36
Germany 8,146,750 0.16
Sub-total 170,781,880 3.44
Asset-Backed United States 78,926,777 1.59
Securities
Short-term United States 44,993,844 0.91
Units United States 28,257,750 0.57
Columbia 15,872,000 0.32
Australia 14,800 0.00
Sub-total 44,144,550 0.89
Convertible Bonds United States 27,518,038 0.55
United Kingdom 6,862,950 0.14
Sub-total 34,380,988 0.69
Common Stock United States 15,041,266 0.30
Columbia 793,488 0.02
Brazil 9 0.00
Sub-total 15,834,763 0.32
Warrants United States 12,271,895 0.25
Columbia 868,000 0.02
Ireland 212,800 0.00
Equador 25,751 0.00
Sub-total 13,378,446 0.27
Convertible United States 5,440,933 0.11
Preferred Stocks
Cash, Deposit and Other Assets
(After deduction of liabilities) 3,169,860 0.06
Total 4,959,603,918 100
(Net Asset Value) (yen573,826 million)
(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 December, 1998 is as
follows:
<TABLE><CAPTION>
Total Net Asset Value Net Asset Value per Share
<S> <C> <C> <C> <C> <C> <C>
Dollar Yen
(thousands) (millions) Dollar Yen
1st Fiscal Year 14,751 1,707 11.97 1,385
(September 30, 1995)
2nd Fiscal Year 46,327 5,360 12.27 (12.34) 1,420 (1,428)
(September 30, 1996)
3rd Fiscal Year 513,351 59,395 12.67 (12.74) 1,466 (1,474)
(September 30, 1997)
4th Fiscal Year 1,019,477 117,953 11.62 (11.69) 1,344 (1,353)
(September 30, 1998)
1998 end of January 862,305 99,769 12.61 (12.68) 1,459 (1,467)
February 929,269 107,516 12.61 (12.68) 1,459 (1,467)
March 1,010,245 116,885 12.65 (12.72) 1,464 (1,472)
April 1,098,115 127,052 12.64 (12.71) 1,462 (1,471)
May 1,156,886 133,852 12.55 (12.62) 1,452 (1,460)
June 1,193,745 138,116 12.50 (12.57) 1,446 (1,454)
July 1,189,059 137,574 12.46 (12.53) 1,442 (1,450)
August 987,020 114,198 11.56 (11.63) 1,337 (1,346)
September 1,019,477 117,953 11.62 (11.69) 1,344 (1,353)
October 1,032,488 119,459 11.29 (11.36) 1,306 (1,314)
November 1,052,499 121,774 11.58 (11.65) 1,340 (1,348)
December 981,995 113,617 11.46 (11.53) 1,326 (1,334)
</TABLE>
(Note 1) Operations of Class M Shares were commenced on
December 1, 1994.
(Note 2) Ex-dividend date is the 10th of each month. The
amount of NAV per share with dividend is set forth in the
parentheses.
(2) Record of Distributions Paid
Amount of Dividend Amount of Profit
Period paid per Share Distributed per Share
1st Fiscal Year
(12/1/94-9/30/95) $0.65 (yen75.21) -- (yen0.00)
2nd Fiscal Year
(12/1/95-9/30/96) $0.87 (yen100.66) $0.00 (yen0.00)
3rd Fiscal Year
(12/1/96-9/30/97) $0.85 (yen98.35) $0.00 (yen0.00)
4th Fiscal Year
(12/1/97-9/30/98) $0.67 (yen77.52) $0.16 (yen18.51)
(Note) Record of distribution paid and NAV on the ex-
dividend date from January 1997 to January 1999 are as
follows:
NAV on the ex-
Dividend dividend date
Month/Year Dollar Yen Dollar
1997 end of January 0.068 7.87 12.32
February 0.069 7.98 12.39
March 0.069 7.98 12.26
April 0.068 7.87 11.95
May 0.069 7.98 12.15
June 0.071 8.21 12.27
July 0.070 8.10 12.42
August 0.069 7.98 12.36
September 0.069 7.98 12.40
October 0.069 7.98 12.68
November 0.069 7.98 12.47
December 0.069 7.98 12.49
1998 end of January 0.069 7.98 12.54
February 0.069 7.98 12.60
March 0.069 7.98 12.54
April 0.069 7.98 12.65
May 0.070 8.10 12.56
June 0.069 7.98 12.52
July 0.069 7.98 12.45
August 0.070 8.10 12.24
September 0.069 7.98 11.45
October 0.070 8.10 11.22
November 0.070 8.10 11.31
December 0.070 8.10 11.52
1999 end of January 0.070 8.10 11.38
(C) Record of Sales and Repurchases
Record of sales and repurchases during the following
fiscal years and number of outstanding Class M shares of the
Fund as of the end of such Fiscal Years are as follows:
Number of Number of Number of
Shares Sold Shares Outstanding
Repurchased Shares
1st Fiscal 1,363,277 131,265 1,232,012
Year (0) (0) (0)
(12/1/94-9/30/95)
2nd Fiscal 3,470,806 925,979 3,776,839
Year (0) (0) (0)
(10/1/95-9/30/96)
3rd Fiscal 38,906,817 2,156,006 40,527,650
Year (28,660,820) (85,850) (28,574,970)
(10/1/96-9/30/97)
4th Fiscal 82,811,002 35,639,555 87,699,097
Year (51,196,320) (33,361,320) (46,409,970)
(10/1/97-9/30/98)
Note: The number of Shares sold, repurchased and
outstanding in the parentheses represents those sold,
repurchased and outstanding in Japan. The Shares are
sold in Japan from May 28, 1997.
II. OUTLINE OF THE TRUST
1. Trust
(A) Law of Place of Incorporation
The Trust is a Massachusetts business trust
organized in Massachusetts, U.S.A. on August 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, without shareholder
approval, create two or more series of shares
representing separate investment portfolios. Any such
series of shares may be further divided without
shareholders approval into two or more classes, with such
preferences and special or relative rights and privileges
as the Trustees may determine. The funds shares are not
currently divided into series.
Under the Agreement and Declaration of Trust the
shareholders shall have power, as and to the extent
provided therein, to vote only (i) for the election of
Trustees, to the extent provided therein (ii) for the
removal of Trustees, to the extent provided therein (iii)
with respect to any investment adviser, to the extent
provided therein (iv) with respect to any termination of
the Trust, to the extent provided therein (v) with
respect to certain amendments of the Agreement and
Declaration of Trust, (vi) to the same extent as the
stockholders of a Massachusetts business corporation as
to whether or not a court action, proceeding, or claim
should or should not be brought or maintained
derivatively or as a class action on behalf of the Trust
or the shareholders, and (vii) with respect to such
additional matters relating to the Trust as may be
required by the Agreement and Declaration of Trust, the
Bylaws of the Trust, or any registration of the Trust
with the U.S. Securities and Exchange Commission (or any
successor agency) or any state, or as the Trustees may
consider necessary or desirable. Certain of the
foregoing actions may, in addition, be taken by the
Trustees without vote of the shareholders of the Trust.
On any matter submitted to a vote of shareholders,
all shares of the Trust then entitled to vote are voted
in the aggregate as a single class without regard to
series or classes of shares, except (1) when required by
the Investment Company Act of 1940, as amended, or when
the Trustees hall have determined that the matter affects
one or more series or classes of shares materially
differently, share are voted by individual series or
class; and (2) when the Trustees have determined that the
matter affects on the interests of one or more series or
classes, then only shareholders of such series or classes
are entitled to vote thereon. There is no cumulative
voting.
Meetings of shareholders may be called by the Clerk
whenever ordered by the Trustees, the Chairman of the
Trustees, or requested in writing by the holder or
holders of at least one-tenth of the outstanding shares
entitled to vote at the meeting. Written notice of any
meeting of shareholders must be given by mailing the
notice at least seven days before the meeting. Thirty
percent of shares entitled to vote on a particular matter
is a quorum for the transaction of business on that
matter at a shareholders' meeting, except that, where any
provision of law or of the Agreement and Declaration of
Trust permits or requires that holders of any series or
class vote as an individual series or class, then thirty
percent of the aggregate number of shares of that series
or class entitled to vote are necessary to constitute a
quorum for the transaction of business by that series or
class. For the purpose of determining the shareholders
of any class or series of shares who are entitled to vote
or act at any meeting, or who are entitled to receive
payment of any dividend or other distribution, the
Trustees are authorized to fix record dates, which may
not be more then 90 days before the date of any meeting
of shareholders or more than 60 days before the date of
payment of any dividend or other distribution.
The Trustees are authorized by the Agreement and
Declaration of Trust to adopt Bylaws not inconsistent
with the Agreement and Declaration of Trust providing for
the conduct of the business of the Trust. The Bylaws
contemplate that the Trustees shall elect a Chairman of
the Trustees, the President, the Treasurer, and the Clerk
of the Trust, and that other officers, if any, may be
elected or appointed by the Trustees at any time. The
Bylaws may be amended or repealed, in whole or in part,
by a majority of the Trustees then in office at any
meeting of the Trustees, or by one or more writings
signed by such a majority.
Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the
Trustees may from time to time determine. It shall be
sufficient notice to a Trustee of a special meeting to
send notice by mail at least forty-eight hours or by
telegram at least twenty-four hours before the meeting or
to give notice to him or her in person or by telephone at
least twenty-four hours before the meeting.
At any meeting of Trustees, a majority of the
Trustees then in office shall constitute a quorum.
Except as otherwise provided in the Agreement and
Declaration of Trust or Bylaws, any action to be taken by
the Trustees may be taken by a majority of the Trustees
present at a meeting (a quorum being present), or by
written consents of a majority of the Trustees then in
office.
