As filed with the Securities and Exchange Commission on
Registration No. 33-25658[/R]
811-5693
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 9[/R] / X /
and/or[/R] ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940 ----
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Amendment No. 11[/R] / X /
(Check appropriate box or boxes) ----
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PUTNAM EUROPE GROWTH FUND
(Exact Name of Registrant as Specified in Charter)[/R]
One Post Office Square, Boston, Massachusetts 02109
(Address of Principal Executive Offices) (Zip Code)[/R]
Registrant's Telephone Number, including Area Code
(617) 292-1000
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It is proposed that this filing will become effective
(check appropriate box)
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/ / immediately upon filing pursuant to paragraph (b)
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/ / on (date)[/R] pursuant to paragraph (b)
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/ / 60 days after filing pursuant to paragraph (a)(1)
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/ X / on October 30, 1998[/R] pursuant to paragraph
(a)(1)
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/ / 75 days after filing pursuant to paragraph (a)(2)
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/ / on (date) pursuant to paragraph (a)(2) of Rule 48 5.
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If appropriate, check the following box:
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/ / this post-effective amendment designates a new
- ---- effective date for a previously filed post-effective
amendm ent.
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JOHN R. VERANI, Vice President
PUTNAM EUROPE GROWTH FUND
One Post Office Square
Boston, Massachusetts 02109
(Name and address of agent for service)
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Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
PART C
Information required to be included in Part C is set
forth under the appropriate Item, so numbered, in Part C
of the Registration Statement.
Prospectus
OCTOBER 30, 1998
PUTNAM EUROPE GROWTH FUND
CLASS A, B AND M SHARES
INVESTMENT CATEGORY: GROWTH
This prospectus explains what you should know about this
mutual fund before you invest. Please read it carefully.
Putnam Investment Management, Inc. (Putnam Management),
which has managed mutual funds since 1937, manages the fund.
Information about this fund, and other Putnam funds, is
available from your financial advisor or Putnam's Web
site at www.putnaminv.com, or by calling 1-800-225-1581.
The U.S. Securities and Exchange Commission (SEC) neither
evaluates the investment merit of the fund or its shares
nor guarantees the accuracy or adequacy of the information
in this prospectus. Any statement to the contrary is a crime.
CONTENTS
2 FUND SUMMARY
2 Goal
2 Main investment strategies
2 Main risks
3 Performance information
4 Fees and expenses
6 WHAT ARE THE FUND'S MAIN INVESTMENT
STRATEGIES AND RELATED RISKS?
10 WHO MANAGES THE FUND?
10 HOW DOES THE FUND PRICE ITS SHARES?
11 HOW DO I BUY FUND SHARES?
14 HOW DO I SELL FUND SHARES?
15 HOW DO I EXCHANGE FUND SHARES?
16 FUND DISTRIBUTIONS AND TAXES
17 FINANCIAL HIGHLIGHTS
Logo BOSTON LONDON TOKYO
Fund summary
GOAL
The fund seeks capital growth.
MAIN INVESTMENT STRATEGIES
The fund is designed for investors who seek growth of the
value of their investment over time. The fund will seek its
goal by investing primarily in common stocks issued by
European companies that Putnam Management believes have
the potential for capital growth, and will, under normal
market conditions, generally invest at least 85% of its
total assets in European companies.
The fund invests in a blend of growth stocks (which
generally are common stocks that Putnam Management
believes have earnings that will grow relatively
rapidly) and value stocks (which generally are common
stocks that Putnam Management believes are currently
selling below their true worth). The fund invests
mainly in large companies, although it can invest in
companies of any size. Although the fund emphasizes
investments in more developed countries, it may also
invest in companies located in emerging markets, such
as those in Eastern Europe.
MAIN RISKS
The main risks of investing in the fund include
* The risks of investing outside the United States,
such as currency fluctuations, economic or financial
instability, or unfavorable political or legal
developments in international markets.
* The risk of investing primarily in one geographic
region, as investments in the region may be
affected by similar economic forces and so may
tend to gain or lose value at approximately the same time.
The vulnerability of the fund to factors affecting
European investments will be significantly greater
than that of a more geographically diversified fund.
* The risk that the stock price of one or more of the
companies in the fund's portfolio will fall, or will fail
to appreciate as anticipated by Putnam Management,
regardless of movements in the securities markets.
Many factors can adversely affect a stock's performance.
This risk is generally greater for smaller companies,
which tend to be more vulnerable to adverse developments.
* The risk that movements in the securities markets will
adversely affect the value of the fund's investments,
regardless of how well the companies in the fund's
portfolio perform.
The fund's shares may rise and fall in value, and
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 bank deposit and
is not insured or guaranteed by the Federal Deposit
Insurance Corporation (FDIC) or any other government agency.
PERFORMANCE INFORMATION
The bar chart that follows shows how the performance of the
fund's class A shares has varied. The table following the
chart compares the fund's average annual total returns for the
periods shown for class A, B and M shares to a broad measure
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
(Bar chart)
Plot Points
1990* 1.53%
1991 14.16%
1992 -1.34%
1993 31.05%
1994 6.44%
1995 21.24%
1996 22.67%
1997 21.96%
Sales charges are not reflected in the performance figures in the
bar chart. If these charges were reflected, returns would be less
than those shown. The return shown for 1990 is not annualized.
Year-to-date returns for 1998 through 6/30/98 were 27.24%. During
the period shown, the highest return for a quarter was 11.67% (quarter
ending 6/30/95) and the lowest return for a quarter was -5.15%
(quarter ending 9/30/92).
AVERAGE ANNUAL TOTAL RETURNS (for periods ending 12/31/97)
PAST PAST PAST SINCE
1 YEAR 5 YEARS 10 YEARS INCEPTION*
CLASS A 14.94% 18.99% NA 14.69%
CLASS B 16.04% NA NA 14.75%
CLASS M 17.05% NA NA 14.53%
MSCI Europe
Index 23.80% 19.25% NA 13.15%
* Inception dates: class A - 9/7/90 (also used for MSCI Europe Index);
class B -2/1/94; class M - 12/1/94
Class A and class M share performance reflects the current
maximum initial sales charges an investor could pay to invest in the
fund. Class B performance reflects the applicable deferred sales
charge if shares had been redeemed on 12/31/97. The fund's
performance through 6/30/92 was more favorable than it otherwise
might have been because Putnam Management bore a portion of the
fund's expense before that date.
FEES AND EXPENSES
This table summarizes the fees and expenses you may pay if you
buy and hold shares of the fund. You pay shareholder fees directly.
Annual fund operating expenses are deducted from the fund's assets.
SHAREHOLDER FEES
CLASS A CLASS B CLASS M
Maximum sales charge (load) imposed
on purchases (as a percentage of
the offering price) 5.75% NONE 3.50%
Maximum deferred sales charge (load)
(as a percentage of the original
purchase price or redemption
proceeds, whichever is lower) NONE* 5.00% NONE
* A deferred sales charge of up to 1% may be imposed on certain
redemptions of class A shares bought without an initial sales charge.
ANNUAL FUND OPERATING EXPENSES (based on the fund's last fiscal year)
TOTAL FUND
MANAGEMENT DISTRIBUTION OTHER OPERATING
FEES (12B-1) FEES EXPENSES EXPENSES
CLASS A 0.75% 0.25% 0.32% 1.32%
CLASS B 0.75% 1.00% 0.32% 2.07%
CLASS M 0.75% 0.75% 0.32% 1.82%
EXAMPLE OF HOW EXPENSES CAN AFFECT
YOUR INVESTMENT
This example can help you compare the cost of investing in this
fund to the cost of investing in other mutual funds. It assumes
that you invest $10,000 in the fund for the time periods shown
and then, except as shown, redeem all your shares at the end of
those periods. It also assumes a 5% return on your investment each
year and that the fund's operating expenses remain the same. Your
actual costs and returns may be higher or lower.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A $702 $969 $1,257 $2,074
CLASS B $710 $949 $1,314 $2,208*
CLASS B (no redemption) $210 $649 $1,114 $2,208*
CLASS M $528 $902 $1,301 $2,412
* Reflects the conversion of class B shares to class A shares,
which pay lower 12b-1 fees, about eight years after purchase.
What are 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
capital growth by investing mainly in common stocks, which
represent ownership interests in companies. The fund generally
invests in a blend of growth and value stocks.
* COMMON STOCKS. The value of a company's stock may fall as a
result of factors relating directly to that company, such as
decisions made by its management or lower demand for the company's
products or services. A stock's value may fall because of factors
affecting not just the company, but companies in a number of different
industries, such as increases in production costs. The value of a
company's stock may also fall due to changes in financial market
conditions that are relatively unrelated to the company or its
industry, such as changes in interest rates or currency exchange
rates. In addition, a company's stock generally pays dividends only
after the company makes required payments to holders of its bonds
and other debt. For this reason, the value of the stock will
usually react more strongly than the bonds and other debt to actual
or perceived changes in the company's financial condition or prospects.
* Growth stocks. The fund may invest in stocks of companies that
Putnam Management believes have earnings that will grow relatively
rapidly. These growth stocks typically trade at higher multiples of
current earnings than other stocks. Therefore, the values of growth
stocks may be more sensitive to changes in current or expected
earnings than the values of other stocks.
* Value stocks. The fund may also invest in companies that are
not expected to experience significant earnings growth, but
whose stock Putnam Management believes is undervalued.
These companies may have experienced adverse business
developments or may be subject to special risks that have caused
their stocks to be out of favor. If Putnam Management's
assessment of a company's prospects is wrong, or if the market
does not recognize the value of the company, the price of its stock
may fall or may not approach the value that Putnam Management
has placed on it.
* FOREIGN INVESTMENTS. The fund may invest without limit in
securities of foreign issuers. Foreign investments involve
certain special risks, including
* Unfavorable changes in currency exchange rates:
Foreign investments are normally issued and traded
in foreign currencies. As a result, their values may
be affected by changes in the exchange rates between
particular foreign currencies and the U.S. dollar.
* Political and economic developments: Foreign
investments may be subject to the risks of seizure by
a foreign government, imposition of restrictions on the
exchange or transport of foreign currency, and tax increases.
* Unreliable or untimely information: There may be less
information publicly available about a foreign company
than about most U.S. companies, and foreign 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 foreign investments may be less
liquid (harder to buy and sell) than domestic investments,
which means the fund may at times be unable to sell these
less liquid foreign investments at desirable prices.
Brokerage commissions and other fees are generally higher
for foreign investments than for domestic investments. The
procedures and rules for settling foreign transactions may
also involve delays in payment, delivery or recovery of money
or investments.
Common stocks of foreign companies have historically
offered lower dividends than comparable U.S. companies. Foreign
withholding taxes may further reduce the amount of income
available to distribute to shareholders of the fund. The
fund's yield is therefore expected to be lower than yields
of most funds that invest mainly in U.S. companies.
Certain of these risks may also apply to some extent to
U.S.-traded investments that are denominated in foreign
currencies, investments in U.S. companies that are traded in
foreign markets, or to investments in U.S. companies that
have significant foreign operations.
* EMERGING MARKETS. While the fund emphasizes investments
in more developed countries, it may also invest in less
developed and developing countries, which are sometimes
referred to as "emerging markets." The risks of foreign
investments are typically increased in emerging markets.
For example, political and economic structures in these
countries may be young and developing rapidly, which can
cause instability. These countries are also more likely to
experience high levels of inflation, deflation or currency
devaluation, which could hurt their economies and securities
markets. For these reasons, investments in emerging markets
are often considered speculative.
* GEOGRAPHIC FOCUS. The fund invests primarily in common
stocks of European companies. The fund considers the
following to be "European companies":
* companies organized under the laws of a European country
with a principal office in a European country;
* companies that earn 50% or more of their total revenues
from business in Europe; or
* companies whose common stock is traded principally on
securities exchange in Europe.
* DERIVATIVES. The fund may engage in a variety of
transactions using "derivatives", such as futures, options,
warrants, forwards and swaps contracts. Derivatives are
financial instruments whose value depends upon, or is derived from,
the value of an underlying security, basket of securities,
index or currency.
The fund may use derivatives to hedge its portfolio. For example,
it may purchase a currency derivative to protect the
fund from declines in securities traded in that currency.
The fund may also use derivatives for non-hedging purposes.
For example, the fund may purchase a derivative to gain
exposure to markets difficult to access through non-derivatives
or to adjust portfolio characteristics of the fund's portfolio
such as sector or country allocation, without affecting
underlying portfolio security selection.
The fund's return with respect to a derivative typically
depends on the change in the value of the security, index or
currency specified in the derivative instrument. With respect
to certain derivatives, such as futures and swaps, the fund may
not only receive a return from the instrument but may be
obligated to pay the counterparty if the instrument moves the
other direction. For example, if the fund purchases a future
on an equity index, if the index goes up the fund will receive
a return. If the index goes down the fund will be required to
pay amounts to its counterparty. The fund may enter into
transactions in which it receives a return when the referenced
instrument goes up ("long" positions) or in which the instrument
goes down ("short" positions). Short positions are used to
reduce exposure to underlying securities or currencies.
Derivatives may be traded in organized exchanges or in
individually negotiated transactions with counterparties
(these latter types of derivatives are known as "over the
counter" instruments).
Derivatives involve special risks and costs and may result in
losses. The successful use of derivatives requires
sophisticated management and the fund will be dependent on
Putnam Management's ability to analyze and manage derivatives
purchased. The prices of derivatives may move in unexpected ways,
especially in abnormal market conditions. Derivatives may
magnify or otherwise increase investment losses.
Other risks arise from the potential inability to terminate derivatives
positions. A liquid secondary market may not exist for the fund's
derivatives positions at any time. These liquidity risks will be more
pronounced for over-the-counter instruments than for exchange traded
instruments. Many over-the-counter instruments will not be liquid.
Over-the-counter instruments also involve the risk that the fund's
counterparty will default on its obligations to the fund. The fund's use of
derivatives may res
* Frequent trading. The fund may buy and sell investments relatively often,
which involves higher expenses, including brokerage commissions, and may
increase the amount of capital gains (including short-term capital gains,
which are generally taxable at ordinary income tax rates) realized by the
fund, on which shareholders must pay tax.
* SMALLER COMPANIES. The fund may invest in small and relatively less
well-known companies, including companies with market capitalizations of
less than $1 billion. These companies are more likely than larger companies
to have limited product lines, markets or financial resources, or to depend
on a small, inexperienced management group. Stocks of smaller companies may
trade less frequently and in limited volume, and their prices may fluctuate
more than stocks of other companies. Stocks of smaller companies
larger companies.
* Other investments. The fund may also make other types of investments, such
as preferred stocks, convertible securities, fixed income investments or
other types of derivatives, and may be subject to other risks, as described
in the fund's statement of additional information (SAI).
* 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 then may
temporarily use alternative strategies that are mainly designed to limit the
fund's losses. 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 goals,
investment strategies and other policies described above without
shareholder approval, except as otherwise indicated.
their policies described above without shareholder approval, except as
otherwise indicated.
Who manages the fund?