Subject to a favorable majority shareholder vote (as
defined in the Agreement and Declaration of Trust), the
Trustees may contract for exclusive or nonexclusive
advisory and/or management services with any corporation,
trust, association, or other organization.
The Agreement and Declaration of Trust contains
provisions for the indemnification of Trustees, officers,
and shareholders of the Trust under the circumstances and
on the terms specified therein.
The Trust may be terminated at any time by vote of
shareholders holding at least two-thirds of the shares
entitled to vote or by the trustees by written notice to
the shareholders. Any series of shares may be terminated
at any time by vote of shareholders holding at least two-
thirds of the shares of such series entitled to vote or
by the Trustees by written notice to the shareholders of
such series.
The foregoing is a general summary of certain
provisions of the Agreement and Declaration of Trust and
Bylaws of the Trust, and is qualified in its entirety by
reference to each of those documents.
(G) Information Concerning Major Shareholders
Not applicable.
(H) Information Concerning Directors, Officers and Employees
(1) Trustees and Officers of the Trust
(as of December, 1998)
Shares
Name Office and Resume Owned
Title
George Putnam Chairman and present: Chairman and
President Director of 5,871.768
Putnam Management
and Putnam Mutual
Funds Corp.
Director, Marsh &
McLennan
Companies, Inc.
John A. Hill Trustee present: Chairman and
Managing 1,107.201
Director, First
Reserve
Corporation
William F. Vice present: Professor of
Pounds Chairman Management, 1,002.028
Alfred P. Sloan
School of
Management,
Massachusetts
Institute of
Technology
Jameson Adkins Trustee present: President,
Baxter Baxter 407.428
Associates, Inc.
Hans H. Estin Trustee present: Vice Chairman,
North American 240.203
Management Corp.
Ronald J. Trustee present: Former
Jackson Chairman, 494.062
President and
Chief Executive
Officer of Fisher-
Price, Inc.,
Trustee of Salem
Hospital and the
Peabody Essex
Museum
Paul L. Joskow Trustee present: Professor of
Economics and 254.086
Management and
former Head of
the Department of
Economics at the
Massachusetts
Institute of
Technology
Director, New
England Electric
System, State
Farm Indemnity
Company and
Whitehead
Institute for
Biomedical
Research
Elizabeth T. Trustee present: President
Kennan Emeritus and 311.777
Professor, Mount
Holyoke College
Lawrence J. Trustee and present: President,
Lasser Vice Chief Executive 146.313
President Officer and
Director of
Putnam
Investments, Inc.
and Putnam
Management
Director, Marsh &
McLennan
Companies, Inc.
John H. Trustee present: Chairman and
Mullin, III Chief Executive 430.330
Offficer of
Ridgeway Farm,
Director of ACX
Technologies,
Inc., Alex. Brown
Realty, Inc. and
The Liberty
Corporation
Robert E. Trustee present: President and
Patterson Trustee of Cabot 574.073
Industrial Trust
and Trustee of
SEA Education
Association
Donald S. Trustee present: Director of
Perkins various 3,428.901
corporations,
including Cummins
Engine Company,
Lucent
Technologies,
Inc., Nanophase
Technologies,
Inc. and Springs
Industries, Inc.
George Putnam, Trustee present: President, New
III Generation 1,559.721
Research, Inc.
A.J.C. Smith Trustee present: Chairman and
Chief Executive 235.250
Officer, Marsh &
McLennan
Companies, Inc.
W. Thomas Trustee present: President and
Stephens Chief Executive 112.334
Officer of
MacMillian
Bloedel, Ltd.
Director of Qwest
Communications
and New Century
Energies
W. Nicholas Trustee present: Director of
Thorndike various 157.014
corporations and
charitable
organizations,
including Data
General
Corporation,
Bradley Real
Estate, Inc. and
Providence
Journal Co.
Trustee of Cabot
Industrial Trust,
Massachusetts
General Hospital
and Eastern
Utilities
Associations
Charles E. Executive present: Managing 0
Porter Vice Director of
President Putnam
Investments, Inc.
and Putnam
Management
Patricia C. Senior Vice present: Senior Vice 0
Flaherty President President of
Putnam
Investments, Inc.
and Putnam
Management
William N. Vice present: Director and
Shiebler President Senior Managing 1,513.543
Director of
Putnam
Investments, Inc.
President and
Director of
Putnam Mutual
Funds
Gordon H. Vice present: Director and 0
Silver President Senior Managing
Director of
Putnam
Investments, Inc.
and Putnam
Management
John D. Hughes Vice present Senior Vice 0
President President of
and Putnam Management
Treasurer
Beverly Marcus Clerk and N/A 0
Assistant
Treasurer
Ian C. Vice present Senior 0
Ferguson President Managing Director
of Putnam
Management
John R. Verani Vice present Senior Vice 0
President President of
Putnam
Investments, Inc.
and Putnam
Management
David L. Vice present: Managing 0
Waldman President Director of
Putnam Management
Stephen Vice present: Managing 0
Oristaglio President Director of
Putnam Management
Edward H. Vice present: Managing 0
D'Aleilo President Director of
Putnam Management
Jennifer E. Vice present Managing 0
Leichter President Director of
Putnam Management
Jeffrey A. Vice present: SeniorVice 0
Kaufman President President of
Putnam Management
D. William Vice present: Managing 0
Kohli President Director of
Putnam
Investments, Inc.
and Putnam
Management
Paul G. Assistant present: N/A 0
Bucuvalas Treasurer
Mary A. Eaton Associate present: N/A 0
Treasurer
and
Assistant
Clerk
Judith Cohen Associate present: N/A 0
Treasurer
and
Assistant
Clerk
Katharine Senior present: N/A 0
Howard Associate
Treasurer
Wanda M. Assistant present: N/A 0
McManus Clerk
Joanne M. Assistant present: N/A 0
Neary Clerk
(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.
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 nearly
$300 billion in assets in nearly 9 million shareholder
accounts at the end of December, 1998. An affiliate, The
Putnam Advisory Company, Inc., manages domestic and
foreign institutional accounts and mutual funds,
including the accounts of many Fortune 500 companies.
Another affiliate, Putnam Fiduciary Trust Company,
provides investment advice to institutional clients under
its banking and fiduciary powers as well as shareholder
and custody services to the Putnam Funds.
Putnam Investment Management Inc., Putnam Mutual Funds
and Putnam Fiduciary Trust Company are subsidiaries of
Putnam Investments, Inc., which is wholly owned by Marsh
& McLennan Companies, Inc., a publicly-owned holding
company whose principal businesses are international
insurance and reinsurance brokerage, employee benefit
consulting and investment management.
(E) Amount of Capital Stock (as of the end of December,
1998)
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 1994 $48,149,491
End of 1995 $45,521,351
End of 1996 $45,817,658
End of 1997 $48,617,160
End of 1998 $425,782,008
(F) Structure of the Management of the Company
Investment Management Company is ultimately managed by
its Board of Directors, which is elected by its
shareholders.
Each fund managed by Investment Management Company is
managed by one or more portfolio managers. These
managers, in coordination with analysts who research
specific securities and other members of the relevant
investment group (in the case of the Fund, Investment
Management Company's Fixed Income Investments Group),
provide a continuous investment program for the Fund and
place all orders for the purchase and sale of portfolio
securities.
The investment performance and portfolio of each Fund is
overseen by its Board of Trustees, a majority of whom are
not affiliated with Investment Management Company. The
Trustees meet 11 times a year and review the performance
of each fund with its manager at least quarterly.
In selecting portfolio securities for the Fund,
Investment Management Company looks for securities that
represent attractive values based on careful issue-by-
issue credit analysis and hundreds of onsite visits and
other contacts with issuers every year. Investment
Management Company is one of the largest managers of high
yield and other debt securities in the United States.
The following officers of Investment Management Company
have had primary responsibility for the day-to-day
management of the Fund's portfolio since the years stated
below:
Names Year Business Experience
(at least 5 years)
D. William 1994 Employed as an investment professional by
Kohli Investment Management Company since 1994.
Managing Prior to September, 1994, Mr. Kohli was
Director Executive Vice President and Co-Director of
Global Bond Management and, prior to
October, 1993, Senior Portfolio Manager at
Franklin Advisors/Templeton Investment
Counsel.
David L. 1998 Employed as an investment professional by
Waldman Putnam Management since 1997.
Managing Prior to June, 1997, Mr. Waldman was a
Director Senior Portfolio Manager at Lazard Freres.
Prior to April, 1995, held various titles at
Goldman Sachs including Analyst, Associate,
Portfolio Manager and Vice President.
Jeffrey A. 1998 Employed as an investment professional by
Kaufman 8 Putnam Management since 1998. Prior to
Senior Vice August, 1998, Mr. Kaufman was a Vice
President President at MFS Investment Management.
Prior to 1994, Mr. Kaufman was an Emerging
Markets Research Consultant at Salomon
Brothers.
Jennifer 1998 Employed as an investment professional by
Leichter Investment Management Company since 1987.
Managing
Director
(G) Information Concerning Major Stockholders
As of the end of December, 1998, all the outstanding
shares of capital stock of Investment Management Company
were owned by Putnam Investments, Inc. See subsection D
above.
(H) Information Concerning Officers and Employees
The following table lists the names of various officers
and directors of Investment Management Company and their
respective positions with Investment Management Company.
For each named individual, the table lists: (i) any other
organizations (excluding other Investment Management
Company's funds) with which the officer and/or director
has recently had or has substantial involvement; and (ii)
positions held with such organization:
List of Officers and Directors of Putnam Investment Management, Inc.
(as of the end of December, 1998)
Position
with Putnam
Name Investment Other Business Affiliation
Management,
Inc.
1 Putnam, George Chairman Director of Putnam Mutual
Funds Corp.
2 Lasser, Lawrence President
J. and
Director
3 Silver, Gordon Director Director of Putnam
H. and Senior Fiduciary Trust Company and
Managing Senior Managing Director of
Director Putnam Mutual Funds Corp.
4 Burke, Robert W. Senior Senior Managing Director of
Managing Putnam Mutual Funds Corp.
Director
5 Coburn, Gary N. Senior
Managing
Director
6 Collman, Senior Senior Managing Director of
Kathleen M. Managing Putnam Mutual Funds Corp.
Director
7 Ferguson, Ian C. Senior
Managing
Director
8 Regan, Anthony Senior
W. Managing
Director
9 Spiegel, Steven Senior Senior Managing Director of
Managing Putnam Mutual Funds Corp.
Director
10 Anderson, Blake Managing
E. Director
11 Antill, Jennifer Managing
Director
12 Beck, Robert R. Managing
Director
13 Bogan, Thomas R. Managing
Director
14 Browchuk, Brett Managing
Director
15 Cassaro, Joseph Managing
A. Director
16 Cotner, C. Beth Managing
Director
17 Cronin, Kevin M. Managing Managing Director of Putnam
Director Fiduciary Trust Company
18 Curtin, William Managing
J. Director
19 D'Alelio, Edward Managing
H. Director
20 Daly, Kenneth L. Managing Managing Director of Putnam
Director Mutual Funds Corp.
21 DeTore, John A. Managing Managing Director of Putnam
Director Fiduciary Trust Company
22 Durgarian, Managing Director and Managing
Karnig H. Director Director of Putnam
and Chief Fiduciary Trust Company
Financial
Officer
23 Esteves, Irene Managing Treasurer of Putnam
M. Director Fiduciary Trust Company
and Chief
Financial
Officer
24 Gillis, Roland Managing
Director
25 Haslett, Thomas Managing
R. Director
26 Hurley, William Managing Managing Director and CFO
J. Director of Putnam Mutual Funds
Corp.
27 Jacobs, Jerome Managing
J. Director
28 Joseph, Joseph Managing
P. Director
29 Kamshad, Omid Managing
Director
30 King, David L. Managing Managing Director of Putnam
Director Mutual Funds Corp.
31 Kohli, D. Managing
William Director
32 Kreisel, Anthony Managing
I. Director
33 Kuenstner, Managing
Deborah F. Director
34 Landes, William Managing
J. Director
35 Leichter, Managing
Jennifer Director
36 Maloney, Kevin Managing
J. Director
37 Martino, Michael Managing Managing Director of Putnam
Director Fiduciary Trust Company
38 Maxwell, Scott Managing
M. Director
39 McGue, William Managing
F. Director
40 McMullen, Carol Managing
C. Director
41 Mcmani, Krisha Managing
Director
42 Miller, Daniel Managing
L. Director
43 Morgan Jr., John Managing Managing Director of Putnam
J. Director Fiduciary Trust Company
44 O'Donnell Jr., Managing
C. Patrick Director
45 Oristaglio, Managing
Stephen Director
46 Peacher, Stephen Managing
C. Director
47 Porter, Charles Managing
E. Director
48 Reilly, Thomas Managing
V. Director
49 Schultz, Managing Managing Director of Putnam
Mitchell D. Director Mutual Funds Corp.
50 Scott, Justin M. Managing Managing Director of Putnam
Director Fiduciary Trust Company
51 Shadek Jr., Managing Managing Director of Putnam
Edward T. Director Fiduciary Trust Company
52 Starr, Loren Managing Managing Director of Putnam
Director Mutual Funds Corp.
53 Swift, Robert Managing
Director
54 Talanian, John Managing Managing Director of Putnam
C. Director Mutual Funds Corp.
55 Tibbetts, Managing Managing Director of Putnam
Richard B. Director Mutual Funds Corp.
56 Waldman, David Managing
L. Director
and Chief
Financial
Officer
57 Wetlaufer, Eric Managing
Director
58 Woolverton, Managing Managing Director of Putnam
William H. Director Mutual Funds Corp.
59 Zieff, William Managing
E. Director
60 Arends, Michael Senior Vice Senior Vice President of
K. President Putnam Mutual Funds Corp.
61 Asher, Steven E. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
and Senior Vice President
of Putnam Fiduciary Trust
Company
62 Atkin, Michael Senior Vice
J. President
63 Attridge, Gail Senior Vice Senior Vice President of
S. President Putnam Fiduciary Trust
Company
64 Augustine, Senior Vice
Jeffrey B. President
65 Bakshi, Manjit Senior Vice
S. President
66 Bamford, Dolores Senior Vice
Snyder President
67 Baumbach, Robert Senior Vice
K. President
68 Berka, Sharon A. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
69 Block, Richard Senior Vice
L. President
70 Boselli, John A. Senior Vice
President
71 Bousa, Edward P. Senior Vice
President
72 Bresnahan, Senior Vice Senior Vice President of
Leslee R. President Putnam Mutual Funds Corp.
73 Burke, Andrea Senior Vice
President
74 Burns, Cheryl A. Senior Vice
President
75 Byrne, Joshua L. Senior Vice
President
76 Callahan, Ellen Senior Vice
S. President
77 Carlson, David Senior Vice
G. President
78 Chrostowski, Senior Vice Senior Vice President of
Louis F. President Putnam Mutual Funds Corp.
79 Curran, Peter J. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
80 Dalferro, John Senior Vice
R. President
81 Derbyshire, Senior Vice
Ralph C. President
82 England, Richard Senior Vice
B. President
83 Farrell, Deborah Senior Vice Senior Vice President of
S. President Putnam Mutual Funds Corp.
84 Finch, Edward R. Senior Vice
President
85 Flaherty, Senior Vice Senior Vice President of
Patricia C. President Putnam Mutual Funds Corp.
86 Fontana, Forrest Senior Vice
N. President
87 Francis, Senior Vice
Jonathan H. President
88 Frost, Karen T. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
89 Frucci, Richard Senior Vice Senior Vice President of
M. President Putnam Fiduciary Trust
Company
90 Fullerton, Brian Senior Vice Senior Vice President of
J. President Putnam Mutual Funds Corp.
91 Grant, Peter J. Senior Vice Senior Vice President of
President Putnam Fiduciary Trust
Company
92 Graviere, Senior Vice
Patrice President
93 Grim, Daniel J. Senior Vice
President
94 Haagensen, Paul Senior Vice
E. President
95 Hadden, Peter J. Senior Vice
President
96 Halperin, Senior Vice
Matthew C. President
97 Healey, Deborah Senior Vice
R. President
98 Holding, Pamela Senior Vice
President
99 Hotchkiss, Senior Vice
Michael F. President
100 Kaufman, Jeffrey Senior Vice
President
101 Kay, Karen R. Senior Vice Clerk, Director and Senior
President Vice President of Putnam
Fiduciary Trust Company and
Senior Vice President of
Putnam Mutual Funds Corp.
102 Kirson, Steven Senior Vice
L. President
103 Knight, Jeffrey Senior Vice
L. President
104 Kobylarz, Senior Vice
Jeffrey J. President
105 Koontz, Jill A. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
106 Korn, Karen R. Senior Vice
President
107 Lannum III, Senior Vice
Coleman N. President
108 Lindsey, Jeffrey Senior Vice
R. President
109 Lomba, Rufino R. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
110 MacElwee, Jones, Senior Vice
Elizabeth M. President
111 Madore, Robert Senior Vice Senior Vice President of
A. President Putnam Fiduciary Trust
Company
112 Malloy, Julie M. Senior Vice
President
113 Marrkand, Paul Senior Vice
E. President
114 Matteis, Andrew Senior Vice
S. President
115 McDonald, Senior Vice
Richard E. President
116 Meehan, Thalia Senior Vice
President
117 Mehta, Sandeep Senior Vice
President
118 Miller, William Senior Vice
H. President
119 Mockard, Jeanne Senior Vice
L. President
120 Morgan, Kelly A. Senior Vice
President
121 Mufson, Michael Senior Vice
J. President
122 Mullen, Donald Senior Vice Senior Vice President of
E. President Putnam Mutual Funds Corp.
123 Mullin, Hugh H. Senior Vice
President
124 Netols, Jeffrey Senior Vice Senior Vice President of
W. President Putnam Fiduciary Trust
Company
125 Oler, Stephen S. Senior Vice
President
126 Paine, Robert M. Senior Vice
President
127 Parker, Margery Senior Vice
C. President
128 Perry, William Senior Vice
President
129 Peters, Carmel Senior Vice
President
130 Petralia, Senior Vice Senior Vice President of
Randolph S. President Putnam Mutual Funds Corp.
131 Plapinger, Keith Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
132 Pohl, Charles G. Senior Vice
President
133 Pollard, Mark D. Senior Vice
President
135 Prusko, James M. Senior Vice Senior Vice President of
President Putnam Fiduciary Trust
Company
136 Quistberg, Paul Senior Vice
T. President
137 Ray, Christopher Senior Vice
A. President
138 Reeves, William Senior Vice
H. President
139 Rogers, Kevin J. Senior Vice
President
140 Ruys de Perez, Senior Vice Senior Vice President of
Charles A. President Putnam Fiduciary Trust
Company and Senior Vice
President of Putnam Mutual
Funds Corp.
141 Santos, David J. Senior Vice Senior Vice President of
President Putnam Fiduciary Trust
Company
142 Santosus, Senior Vice
Anthony C. President
143 Schwister, Jay Senior Vice Senior Vice President of
E. President Putnam Fiduciary Trust
Company
144 Scordato, Senior Vice Senior Vice President of
Christine A. President Putnam Mutual Funds Corp.