The fund's Trustees oversee the general conduct of the fund's business. The
Trustees have retained Putnam Management to be the fund's investment manager,
responsible for making investment decisions for the fund and managing the
fund's other affairs and business. The fund pays Putnam Management a
quarterly management fee for these services based on the fund's average net
assets. The fund paid Putnam Management a management fee of 0.75% of average
net assets for the fund's last fiscal year. Putnam Management' office Square,
Boston, MA 02109.
The following officers of Putnam Management have had primary responsibility
for the day-to-day management of the fund's portfolio since the years shown
below. Their recent professional experience is also shown.
MANAGER SINCE EXPERIENCE
Nigel P. Hart 1998 Employed as an investment professional by
Vice President Putnam Management since 1997. Prior to November, 1997,
Mr. Hart was a Vice President and Portfolio Manager at IAI International.
Omid Kamshad 1996 Employed as an investment professional by
Managing Director Putnam Management since 1996. Prior to January, 1996
Mr. Kamshad was Director of Investments at Lombard Odier International.
Prior to April, 1995, Mr. Kamshad was Director at Baring Asset Management
Company.
Mark D. Pollard 1995 Employed as an investment professional by
Senior Vice President Putnam Management since 1990.
Justin M. Scott 1991 Employed as an investment professional by
Managing Director Putnam Management since 1988.
How does the fund price its shares?
The net asset value (NAV) of shares of each class equals the total value of
its assets, less its liabilities, divided by the number of its outstanding
shares. Shares are only valued as of the close of regular trading on the New
York Stock Exchange each day the exchange is open.
The fund values its investments for which market quotations are readily
available at market value. It values short-term investments that will mature
within 60 days at amortized cost, which approximates market value. It values
all other investments and assets at their fair value.
The fund translates prices for its investments quoted in foreign currencies
into U.S. dollars at current exchange rates. As a result, changes in the
value of those currencies in relation to the U.S. dollar may affect the
fund's NAV. Because foreign markets may be open at different times than the
New York Stock Exchange, the value of the fund's shares may change on days
when shareholders are not able to buy or sell them. If events materially
affecting the values of the fund's foreign investments occur between
arkets and the close of regular trading on the New York Stock Exchange,
these investments will be valued at their fair value.
How do I buy fund shares?
You 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. Your
financial advisor or Putnam Investor Services generally must receive your
completed buy order before the close of regular trading on the New York Stock
Exchange for your shares to be bought at that day's offering price.
You 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 You can make regular investments of $25 or
more per month through automatic deductions from your bank checking or
savings account. Application forms are available through your advisor or
Putnam Investor Services at 1-800-225-1581.
You may also complete an order form and write a check for the amount you 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.
WHICH CLASS OF SHARES IS BEST FOR ME?
This prospectus offers you a choice of three classes of fund shares: A, B,
and M. This allows you to choose among different types of sales charges and
different levels of ongoing operating expenses, as illustrated in the "Fees
and expenses" section. The class of shares that is best for you depends on a
number of factors, including the amount you plan to invest and how long you
plan to hold the shares. Here is a summary of the differences among the
classes of shares:
CLASS A SHARES
* Initial sales charge of up to 5.75%
* Lower sales charge for investments of $50,000 or more
* No deferred sales charge (except on certain redemptions of shares bought
without an initial sales charge)
* Lower annual expenses, and higher dividends, than class B or M shares
because of lower 12b-1 fee
CLASS B SHARES
* No initial sales charge
* Deferred sales charge of up to 5% if you sell shares within 6 years after
you bought them
* Higher annual expenses, and lower dividends, than class A or M shares
because of higher 12b-1 fee
* Convert automatically to class A shares after about 8 years, reducing the
future 12b-1 fee (and may convert sooner in some cases)
* Orders for class B shares for more than $250,000 are treated as orders for
class A shares or refused
CLASS M SHARES
* Initial sales charge of up to 3.50%
* Lower sales charges for larger investments of $50,000 or more
* No deferred sales charge
* Lower annual expenses, and higher dividends, than class B shares because of
lower 12b-1 fee
* Higher annual expenses, and lower dividends, than class A shares because of
higher 12b-1 fee
* No conversion to class A shares, so future 12b-1 fee does not decrease
INITIAL SALES CHARGES FOR CLASS A AND M SHARES
CLASS A SALES CHARGE CLASS M SALES CHARGE
AS A PERCENTAGE OF: AS A PERCENTAGE OF:
----------------------------------- ------------------------------------
AMOUNT OF PURCHASE NET AMOUNT OFFERING NET AMOUNT OFFERING
AT OFFERING PRICE ($) INVESTED PRICE INVESTED PRICE
- -----------------------------------------------------------------------
Under 50,000 6.10% 5.75% 3.63% 3.50%
50,000 but under
100,000 4.71 4.50 2.56 2.50
100,000 but under
250,000 3.63 3.50 1.52 1.50
250,000 but under
500,000 2.56 2.50 1.01 1.00
500,000 but under
1,000,000 2.04 2.00 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- ----------------------------------------------------------------------------
DEFERRED SALES CHARGES FOR CLASS B AND CERTAIN CLASS A SHARES
If you sell (redeem) class B shares within six years after you bought them,
you will generally pay a deferred sales charge according to the following
schedule.
YEAR AFTER
PURCHASE 1 2 3 4 5 6 7+
- --------------------------------------------------------------------------
CHARGE 5% 4% 3% 3% 2% 1% 0%
A deferred sales charge of up to 1% may apply to class A shares purchased
without an initial sales charge, if redeemed within two years after purchase.
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. You may sell shares acquired by
reinvestment of distributions without a charge at any time.
* YOU MAY BE ELIGIBLE FOR REDUCTIONS AND WAIVERS OF SALES CHARGES. Sales
charges may be reduced or waived under certain circumstances and for certain
groups. Consult the fund's SAI, your financial advisor or Putnam Mutual Funds
for details.
* 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 0.35% on class A shares and 1.00% on class B and class M shares. The
Trustees currently limit payments on class A and class M shares to 0.25% and
0.75% of average net assets, respectively. Because these fees are paid out of
the fund's assets on an ongoing basis, the higher
ass M shares will increase the cost of your investment over time and may cost
you more than paying the initial sales charge for class A shares. Because
class M shares, unlike class B shares, do not convert to class A shares,
class M shares may cost you more over time than class B shares.
How do I sell fund shares?
You can sell your shares back to the fund any day the New York Stock Exchange
is open, either through your financial advisor or directly to the fund.
Redemptions may be delayed until the fund collects the purchase price of
shares or until 15 calendar days after the purchase date.
* SELLING SHARES THROUGH YOUR FINANCIAL ADVISOR. Your advisor must receive
your request in proper form before the close of regular trading on the New
York Stock Exchange to receive that day's NAV, less any applicable deferred
sales charge. Your advisor will be responsible for furnishing all necessary
documents to Putnam Investor Services on a timely basis and may charge you
for his or her services.
* SELLING SHARES DIRECTLY TO THE FUND. Putnam Investor Services must receive
your 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
you have certificates for the shares you want to sell, you must include them
along with completed stock power forms.
BY TELEPHONE. You may use Putnam's Telephone Redemption Privilege to redeem
shares valued at less than $100,000 unless you have notified Putnam Investor
Services of an address change within the preceding 15 days. Unless you
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 your shares. The Telephone Redemption Privilege may be modified or
terminated without notice.
* ADDITIONAL DOCUMENTS. If you sell shares with a value of $100,000 or more,
and want your redemption proceeds sent to an address other than your address
as it appears on Putnam's records, or if you 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 your financial advisor, Putnam Investor Services a
.
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 SEND ME THE MONEY? The fund generally sends you payment
for your shares the business day after your request is received. Under
unusual circumstances, the fund may suspend redemptions, or postpone payment
for seven days or more.
* REDEMPTION BY THE FUND. If you own fewer shares than the minimum set by the
Trustees (presently 20 shares), the fund may redeem your shares without your
permission and send you the proceeds. The fund may also redeem shares if you
own shares more 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.
How do I exchange fund shares?
If you want to switch your investment from one Putnam fund to another, you
can exchange your fund shares for shares of the same class of another Putnam
fund at NAV. Not all Putnam funds offer all classes of shares. If you
exchange shares subject to a deferred sales charge, the transaction will not
be subject to the deferred sales charge. However, when you redeem the shares
acquired through the exchange, the redemption may be subject to the deferred
sales charge, depending upon when you originally purchased
sales charge will be computed using the schedule of any fund into or from
which you have exchanged your shares that would result in your paying the
highest deferred sales charge applicable to your class of shares. For
purposes of computing the deferred sales charge, the length of time you have
owned your shares will be measured from the date of original purchase and
will not be affected by any exchange.
To exchange your shares, complete an Exchange Authorization Form and send it
to Putnam Investor Services. The form is available from Putnam Investor
Services. A Telephone Exchange Privilege is currently available for amounts
up to $500,000. The Telephone Exchange Privilege is not available if the fund
issued certificates for your shares. Ask your financial advisor or Putnam
Investor Services for prospectuses of other Putnam funds. Some Putnam funds
are not available in all states.
The exchange privilege is not intended as a vehicle for short-term trading.
Excessive exchange activity may interfere with portfolio management and have
an adverse effect on all shareholders. In order to limit excessive exchange
activity and in other circumstances after doing so would be in the best
interests of the fund, the fund reserves the right to revise or terminate
the exchange privilege, limit the amount or number of exchanges or reject
any exchange. These actions may apply to all shareholders or on
whose exchanges Putnam Management determines are likely to have a negative
effect on the fund. Consult Putnam Investor Services before requesting an
exchange.
Fund distributions and taxes
The fund distributes any net investment income and any net realized capital
gains at least once a year. You may choose to:
* reinvest all distributions in additional shares;
* receive any distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares; or
* receive all distributions in cash.
If you do not select an option when you open your account, all distributions
will be reinvested. If you do not cash a distribution check within a
specified period or notify Putnam Investor Services to issue a new check, the
distribution will be reinvested in the fund. Similarly, if any correspondence
sent by the fund or Putnam Investor Services is returned as "undeliverable,"
fund distributions will automatically be reinvested in the fund or in another
Putnam fund.
For federal income tax purposes, distributions of investment income are
taxable as ordinary income. Taxes on distributions of capital gains are
determined by how long the fund owned the investments that generated them,
rather than how long you have owned your shares. Distributions are taxable
to you even if they are paid from income or gains earned by the fund before
your investment (and thus were included in the price you paid). Distributions
of gains from investments that the fund owned for more than 12 m
capital gains. Distributions of gains from investments that the fund owned
for 12 months or less will be taxable as ordinary income. Distributions are
taxable whether you received them in cash or reinvested them in additional
shares.
Any gain resulting from the sale or exchange of your shares will generally
also be subject to tax. You should consult your tax advisor for more
information on your own tax situation, including possible state and local
taxes.
Financial highlights
The financial highlights table is intended to help you understand the fund's
recent financial performance. Certain information reflects financial results
for a single fund share. The total returns represent the rate that an
investor would have earned or lost on an investment in the fund, assuming
reinvestment of all dividends and distributions. This information has been
audited by PricewaterhouseCoopers LLP. Its report and the fund's financial
statements are included in the fund's annual report to sharehold
upon request.
FINANCIAL HIGHLIGHTS
CLASS A
YEAR ENDED JUNE 30
1998 1997 1996 1995 1994
NET ASSET VALUE,
BEGINNING OF PERIOD $18.96 $15.91 $13.88 $11.64 $9.84
INCOME FROM INVESTMENT OPERATIONS
Net investment income .31(c) .24(C) .24(C) .18 .18
Net realized and unrealized
gain (loss) on investments 5.91 4.07 2.19 2.22 1.73
TOTAL FROM INVESTMENT OPERATIONS 6.22 4.31 2.43 .44 1.91
LESS DISTRIBUTIONS FROM:
Net investment income (.37) (.20) -- _ (.11)
Net realized gain on investments (1.13) (1.06) (.40) (.16) --
TOTAL DISTRIBUTIONS (1.50) (1.26) (.40) (.16) (.11)
Net asset value,
end of period $23.68 $18.96 $15.91 $13.88 $11.64
RATIOS AND SUPPLEMENTAL DATA
TOTAL RETURN AT NAV (%)(A) 35.22 28.49 17.82 20.84 19.45
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $791,871 $313,492 $127,980 $90,420 $67,471
Ratio of expenses to average
net assets (%)(b) 1.32 1.45 1.47 1.38 1.50
Ratio of net investment income
to average net assets (%) 1.46 1.43 1.59 1.45 1.17
Portfolio turnover rate (%) 48.86 55.45 38.85 44.33 36.73
(a) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(b)The ratio of expenses to average net assets for the year ended
June 30, 1996 and thereafter includes amounts paid through expense offset
and brokerage service arrangements. Prior period ratios exclude these amounts.
(c) Per share net investment income (loss) has been determined on the basis
of the weighted average number of shares outstanding during the period.
FINANCIAL HIGHLIGHTS
CLASS B
YEAR ENDED JUNE 30
1998 1997 1996 1995 1994+
NET ASSET VALUE,
BEGINNING OF PERIOD $18.56 $15.64 $13.75 $11.62 $12.49
INCOME FROM INVESTMENT OPERATIONS
Net investment income .14(c) .13(c) .14(c) .08 .04
Net realized and unrealized
gain (loss) on investments 5.80 3.97 2.15 2.21 (.91)
TOTAL FROM INVESTMENT OPERATIONS 5.94 4.10 2.29 2.29 (.87)
LESS DISTRIBUTIONS FROM:
Net investment income (.26) (.12) --- --- ---
Net realized gain on investments (1.13) (1.06) (.40) (.16) --
TOTAL DISTRIBUTIONS (1.39) (1.18) (.40) (.16) _
NET ASSET VALUE,
END OF PERIOD $23.11 $18.56 $15.64 $13.75 $11.62
RATIOS AND SUPPLEMENTAL DATA
TOTAL RETURN AT NAV (%)(A) 34.26 27.51 16.95 19.92 (6.97)*
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $633,294 $261,454 $90,126 $45,733 $21,368
Ratio of expenses to average
net assets (%) 2.07 2.20 2.23 2.13 .95*
Ratio of net investment income
to average net assets (%) .69 .76 .96 .74 .54*
Portfolio turnover rate (%) 48.86 55.45 38.85 44.33 36.73
+ For the period from the commencement of operations on February 1, 1994 to
June 30, 1994.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(b)The ratio of expenses to average net assets for the year ended
June 30, 1996 and thereafter includes amounts paid through expense offset
and brokerage service arrangements. Prior period ratios exclude these amounts.
(c) Per share net investment income (loss) has been determined on the basis
of the weighted average number of shares outstanding during the period.