145 Sievert, Jean I. Senior Vice
President
146 Simon, Sheldon Senior Vice
N. President
147 Simozar, Saied Senior Vice
President
148 Smith Jr., Leo Senior Vice
J. President
149 Smith, Margaret Senior Vice
D. President
150 Spatz, Erin J. Senior Vice
President
151 Stack, Michael Senior Vice Senior Vice President of
P. President Putnam Mutual Funds Corp.
152 Stairs, George Senior Vice
W. President
153 Strumpf, Casey Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
154 Sugimoto, Senior Vice Senior Vice President of
Toshifumi President Putnam Mutual Funds Corp.
155 Sullivan, Roger Senior Vice
R. President
156 Svensson, Lisa Senior Vice
H. President
157 Swanberg, Senior Vice
Charles H. President
158 Thomsen, Senior Vice Senior Vice President of
Rosemary H. President Putnam Fiduciary Trust
Company
159 Troped, Bonnie Senior Vice Senior Vice President of
L. President Putnam Mutual Funds Corp.
160 Verani, John R. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
161 Walsh, Francis Senior Vice
P. President
162 Warren, Paul C. Senior Vice
President
163 Weinstein, Senior Vice
Michael R. President
164 Weiss, Manuel Senior Vice
President
165 Whalen, Edward Senior Vice Senior Vice President of
F. President Putnam Mutual Funds Corp.
166 Wheeler, Diane Senior Vice
D.F. President
167 Wyke, Richard P. Senior Vice
President
168 Yogg, Michael R. Senior Vice
President
169 Zukowski, Gerald Senior Vice
S. President
(I) Summary of Business Lines and Business Operation
Investment Management Company is engaged in the business
of providing investment management and investment
advisory services to mutual funds. As of the end of
December, 1998, Investment Management Company managed,
advised, and/or administered the following 113 funds and
fund portfolios (having an aggregate net asset value of
approximately $252 billion):
(As of the end of December 1998)
Name Month/Date/ Principal Total Net
Year Characteristics Net Asset
Established Asset value
Value per
share
($)
1 The George Putnam 11/5/37 Open/Equity 3,706.00 18.04
Fund of Boston; A
2 The George Putnam 4/24/92 Open/Equity 1,461.27 17.90
Fund of Boston; B
3 The George Putnam 12/1/94 Open/Equity 297.88 17.90
Fund of Boston; M
4 The George Putnam 1/1/94 Open/Equity 505.03 18.08
Fund of Boston; Y
5 Putnam American 3/1/85 Open/Bond 1,459.75 8.99
Government Income
Fund; A
6 Putnam American 5/20/94 Open/Bond 99.21 8.95
Government Income
Fund; B
7 Putnam American 2/14/95 Open/Bond 3.81 9.01
Government Income
Fund; M
8 Putnam Asia Pacific 2/20/91 Open/Equity 124.17 9.22
Growth Fund; A
9 Putnam Asia Pacific 6/1/93 Open/Equity 116.53 9.06
Growth Fund; B
10 Putnam Asia Pacific 2/1/95 Open/Equity 6.49 9.15
Growth Fund; M
11 Putnam Asia Pacific 3/23/98 Open/Equity 1.97 7.573
Fund II
12 Putnam Asset 2/7/94 Open/Balanced 996.66 12.01
Allocation: Balanced
Portfolio; A
13 Putnam Asset 2/11/94 Open/Balanced 555.48 11.94
Allocation: Balanced
Portfolio; B
14 Putnam Asset 9/1/94 Open/Balanced 111.49 11.88
Allocation: Balanced
Portfolio; C
15 Putnam Asset 2/6/95 Open/Balanced 66.17 11.99
Allocation: Balanced
Portfolio; M
16 Putnam Asset 7/14/94 Open/Balanced 275.92 12.01
Allocation: Balanced
Portfolio; Y
17 Putnam Asset 2/7/94 Open/Balanced 412.46 10.38
Allocation :
Conservative
Portfolio; A
18 Putnam Asset 2/18/94 Open/Balanced 179.58 10.34
Allocation :
Conservative
Portfolio; B
19 Putnam Asset 9/1/94 Open/Balanced 54.42 10.32
Allocation :
Conservative
Portfolio; C
20 Putnam Asset 2/7/95 Open/Balanced 22.90 10.35
Allocation :
Conservative
Portfolio; M
21 Putnam Asset 7/14/94 Open/Balan 36.98 10.39
Allocation :
Conservative
Portfolio; Y
22 Putnam Asset 2/8/94 Open/Balanced 717.52 13.63
Allocation: Growth
Portfolio; A
23 Putnam Asset 2/16/94 Open/Balanced 461.20 13.48
Allocation: Growth
Portfolio; B
24 Putnam Asset 9/1/94 Open/Balanced 105.26 13.38
Allocation: Growth
Portfolio; C
25 Putnam Asset 2/1/95 Open/Balanced 61.66 13.49
Allocation: Growth
Portfolio; M
26 Putnam Asset 7/14/94 Open/Balanced 254.78 13.69
Allocation: Growth
Portfolio; Y
27 Putnam Arizona Tax 1/30/91 Open/Bond 115.80 9.35
Exempt Income Fund; A
28 Putnam Arizona Tax 7/15/93 Open/Bond 33.61 9.33
Exempt Income Fund; B
29 Putnam Arizona Tax 7/3/95 Open/Bond 0.51 9.38
Exempt Income Fund; M
30 Putnam Balanced Fund 4/19/85 Open/Balanced 3.62 11.99
31 Putnam Balanced 4/19/85 Open/Balanced 663.62 10.79
Retirement Fund; A
32 Putnam Balanced 2/1/94 Open/Balanced 164.17 10.70
Retirement Fund; B
33 Putnam Balanced 3/17/95 Open/Balanced 12.62 10.73
Retirement Fund; M
34 Putnam California 11/27/92 Closed/Bond 72.00 15.63
Investment Grade
Municipal Trust
35 Putnam California Tax 4/29/83 Open/Bond 3,027.07 8.78
Exempt Income Fund; A
36 Putnam California Tax 1/4/93 Open/Bond 649.40 8.77
Exempt Income Fund; B
37 Putnam California Tax 2/14/95 Open/Bond 20.70 8.77
Exempt Income Fund; M
38 Putnam California Tax 10/26/87 Open/Bond 47.68 1.00
Exempt Money Market Fund
39 Putnam Capital 8/5/93 Open/Equity 50.92 8.10
Opportunities Fund; A
40 Putnam Capital 11/2/94 Open/Equity 67.95 8.09
Opportunities Fund; B
41 Putnam Capital 1/22/96 Open/Equity 4.31 8.10
Opportunities Fund; M
42 Putnam Capital 8/5/93 Open/Equity 1,541.18 22.66
Appreciation Fund; A
43 Putnam Capital 11/2/94 Open/Equity 1,714.38 22.43
Appreciation Fund; B
44 Putnam Capital 1/22/96 Open/Equity 115.14 22.46
Appreciation Fund; M
45 Putnam Convertible 6/29/95 Closed/Bond 86.14 23.25
Opportunity and
Income Trust
46 Putnam Convertible 6/29/72 Open/Balan 1,084.42 19.43
Income-Growth Trust;
A
47 Putnam Convertible 7/15/93 Open/Balanced 302.40 19.22
Income-Growth Trust;
B
48 Putnam Convertible 3/13/95 Open/Balanced 18.75 19.32
Income-Growth Trust;
M
49 Putnam Diversified 7/1/94 Open/Equity 295.17 13.27
Equity Trust; A
50 Putnam Diversified 7/2/94 Open/Equit 374.23 13.06
Equity Trust; B
51 Putnam Diversified 7/3/95 Open/Equity 28.77 13.13
Equity Trust; M
52 Putnam Dividend 9/28/89 Closed/Bond 124.78 11.53
Income Fund
53 Putnam Diversified 10/3/88 Open/Bond 1,855.08 11.50
Income Trust; A
54 Putnam Diversified 3/1/93 Open/Bond 2,108.26 11.45
Income Trust; B
55 Putnam Diversified 12/1/94 Open/Bond 982.02 11.46
Income Trust; M
56 Putnam Diversified 7/11/96 Open/Bond 14.20 11.51
Income Trust ; Y
57 Putnam Emerging 10/2/95 Open/Equity 37.56 7.04
Markets Fund; A
58 Putnam Emerging 10/2/95 Open/Equity 26.63 7.00
Markets Fund; B
59 Putnam Emerging 10/2/95 Open/Equity 2.17 7.01
Markets Fund; M
60 Putnam Equity Fund 98 12/30/97 Open/Equity 6.08 11.26
61 Putnam Equity Income 6/15/77 Open/Balanced 1,127.45 15.60
Fund; A
62 Putnam Equity Income 9/13/93 Open/Balanced 652.23 15.51
Fund; B
63 Putnam Equity Income 12/2/94 Open/Balanced 60.81 15.52
Fund; M
64 Putnam Europe Growth 9/7/90 Open/Equity 877.18 21.75
Fund; A
65 Putnam Europe Growth 2/1/94 Open/Equity 771.79 21.25
Fund; B
66 Putnam Europe Growth 12/1/94 Open/Equity 212.90 21.56
Fund; M
67 Putnam Florida Tax 8/24/90 Open/Bond 247.41 9.48
Exempt Income Fund; A
68 Putnam Florida Tax 1/4/93 Open/Bond 82.20 9.48
Exempt Income Fund; B
69 Putnam Florida Tax 5/1/95 Open/Bond 3.36 9.47
Exempt Income Fund; M
70 Putnam Global Natural 7/24/80 Open/Equity 166.04 15.96
Resources Fund; A
71 Putnam Global Natural 2/1/94 Open/Equit 114.68 15.74
Resources Fund; B
72 Putnam Global Natural 7/3/95 Open/Equity 5.93 15.89
Resources Fund; M
73 Putnam Global Equity 5/6/98 Open/Equity 2.55 10.19
Fund
74 Putnam Global Growth 1/3/95 Open/Equity 26.52 13.02
and Income Fund; A
75 Putnam Global Growth 1/3/95 Open/Equity 20.55 12.95
and Income Fund; B
76 Putnam Global Growth 1/3/95 Open/Equity 2.22 12.98
and Income Fund; M
77 Putnam Global 6/1/87 Open/Bond 250.52 12.93
Governmental Income Trust; A
78 Putnam Global 2/1/94 Open/Bond 35.70 12.89
Governmental Income Trust; B
79 Putnam Global 3/17/95 Open/Bond 213.82 12.87
Governmental Income
Trust; M
80 Putnam Global Growth 9/1/67 Open/Equity 3,366.80 12.45
Fund; A
81 Putnam Global Growth 4/27/92 Open/Equity 1,986.01 11.99
Fund; B
82 Putnam Global Growth 3/1/95 Open/Equity 59.55 12.36
Fund; M
83 Putnam Global Growth 6/15/94 Open/Equity 73.39 12.64
Fund; Y
84 Putnam Growth and 1/5/95 Open/Balanced 1,270.85 13.96
Income Fund II; A
85 Putnam Growth and 1/5/95 Open/Balanced 1,510.83 13.85
Income Fund II; B
86 Putnam Growth and 1/5/95 Open/Balanced 171.82 13.90
Income Fund II; M
87 The Putnam Fund for 11/6/57 Open/Balanced 20,760.08 20.49
Growth and Income; A
88 The Putnam Fund for 4/27/92 Open/Balanced 16,314.27 20.23
Growth and Income; B
89 The Putnam Fund for 5/1/95 Open/Balanced 459.38 20.37
Growth and Income; M
90 The Putnam Fund for 6/15/94 Open/Balanced 895.09 20.52
Growth and Income; Y
91 Putnam Growth Fund 5/1/98 Open/Equity 2.37 9.75
92 Putnam Growth 10/2/95 Open/Equity 542.50 19.72
Opportunities; A
93 Putnam Growth 8/1/97 Open/Equit 597.11 19.52
Opportunities; B
94 Putnam Growth 8/1/97 Open/Equity 45.67 19.59
Opportunities; M
95 Putnam High Income 7/9/87 Closed/Bond 115.75 8.54
Convertible and Bond
Fund
96 Putnam High Yield 3/25/86 Open/Bond 1,206.49 8.18
Advantage Fund; A
97 Putnam High Yield 5/16/94 Open/Bond 1,011.04 8.14
Advantage Fund; B
98 Putnam High Yield 12/1/94 Open/Bond 924.65 8.17
Advantage Fund; M
99 Putnam High Yield 1/1/97 Open/Bond 49.01 7.53
Total Return Fund; A
100 Putnam High Yield 1/1/97 Open/Bond 55.87 7.46
Total Return Fund; B
10 Putnam High Yield 1/1/97 Open/Bond 3.85 7.47
1 Total Return Fund; M
10 Putnam High Quality 6/2/86 Open/Bond 339.61 10.19
2 Bond Fund; A
10 Putnam High Quality 6/6/94 Open/Bond 40.18 10.15
3 Bond Fund; B
10 Putnam High Quality 4/12/95 Open/Bond 2.61 10.19
4 Bond Fund; M
10 Putnam High Yield 12/31/97 Open/Bond 428.28 7.84
5 Fund II; A
10 Putnam High Yield 12/31/97 Open/Bond 619.47 7.85
6 Fund II; B
10 Putnam High Yield 12/31/97 Open/Bond 34.03 7.85
7 Fund II; M
10 Putnam High Yield 2/14/78 Open/Bond 2,656.78 10.82
8 Trust; A
10 Putnam High Yield 3/1/93 Open/Bond 921.16 10.78
9 Trust; B
11 Putnam High Yield 7/3/95 Open/Bond 18.29 10.82
0 Trust; M
11 Putnam Health 5/28/82 Open/Equity 2,924.77 64.03
1 Sciences Trust; A
11 Putnam Health 3/1/93 Open/Equity 1,976.28 61.59
2 Sciences Trust; B
11 Putnam Health 7/3/95 Open/Equit 87.67 63.11
3 Sciences Trust; M
11 Putnam High Yield 5/25/89 Closed/Bond 202.71 9.20
4 Municipal Trust
11 Putnam Income Fund; A 11/1/54 Open/Bond 1,441.77 6.92
5
11 Putnam Income Fund; B 3/1/93 Open/Bond 509.70 6.88
6
11 Putnam Income Fund; M 12/14/94 Open/Bond 1,369.57 6.88
7
11 Putnam Income Fund; Y 2/12/94 Open/Bond 250.81 6.93
8
11 Putnam Intermediate 2/16/93 Open/Bond 244.17 5.00
9 U.S. Government
Income Fund; A
12 Putnam Intermediate 2/16/93 Open/Bond 144.46 5.00
0 U.S. Government
Income Fund; B
12 Putnam Intermediate 4/3/95 Open/Bond 10.43 5.01
1 U.S. Government
Income Fund; M
12 Putnam Intermediate 10/1/97 Open/Bond 120.18 5.00
2 U.S. Government
Income Fund; Y
12 Putnam International 12/28/95 Open/Equity 4.41 10.88
3 Fund
12 Putnam International 8/1/96 Open/Equity 406.81 11.08
4 Growth and Income
Fund; A
12 Putnam International 8/1/96 Open/Equity 404.43 11.01
5 Growth and Income
Fund; B
12 Putnam International 8/1/96 Open/Equity 35.80 11.05
6 Growth and Income
Fund; M
12 Putnam International 2/28/91 Open/Equity 2,173.06 19.23
7 Growth Fund; A
12 Putnam International 6/1/94 Open/Equit 1,445.40 18.91
8 Growth Fund; B
12 Putnam International 12/1/94 Open/Equity 160.91 19.11
9 Growth Fund; M
13 Putnam International 7/12/96 Open/Equity 153.89 19.28
0 Growth Fund; Y
13 Putnam International 1/3/95 Open/Equit 728.50 12.91
1 New Opportunities
Fund; A
13 Putnam International 7/21/95 Open/Equity 913.23 12.64
2 New Opportunities
Fund; B
13 Putnam International 10/30/96 Open/Equit 72.12 12.75
3 New Opportunities
Fund; M
13 Putnam International 12/28/95 Open/Equity 114.53 13.69
4 Voyager Fund; A
13 Putnam International 10/30/96 Open/Equit 91.66 13.60
5 Voyager Fund; B
13 Putnam International 10/30/96 Open/Equity 10.49 13.65
6 Voyager Fund; M
13 Putnam Investment 10/26/89 Closed/Bond 249.04 11.94
7 Grade Municipal Trust
13 Putnam Investment 11/27/92 Closed/Bond 188.62 14.12
8 Grade Municipal Trust
II
13 Putnam Investment 11/29/93 Closed/Bond 53.85 13.44
9 Grade Municipal Trust
III
14 Putnam Investors 12/1/25 Open/Equity 4,218.45 14.82
0 Fund; A
14 Putnam Investors 3/1/93 Open/Equity 1,738.67 14.20
1 Fund; B
14 Putnam Investors 12/2/94 Open/Equity 135.17 14.56
2 Fund; M
14 Putnam Investors 1/7/97 Open/Equity 275.57 14.86
3 Fund; Y
14 Putnam Japan Fund 12/28/95 Open/Equity 2.27 5.61
4
14 Putnam Latin America 3/23/98 Open/Equity 1.30 4.91
5 Fund
14 Putnam Massachusetts 10/23/89 Open/Bond 302.60 9.63
6 Tax Exempt Income
Fund; A
14 Putnam Massachusetts 7/15/93 Open/Bond 116.97 9.62
7 Tax Exempt Income
Fund; B
14 Putnam Massachusetts 5/12/95 Open/Bond 3.46 9.62
8 Tax Exempt Income
Fund; M
14 Putnam Master Income 4/29/88 Closed/Bond 444.69 8.38
9 Trust
15 Putnam Managed High 6/25/93 Closed/Bond 93.07 12.40
0 Yield Trust
15 Putnam Michigan Tax 10/23/89 Open/Bond 146.48 9.32
1 Exempt Income Fund; A
15 Putnam Michigan Tax 7/15/93 Open/Bond 45.41 9.31
2 Exempt Income Fund; B
15 Putnam Michigan Tax 4/17/95 Open/Bond 1.66 9.32
3 Exempt Income Fund; M
15 Putnam Minnesota Tax 10/23/89 Open/Bond 102.63 9.21
4 Exempt Income Fund; A
15 Putnam Minnesota Tax 7/15/93 Open/Bond 48.37 9.18
5 Exempt Income Fund; B
15 Putnam Minnesota Tax 4/3/95 Open/Bond 1.42 9.21
6 Exempt Income Fund; M
15 Putnam Managed 2/24/89 Closed/Bond 451.43 9.75
7 Municipal Income
Trust
15 Putnam Money Market 10/1/76 Open/Bond 2,787.08 1.00
8 Fund; A
15 Putnam Money Market 4/27/92 Open/Bond 713.73 1.00
9 Fund; B
16 Putnam Money Market 12/8/94 Open/Bond 84.95 1.00
0 Fund; M
16 Putnam Master 4/29/88 Closed/Bond 804.04 8.04
1 Intermediate Income
Trust
16 Putnam Municipal 5/22/89 Open/Bond 830.09 9.32
2 Income Fund; A
16 Putnam Municipal 1/4/93 Open/Bond 506.61 9.31
3 Income Fund; B
16 Putnam Municipal 12/1/94 Open/Bond 15.36 9.32
4 Income Fund; M
16 Putnam Municipal 5/28/93 Closed/Bond 229.42 14.20