FINANCIAL HIGHLIGHTS
CLASS M
YEAR ENDED JUNE 30
1998 1997 1996 1995+
NET ASSET VALUE,
BEGINNING OF PERIOD $18.85 $15.86 $13.90 $12.35
INCOME FROM INVESTMENT OPERATIONS
Net investment income .20( c) .19(c) .24(c) .09
Net realized and unrealized
gain (loss) on investments 5.89 4.03 212 1.62
TOTAL FROM INVESTMENT OPERATIONS 6.09 4.22 2.36 1.71
LESS DISTRIBUTIONS FROM:
Net investment income (.30) (.17) -- --
Net realized gain on investments (1.13) (1.06) (.40) (.16)
TOTAL DISTRIBUTIONS (1.43) (1.23) (.40) (.16)
NET ASSET VALUE,
END OF PERIOD $23.51 $18.85 $15.86 $13.90
RATIOS AND SUPPLEMENTAL DATA
TOTAL RETURN AT NAV (%)(A) 34.56 27.91 17.28 14.06*
NET ASSETS, END OF PERIOD
(IN THOUSANDS) $42,614 $15,811 $4,047 $746
Ratio of expenses to average
net assets (%)(b) 1.82 1.95 2.02 1.08*
Ratio of net investment income
to average net assets (%) .99 1.10 1.59 1.61*
Portfolio turnover rate (%) 48.86 55.45 38.85 44.33
+ For the period from the commencement of operations on December 1, 1994
through June 30, 1995.
* Not annualized.
(a) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(b)The ratio of expenses to average net assets for the year ended
June 30, 1996 and thereafter includes amounts paid through expense offset
and brokerage service arrangements. Prior period ratios exclude these
amounts.
(c) Per share net investment income has been determined on the basis of the
weighted average number of shares outstanding during the period.
PUTNAM EUROPE
GROWTH FUND
The fund's statement of additional information (SAI) and annual and
semi-annual reports to shareholders include additional information about the
fund. The SAI, and the auditor's report and financial statements included in
the fund's most recent annual report to its shareholders, are incorporated by
reference into this prospectus, which means they are part of this prospectus
for legal purposes. The fund's annual report discusses the market conditions
and investment strategies that significantly affected the
g its last fiscal year. You may get free copies of these materials, request
other information about the fund, or make shareholder inquiries, by
contacting your financial advisor or by calling Putnam toll-free at
1-800-225-1581.
You may review and copy information about the fund, including its SAI, at the
Securities and Exchange Commission's public reference room in Washington,
D.C. You may call the Commission at 1-800-SEC-0330 for information about the
operation of the public reference room. You may also access reports and other
information about the fund on the Commission's Internet site at
http://www.sec.gov. You may get copies of this information, with payment of
a duplication fee, by writing the Public Reference Section of the
D.C. 20549-6009. You may need to refer to the fund's file number under the
Investment Company Act, which is 811-5693
PUTNAM INVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
www.putnaminv.com
Address correspondence to:
Putnam Investor Services
P.O. Box 989
Boston, MA 02103
PUTNAM EUROPE GROWTH FUND
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
OCTOBER 30, 1998[/R]
This SAI is not a prospectus and is only authorized for distribution when
accompanied or preceded by the prospectus of the fund dated
October 30, 1998[/R], as revised from time to time. This SAI contains
information which may be useful to investors but which is not included in the
prospectus. If the fund has more than one form of current prospectus, each
reference to the prospectus in this SAI shall include all of the fund's
prospectuses, unless otherwise noted. The SAI should be read together with
the investors may obtain a free copy of the applicable prospectus from Putnam
Investor Services, Mailing address: P.O. Box 41203, Providence, RI 02940-1203.
Part I of this SAI contains specific information about the fund. Part II
includes information about the fund and the other Putnam funds.
Certain disclosure has been incorporated by reference from the
fund ' s annual report. For a free copy of the fund ' s annual
report, call Putnam Investor Services at 1-800-225-1581
TABLE OF CONTENTS
PART I
FUND HISTORY I[/R]- 3
ADDITIONAL INVESTMENT STRATEGIES I-3
INVESTMENT RESTRICTIONS I[/R]- 5
CHARGES AND EXPENSES I[/R]- 7
INVESTMENT PERFORMANCE I[/R]- 14
ADDITIONAL OFFICERS I[/R]- 15
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS I-16[/R]
PART II
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II[/R]- 1
TAXES II[/R]- 28
MANAGEMENT II[/R]- 33
DETERMINATION OF NET ASSET VALUE II[/R]- 42
HOW TO BUY SHARES II[/R]- 44
DISTRIBUTION PLANS II[/R]- 57
INVESTOR SERVICES II[/R]- 58
SIGNATURE GUARANTEES II[/R]- 63
SUSPENSION OF REDEMPTIONS II[/R]- 63
SHAREHOLDER LIABILITY II[/R]- 64
STANDARD PERFORMANCE MEASURES II[/R]- 64
COMPARISON OF PORTFOLIO PERFORMANCE II[/R]- 65
SECURITIES RATINGS II-70
DEFINITIONS II[/R]- 75
SAI
PART I
FUND HISTORY
Putnam Europe Growth Fund is a Massachusetts business trust organized on
November 10, 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 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
The fund may offer other classes of shares with different sales charges and
expenses. Because of these different sales charges and expenses, the
investment performance of the classes will vary. For more information,
including your eligibility to purchase any class of shares, contact your
investment dealer or Putnam Mutual Funds (at 1-800-225-1581).
Each share has one vote, with fractional shares voting proportionally.
Shares of all classes will vote together as a single class except when
otherwise required by law or as determined by the Trustees. Shares are
freely transferable, are entitled to dividends as declared by the Trustees,
and, if the fund were liquidated, would receive the net assets of the fund.
The fund may suspend the sale of shares at any time and may refuse any order
to purchase shares. Although the fund is not required to hold annual
holders, 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.
The fund is a "diversified" investment company under the Investment Company
Act of 1940. This means that with respect to 75% of its total assets, the
fund may not invest more than 5% of its total assets in the securities of any
one issuer (except U.S. government securities). The remaining 25% of its
total assets is not subject to this restriction. To the extent the fund
invests a significant portion of its assets in the securities of a particular
issuer, it will be subject to an increased risk of loss if the
issuer's securities declines.
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) Borrow money in excess of 10% of the value (taken at the lower of cost or
current value) of its total assets (not including the amount borrowed) at
the time the borrowing is made, and then only from banks as a temporary
measure to facilitate the meeting of redemption requests (not for leverage)
which might otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such borrowings will
be repaid before any additional investments are purchased.
(2) Underwrite securities issued by other persons except to the extent that,
in connection with the disposition of its portfolio investments, it may be
deemed to be an underwriter under certain federal securities law s.
(3) Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by interests
in real estate, and securities representing interests in real estate, 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 there in.
(4) Purchase or sell commodities or commodity contracts, except that the fund
may purchase and sell financial futures contracts and options and may enter
into foreign exchange contracts and other financial transactions not
involving physical commodities.
(5) Make loans, except by purchase of debt obligations in which the fund may
invest consistent with its investment policies, by entering into repurchase
agreements, or by lending its portfolio securi ties.
(6) With respect to 75% of its total assets, 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.
government or its agencies or instrumentalities.
(7) With respect to 75% of its total assets, acquire more than 10% of the
outstanding voting securities of any issuer.
(8) Purchase securities (other than securities of the U.S. government) if as
a result of such purchase more than 25% of the fund's total assets would be
invested in any one industry.
(9) Issue any class of securities which is senior to the fund's shares of
beneficial interest, except for permitted borrowings.
Although certain of the fund's fundamental investment restrictions permit it
to borrow money to a limited extent, the fund does not currently intend to do
so and did not do so last year.
The Investment Company Act of 1940 provides that a "vote of a majority of the
outstanding voting securities" of the fund means the affirmative vote of the
lesser of (1) more than 50% of the outstanding fund shares, or (2) 67% or
more of the shares present at a meeting if more than 50% of the outstanding
fund shares are represented at the meeting in person or by proxy.
IT IS CONTRARY TO THE FUND'S PRESENT POLICY, WHICH MAY BE CHANGED WITHOUT
SHAREHOLDER APPROVAL, TO:
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 then be invested in the
aggregate in securities described in (a), (b), and (c) above.
-------------------------
IN CONNECTION WITH THE OFFERING OF ITS SHARES IN JAPAN, THE FUND HAS
UNDERTAKEN TO THE JAPANESE SECURITIES DEALERS ASSOCIATION THAT THE FUND WILL
NOT:
(1) INVEST MORE THAN 10% OF ITS NET ASSETS IN SECURITIES THAT ARE NOT TRADED
ON AN OFFICIAL STOCK EXCHANGE OR OTHER REGULATED MARKET, INCLUDING, WITHOUT
LIMITATION, THE NATIONAL ASSOCIATION OF SECURITIES DEALERS AUTOMATED
QUOTATION SYSTEM (THIS RESTRICTION SHALL NOT BE APPLICABLE TO SECURITIES
DETERMINED BY PUTNAM INVESTMENT MANAGEMENT, INC. TO BE LIQUID AND FOR WHICH A
MARKET PRICE (INCLUDING A DEALER QUOTATION) IS GENERALLY OBTAINABLE OR
DETERMINABLE); (2) BORROW MONEY IN EXCESS OF 10% OF THE VALUE OF IT
SHORT SALES OF SECURITIES; (4) INVEST IN THE SECURITIES OF OTHER REGISTERED
OPEN-END INVESTMENT FUNDS OR COMPANIES, EXCEPT AS THEY MAY BE ACQUIRED AS
PART OF A MERGER, CONSOLIDATION OR ACQUISITION OF ASSETS; (5) INVEST MORE
THAN 5% OF THE TOTAL ASSETS IN THE SECURITIES OF ANY ONE ISSUER (OTHER THAN
THE U.S. GOVERNMENT OR OTHER SOVEREIGN GOVERNMENTS OR THEIR AGENCIES OR
INSTRUMENTALITIES); (6) ACQUIRE MORE THAN 10% OF THE OUTSTANDING VOTING
SECURITIES OF ANY ISSUER; AND (7) TOGETHER WITH OTHER MUTUAL FUNDS
MENT MANAGEMENT, INC., ACQUIRE MORE THAN 15% OF THE OUTSTANDING VOTING
SECURITIES OF ANY ISSUER.
IF THE UNDERTAKING IS VIOLATED, THE FUND WILL, PROMPTLY AFTER DISCOVERY, 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.
All percentage limitations on investments (other than pursuant to the
non-fundamental restriction) 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.
------------------------
CHARGES AND EXPENSES
MANAGEMENT FEES
Under a Management Contract dated October 21, 1996, the fund pays a quarterly
fee to Putnam Management based on the average net assets of the fund, as
determined at the close of each business day during the quarter, at the
annual rate of 0.80% of the first $500 million of average net assets, 0.70%
of the next $500 million, 0.65% of the next $500 million, 0.60% of the next
$5 billion, 0.575% of the next $5 billion, 0.555% of the next $5 billion,
0.540% of the next $5 billion and 0.530% thereafter. For the
pursuant to the Management Contract (and a management contract in effect
prior to October 21, 1996, pursuant to which management fees were paid to
Putnam Management was paid at the rate of 0.80% of the first $500 million of
average net assets, 0.70% of the next $500 million, 0.65% of the next $500
million and 0.60% of any amount over $1.5 billion), the fund incurred the
following fees:
FISCAL MANAGEMENT
YEAR FEE PAID
1998 $6,715,370
1997 $2,875,19 0
1996 $1,411,1 98
BROKERAGE COMMISSIONS
The following table shows brokerage commissions paid during the fiscal
periods indicated:
FISCAL BROKERAGE
YEAR COMMISSIONS
1998 $2,893,467
1997 $1,427,19 1
1996 $ 448,7 49
The following table shows transactions placed with brokers and dealers during
the most recent fiscal year to recognize research, statistical and quotation
services received by Putnam Management and its affiliates:
DOLLAR
VALUE PERCENT OF
OF THESE TOTAL AMOUNT OF
TRANSACTIONS TRANSACTIONS COMMISSIONS
$1,133,801,677 89.88% $2,673,369
ADMINISTRATIVE EXPENSE REIMBURSEMENT
The fund reimbursed Putnam Management for administrative services during
fiscal 1998 , including compensation of certain fund officers and
contributions to the Putnam Investments, Inc. Profit Sharing Retirement Plan
for their benefit, as follows:
PORTION OF TOTAL
REIMBURSEMENT FOR
COMPENSATION
TOTAL AND
REIMBURSEMENT CONTRIBUTIONS
$16,268 $13,955[/R]
TRUSTEE RESPONSIBILITIES AND FEES
The Trustees are responsible for generally overseeing the conduct of fund
business. Subject to such policies as the Trustees may determine, Putnam
Management furnishes a continuing investment program for the fund and makes
investment decisions on its behalf. Subject to the control of the Trustees,
Putnam Management also manages the fund[/R]' s other affairs and
business.
Each Trustee receives a fee for his or her services. Each Trustee also
receives fees for serving as Trustee of other Putnam funds. The Trustees
periodically review their fees to assure that such fees continue to be
appropriate in light of their responsibilities as well as in relation to fees
paid to trustees of other mutual fund complexes. The Trustees meet monthly
over a two-day period, except in August. The Compensation Committee, which
consists solely of Trustees not affiliated with Putnam Management
recommending Trustee compensation, estimates that Committee and Trustee
meeting time together with the appropriate preparation requires the
equivalent of at least three business days per Trustee meeting. The
following table shows the year each Trustee was first elected a Trustee of
the Putnam funds, the estimated fees to be paid to each Trustee by the fund
for fiscal 1998[/R] and the fees paid to each Trustee by all of the Putnam
funds during calendar 1997[/R]:
COMPENSATION TABLE
Pension or[/R] Estimated Total
Aggregate retirement annual benefits compensation
compensation benefits accrued from all from all
from the as part of Putnam funds Putnam
Trustees fund(1) fund expenses upon retirement(2) funds(3)[/R]
Jameson A. Baxter/1994 (4) $1,528 $302 $87,500 $176,000[/R]
Hans H. Estin/1972 1,33163787,500 175,000[/R]
John A. Hill/1985 (4) 1,31523987,500 175,000[/R]
Ronald J. Jackson/1996(4) 1,47614987,500 176,000
Paul L. Joskow/1997(4)(5)9151587,500 25,500[/R]
Elizabeth T. Kennan/1992 1,47633987,500 174,000[/R]
Lawrence J. Lasser/1992 1,30025387,500 172,000
John H. Mullin, III/(4)9152387,500[/R]
Robert E. Patterson/1984 1,32319187,500 176,000[/R]
Donald S. Perkins/1982 1,33168987,500 176,000[/R]
William F. Pounds/1971(6) 1,45671598,000 201,000[/R]
George Putnam/1957 1,30872987,500 175,000[/R]
George Putnam, III/1984 1,32412687,500 174,000[/R]
A.J.C. Smith/1986 1,30042987,500 170,000[/R]
W. Thomas Stephens/1997(4)(7)1,1452187,500 53,000[/R]
W. Nicholas Thorndike/1992 1,33148787,500 176,000[/R]
(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[/R].
(3)[/R] As of December 31, 1997,[/R] there were 101[/R] funds in the Putnam
family.
(4)[/R] Includes compensation deferred pursuant to a Trustee Compensation
Deferral Plan. The total amounts of deferred compensation payable by the
fund to Ms. Baxter and Messrs. Hill, Jackson, Joskow, Mullin and Stephens as
of June 30, 1998 were $881, $697, $796, $760, $707 and $721, respectively
including income earned on such amounts.
(5) Elected as a Trustee in November 1997.
(6) Includes additional compensation for service as Vice Chairman of the
Putnam funds.
(7)[/R] Elected as a Trustee in September 1997.
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.
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 had he or she retired
immediately prior to such termination or amendment.
For additional information concerning the Trustees, see "Management" in Part
II of this SAI.
SHARE OWNERSHIP
At July 31, 1998[/R], the officers and Trustees of the fund as a group owned
less than 1% of the outstanding shares of each class of the fund, and, except
as noted below, to the knowledge of the fund no person owned of record or
beneficially 5% or more of any class of shares of the fund:
SHAREHOLDER NAME PERCENTAGE
CLASS AND ADDRESS OWNED
B Merrill, Lynch, Pierce, 7.20%[/R]
Fenner & Smith
165 Broadway
One Liberty Plaza
New York, NY 10006
M Yamatane Securities 58.90%
Foreign Securities Dept.
7-12 Kabuto-Cho Nihonbashi
Chuo-Ku
Tokyo103 Japan[/R]
DISTRIBUTION FEES
During fiscal 1998[/R], the fund paid the following 12b-1 fees to Putnam
Mutual Funds:
CLASS A CLASS B CLAS S M
$1,210,708 $3,880,500 $176,038[/R]
CLASS A SALES CHARGES AND CONTINGENT DEFERRED SALES CHARGES
Putnam Mutual Funds received sales charges with respect to class A shares in
the following amounts during the periods indicated:
SALES CHARGES
RETAINED BY PUTNAM CONTINGENT
TOTAL MUTUAL FUNDS DEFERRED
FISCAL FRONT-END AFTER SALES
YEAR SALES CHARGES DEALER CONCESSIONS CHARGES
1998 $5,080,890 $790,212 $18,565
1997 $2,509,018 $403,569 $ 9, 200
1996 $1,091,893 $165,776 $ 1,219
CLASS B CONTINGENT DEFERRED SALES CHARGES
Putnam Mutual Funds received contingent deferred sales charges upon
redemptions of class B shares in the following amounts during the periods
indicated:
FISCAL CONTINGENT DEFERRED
YEAR SALES CHARGES
1998 $427,456
1997 $174,56 5
1996 $110,3 11
CLASS M SALES CHARGES
Putnam Mutual Funds received sales charges with respect to class M shares in
the following amounts during the periods indicated:
SALES CHARGES
RETAINED BY PUTNAM
MUTUAL FUNDS
FISCAL TOTAL AFTER
Year sales charges dealer concessions
1998 $268,590 $44,390
1997 $105,793 $18,2 98
1996 $ 38,077 $ 5,994
INVESTOR SERVICING AND CUSTODY FEES AND EXPENSES
DURING THE 1998 FISCAL YEAR, THE FUND INCURRED $2,339,412[/R] IN FEES AND
OUT-OF-POCKET EXPENSES FOR INVESTOR SERVICING AND CUSTODY SERVICES PROVIDED
BY PUTNAM FIDUCIARY TRUST COMPANY.
INVESTMENT PERFORMANCE
STANDARD PERFORMANCE MEASURES
(for periods ended June 30, 1998)[/R]
Class A Class B Class M
Inception date: 9/7/90 2/1/94 12/1/94
AVERAGE ANNUAL TOTAL RETURN
1 year 27.42% 29.26% 29.87%
5 years 22.73% 23.12% 22.83%[/R]
Life of fund 17.27% 17.27% 17.08%[/R]
Returns for class A and class M shares reflect the deduction of the current
maximum initial sales charges of 5.75% for class A shares and 3.50% for class
M shares.
Returns for class B shares reflects the deduction of the applicable
contingent deferred sales charge ("CDSC") which is 5% in the first year,
declining to 1% in the sixth year, and is eliminated thereafter.
Returns shown for class B and class M shares for periods prior to their
inception are derived from the historical performance of class A shares,
adjusted to reflect both the deduction of the initial sales charge or CDSC,
if any, currently applicable to each class and the higher operating expenses
applicable to such shares.
Returns shown for class A shares have not been adjusted to reflect payments
under the class A distribution plan prior to its implementation. All returns
assume reinvestment of distributions at net asset value and represent past
performance; they do not guarantee future results. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
See "Standard performance measures" in part II of this SAI for information on
how performance is calculated.
ADDITIONAL OFFICERS
In addition to the persons listed as fund officers in Part II of this SAI,
each of the following persons is also a Vice President of the fund and
certain of the other Putnam funds, the total number of which is noted
parenthetically. Officers of Putnam Management hold the same offices in
Putnam Management's parent company, Putnam Investments, Inc.
OFFICER NAME (AGE) (NUMBER OF FUNDS)
JUSTIN M. SCOTT[/R] (Age 41) (12[/R] funds). Managing Director of Putnam
Management.
OMID KAMSHAD (Age 36)[/R] (5 funds). Managing Director[/R] of Putnam
Management. Prior to January, 1996 Mr. Kamshad was Director of Investments
at Lombard Odier International and prior to April, 1995 he was Director at
Baring Asset Management Company.
MARK D. POLLARD (Age 39) (1 fund)[/R]. Senior Vice President of Putnam
Management.
NIGEL P. HART(Age 31) (2 funds). Vice President of Putnam Management.
Prior to November, 1997, Mr. Hart was a Vice President and Portfolio Manager
at IAI International.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
PRICEWATERHOUSECOOPERS[/R] LLP, 160 FEDERAL STREET, BOSTON, MA 02110, ARE THE
FUND'S INDEPENDENT ACCOUNTANTS, PROVIDING AUDIT SERVICES, TAX RETURN REVIEW
AND OTHER TAX CONSULTING SERVICES AND ASSISTANCE AND CONSULTATION IN
CONNECTION WITH THE REVIEW OF VARIOUS SECURITIES AND EXCHANGE COMMISSION
FILINGS. THE REPORT OF INDEPENDENT ACCOUNTANTS, FINANCIAL HIGHLIGHTS AND
FINANCIAL STATEMENTS INCLUDED IN THE FUND'S ANNUAL REPORT FOR THE FISCAL YEAR
ENDED JUNE 30, 1998[/R], FILED ELECTRONICALLY ON AUGUST 25, 1998, ARE
INCORPORATED BY REFERENCE INTO THIS SAI. THE FINANCIAL HIGHLIGHTS INCLUDED
IN THE PROSPECTUS AND INCORPORATED BY REFERENCE INTO THIS SAI AND THE
FINANCIAL STATEMENTS INCORPORATED BY REFERENCE INTO THE PROSPECTUS AND THIS
SAI HAVE BEEN SO INCLUDED AND INCORPORATED IN RELIANCE UPON THE REPORT OF THE
INDEPENDENT ACCOUNTANTS, GIVEN ON THEIR AUTHORITY AS EXPERTS IN AUDITING AND
ACCOUNTING.
<PAGE>
II-2
4/21/98
TABLE OF CONTENTS
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1
TAXES II-28
MANAGEMENT II-33
DETERMINATION OF NET ASSET VALUE II-42
HOW TO BUY SHARES II-44
DISTRIBUTION PLANS II-57
INVESTOR SERVICES II-58
SIGNATURE GUARANTEES II-63
SUSPENSION OF REDEMPTIONS II-63
SHAREHOLDER LIABILITY II-64
STANDARD PERFORMANCE MEASURES II-64
COMPARISON OF PORTFOLIO PERFORMANCE II-65
SECURITIES RATINGS II-70
DEFINITIONS II-75
THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
PART II
As noted in the prospectus, in addition to the principal
investment strategies and the principal risks described in the
prospectus, the fund may employ other investment practices and
may be subject to other risks, which are described below.
Because the following is a combined description of investment
strategies of all of the Putnam funds, certain matters described
herein may not apply to your fund. For more information about
the investment practices and risks associated with your fund,
please contact your financial advisor or call Putnam Investor
Services at 1-800-225-1581. Shareholders who purchase shares at
net asset value through employer-sponsored defined contribution
plans should also consult their employer for information about
the extent to which the matters described below apply to them.
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS
FOREIGN INVESTMENTS
The fund may invest in securities of foreign issuers. These
foreign investments involve certain special risks described
below.
Foreign securities are normally denominated and traded in foreign
currencies. As a result, the value of the fund's foreign
investments and the value of its shares may be affected favorably
or unfavorably by changes in currency exchange rates relative to
the U.S. dollar. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and
foreign issuers are not generally subject to accounting, auditing
and financial reporting standards and practices comparable to
those in the United States. The securities of some foreign
issuers are less liquid and at times more volatile than
securities of comparable U.S. issuers. Foreign brokerage
commissions and other fees are also generally higher than in the
United States. Foreign settlement procedures and trade
regulations may involve certain risks (such as delay in payment
or delivery of securities or in the recovery of the fund's assets
held abroad) and expenses not present in the settlement of
investments in U.S. markets.
In addition, the fund's investments in foreign securities may be
subject to the risk of nationalization or expropriation of
assets, imposition of currency exchange controls, foreign
withholding taxes or restrictions on the repatriation of foreign
currency, confiscatory taxation, political or financial
instability and diplomatic developments which could affect the
value of the fund's investments in certain foreign countries.
Dividends or interest on, or proceeds from the sale of, foreign
securities may be subject to foreign withholding taxes, and
special U.S. tax considerations may apply.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit the
fund's ability to invest in securities of certain issuers
organized under the laws of those foreign countries.
The risks described above, including the risks of nationalization
or expropriation of assets, are typically increased in connection
with investments in "emerging markets." For example, political
and economic structures in these countries may be in their
infancy and developing rapidly, and such countries may lack the
social, political and economic stability characteristic of more
developed countries. Certain of these countries have in the past
failed to recognize private property rights and have at times
nationalized and expropriated the assets of private companies.
High rates of inflation or currency devaluations may adversely
affect the economies and securities markets of such countries.
Investments in emerging markets may be considered speculative.
The currencies of certain emerging market countries have
experienced a steady devaluation relative to the U.S. dollar, and
continued devaluations may adversely affect the value of a fund's
assets denominated in such currencies. Many emerging market
companies have experienced substantial, and in some periods
extremely high, rates of inflation or deflation for many years,
and continued inflation may adversely affect the economies and
securities markets of such countries.
In addition, unanticipated political or social developments may
affect the value of the fund's investments in emerging markets
and the availability to the fund of additional investments in
these markets. The small size, limited trading volume and
relative inexperience of the securities markets in these
countries may make the fund's investments in securities traded in
emerging markets illiquid and more volatile than investments in
securities traded in more developed countries, and the fund may
be required to establish special custodial or other arrangements
before making investments in securities traded in emerging
markets. There may be little financial or accounting information
available with respect to issuers of emerging market securities,
and it may be difficult as a result to assess the value of
prospects of an investment in such securities.
Certain of the foregoing risks may also apply to some extent to
securities of U.S. issuers that are denominated in foreign
currencies or that are traded in foreign markets, or securities
of U.S. issuers having significant foreign operations.
FOREIGN CURRENCY TRANSACTIONS
The fund may engage without limit in currency exchange
transactions, including purchasing and selling foreign currency,
foreign currency options, foreign currency forward contracts and
foreign currency futures contracts and related options, to manage
its exposure to foreign currencies. In addition, the fund may
write covered call and put options on foreign currencies for the
purpose of increasing its current return.
Generally, the fund may engage in both "transaction hedging" and
"position hedging." The fund may also engage in foreign currency
transactions for non-hedging purposes, subject to applicable law.
When it engages in transaction hedging, the fund enters into
foreign currency transactions with respect to specific
receivables or payables, generally arising in connection with the
purchase or sale of portfolio securities. The fund will engage
in transaction hedging when it desires to "lock in" the U.S.
dollar price of a security it has agreed to purchase or sell, or
the U.S. dollar equivalent of a dividend or interest payment in a
foreign currency. By transaction hedging the fund will attempt
to protect itself against a possible loss resulting from an
adverse change in the relationship between the U.S. dollar and
the applicable foreign currency during the period between the
date on which the security is purchased or sold, or on which the
dividend or interest payment is earned, and the date on which
such payments are made or received.
The fund may purchase or sell a foreign currency on a spot (or
cash) basis at the prevailing spot rate in connection with the
settlement of transactions in portfolio securities denominated in
that foreign currency. If conditions warrant, for transaction
hedging purposes the fund may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward
contracts") and purchase and sell foreign currency futures
contracts. A foreign currency forward contract is a negotiated
agreement to exchange currency at a future time at a rate or
rates that may be higher or lower than the spot rate. Foreign
currency futures contracts are standardized exchange-traded
contracts and have margin requirements. In addition, for
transaction hedging purposes the fund may also purchase or sell
exchange-listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign currencies.
The fund may also enter into contracts to purchase or sell
foreign currencies at a future date ("forward contracts") and
purchase and sell foreign currency futures contracts.
For transaction hedging purposes the fund may also purchase
exchange-listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign currencies. A
put option on a futures contract gives the fund the right to
assume a short position in the futures contract until the
expiration of the option. A put option on a currency gives the
fund the right to sell the currency at an exercise price until
the expiration of the option. A call option on a futures
contract gives the fund the right to assume a long position in
the futures contract until the expiration of the option. A call
option on a currency gives the fund the right to purchase the
currency at the exercise price until the expiration of the
option.
The fund may engage in position hedging to protect against a
decline in the value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in the value of the currency in which the
securities the fund intends to buy are denominated, when the fund
holds cash or short-term investments). For position hedging
purposes, the fund may purchase or sell, on exchanges or in over-
the-counter markets, foreign currency futures contracts, foreign
currency forward contracts and options on foreign currency
futures contracts and on foreign currencies. In connection with
position hedging, the fund may also purchase or sell foreign
currency on a spot basis.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward
or futures contract. Accordingly, it may be necessary for the
fund to purchase additional foreign currency on the spot market
(and bear the expense of such purchase) if the market value of
the security or securities being hedged is less than the amount
of foreign currency the fund is obligated to deliver and a
decision is made to sell the security or securities and make
delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security or securities if
the market value of such security or securities exceeds the
amount of foreign currency the fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in
the underlying prices of the securities which the fund owns or
intends to purchase or sell. They simply establish a rate of
exchange which one can achieve at some future point in time.
Additionally, although these techniques tend to minimize the risk
of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the
increase in value of such currency. See "Risk factors in options
transactions."
The fund may seek to increase its current return or to offset
some of the costs of hedging against fluctuations in current
exchange rates by writing covered call options and covered put
options on foreign currencies. The fund receives a premium from
writing a call or put option, which increases the fund's current
return if the option expires unexercised or is closed out at a
net profit. The fund may terminate an option that it has written
prior to its expiration by entering into a closing purchase
transaction in which it purchases an option having the same terms
as the option written.
The fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the fund. Cross hedging transactions by the fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge.
The fund may also engage in non-hedging currency transactions.