5 Opportunities Trust
16 Putnam New 8/31/90 Open/Equity 10,695.19 58.43
6 Opportunities Fund; A
16 Putnam New 3/1/93 Open/Equity 7,914.10 55.84
7 Opportunities Fund; B
16 Putnam New 12/1/94 Open/Equity 457.39 57.20
8 Opportunities Fund; M
16 Putnam New 7/19/94 Open/Equity 546.29 59.14
9 Opportunities Fund; Y
17 Putnam New Value 1/3/96 Open/Equity 396.38 13.46
0 Fund; A
17 Putnam New Value 2/26/96 Open/Equity 408.43 13.36
1 Fund; B
17 Putnam New Value 2/26/96 Open/Equity 40.54 13.42
2 Fund; M
17 Putnam New Jersey Tax 2/20/90 Open/Bond 217.43 9.34
3 Exempt Income Fund; A
17 Putnam New Jersey Tax 1/4/93 Open/Bond 100.53 9.33
4 Exempt Income Fund; B
17 Putnam New Jersey Tax 5/1/95 Open/Bond 0.91 9.34
5 Exempt Income Fund; M
17 Putnam New York 11/27/92 Closed/Bond 40.29 14.15
6 Investment Grade
Municipal Trust
17 Putnam New York Tax 9/2/83 Open/Bond 1,606.37 8.95
7 Exempt Income Fund; A
17 Putnam New York Tax 1/4/93 Open/Bond 230.43 8.93
8 Exempt Income Fund; B
17 Putnam New York Tax 4/10/95 Open/Bond 2.39 8.95
9 Exempt Income Fund; M
18 Putnam New York Tax 10/26/87 Open/Bond 38.90 1.00
0 Exempt Money Market
Fund
18 Putnam New York Tax 11/7/90 Open/Bond 165.64 9.18
1 Exempt Opportunities
Fund; A
18 Putnam New York Tax 2/1/94 Open/Bond 69.09 9.17
2 Exempt Opportunities
Fund; B
18 Putnam New York Tax 2/10/95 Open/Bond 2.57 9.16
3 Exempt Opportunities
Fund; M
18 Putnam Ohio Tax 10/23/89 Open/Bond 185.38 9.15
4 Exempt Income Fund; A
18 Putnam Ohio Tax 7/15/93 Open/Bond 56.11 9.14
5 Exempt Income Fund; B
18 Putnam Ohio Tax 4/3/95 Open/Bond 2.31 9.15
6 Exempt Income Fund; M
18 Putnam OTC & Emerging 11/1/82 Open/Equity 2,578.52 17.25
7 Growth Fund; A
18 Putnam OTC & Emerging 7/15/93 Open/Equity 1,263.77 16.43
8 Growth Fund; B
18 Putnam OTC & Emerging 12/2/94 Open/Equity 262.82 16.84
9 Growth Fund; M
19 Putnam OTC & Emerging 7/12/96 Open/Equity 98.14 17.38
0 Growth Fund; Y
19 Putnam Pennsylvania 7/21/89 Open/Bond 185.03 9.28
1 Tax Exempt Income
Fund; A
19 Putnam Pennsylvania 7/15/93 Open/Bond 97.70 9.27
2 Tax Exempt Income
Fund; B
19 Putnam Pennsylvania 7/3/95 Open/Bond 2.67 9.29
3 Tax Exempt Income
Fund; M
19 Putnam Preferred 1/4/84 Open/Bond 116.46 8.88
4 Income Fund; A
19 Putnam Preferred 4/20/95 Open/Bond 12.40 8.85
5 Income Fund; M
19 Putnam Premier Income 2/29/95 Closed/Bond 1,129.66 8.04
6 Trust
19 Putnam Research Fund; 10/2/95 Open/Equity 231.36 15.16
7 A
19 Putnam Research Fund; 6/15/98 Open/Equity 236.52 15.10
8 B
19 Putnam Research Fund; 6/15/98 Open/Equity 22.07 15.12
9 M
20 Putnam Strategic 2/19/95 Open/Bond 78.63 7.77
0 Income Fund; A
20 Putnam Strategic 2/19/96 Open/Bond 118.55 7.78
1 Income Fund; B
20 Putnam Strategic 2/19/96 Open/Bond 9.57 7.77
2 Income Fund; M
20 Putnam Tax Exempt 12/31/76 Open/Bond 1,959.10 9.18
3 Income Fund; A
20 Putnam Tax Exempt 1/4/93 Open/Bond 247.73 9.18
4 Income Fund; B
20 Putnam Tax Exempt 2/16/95 Open/Bond 10.31 9.20
5 Income Fund; M
20 Putnam Tax Exempt 10/26/87 Open/Bond 80.03 1.00
6 Money Market Fund
20 Putnam Tax - Free 6/29/92 Closed/Bond 204.87 14.84
7 Health Care Fund
20 Putnam Tax - Free 9/20/93 Open/Bond 1,044.95 14.63
8 Income Trust
Tax - Free High Yield
Fund; A
20 Putnam Tax - Free 9/9/85 Open/Bond 955.19 14.65
9 Income Trust
Tax - Free High Yield
Fund B
21 Putnam Tax - Free 6/1/95 Open/Bond 22.15 14.64
0 Income Trust
Tax - Free High Yield
Fund M
21 Putnam Tax - Free 5/1/98 Open/Bond 241.71 15.41
1 Income Trust
Tax - Free Insured
Fund; A
21 Putnam Tax - Free 9/9/85 Open/Bond 354.43 15.43
2 Income Trust
Tax - Free Insured
Fund; B
21 Putnam Tax - Free 6/1/95 Open/Bond 2.42 15.40
3 Income Trust
Tax - Free Insured
Fund; M
21 Putnam U.S. Core Fund 5/1/98 Open/Equity 2.35 9.71
4
21 Putnam U.S. 2/8/84 Open/Bond 2,108.81 13.12
5 Government Income
Trust; A
21 Putnam U.S. 4/27/92 Open/Bond 1,293.19 13.07
6 Government Income
Trust; B
21 Putnam U.S. 2/6/95 Open/Bond 159.19 13.10
7 Government Income
Trust; M
21 Putnam U.S. 4/11/94 Open/Bond 8.99 13.12
8 Government Income
Trust; Y
21 Putnam Utilities 11/19/90 Open/Balanced 910.49 14.01
9 Growth and Income
Fund; A
22 Putnam Utilities 4/27/92 Open/Balanced 723.85 13.94
0 Growth and Income
Fund; B
22 Putnam Utilities 3/1/95 Open/Balanced 15.66 13.99
1 Growth and Income
Fund; M
22 Putnam Value Fund 5/1/98 Open/Balanced 2.04 8.37
2
22 Putnam Vista Fund; A 6/3/68 Open/Equity 3,437.82 13.07
3
22 Putnam Vista Fund; B 3/1/93 Open/Equity 1,668.99 12.39
4
22 Putnam Vista Fund; M 12/1/94 Open/Equity 136.48 12.75
5
22 Putnam Vista Fund; Y 3/28/95 Open/Equity 301.14 13.24
6
22 Putnam Voyager Fund 4/14/93 Open/Equity 753.10 22.70
7 II; A
22 Putnam Voyager Fund 10/2/95 Open/Equity 698.37 22.13
8 II; B
22 Putnam Voyager Fund 10/2/95 Open/Equity 84.86 22.34
9 II; M
230 Putnam Voyager Fund; 4/1/96 Open/Equity 15,569.92 21.92
A
23 Putnam Voyager Fund; 4/27/92 Open/Equity 7,916.25 20.49
1 B
23 Putnam Voyager Fund; 12/1/94 Open/Equit 368.68 21.40
2 M
23 Putnam Voyager Fund; 4/1/94 Open/Equity 1,613.46 22.28
3 Y
23 Putnam VT Asia 5/1/95 Open/Equity 90.62 8.33
4 Pacific Growth Fund;
A
23 Putnam VT Asia 4/30/98 Open/Equity 0.12 8.33
5 Pacific Growth Fund;
B
23 Putnam VT Diversified 9/15/93 Open/Bond 669.47 10.49
6 Income Fund; A
23 Putnam VT Diversified 4/6/98 Open/Bond 1.93 10.47
7 Income Fund; B
23 Putnam VT Global 2/1/88 Open/Balanced 1,021.63 18.95
8 Asset Allocation
Fund; A
23 Putnam VT Global 4/30/98 Open/Balanced 1.31 18.96
9 Asset Allocation
Fund; B
24 Putnam VT George 4/30/98 Open/Equity 112.65 10.28
0 Putnam Fund; A
24 Putnam VT George 4/30/98 Open/Equity 1.92 10.28
1 Putnam Fund; B
24 Putnam VT Global 5/1/90 Open/Equity 1,987.92 20.28
2 Growth Fund; A
24 Putnam VT Global 4/30/98 Open/Equity 0.84 20.28
3 Growth Fund; B
24 Putnam VT Growth and 2/1/88 Open/Balanced 9,946.40 28.77
4 Income Fund; A
24 Putnam VT Growth and 4/30/98 Open/Balanced 7.53 28.75
5 Income Fund; B
24 Putnam VT U.S. 2/1/88 Open/Bond 1,008.49 13.85
6 Government and High
Quality Bond Fund; A
24 Putnam VT U.S. 4/30/98 Open/Bond 2.31 13.85
7 Government and High
Quality Bond Fund; B
24 Putnam VT High Yield 2/1/88 Open/Bond 1,033.09 11.70
8 Fund; A
24 Putnam VT High Yield 4/30/98 Open/Bond 1.82 11.70
9 Fund; B
25 Putnam VT Health and 4/30/98 Open/Equity 133.96 10.94
0 Sciences Fund; A
25 Putnam VT Health and 4/30/98 Open/Equity 2.12 10.93
1 Sciences Fund; B
25 Putnam VT 1/1/97 Open/Balanced 318.66 12.24
2 International Growth
and Income; A
25 Putnam VT 4/6/98 Open/Balanced 0.98 12.24
3 International Growth
and Income; B
25 Putnam VT 1/1/97 Open/Equity 135.77 11.49
4 International New
Opportunities Fund; A
25 Putnam VT 4/30/98 Open/Equity 0.09 11.48
5 International New
Opportunities Fund; B
25 Putnam VT 1/1/97 Open/Equity 317.59 13.52
6 International Growth
Fund; A
25 Putnam VT 4/30/98 Open/Equity 1.22 13.51
7 International Growth
Fund; B
25 Putnam VT Investors 4/30/98 Open/Equity 241.41 11.65
8 Fund; A
25 Putnam VT Investors 4/30/98 Open/Equity 2.60 11.64
9 Fund; B
26 Putnam VT Money 2/1/88 Open/Bond 596.70 1.00
0 Market Fund; A