For example, Putnam Management may believe that exposure to a
currency is in the fund's best interest but that securities
denominated in that currency are unattractive. In that case the
fund may purchase a currency forward contract or option in order
to increase its exposure to the currency. In accordance with SEC
regulations, the fund will segregate liquid assets in its
portfolio to cover forward contracts used for non-hedging
purposes.
The value of any currency, including U.S. dollars and foreign
currencies, may be affected by complex political and economic
factors applicable to the issuing country. In addition, the
exchange rates of foreign currencies (and therefore the values of
foreign currency options, forward contracts and futures
contracts) may be affected significantly, fixed, or supported
directly or indirectly by U.S. and foreign government actions.
Government intervention may increase risks involved in purchasing
or selling foreign currency options, forward contracts and
futures contracts, since exchange rates may not be free to
fluctuate in response to other market forces.
The value of a foreign currency option, forward contract or
futures contract reflects the value of an exchange rate, which in
turn reflects relative values of two currencies, the U.S. dollar
and the foreign currency in question. Because foreign currency
transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in
the exercise of foreign currency options, forward contracts and
futures contracts, investors may be disadvantaged by having to
deal in an odd-lot market for the underlying foreign currencies
in connection with options at prices that are less favorable than
for round lots. Foreign governmental restrictions or taxes could
result in adverse changes in the cost of acquiring or disposing
of foreign currencies.
There is no systematic reporting of last sale information for
foreign currencies and there is no regulatory requirement that
quotations available through dealers or other market sources be
firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot
transactions in the interbank market and thus may not reflect
exchange rates for smaller odd-lot transactions (less than $1
million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To
the extent that options markets are closed while the markets for
the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets.
The decision as to whether and to what extent the fund will
engage in foreign currency exchange transactions will depend on a
number of factors, including prevailing market conditions, the
composition of the fund's portfolio and the availability of
suitable transactions. Accordingly, there can be no assurance
that the fund will engage in foreign currency exchange
transactions at any given time or from time to time.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number
of days from the date of the contract as agreed by the parties,
at a price set at the time of the contract. In the case of a
cancelable forward contract, the holder has the unilateral right
to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage
for trades. A foreign currency futures contract is a
standardized contract for the future delivery of a specified
amount of a foreign currency at a price set at the time of the
contract. Foreign currency futures contracts traded in the
United States are designed by and traded on exchanges regulated
by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the
maturity date of a forward contract may be any fixed number of
days from the date of the contract agreed upon by the parties,
rather than a predetermined date in a given month. Forward
contracts may be in any amount agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange
contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires
no margin or other deposit.
At the maturity of a forward or futures contract, the fund either
may accept or make delivery of the currency specified in the
contract, or at or prior to maturity enter into a closing
transaction involving the purchase or sale of an offsetting
contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to
the original forward contract. Closing transactions with respect
to futures contracts are effected on a commodities exchange; a
clearing corporation associated with the exchange assumes
responsibility for closing out such contracts.
Positions in the foreign currency futures contracts may be closed
out only on an exchange or board of trade which provides a
secondary market in such contracts. Although the fund intends to
purchase or sell foreign currency futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a secondary market
on an exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be
possible to close a futures position and, in the event of adverse
price movements, the fund would continue to be required to make
daily cash payments of variation margin.
FOREIGN CURRENCY OPTIONS. In general, options on foreign
currencies operate similarly to options on securities and are
subject to many of the risks described above. Foreign currency
options are traded primarily in the over-the-counter market,
although options on foreign currencies are also listed on several
exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Monetary Unit
("EMU"). The EMU is composed of amounts of a number of
currencies, and is the official medium of exchange of the
European Community's European Monetary System.
The fund will only purchase or write foreign currency options
when Putnam Management believes that a liquid secondary market
exists for such options. There can be no assurance that a liquid
secondary market will exist for a particular option at any
specific time. Options on foreign currencies are affected by all
of those factors which influence foreign exchange rates and
investments generally.
SETTLEMENT PROCEDURES. Settlement procedures relating to the
fund's investments in foreign securities and to the fund's
foreign currency exchange transactions may be more complex than
settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not
present in the fund's domestic investments. For example,
settlement of transactions involving foreign securities or
foreign currencies may occur within a foreign country, and the
fund may be required to accept or make delivery of the underlying
securities or currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be required to pay
any fees, taxes or charges associated with such delivery. Such
investments may also involve the risk that an entity involved in
the settlement may not meet its obligations.
FOREIGN CURRENCY CONVERSION. Although foreign exchange dealers
do not charge a fee for currency conversion, they do realize a
profit based on the difference (the "spread") between prices at
which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the fund at one
rate, while offering a lesser rate of exchange should the fund
desire to resell that currency to the dealer.
OPTIONS ON SECURITIES
WRITING COVERED OPTIONS. The fund may write covered call options
and covered put options on optionable securities held in its
portfolio, when in the opinion of Putnam Management such
transactions are consistent with the fund's investment
objective(s) and policies. Call options written by the fund give
the purchaser the right to buy the underlying securities from the
fund at a stated exercise price; put options give the purchaser
the right to sell the underlying securities to the fund at a
stated price.
The fund may write only covered options, which means that, so
long as the fund is obligated as the writer of a call option, it
will own the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of
securities exchanges). In the case of put options, the fund will
hold cash and/or high-grade short-term debt obligations equal to
the price to be paid if the option is exercised. In addition,
the fund will be considered to have covered a put or call option
if and to the extent that it holds an option that offsets some or
all of the risk of the option it has written. The fund may write
combinations of covered puts and calls on the same underlying
security.
The fund will receive a premium from writing a put or call
option, which increases the fund's return on the underlying
security in the event the option expires unexercised or is closed
out at a profit. The amount of the premium reflects, among other
things, the relationship between the exercise price and the
current market value of the underlying security, the volatility
of the underlying security, the amount of time remaining until
expiration, current interest rates, and the effect of supply and
demand in the options market and in the market for the underlying
security. By writing a call option, the fund limits its
opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option
but continues to bear the risk of a decline in the value of the
underlying security. By writing a put option, the fund assumes
the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current
market value, resulting in a potential capital loss unless the
security subsequently appreciates in value.
The fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction, in
which it purchases an offsetting option. The fund realizes a
profit or loss from a closing transaction if the cost of the
transaction (option premium plus transaction costs) is less or
more than the premium received from writing the option. If the
fund writes a call option but does not own the underlying
security, and when it writes a put option, the fund may be
required to deposit cash or securities with its broker as
"margin," or collateral, for its obligation to buy or sell the
underlying security. As the value of the underlying security
varies, the fund may have to deposit additional margin with the
broker. Margin requirements are complex and are fixed by
individual brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock exchanges and
other self-regulatory organizations.
PURCHASING PUT OPTIONS. The fund may purchase put options to
protect its portfolio holdings in an underlying security against
a decline in market value. Such protection is provided during
the life of the put option since the fund, as holder of the
option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying
security's market price. In order for a put option to be
profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the
premium and transaction costs. By using put options in this
manner, the fund will reduce any profit it might otherwise have
realized from appreciation of the underlying security by the
premium paid for the put option and by transaction costs.
PURCHASING CALL OPTIONS. The fund may purchase call options to
hedge against an increase in the price of securities that the
fund wants ultimately to buy. Such hedge protection is provided
during the life of the call option since the fund, as holder of
the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying
security's market price. In order for a call option to be
profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and
transaction costs.
RISK FACTORS IN OPTIONS TRANSACTIONS
The successful use of the fund's options strategies depends on
the ability of Putnam Management to forecast correctly interest
rate and market movements. For example, if the fund were to
write a call option based on Putnam Management's expectation that
the price of the underlying security would fall, but the price
were to rise instead, the fund could be required to sell the
security upon exercise at a price below the current market price.
Similarly, if the fund were to write a put option based on Putnam
Management's expectation that the price of the underlying
security would rise, but the price were to fall instead, the fund
could be required to purchase the security upon exercise at a
price higher than the current market price.
When the fund purchases an option, it runs the risk that it will
lose its entire investment in the option in a relatively short
period of time, unless the fund exercises the option or enters
into a closing sale transaction before the option's expiration.
If the price of the underlying security does not rise (in the
case of a call) or fall (in the case of a put) to an extent
sufficient to cover the option premium and transaction costs, the
fund will lose part or all of its investment in the option. This
contrasts with an investment by the fund in the underlying
security, since the fund will not realize a loss if the
security's price does not change.
The effective use of options also depends on the fund's ability
to terminate option positions at times when Putnam Management
deems it desirable to do so. There is no assurance that the fund
will be able to effect closing transactions at any particular
time or at an acceptable price.
If a secondary market in options were to become unavailable, the
fund could no longer engage in closing transactions. Lack of
investor interest might adversely affect the liquidity of the
market for particular options or series of options. A market may
discontinue trading of a particular option or options generally.
In addition, a market could become temporarily unavailable if
unusual events -- such as volume in excess of trading or clearing
capability -- were to interrupt its normal operations.
A market may at times find it necessary to impose restrictions on
particular types of options transactions, such as opening
transactions. For example, if an underlying security ceases to
meet qualifications imposed by the market or the Options Clearing
Corporation, new series of options on that security will no
longer be opened to replace expiring series, and opening
transactions in existing series may be prohibited. If an options
market were to become unavailable, the fund as a holder of an
option would be able to realize profits or limit losses only by
exercising the option, and the fund, as option writer, would
remain obligated under the option until expiration or exercise.
Disruptions in the markets for the securities underlying options
purchased or sold by the fund could result in losses on the
options. If trading is interrupted in an underlying security,
the trading of options on that security is normally halted as
well. As a result, the fund as purchaser or writer of an option
will be unable to close out its positions until options trading
resumes, and it may be faced with considerable losses if trading
in the security reopens at a substantially different price. In
addition, the Options Clearing Corporation or other options
markets may impose exercise restrictions. If a prohibition on
exercise is imposed at the time when trading in the option has
also been halted, the fund as purchaser or writer of an option
will be locked into its position until one of the two
restrictions has been lifted. If the Options Clearing
Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by
the writers of all outstanding calls in the event of exercise, it
may prohibit indefinitely the exercise of put options. The fund,
as holder of such a put option, could lose its entire investment
if the prohibition remained in effect until the put option's
expiration.
Foreign-traded options are subject to many of the same risks
presented by internationally-traded securities. In addition,
because of time differences between the United States and various
foreign countries, and because different holidays are observed in
different countries, foreign options markets may be open for
trading during hours or on days when U.S. markets are closed. As
a result, option premiums may not reflect the current prices of
the underlying interest in the United States.
Over-the-counter ("OTC") options purchased by the fund and assets
held to cover OTC options written by the fund may, under certain
circumstances, be considered illiquid securities for purposes of
any limitation on the fund's ability to invest in illiquid
securities.
INVESTMENTS IN MISCELLANEOUS FIXED-INCOME SECURITIES
If the fund may invest in inverse floating obligations, premium
securities, or interest-only or principal-only classes of
mortgage-backed securities (IOs and POs), it may do so without
limit. The fund, however, currently does not intend to invest
more than 15% of its assets in inverse floating obligations or
more than 35% of its assets in IOs and POs under normal market
conditions.
LOWER-RATED SECURITIES
The fund may invest in lower-rated fixed-income securities
(commonly known as "junk bonds"). The lower ratings of certain
securities held by the fund reflect a greater possibility that
adverse changes in the financial condition of the issuer or in
general economic conditions, or both, or an unanticipated rise in
interest rates, may impair the ability of the issuer to make
payments of interest and principal. The inability (or perceived
inability) of issuers to make timely payment of interest and
principal would likely make the values of securities held by the
fund more volatile and could limit the fund's ability to sell its
securities at prices approximating the values the fund had placed
on such securities. In the absence of a liquid trading market
for securities held by it, the fund at times may be unable to
establish the fair value of such securities.
Securities ratings are based largely on the issuer's historical
financial condition and the rating agencies' analysis at the time
of rating. Consequently, the rating assigned to any particular
security is not necessarily a reflection of the issuer's current
financial condition, which may be better or worse than the rating
would indicate. In addition, the rating assigned to a security
by Moody's Investors Service, Inc. or Standard & Poor's (or by
any other nationally recognized securities rating agency) does
not reflect an assessment of the volatility of the security's
market value or the liquidity of an investment in the security.
See "Securities ratings."
Like those of other fixed-income securities, the values of
lower-rated securities fluctuate in response to changes in
interest rates. A decrease in interest rates will generally
result in an increase in the value of the fund's assets.
Conversely, during periods of rising interest rates, the value of
the fund's assets will generally decline. The values of lower-
rated securities may often be affected to a greater extent by
changes in general economic conditions and business conditions
affecting the issuers of such securities and their industries.
Negative publicity or investor perceptions may also adversely
affect the values of lower-rated securities. Changes by
nationally recognized securities rating agencies in their ratings
of any fixed-income security and changes in the ability of an
issuer to make payments of interest and principal may also affect
the value of these investments. Changes in the value of
portfolio securities generally will not affect income derived
from these securities, but will affect the fund's net asset
value. The fund will not necessarily dispose of a security when
its rating is reduced below its rating at the time of purchase.
However, Putnam Management will monitor the investment to
determine whether its retention will assist in meeting the fund's
investment objective(s).
Issuers of lower-rated securities are often highly leveraged, so
that their ability to service their debt obligations during an
economic downturn or during sustained periods of rising interest
rates may be impaired. Such issuers may not have more
traditional methods of financing available to them and may be
unable to repay outstanding obligations at maturity by
refinancing. The risk of loss due to default in payment of
interest or repayment of principal by such issuers is
significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior
indebtedness.
At times, a substantial portion of the fund's assets may be
invested in securities of which the fund, by itself or together
with other funds and accounts managed by Putnam Management or its
affiliates, holds all or a major portion. Although Putnam
Management generally considers such securities to be liquid
because of the availability of an institutional market for such
securities, it is possible that, under adverse market or economic
conditions or in the event of adverse changes in the financial
condition of the issuer, the fund could find it more difficult to
sell these securities when Putnam Management believes it
advisable to do so or may be able to sell the securities only at
prices lower than if they were more widely held. Under these
circumstances, it may also be more difficult to determine the
fair value of such securities for purposes of computing the
fund's net asset value. In order to enforce its rights in the
event of a default of such securities, the fund may be required
to participate in various legal proceedings or take possession of
and manage assets securing the issuer's obligations on such
securities. This could increase the fund's operating expenses
and adversely affect the fund's net asset value. In the case of
tax-exempt funds, any income derived from the fund's ownership or
operation of such assets would not be tax-exempt. The ability of
a holder of a tax-exempt security to enforce the terms of that
security in a bankruptcy proceeding may be more limited than
would be the case with respect to securities of private issuers.
In addition, the fund's intention to qualify as a "regulated
investment company" under the Internal Revenue Code may limit the
extent to which the fund may exercise its rights by taking
possession of such assets.
Certain securities held by the fund may permit the issuer at its
option to "call," or redeem, its securities. If an issuer were
to redeem securities held by the fund during a time of declining
interest rates, the fund may not be able to reinvest the proceeds
in securities providing the same investment return as the
securities redeemed.
The fund may invest without limit in so-called "zero-coupon"
bonds and "payment-in-kind" bonds. Zero-coupon bonds are issued
at a significant discount from their principal amount in lieu of
paying interest periodically. Payment-in-kind bonds allow the
issuer, at its option, to make current interest payments on the
bonds either in cash or in additional bonds. Because zero-coupon
and payment-in-kind bonds do not pay current interest in cash,
their value is subject to greater fluctuation in response to
changes in market interest rates than bonds that pay interest
currently. Both zero-coupon and payment-in-kind bonds allow an
issuer to avoid the need to generate cash to meet current
interest payments. Accordingly, such bonds may involve greater
credit risks than bonds paying interest currently in cash. The
fund is required to accrue interest income on such investments
and to distribute such amounts at least annually to shareholders
even though such bonds do not pay current interest in cash.
Thus, it may be necessary at times for the fund to liquidate
investments in order to satisfy its dividend requirements.
To the extent the fund invests in securities in the lower rating
categories, the achievement of the fund's goals is more dependent
on Putnam Management's investment analysis than would be the case
if the fund were investing in securities in the higher rating
categories. This may be particularly true with respect to tax-
exempt securities, as the amount of information about the
financial condition of an issuer of tax-exempt securities may not
be as extensive as that which is made available by corporations
whose securities are publicly traded.
LOAN PARTICIPATIONS
The fund may invest in "loan participations." By purchasing a
loan participation, the fund acquires some or all of the interest
of a bank or other lending institution in a loan to a particular
borrower. Many such loans are secured, and most impose
restrictive covenants which must be met by the borrower.
The loans in which the fund may invest are typically made by a
syndicate of banks, represented by an agent bank which has
negotiated and structured the loan and which is responsible
generally for collecting interest, principal, and other amounts
from the borrower on its own behalf and on behalf of the other
lending institutions in the syndicate and for enforcing its and
their other rights against the borrower. Each of the lending
institutions, including the agent bank, lends to the borrower a
portion of the total amount of the loan, and retains the
corresponding interest in the loan.
The fund's ability to receive payments of principal and interest
and other amounts in connection with loan participations held by
it will depend primarily on the financial condition of the
borrower. The failure by the fund to receive scheduled interest
or principal payments on a loan participation would adversely
affect the income of the fund and would likely reduce the value
of its assets, which would be reflected in a reduction in the
fund's net asset value. Banks and other lending institutions
generally perform a credit analysis of the borrower before
originating a loan or participating in a lending syndicate. In
selecting the loan participations in which the fund will invest,
however, Putnam Management will not rely solely on that credit
analysis, but will perform its own investment analysis of the
borrowers. Putnam Management's analysis may include
consideration of the borrower's financial strength and managerial
experience, debt coverage, additional borrowing requirements or
debt maturity schedules, changing financial conditions, and
responsiveness to changes in business conditions and interest
rates. Because loan participations in which the fund may invest
are not generally rated by independent credit rating agencies, a
decision by the fund to invest in a particular loan participation
will depend almost exclusively on Putnam Management's, and the
original lending institution's, credit analysis of the borrower.
Loan participations may be structured in different forms,
including novations, assignments, and participating interests.
In a novation, the fund assumes all of the rights of a lending
institution in a loan, including the right to receive payments of
principal and interest and other amounts directly from the
borrower and to enforce its rights as a lender directly against
the borrower. The fund assumes the position of a co-lender with
other syndicate members. As an alternative, the fund may
purchase an assignment of a portion of a lender's interest in a
loan. In this case, the fund may be required generally to rely
upon the assigning bank to demand payment and enforce its rights
against the borrower, but would otherwise be entitled to all of
such bank's rights in the loan. The fund may also purchase a
participating interest in a portion of the rights of a lending
institution in a loan. In such case, it will be entitled to
receive payments of principal, interest, and premium, if any, but
will not generally be entitled to enforce its rights directly
against the agent bank or the borrower, but must rely for that
purpose on the lending institution. The fund may also acquire a
loan participation directly by acting as a member of the original
lending syndicate.
The fund will in many cases be required to rely upon the lending
institution from which it purchases the loan participation to
collect and pass on to the fund such payments and to enforce the
fund's rights under the loan. As a result, an insolvency,
bankruptcy, or reorganization of the lending institution may
delay or prevent the fund from receiving principal, interest, and
other amounts with respect to the underlying loan. When the fund
is required to rely upon a lending institution to pay to the fund
principal, interest, and other amounts received by it, Putnam
Management will also evaluate the creditworthiness of the lending
institution.
The borrower of a loan in which the fund holds a participation
interest may, either at its own election or pursuant to terms of
the loan documentation, prepay amounts of the loan from time to
time. There is no assurance that the fund will be able to
reinvest the proceeds of any loan prepayment at the same interest
rate or on the same terms as those of the original loan
participation.
Corporate loans in which the fund may purchase a loan
participation are made generally to finance internal growth,
mergers, acquisitions, stock repurchases, leveraged buy-outs, and
other corporate activities. Under current market conditions,
most of the corporate loan participations purchased by the fund
will represent interests in loans made to finance highly
leveraged corporate acquisitions, known as "leveraged buy-out"
transactions. The highly leveraged capital structure of the
borrowers in such transactions may make such loans especially
vulnerable to adverse changes in economic or market conditions.
In addition, loan participations generally are subject to
restrictions on transfer, and only limited opportunities may
exist to sell such participations in secondary markets. As a
result, the fund may be unable to sell loan participations at a
time when it may otherwise be desirable to do so or may be able
to sell them only at a price that is less than their fair market
value.
Certain of the loan participations acquired by the fund may
involve revolving credit facilities under which a borrower may
from time to time borrow and repay amounts up to the maximum
amount of the facility. In such cases, the fund would have an
obligation to advance its portion of such additional borrowings
upon the terms specified in the loan participation. To the
extent that the fund is committed to make additional loans under
such a participation, it will at all times hold and maintain in a
segregated account liquid assets in an amount sufficient to meet
such commitments. Certain of the loan participations acquired by
the fund may also involve loans made in foreign currencies. The
fund's investment in such participations would involve the risks
of currency fluctuations described above with respect to
investments in the foreign securities.
FLOATING RATE AND VARIABLE RATE DEMAND NOTES
Certain funds may purchase floating rate and variable rate demand
notes and bonds. These securities may have a stated maturity in
excess of one year, but permit a holder to demand payment of
principal plus accrued interest upon a specified number of days
notice. Frequently, such obligations are secured by letters of
credit or other credit support arrangements provided by banks.
The issuer has a corresponding right, after a given period, to
prepay in its discretion the outstanding principal of the
obligation plus accrued interest upon a specific number of days
notice to the holders. The interest rate of a floating rate
instrument may be based on a known lending rate, such as a bank's
prime rate, and is reset whenever such rate is adjusted. The
interest rate on a variable rate demand note is reset at
specified intervals at a market rate.
MORTGAGE RELATED AND ASSET-BACKED SECURITIES
The fund may invest in mortgage-backed securities, including
collateralized mortgage obligations ("CMOs") and certain stripped
mortgage-backed securities. CMOs and other mortgage-backed
securities represent a participation in, or are secured by,
mortgage loans.
The fund may also invest in asset-backed securities. Asset-backed
securities are structured like mortgage-backed securities, but
instead of mortgage loans or interests in mortgage loans, the
underlying assets may include such items as motor vehicle
installment sales or installment loan contracts, leases of
various types of real and personal property, and receivables from
credit card agreements. The ability of an issuer of asset-backed
securities to enforce its security interest in the underlying
assets may be limited.
Mortgage-backed securities have yield and maturity
characteristics corresponding to the underlying assets. Unlike
traditional debt securities, which may pay a fixed rate of
interest until maturity, when the entire principal amount comes
due, payments on certain mortgage-backed securities include both
interest and a partial repayment of principal. Besides the
scheduled repayment of principal, repayments of principal may
result from the voluntary prepayment, refinancing, or foreclosure
of the underlying mortgage loans. If property owners make
unscheduled prepayments of their mortgage loans, these
prepayments will result in early payment of the applicable
mortgage-related securities. In that event the fund may be
unable to invest the proceeds from the early payment of the
mortgage-related securities in an investment that provides as
high a yield as the mortgage-related securities. Consequently,
early payment associated with mortgage-related securities may
cause these securities to experience significantly greater price
and yield volatility than that experienced by traditional fixed-
income securities. The occurrence of mortgage prepayments is
affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage
and other social and demographic conditions. During periods of
falling interest rates, the rate of mortgage prepayments tends to
increase, thereby tending to decrease the life of mortgage-
related securities. During periods of rising interest rates, the
rate of mortgage prepayments usually decreases, thereby tending
to increase the life of mortgage-related securities. If the life
of a mortgage-related security is inaccurately predicted, the
fund may not be able to realize the rate of return it expected.
Mortgage-backed and asset-backed securities are less effective
than other types of securities as a means of "locking in"
attractive long-term interest rates. One reason is the need to
reinvest prepayments of principal; another is the possibility of
significant unscheduled prepayments resulting from declines in
interest rates. These prepayments would have to be reinvested at
lower rates. As a result, these securities may have less
potential for capital appreciation during periods of declining
interest rates than other securities of comparable maturities,
although they may have a similar risk of decline in market value
during periods of rising interest rates. Prepayments may also
significantly shorten the effective maturities of these
securities, especially during periods of declining interest
rates. Conversely, during periods of rising interest rates, a
reduction in prepayments may increase the effective maturities of
these securities, subjecting them to a greater risk of decline in
market value in response to rising interest rates than
traditional debt securities, and, therefore, potentially
increasing the volatility of the fund.
Prepayments may cause losses on securities purchased at a
premium. At times, some of the mortgage-backed and asset-backed
securities in which the fund may invest will have higher than
market interest rates and therefore will be purchased at a
premium above their par value. Unscheduled prepayments, which are
made at par, will cause the fund to experience a loss equal to
any unamortized premium.
CMOs may be issued by a U.S. government agency or instrumentality
or by a private issuer. Although payment of the principal of,
and interest on, the underlying collateral securing privately
issued CMOs may be guaranteed by the U.S. government or its
agencies or instrumentalities, these CMOs represent obligations
solely of the private issuer and are not insured or guaranteed by
the U.S. government, its agencies or instrumentalities or any
other person or entity.
Prepayments could cause early retirement of CMOs. CMOs are
designed to reduce the risk of prepayment for investors by
issuing multiple classes of securities, each having different
maturities, interest rates and payment schedules, and with the
principal and interest on the underlying mortgages allocated
among the several classes in various ways. Payment of interest
or principal on some classes or series of CMOs may be subject to
contingencies or some classes or series may bear some or all of
the risk of default on the underlying mortgages. CMOS of
different classes or series are generally retired in sequence as
the underlying mortgage loans in the mortgage pool are repaid.
If enough mortgages are repaid ahead of schedule, the classes or
series of a CMO with the earliest maturities generally will be
retired prior to their maturities. Thus, the early retirement of
particular classes or series of a CMO held by the fund would have
the same effect as the prepayment of mortgages underlying other
mortgage-backed securities. Conversely, slower than anticipated
prepayments can extend the effective maturities of CMOs,
subjecting them to a greater risk of decline in market value in
response to rising interest rates than traditional debt
securities, and, therefore, potentially increasing the volatility
of the fund.
Prepayments could result in losses on stripped mortgage-backed
securities. Stripped mortgage-backed securities are usually
structured with two classes that receive different portions of
the interest and principal distributions on a pool of mortgage
loans. The fund may invest in both the interest-only or "IO"
class and the principal-only or "PO" class. The yield to
maturity on an IO class of stripped mortgage-backed securities is
extremely sensitive not only to changes in prevailing interest
rates but also to the rate of principal payments (including
prepayments) on the underlying assets. A rapid rate of principal
prepayments may have a measurable adverse effect on the fund's
yield to maturity to the extent it invests in IOs. If the assets
underlying the IO experience greater than anticipated prepayments
of principal, the fund may fail to recoup fully its initial
investment in these securities. Conversely, POs tend to increase
in value if prepayments are greater than anticipated and decline
if prepayments are slower than anticipated.
The secondary market for stripped mortgage-backed securities may
be more volatile and less liquid than that for other mortgage-
backed securities, potentially limiting the fund's ability to buy
or sell those securities at any particular time.
STRUCTURED NOTES
A fund may be able to invest in so-called structured notes. These
securities are generally derivative instruments whose value is
tied to an underlying index or other security or asset class.
Such structured notes may include, for example, notes that allow
a fund to invest indirectly in certain foreign investments which
the fund would otherwise would not be able to directly invest
often because of restrictions imposed by local laws.
CONVERTIBLE SECURITIES.
Convertible securities include bonds, debentures, notes,
preferred stocks and other securities that may be converted into
or exchanged for, at a specific price or formula within a
particular period of time, a prescribed amount of common stock or
other equity securities of the same or a different issuer.
Convertible securities entitle the holder to receive interest
paid or accrued on debt or dividends paid or accrued on preferred
stock until the security matures or is redeemed, converted or
exchanged.
The market value of a convertible security is a function of its
"investment value" and its "conversion value." A security's
"investment value" represents the value of the security without
its conversion feature (i.e., a nonconvertible fixed income
security). The investment value may be determined by reference
to its credit quality and the current value of its yield to
maturity or probable call date. At any given time, investment
value is dependent upon such factors as the general level of
interest rates, the yield of similar nonconvertible securities,
the financial strength of the issuer and the seniority of the
security in the issuer's capital structure. A security's
"conversion value" is determined by multiplying the number of
shares the holder is entitled to receive upon conversion or
exchange by the current price of the underlying security.
If the conversion value of a convertible security is
significantly below its investment value, the convertible
security will trade like nonconvertible debt or preferred stock
and its market value will not be influenced greatly by
fluctuations in the market price of the underlying security.
Conversely, if the conversion value of a convertible security is
near or above its investment value, the market value of the
convertible security will be more heavily influenced by
fluctuations in the market price of the underlying security.
The fund's investments in convertible securities may at times
include securities that have a mandatory conversion feature,
pursuant to which the securities convert automatically into
common stock or other equity securities at a specified date and a
specified conversion ratio, or that are convertible at the option
of the issuer. Because conversion of the security is not at the
option of the holder, the fund may be required to convert the
security into the underlying common stock even at times when the
value of the underlying common stock or other equity security has
declined substantially.
The fund's investments in convertible securities, particularly
securities that are convertible into securities of an issuer
other than the issuer of the convertible security, may be
illiquid. The fund may not be able to dispose of such securities
in a timely fashion or for a fair price, which could result in
losses to the fund.
PRIVATE PLACEMENTS
The fund may invest in securities that are purchased in private
placements and, accordingly, are subject to restrictions on
resale as a matter of contract or under federal securities laws.