26 Putnam VT Money 4/30/98 Open/Bond 13.15 1.00
1 Market Fund; B
26 Putnam VT New 5/2/94 Open/Equity 3,585.12 26.06
2 Opportunities Fund; A
26 Putnam VT New 4/30/98 Open/Equity 1.36 26.04
3 Opportunities Fund; B
26 Putnam VT New Value 1/2/97 Open/Equity 256.03 12.03
4 Fund; A
26 Putnam VT New Value 4/30/98 Open/Equity 0.41 12.02
5 Fund; B
26 Putnam VT OTC & 4/30/98 Open/Equity 28.07 10.09
6 Emerging Growth Fund;
A
26 Putnam VT OTC & 4/30/98 Open/Equity 0.54 10.09
7 Emerging Growth Fund;
B
26 Putnam VT Research A 10/1/98 Open/Equity 22.49 11.93
8
26 Putnam VT Research B 10/1/98 Open/Equity 0.26 11.92
9
27 Putnam VT Utilities 5/1/92 Open/Balanced 1,015.00 18.19
0 Growth and Income
Fund; A
27 Putnam VT Utilities 4/30/98 Open/Balanced 1.79 18.19
1 Growth and Income
Fund; B
27 Putnam VT Vista Fund; 1/2/97 Open/Equity 312.03 14.72
2 A
27 Putnam VT Vista Fund; 4/30/98 Open/Equity 0.84 14.73
3 B
27 Putnam VT Voyager 2/1/88 Open/Equity 5,802.65 45.85
4 Fund; A
27 Putnam VT Voyager 4/30/98 Open/Equity 4.28 45.81
5 Fund; B
J) Miscellaneous
1. Election and Removal of Directors
Directors of Investment Management Company are
elected to office or removed from office by vote of
either stockholders or directors, in accordance with
Articles of Organization and By-Laws of Investment
Management Company.
2. Results of operations
Officers are elected by the Board of Directors. The
Board of Directors may remove any officer without cause.
3. Supervision by SEC of Changes in Directors and Certain
Officers
Putnam files certain reports with the SEC in
accordance with Sections 203 and 204 of the Investment
Advisers Act of 1940, which reports list and provide
certain information relating to directors and officers
of Investment Management Company.
4. Amendment to the Articles of Organization, Transfer
of Business and Other Important Matters.
a. Articles of Organization of Investment Management
Company may be amended, under the General
Corporation Law of The Commonwealth of
Massachusetts, by appropriate shareholders' vote.
b. Under the General Corporation Law of The
Commonwealth of Massachusetts, transfer of business
requires a vote of 2/3 of the stockholders entitled
to vote thereon.
c. Investment Management Company has no direct
subsidiaries.
5. Litigation, etc.
There are no known facts, such as legal proceedings,
which are expected to materially affect the Fund and/or
Investment Management Company within the six-month period
preceding the filing of this Registration Statement.
III. OUTLINE OF THE OTHER RELATED COMPANIES
(A) Putnam Fiduciary Trust Company (the Transfer Agent,
Shareholder Service Agent and Custodian)
(1) Amount of Capital
U.S.$39,202,527 (approximately yen4.5 billion) as of
the end of December, 1998
(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.$175,288,886 (approximately yen20.3 billion) as of
the end of December, 1998
(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. provides marketing
services to the Fund.
(C) Yamatane Securities Co., Ltd. (Distributor in Japan and
Agent Company)
(1) Amount of Capital
yen14,760,030,000 as of the end of December, 1998
(2) Description of Business
Yamatane Securities Co., Ltd.is a diversified
securities company in Japan from its establishment in
1993. Also, it engages the fund units for the investment
trust funds of Dai-Ichi Kangyo Asahi Investment Trust
Management Co., Ltd.,Sakura Investment Trust Management
Co., Ltd., Nissei Investment Trust Management Co., Ltd.,
NCG Investment Trust Management Co., Ltd., Nomura Asset
Management Co., Ltd. and Goldman Sachs Investment Trust
Management Co., Ltd., etc. and acts as the Agent Company
and engages in handling the sales and repurchase for
Priton Fund (Japan).
(3) Outline of Business Relationship with the Fund
The Company acts as a Distributor in Japan and Agent
Company for the Fund in connection with the offering of
shares in Japan.
(D) Capital Relationships
100% of the shares of Putnam Investment Management,
Inc. are held by Putnam Investments, Inc.
(E) Interlocking Directors and Auditors
Names and functions of officers of the Fund who also
are officers of the related companies are as follows:
(as of the filing date)
Name of Investment Transfer Agent
Officer Management and
or Fund Company Shareholder
Trustee Service Agent
George Chairman and Chairman and None
Putnam Trustee Director
Charles Executive Vice Managing None
E. Porter President Director
Patricia Senior Vice Senior Vice None
C. President President
Flaherty
Lawrence Trustee and President and None
J. Lasser Vice President CEO
Gordon H. Vice President Senior Director
Silver Managing
Director
Ian C. Vice President Senior None
Ferguson Managing
Director
John R. Vice President Senior Vice None
Verani President
Steven Vice President Managing None
Oristagli Director
o
Jennifer Vice President Managing None
Leichter Director
D. Vice President Managing None
William Director
Kohli
David L. Vice President Managing None
Waldman Director
Jeffrey Vice President Senior Vice None
A. President
Kaufman
IV. FINANCIAL CONDITION OF THE FUND
1. FINANCIAL STATEMENTS
[Omitted, in Japanese version, financial statements of
the Fund and Japanese translations thereof are
incorporated here]
FINANCIAL HIGHLIGHTS
The following table presents per share financial
information for class M shares. This information has
been audited and reported on by the Fund's independent
accountants, PricewaterhouseCoopers LLP. Financial
statements included in the Fund's annual report to
shareholders for the 1998 fiscal year are presented in
their entirety in this SRS. The Fund's annual report is
available without charge upon request.
Effective July 1, 1998, Coopers & Lybrand L.L.P. and
Price Waterhouse LLP combined their businesses and
practices and began doing business as
FINANCIAL HIGHLIGHTS (for a share outstanding throughout the
period)
YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30 SEPTEMBER 30 SEPTEMBER 30
1998 1997 1996
CLASS M
NET ASSET VALUE, BEGINNING OF $12.67 $12.27 $11.97
PERIOD
INVESTMENT OPERATIONS
Net investment income .96(c) .82(c) .86
Net realized and unrealized gain (loss)
on investments (1.18) .43 .31
TOTAL FROM INVESTMENT OPERATIONS (.22) 1.25 1.17
LESS DISTRIBUTIONS
From net investment income (.67) (.85) (.87)
In excess of net investment income - - -
From net realized gain on investments (.16) - -
In excess of net realized gain on - - -
investments
Return of Capital - - -
TOTAL DISTRIBUTIONS (.83) (.85) (.87)
NET ASSET VALUE, END OF PERIOD$11.62 $12.67 $12.27
TOTAL INVESTMENT RETURN (1.97) 10.59 10.12
AT NET ASSET VALUE (%) (a)
NET ASSETS, END OF PERIOD $1,019,477 $513,351 $46,327
(in thousands)
Ratio of expenses to average net
assets (%) (b) 1.22 1.24 1.28
Ratio of net investment income 7.69 6.88 7.09
to average net assets (%)
Portfolio turnover (%) 188.75 250.93 304.39
(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.
(c) Per share net investment income has been determined on
outstanding during the period.