Because there may be relatively few potential purchasers for such
investments, especially under adverse market or economic
conditions or in the event of adverse changes in the financial
condition of the issuer, the fund could find it more difficult to
sell such securities when Putnam Management believes it advisable
to do so or may be able to sell such securities only at prices
lower than if such securities were more widely held. At times,
it may also be more difficult to determine the fair value of such
securities for purposes of computing the fund's net asset value.
While such private placements may often offer attractive
opportunities for investment not otherwise available on the open
market, the securities so purchased are often "restricted
securities," i.e., securities which cannot be sold to the
public without registration under the Securities Act of 1933 or
the availability of an exemption from registration (such as
Rules 144 or 144A), or which are "not readily marketable" because
they are subject to other legal or contractual delays in or
restrictions on resale.
The absence of a trading market can make it difficult to
ascertain a market value for illiquid investments. Disposing of
illiquid investments may involve time-consuming negotiation and
legal expenses, and it may be difficult or impossible for the
fund to sell them promptly at an acceptable price. The fund may
have to bear the extra expense of registering such securities for
resale and the risk of substantial delay in effecting such
registration. Also market quotations are less readily available.
The judgment of Putnam Management may at times play a greater
role in valuing these securities than in the case of unrestricted
securities.
Generally speaking, restricted securities may be sold only to
qualified institutional buyers, or in a privately negotiated
transaction to a limited number of purchasers, or in limited
quantities after they have been held for a specified period of
time and other conditions are met pursuant to an exemption from
registration, or in a public offering for which a registration
statement is in effect under the Securities Act of 1933. The
funds may be deemed to be an "underwriter" for purposes of the
Securities Act of 1933 when selling restricted securities to the
public, and in such event the fund may be liable to purchasers of
such securities if the registration statement prepared by the
issuer, or the prospectus forming a part of it, is materially
inaccurate or misleading.
FUTURES CONTRACTS AND RELATED OPTIONS
Subject to applicable law the fund may invest without limit in
futures contracts and related options for hedging and non-hedging
purposes, such as to manage the effective duration of the fund's
portfolio or as a substitute for direct investment. A financial
futures contract sale creates an obligation by the seller to
deliver the type of financial instrument called for in the
contract in a specified delivery month for a stated price. A
financial futures contract purchase creates an obligation by the
purchaser to take delivery of the type of financial instrument
called for in the contract in a specified delivery month at a
stated price. The specific instruments delivered or taken,
respectively, at settlement date are not determined until on or
near that date. The determination is made in accordance with the
rules of the exchange on which the futures contract sale or
purchase was made. Futures contracts are traded in the United
States only on commodity exchanges or boards of trade -- known as
"contract markets" -- approved for such trading by the Commodity
Futures Trading Commission (the "CFTC"), and must be executed
through a futures commission merchant or brokerage firm which is
a member of the relevant contract market.
Although futures contracts (other than index futures) by their
terms call for actual delivery or acceptance of commodities or
securities, in most cases the contracts are closed out before the
settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a
futures contract for the same aggregate amount of the specific
type of financial instrument or commodity with the same delivery
date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid
the difference and realizes a gain. Conversely, if the price of
the offsetting purchase exceeds the price of the initial sale,
the seller realizes a loss. If the fund is unable to enter into
a closing transaction, the amount of the fund's potential loss is
unlimited. The closing out of a futures contract purchase is
effected by the purchaser's entering into a futures contract
sale. If the offsetting sale price exceeds the purchase price,
the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, he realizes a loss. In general, 40%
of the gain or loss arising from the closing out of a futures
contract traded on an exchange approved by the CFTC is treated as
short-term gain or loss, and 60% is treated as long-term gain or
loss.
Unlike when the fund purchases or sells a security, no price is
paid or received by the fund upon the purchase or sale of a
futures contract. Upon entering into a contract, the fund is
required to deposit with its custodian in a segregated account in
the name of the futures broker an amount of liquid assets. This
amount is known as "initial margin." The nature of initial
margin in futures transactions is different from that of margin
in security transactions in that futures contract margin does not
involve the borrowing of funds to finance the transactions.
Rather, initial margin is similar to a performance bond or good
faith deposit which is returned to the fund upon termination of
the futures contract, assuming all contractual obligations have
been satisfied. Futures contracts also involve brokerage costs.
Subsequent payments, called "variation margin" or "maintenance
margin," to and from the broker (or the custodian) are made on a
daily basis as the price of the underlying security or commodity
fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to
the market." For example, when the fund has purchased a futures
contract on a security and the price of the underlying security
has risen, that position will have increased in value and the
fund will receive from the broker a variation margin payment
based on that increase in value. Conversely, when the fund has
purchased a security futures contract and the price of the
underlying security has declined, the position would be less
valuable and the fund would be required to make a variation
margin payment to the broker.
The fund may elect to close some or all of its futures positions
at any time prior to their expiration in order to reduce or
eliminate a hedge position then currently held by the fund. The
fund may close its positions by taking opposite positions which
will operate to terminate the fund's position in the futures
contracts. Final determinations of variation margin are then
made, additional cash is required to be paid by or released to
the fund, and the fund realizes a loss or a gain. Such closing
transactions involve additional commission costs.
The fund does not intend to purchase or sell futures or related
options for other than hedging purposes, if, as a result, the sum
of the initial margin deposits on the fund's existing futures and
related options positions and premiums paid for outstanding
options on futures contracts would exceed 5% of the fund's net
assets.
OPTIONS ON FUTURES CONTRACTS. The fund may purchase and write
call and put options on futures contracts it may buy or sell and
enter into closing transactions with respect to such options to
terminate existing positions. In return for the premium paid,
options on futures contracts give the purchaser the right to
assume a position in a futures contract at the specified option
exercise price at any time during the period of the option. The
fund may use options on futures contracts in lieu of writing or
buying options directly on the underlying securities or
purchasing and selling the underlying futures contracts. For
example, to hedge against a possible decrease in the value of its
portfolio securities, the fund may purchase put options or write
call options on futures contracts rather than selling futures
contracts. Similarly, the fund may purchase call options or
write put options on futures contracts as a substitute for the
purchase of futures contracts to hedge against a possible
increase in the price of securities which the fund expects to
purchase. Such options generally operate in the same manner as
options purchased or written directly on the underlying
investments.
As with options on securities, the holder or writer of an option
may terminate his position by selling or purchasing an offsetting
option. There is no guarantee that such closing transactions can
be effected.
The fund will be required to deposit initial margin and
maintenance margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements
similar to those described above in connection with the
discussion of futures contracts.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED OPTIONS.
Successful use of futures contracts by the fund is subject to
Putnam Management's ability to predict movements in various
factors affecting securities markets, including interest rates.
Compared to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts involves
less potential risk to the fund because the maximum amount at
risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of
a call or put option on a futures contract would result in a loss
to the fund when the purchase or sale of a futures contract would
not, such as when there is no movement in the prices of the
hedged investments. The writing of an option on a futures
contract involves risks similar to those risks relating to the
sale of futures contracts.
The use of options and futures strategies also involves the risk
of imperfect correlation among movements in the prices of the
securities underlying the futures and options purchased and sold
by the fund, of the options and futures contracts themselves,
and, in the case of hedging transactions, of the securities which
are the subject of a hedge. The successful use of these
strategies further depends on the ability of Putnam Management to
forecast interest rates and market movements correctly.
There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render
certain market clearing facilities inadequate, and thereby result
in the institution by exchanges of special procedures which may
interfere with the timely execution of customer orders.
To reduce or eliminate a position held by the fund, the fund may
seek to close out such position. The ability to establish and
close out positions will be subject to the development and
maintenance of a liquid secondary market. It is not certain that
this market will develop or continue to exist for a particular
futures contract or option. Reasons for the absence of a liquid
secondary market on an exchange include the following: (i) there
may be insufficient trading interest in certain contracts or
options; (ii) restrictions may be imposed by an exchange on
opening transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may be imposed
with respect to particular classes or series of contracts or
options, or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or a clearing corporation may not
at all times be adequate to handle current trading volume; or
(vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the
trading of contracts or options (or a particular class or series
of contracts or options), in which event the secondary market on
that exchange for such contracts or options (or in the class or
series of contracts or options) would cease to exist, although
outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with
their terms.
U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS. U.S.
Treasury security futures contracts require the seller to
deliver, or the purchaser to take delivery of, the type of U.S.
Treasury security called for in the contract at a specified date
and price. Options on U.S. Treasury security futures contracts
give the purchaser the right in return for the premium paid to
assume a position in a U.S. Treasury security futures contract at
the specified option exercise price at any time during the period
of the option.
Successful use of U.S. Treasury security futures contracts by the
fund is subject to Putnam Management's ability to predict
movements in the direction of interest rates and other factors
affecting markets for debt securities. For example, if the fund
has sold U.S. Treasury security futures contracts in order to
hedge against the possibility of an increase in interest rates
which would adversely affect securities held in its portfolio,
and the prices of the fund's securities increase instead as a
result of a decline in interest rates, the fund will lose part or
all of the benefit of the increased value of its securities which
it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the fund
has insufficient cash, it may have to sell securities to meet
daily maintenance margin requirements at a time when it may be
disadvantageous to do so.
There is also a risk that price movements in U.S. Treasury
security futures contracts and related options will not correlate
closely with price movements in markets for particular
securities. For example, if the fund has hedged against a
decline in the values of tax-exempt securities held by it by
selling Treasury security futures and the values of Treasury
securities subsequently increase while the values of its
tax-exempt securities decrease, the fund would incur losses on
both the Treasury security futures contracts written by it and
the tax-exempt securities held in its portfolio.
INDEX FUTURES CONTRACTS. An index futures contract is a contract
to buy or sell units of an index at a specified future date at a
price agreed upon when the contract is made. Entering into a
contract to buy units of an index is commonly referred to as
buying or purchasing a contract or holding a long position in the
index. Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a short
position. A unit is the current value of the index. The fund
may enter into stock index futures contracts, debt index futures
contracts, or other index futures contracts appropriate to its
objective(s). The fund may also purchase and sell options on
index futures contracts.
For example, the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500") is composed of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The S&P 500
assigns relative weightings to the common stocks included in the
Index, and the value fluctuates with changes in the market values
of those common stocks. In the case of the S&P 500, contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500
were $150, one contract would be worth $75,000 (500 units x
$150). The stock index futures contract specifies that no
delivery of the actual stocks making up the index will take
place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the
difference between the contract price and the actual level of the
stock index at the expiration of the contract. For example, if
the fund enters into a futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price of $150
and the S&P 500 is at $154 on that future date, the fund will
gain $2,000 (500 units x gain of $4). If the fund enters into a
futures contract to sell 500 units of the stock index at a
specified future date at a contract price of $150 and the S&P 500
is at $152 on that future date, the fund will lose $1,000 (500
units x loss of $2).
There are several risks in connection with the use by the fund of
index futures. One risk arises because of the imperfect
correlation between movements in the prices of the index futures
and movements in the prices of securities which are the subject
of the hedge. Putnam Management will, however, attempt to reduce
this risk by buying or selling, to the extent possible, futures
on indices the movements of which will, in its judgment, have a
significant correlation with movements in the prices of the
securities sought to be hedged.
Successful use of index futures by the fund is also subject to
Putnam Management's ability to predict movements in the direction
of the market. For example, it is possible that, where the fund
has sold futures to hedge its portfolio against a decline in the
market, the index on which the futures are written may advance
and the value of securities held in the fund's portfolio may
decline. If this occurred, the fund would lose money on the
futures and also experience a decline in value in its portfolio
securities. It is also possible that, if the fund has hedged
against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices
increase instead, the fund will lose part or all of the benefit
of the increased value of those securities it has hedged because
it will have offsetting losses in its futures positions. In
addition, in such situations, if the fund has insufficient cash,
it may have to sell securities to meet daily variation margin
requirements at a time when it is disadvantageous to do so.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the
index futures and the portion of the portfolio being hedged, the
prices of index futures may not correlate perfectly with
movements in the underlying index due to certain market
distortions. First, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather
than meeting additional margin deposit requirements, investors
may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and
futures markets. Second, margin requirements in the futures
market are less onerous than margin requirements in the
securities market, and as a result the futures market may attract
more speculators than the securities market does. Increased
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortions in the futures market and also because of the
imperfect correlation between movements in the index and
movements in the prices of index futures, even a correct forecast
of general market trends by Putnam Management may still not
result in a profitable position over a short time period.
OPTIONS ON STOCK INDEX FUTURES. Options on index futures are
similar to options on securities except that options on index
futures give the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the index
futures contract, at exercise, exceeds (in the case of a call) or
is less than (in the case of a put) the exercise price of the
option on the index future. If an option is exercised on the
last trading day prior to its expiration date, the settlement
will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the index
on which the future is based on the expiration date. Purchasers
of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid.
OPTIONS ON INDICES
As an alternative to purchasing call and put options on index
futures, the fund may purchase and sell call and put options on
the underlying indices themselves. Such options would be used in
a manner identical to the use of options on index futures.
INDEX WARRANTS
The fund may purchase put warrants and call warrants whose values
vary depending on the change in the value of one or more
specified securities indices ("index warrants"). Index warrants
are generally issued by banks or other financial institutions and
give the holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a cash payment
from the issuer based on the value of the underlying index at the
time of exercise. In general, if the value of the underlying
index rises above the exercise price of the index warrant, the
holder of a call warrant will be entitled to receive a cash
payment from the issuer upon exercise based on the difference
between the value of the index and the exercise price of the
warrant; if the value of the underlying index falls, the holder
of a put warrant will be entitled to receive a cash payment from
the issuer upon exercise based on the difference between the
exercise price of the warrant and the value of the index. The
holder of a warrant would not be entitled to any payments from
the issuer at any time when, in the case of a call warrant, the
exercise price is greater than the value of the underlying index,
or, in the case of a put warrant, the exercise price is less than
the value of the underlying index. If the fund were not to
exercise an index warrant prior to its expiration, then the fund
would lose the amount of the purchase price paid by it for the
warrant.
The fund will normally use index warrants in a manner similar to
its use of options on securities indices. The risks of the
fund's use of index warrants are generally similar to those
relating to its use of index options. Unlike most index options,
however, index warrants are issued in limited amounts and are not
obligations of a regulated clearing agency, but are backed only
by the credit of the bank or other institution which issues the
warrant. Also, index warrants generally have longer terms than
index options. Although the fund will normally invest only in
exchange-listed warrants, index warrants are not likely to be as
liquid as certain index options backed by a recognized clearing
agency. In addition, the terms of index warrants may limit the
fund's ability to exercise the warrants at such time, or in such
quantities, as the fund would otherwise wish to do.