2. CONDITION OF THE FUND
(a) Statement of Net Assets
(As of the end of December, 1998)
$ Yen
(in thousands)
a. Total Assets 5,236,582,984 605,872,651
b. Total Liabilities 276,979,066 32,046,478
c. Total Net Assets 4,959,603,918 573,826,173
(a-b)
d. Total Number of Shares
Outstanding
Class A. 161,347,222 Shares
Class B. 184,178,687 Shares
Class M. 85,694,369 Shares
Class Y. 1,234,082 Shares
e. Net Asset Value
per Share (c/d)
Class A. $11.50 yen1,330.55
Class B. $11.45 yen1,324.77
Class M. $11.46 yen1,325.92
Class Y. $11.50 yen1,330.55
(b) Names of Major Portflio Holdings other than Equity Shares
(Top 30 Holdings)
<TABLE><CAPTION>
(As of the end of December 1998)
U.S. Dollar
-------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Kind of Interest Par Value Acquisition Current Investment st
Name of Securities Issue Maturity Rate (%) (1,000) curr Cost Value Ratio (%)
1 FNMA U.S.Gover 2026-2028 6 1/2 328,440 USD 310,269,842 314,357,268 6.3
. nment
2 GNMA U.S.Gover 2025-2028 7 253,547 USD 256,390,436 259,417,245 5.2
. nment
3 United Kingdom Foreign 2000 8 128,725 GBP 222,951,417 225,430,223 4.5
. Treasury Bonds Bond
4 U.S. Treasury U.S.Gover 2000 4 5/8 91,500 USD 91,901,641 91,556,730 1.8
. Bonds nment
5 U.S. Treasury U.S.Gover 2027 6 1/8 74,405 USD 78,586,609 83,286,725 1.7
. Bonds nment
6 United Mexican Foreign 2019 6 1/4 3,040 USD 87,920,869 80,505,152 1.6
. States Bonds
7 GNMA U.S.Gover 2022-2026 7 1/2 73,933 USD 75,487,162 76,257,732 1.5
. nment
8 Netherlands Foreign 2002 8 1/4 98,120 NLG 60,108,239 60,297,207 1.2
. (Government of) Bonds
9 Germany (Republic Foreign 2003 7 1/8 86,480 DEM 58,893,504 59,174,899 1.2
. of) Bonds
1 France (Government Foreign 2007 5 1/2 276,656 FRF 55,114,690 55,467,828 1.1
0 of) Bonds
.
1 Netherlands Foreign 2004 7 1/4 87,425 NLG 55,118,641 55,143,569 1.1
1 (Government of) Bonds
.
1 Brazil (Government Brady 2024 6 2/3 92,045 USD 48,093,513 53,386,100 1.1
2 of) Bonds
.
1 CRIMT Ser.98-C1, CMO 2011 7 52,655 USD 51,116,487 51,552,536 1.0
3 Class A2
.
1 GNMA U.S.Gover 2025-2027 8 46,676 USD 48,438,396 48,523,769 1.0
4 nment
.
1 U.S. Treasury U.S.Gover 2028 5 1/4 47,185 USD 47,446,716 48,305,644 1.0
5 Bonds nment
.
1 Household Corporate 2003 6 1/5 46,355 USD 47,061,684 46,563,598 0.9
6 Netherlands N.V. Bonds
.
1 Peru (Government Brady 2017 4 70,965 USD 46,920,278 44,530,538 0.9
7 of) Bonds
.
1 Bulgaria Brady 2012 2 1/4 7,740 USD 50,886,956 44,118,000 0.9
8 (Government of) Bonds
.
1 United Kingdom Foreign 2002 9 3/4 22,520 GBP 43,788,067 43,637,779 0.9
9 Treasury Bonds Bond
.
2 FNMA - Dwarf U.S.Gover 2012-2013 6 40,860 USD 40,865,936 40,961,701 0.8
0 nment
.
2 Canada (Government Foreign 2007 7 1/4 45,085 CAD 34,446,319 34,209,220 0.7
1 of) Bond
.
2 FHLMC U.S.Gover 2017-2028 7 1/2 27,352 USD 28,186,488 28,086,914 0.6
2 nment
.
2 Time Warner, Inc. Corporate 2029 6 5/8 27,210 USD 26,954,103 27,685,087 0.6
3 Bonds
.
2 Raytheon Co. Corporate 2018 6 2/5 27,850 USD 27,735,047 27,641,125 0.6
4 Bonds
.
2 RAST Ser. 98-A5, CMO 2028 6 3/4 26,815 USD 26,706,176 26,991,086 0.5
5 Class A8
.
2 Sprint Capital Corporate 2003 5 5/7 26,925 USD 27,071,780 26,927,693 0.5
6 Corp. Bonds
.
2 Boeing Co. Corporate 2038 6 5/8 26,500 USD 26,877,625 26,619,515 0.5
7 Bonds
.
2 Financing Corp. CMO 2023 6 1/2 26,314 USD 24,541,961 25,919,700 0.5
8
.
2 Global Crossing Corporate 2008 9 5/8 22,095 USD 22,029,387 23,089,275 0.5
.
3 FHS Ser. 177, CMO 2026 0 27,254 USD 23,122,671 22,646,488 0.5
0 Princial Only
.
V. 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.]
[Financial Highlights will appear in this section and, in
the Japanese prospectus, at the beginning of such
prospectus as summary of the prospectus.]
VI. 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 Distributor or Sales Handling 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.
VII. REFERENCE INFORMATION
The following documents in connection with the Fund were
filed with Director of Kanto Local Finance Bureau of MOF.
June 30, 1998: Semi-annual Report (during the Fourth term)
Amendment to Securities Registration Statement
July 1, 1998: Amendment to Semi-annual Report
August 4, 1998: Securities Registration Statement
August 13, 1998: Amendment to Securities Registration Statement
December 1, 1998: Amendment to Securities Registration Statement
[Final]
AMENDMENT TO SECURITIES REGISTRATION STATEMENT
(NAV Sale)
PUTNAM DIVERSIFIED INCOME TRUST
AMENDMENT TO SECURITIES REGISTRATION STATEMENT
To: Director of Kanto Local Finance Bureau
Filing Date of SRS: February 5, 1999
Name of the Regist
Name and Official Title of Trustees: George Putnam
William F. Pounds
John A. Hill
Jameson A. Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Robert E. Patterson
Donald S. Perkins
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]_____
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
- ii -
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 1 billion Class M Shares
Foreign Investment Fund Securities Up to the total amount obtained by
to be Publicly Offered or Sold: agregating the respective net
asset value per Class M Share in
respect of 1 billion Class M Shares
(The Maximum amount expected to be
sold is 11.46 billion U.S.
dollars (approximately yen1,326
billion).
Note 1: U.S.$ amount is translated into Japanese Yen at the
rate of U.S.$l.00=yen115.70 the mean of the exchange rate
quotations by The Bank of Tokyo-Mitsubishi, Ltd. for
buying and selling spot dollars by telegraphic transfer
against yen on 30th December, 1998.
Note 2: The maximum amount expected to be sold is an amount
calculated by multiplying the net asset value per Class M
Share as of the end of December, 1998 (U.S.$ 11.46) by 1
billion Class M Shares for convenience.
Places where a copy of this Amendment to the Securities
Registration
Statement is available for Public Inspection
Not applicable.
(Total number of pages of this Amendment to Securities
Registration Statement in Japanese is
2 including front and back pages.)
I. REASON FOR FILING THIS AMENDMENT TO SECURITIES
REGISTRATION STATEMENT:
This statement amends and updates the relevant
information of the Securities Registration Statement
("SRS") filed on August 4, 1998 due to the fact that the
aforementioned Securities Report was filed today.
The exchange rates used in this statement to translate
the amended amounts of foreign currencies are different
from those used before these amendments, as the latest
exchange rates are used in this statement.
II. CONTENTS OF THE AMENDMENTS (the page numbers refer to
those of the Japanese original)
PART II. INFORMATION CONCERNING ISSUER
(page 4 of the original Japanese SRS)
The following matters in the original Japanese SRS are
amended to have the same contents as those provided in
the following items of the aforementioned Securities
Report:
Before amendment After amendment
[Original Japanese SRS] [Aforementioned Annual
Securities Report]
I. DESCRIPTION OF THE FUND I.DESCRIPTION OF THE FUND (the
aforementioned Japanese
Annual Securities Report,
from page 1 to page 27)
II. OUTLINE OF THE FUND II. OUTLINE OF THE TRUST
(Ditto, from page 28 to
page 58)
III. OUTLINE OF THE OTHER III. OUTLINE OF THE OTHER
RELATED COMPANIES
RELATED COMPANIES (Ditto,
from page 59 to page 60)
IV. FINANCIAL CONDITIONS OF IV. FINANCIAL CONDITIONS OF THE FUND
THE FUND (Ditto, from page 61 to page 183)
V. SUMMARY OF INFORMATION VI. SUMMARY OF INFORMATION
CONCERNING THE EXERCISE OF CONCERNING THE EXERCISE OF
RIGHTS BY HOLDERS OF FOREIGN RIGHTS BY HOLDERS OF FOREIGN
INVESTMENT FUND SECURITIES INVESTMENT FUND SECURITIES
(Ditto, page 209)
VI. MISCELLANEOUS VII. REFERENCE INFORMATION
(Ditto, page 209)
Note 1: U.S.$ amount is translated into Japanese
Yen at the rate of U.S.$1 = yen115.70, the mean of the
exchange rate quotations at The Bank of Tokyo-
Mitsubishi, Ltd. for buying and selling spot dollars
by telegraphic transfer against yen on 30th December,
1998, for convenience.
Note 2: 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.
Note 3:In this Report, "fiscal year" refers to a year
from October 1 to September 30 of the following year.
PART III. SPECIAL INFORMATION
(Ditto, page 231)
II. FINANCIAL CONDITIONS OF THE INVESTMENT MANAGEMENT
COMPANY of the Original SRS is ammended to to have the
same contents as those provided in V. FINANCIAL
CONDITIONS OF THE INVESTMENT MANAGEMENT COMPANY of the
aforementioned Securities Report:
</TABLE>