SHORT-TERM TRADING
In seeking the fund's objective(s), Putnam Management will buy or
sell portfolio securities whenever Putnam Management believes it
appropriate to do so. In deciding whether to sell a portfolio
security, Putnam Management does not consider how long the fund
has owned the security. From time to time the fund will buy
securities intending to seek short-term trading profits. A
change in the securities held by the fund is known as "portfolio
turnover" and generally involves some expense to the fund. This
expense may include brokerage commissions or dealer markups and
other transaction costs on both the sale of securities and the
reinvestment of the proceeds in other securities. If sales of
portfolio securities cause the fund to realize net short-term
capital gains, such gains will be taxable as ordinary income. As
a result of the fund's investment policies, under certain market
conditions the fund's portfolio turnover rate may be higher than
that of other mutual funds. Portfolio turnover rate for a fiscal
year is the ratio of the lesser of purchases or sales of
portfolio securities to the monthly average of the value of
portfolio securities -- excluding securities whose maturities at
acquisition were one year or less. The fund's portfolio turnover
rate is not a limiting factor when Putnam Management considers a
change in the fund's portfolio.
SECURITIES LOANS
The fund may make secured loans of its portfolio securities, on
either a short-term or long-term basis, amounting to not more
than 25% of its total assets, thereby realizing additional
income. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of
the securities or possible loss of rights in the collateral
should the borrower fail financially. As a matter of policy,
securities loans are made to broker-dealers pursuant to
agreements requiring that the loans be continuously secured by
collateral consisting of cash or short-term debt obligations at
least equal at all times to the value of the securities on loan,
"marked-to-market" daily. The borrower pays to the fund an
amount equal to any dividends or interest received on securities
lent. The fund retains all or a portion of the interest received
on investment of the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to consent, with
respect to the loaned securities may pass to the borrower, the
fund retains the right to call the loans at any time on
reasonable notice, and it will do so to enable the fund to
exercise voting rights on any matters materially affecting the
investment. The fund may also call such loans in order to sell
the securities.
REPURCHASE AGREEMENTS
The fund may enter into repurchase agreements. A repurchase
agreement is a contract under which the fund acquires a security
for a relatively short period (usually not more than one week)
subject to the obligation of the seller to repurchase and the
fund to resell such security at a fixed time and price
(representing the fund's cost plus interest). It is the fund's
present intention to enter into repurchase agreements only with
commercial banks and registered broker-dealers and only with
respect to obligations of the U.S. government or its agencies or
instrumentalities. Repurchase agreements may also be viewed as
loans made by the fund which are collateralized by the securities
subject to repurchase. Putnam Management will monitor such
transactions to ensure that the value of the underlying
securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest
factor. If the seller defaults, the fund could realize a loss on
the sale of the underlying security to the extent that the
proceeds of the sale including accrued interest are less than the
resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or
insolvency proceedings, the fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal
and interest if the fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's
estate.
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, the fund may transfer uninvested cash
balances into a joint account, along with cash of other Putnam
funds and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money
market instruments.
RESTRICTED SECURITIES
The SEC Staff currently takes the view that any delegation by the
Trustees of the authority to determine that a restricted security
is readily marketable (as described in the investment
restrictions of the funds) must be pursuant to written procedures
established by the Trustees. It is the present intention of the
funds' Trustees that, if the Trustees decide to delegate such
determinations to Putnam Management or another person, they would
do so pursuant to written procedures, consistent with the Staff's
position. Should the Staff modify its position in the future,
the Trustees would consider what action would be appropriate in
light of the Staff's position at that time.
FORWARD COMMITMENTS
The fund may enter into contracts to purchase securities for a
fixed price at a future date beyond customary settlement time
("forward commitments") if the fund sets aside, on the books and
records of its custodian, liquid assets in an amount sufficient
to meet the purchase price, or if the fund enters into offsetting
contracts for the forward sale of other securities it owns. In
the case of to-be-announced ("TBA") purchase commitments, the
unit price and the estimated principal amount are established
when the fund enters into a contract, with the actual principal
amount being within a specified range of the estimate. Forward
commitments may be considered securities in themselves, and
involve a risk of loss if the value of the security to be
purchased declines prior to the settlement date, which risk is in
addition to the risk of decline in the value of the fund's other
assets. Where such purchases are made through dealers, the fund
relies on the dealer to consummate the sale. The dealer's
failure to do so may result in the loss to the fund of an
advantageous yield or price. Although the fund will generally
enter into forward commitments with the intention of acquiring
securities for its portfolio or for delivery pursuant to options
contracts it has entered into, the fund may dispose of a
commitment prior to settlement if Putnam Management deems it
appropriate to do so. The fund may realize short-term profits or
losses upon the sale of forward commitments.
The fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time
a TBA sale commitment is outstanding, equivalent deliverable
securities, or an offsetting TBA purchase commitment deliverable
on or before the sale commitment date, are held as "cover" for
the transaction. Unsettled TBA sale commitments are valued at
current market value of the underlying securities. If the TBA
sale commitment is closed through the acquisition of an
offsetting purchase commitment, the fund realizes a gain or loss
on the commitment without regard to any unrealized gain or loss
on the underlying security. If the fund delivers securities
under the commitment, the fund realizes a gain or loss from the
sale of the securities based upon the unit price established at
the date the commitment was entered into.
SWAP AGREEMENTS
The fund may enter into swap agreements and other types of over-
the-counter transactions with broker-dealers or other financial
institutions, in which its investment return will depend on the
change in value of a specified security or index. The fund would
typically receive from the counterparty the amount of any
increase, and pay to the counterparty the amount of any decrease,
in the value of the underlying security or index. The contracts
would thus, absent the failure of the counterparty to complete
its obligations, provide to the fund approximately the same
return as it would have realized if it had owned the security or
index directly.
The fund's ability to realize a profit from such transactions
will depend on the ability of the financial institutions with
which it enters into the transactions to meet their obligations
to the fund. Under certain circumstances, suitable transactions
may not be available to the fund, or the fund may be unable to
close out its position under such transactions at the same time,
or at the same price, as if it had purchased comparable publicly
traded securities.
DERIVATIVES
Certain of the instruments in which the fund may invest, such as
futures contracts, options and forward contracts, are considered
to be "derivatives." Derivatives are financial instruments whose
value depends upon, or is derived from, the value of an
underlying asset, such as a security or an index. Further
information about these instruments and the risks involved in
their use is included elsewhere in the prospectus or in this SAI.
YEAR 2000
Like other financial and business organizations, the funds depend
on the proper function of their service providers' computer
systems. To the extent that the systems used by the funds or
their service providers cannot distinguish between the year 1900
and the year 2000 or have other operating difficulties as a
result of the year 2000, the operations of and services provided
to the funds and their shareholders could be adversely impacted.
Putnam Management and its affiliates have reported that each
expects to modify its systems, as necessary, to address this so-
called "year 2000 problem," and will, on behalf of the funds,
inquire as to the year 2000 compliance of the funds' other major
service providers. However, there can be no assurance that the
operations of and services provided to the funds and their
shareholders will not be adversely affected. Similarly,
companies in which the funds invest may also experience "year
2000 problems," which could ultimately result in losses to a fund
to the extent that the securities of any such company decline in
value as a result of a "year 2000 problem."
TAXES
TAXATION OF THE FUND. The fund intends to qualify each year as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). In order to
qualify for the special 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 net short-term capital gains
over net long-term capital losses for such year; and
(c) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's
assets is represented by cash and cash items, U.S. government
securities, securities of other regulated investment companies,
and other securities limited in respect of any one issuer to a
value not greater than 5% of the value of the fund's total assets
and to 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. Distributions from the fund (other than
exempt-interest dividends, as discussed below) will be taxable to
shareholders as ordinary income to the extent derived from the
fund's investment income and net short-term gains. Pursuant to
the Taxpayer Relief Act of 1997, two different tax rates apply to
net capital gains (that is, the excess of net gains from capital
assets held more than one year over net losses from capital
assets held for not more than one year). One rate (generally
28%) applies to net gains on capital assets held for more than
one year but not more than 18 months ("28% gains") and a second,
preferred rate (generally 20%) applies to the balance of such net
capital gains ("20% gains"). Distributions of net capital gains
will be treated in the hands of shareholders as 28% gains to the
extent designated by the fund as deriving from net gains from
assets held for more than one year but not more than 18 months,
and the balance will be treated as 20% gains. Distributions of
28% gains and 20% gains will be taxable to shareholders as such,
regardless of how long a shareholder has held the shares in the
fund.
EXEMPT-INTEREST DIVIDENDS. The fund will be qualified to pay
exempt-interest dividends to its shareholders only if, at the
close of each quarter of the fund's taxable year, at least 50% of
the total value of the fund's assets consists of obligations the
interest on which is exempt from federal income tax.
Distributions that the fund properly designates as exempt-
interest dividends are treated as interest excludable from
shareholders' gross income for federal income tax purposes but
may be taxable for federal alternative minimum tax purposes and
for state and local purposes. If the fund intends to be
qualified to pay exempt-interest dividends, the fund may be
limited in its ability to enter into taxable transactions
involving forward commitments, repurchase agreements, financial
futures and options contracts on financial futures, tax-exempt
bond indices and other assets.
Part or all of the interest on indebtedness, if any, incurred or
continued by a shareholder to purchase or carry shares of a fund
paying exempt-interest dividends is not deductible. The portion
of interest that is not deductible is equal to the total interest
paid or accrued on the indebtedness, multiplied by the percentage
of the fund's total distributions (not including distributions
from net long-term capital gains) paid to the shareholder that
are exempt-interest dividends. Under rules used by the Internal
Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying
particular assets, the purchase of shares may be considered to
have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.
In general, exempt-interest dividends, if any, attributable to
interest received on certain private activity obligations and
certain industrial development bonds will not be tax-exempt to
any shareholders who are "substantial users" of the facilities
financed by such obligations or bonds or who are "related
persons" of such substantial users.
A fund which is qualified to pay exempt-interest dividends will
inform investors within 60 days of the fund's fiscal year-end of
the percentage of its income distributions designated as
tax-exempt. The percentage is applied uniformly to all
distributions made during the year. The percentage of income
designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the fund's income
that was tax-exempt during the period covered by the
distribution.
HEDGING TRANSACTIONS. If the fund engages in hedging
transactions, including hedging transactions in options, futures
contracts, and straddles, or other similar transactions, it will
be subject to special tax rules (including constructive sale,
mark-to-market, straddle, wash sale, and short sale rules), the
effect of which may be to accelerate income to the fund, defer
losses to the fund, cause adjustments in the holding periods of
the fund's securities, convert long-term capital gains into short-
term capital gains or convert short-term capital losses into
long-term capital losses. These rules could therefore affect the
amount, timing and character of distributions to shareholders.
The fund will endeavor to make any available elections pertaining
to such transactions in a manner believed to be in the best
interests of the fund.
Certain of the fund's hedging activities (including its
transactions, if any, in foreign currencies or foreign
currency-denominated instruments) are likely to produce a
difference between its book income and its taxable income. If
the fund's book income exceeds its taxable income, the
distribution (if any) of such excess will be treated as (i) a
dividend to the extent of the fund's remaining earnings and
profits (including earnings and profits arising from tax-exempt
income), (ii) thereafter as a return of capital to the extent of
the recipient's basis in the shares, and (iii) thereafter as gain
from the sale or exchange of a capital asset. If the fund's book
income is less than its taxable income, the fund could be
required to make distributions exceeding book income to qualify
as a regulated investment company that is accorded special tax
treatment.
RETURN OF CAPITAL DISTRIBUTIONS. If the fund makes a
distribution to you in excess of its current and accumulated
"earnings and profits" in any taxable year, the excess
distribution will be treated as a return of capital to the extent
of your tax basis in your shares, and thereafter as capital gain.
A return of capital is not taxable, but it reduces your tax basis
in your shares, thus reducing any loss or increasing any gain on
a subsequent taxable disposition by you of your shares.
Dividends and distributions on a fund's shares are generally
subject to federal income tax as described herein to the extent
they do not exceed the fund's realized income and gains, even
though such dividends and distributions may economically
represent a return of a particular shareholder's investment.
Such distributions are likely to occur in respect of shares
purchased at a time when the fund's net asset value reflects
gains that are either unrealized, or realized but not
distributed.
SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. 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.
CAPITAL LOSS CARRYOVER. Distributions from capital gains are
generally made after applying any available capital loss
carryovers. The amounts and expiration dates of any capital loss
carryovers available to the fund are shown in Note 1 (Federal
income taxes) to the financial statements included in Part I of
this SAI or incorporated by reference into this SAI.
FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED HEDGING
TRANSACTIONS. 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.
If more than 50% of the fund's assets at year end consists of the
securities of foreign corporations, the fund may elect to permit
shareholders to claim a credit or deduction on their income tax
returns for their pro rata portion of qualified taxes paid by the
fund to foreign countries in respect of foreign securities the
fund has held for at least the minimum period specified in the
Code. In such a case, shareholders will include in gross income
from foreign sources their pro rata shares of such taxes. A
shareholder's ability to claim a foreign tax credit or deduction
in respect of foreign taxes paid by the fund may be subject to
certain limitations imposed by the Code, as a result of which a
shareholder may not get a full credit or deduction for the amount
of such taxes. In particular, shareholders must hold their fund
shares (without protection from risk of loss) on the ex-dividend
date and for at least 15 additional days during the 30-day period
surrounding the ex-dividend date to be eligible to claim a
foreign tax credit with respect to a given dividend.
Shareholders who do not itemize on their federal income tax
returns may claim a credit (but no deduction) for such foreign
taxes.
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.
SALE OR REDEMPTION OF SHARES. The sale, exchange or redemption
of fund shares may give rise to a gain or loss. In general, any
gain realized upon a taxable disposition of shares will be
treated as 28% gains if the shares have been held for more than
12 months but not more than 18 months, and as 20% gains if the
shares have been held for more than 18 months. Otherwise the
gain on the sale, exchange or redemption of fund shares will be
treated as short-term capital gain. In general, any loss
realized upon a taxable disposition of shares will be treated as
long-term loss if the shares have been held for more than 12
months, and otherwise as short-term capital loss. However, if a
shareholder sells shares at a loss within six months of purchase,
any loss will be disallowed for Federal income tax purposes to
the extent of any exempt-interest dividends received on such
shares. In addition, any loss (not already disallowed as
provided in the preceding sentence) 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 same 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.
SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS. Special tax rules
apply to investments though defined contribution plans and other
tax-qualified plans. Shareholders should consult their tax
adviser to determine the suitability of shares of a fund as an
investment through such plans and the precise effect of an
investment on their particular tax situation.
BACKUP WITHHOLDING. 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.
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 will generally be effective for payments 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.
MANAGEMENT
TRUSTEES NAME (AGE)
*+GEORGE PUTNAM (71), Chairman and President. Chairman and
Director of Putnam Management and Putnam Mutual Funds. Director,
Freeport Copper and Gold, Inc. (a mining and natural resource
company), Houghton Mifflin Company (a major publishing company)
and Marsh & McLennan Companies, Inc.
JOHN A. HILL (55),Vice Chairman. Chairman and Managing
Director, First Reserve Corporation (a registered investment
adviser investing in companies in the world-wide energy industry
on behalf of institutional investors). Director of Snyder Oil
Corporation, TransMontaigne Oil Company, Weatherford Enterra,
Inc. (an oil field service company) and various private companies
owned by First Reserve Corporation, such as James River Coal and
Anker Coal Corporation, and various First Reserve Funds, such as
American Gas & Oil Investors, Ltd., AmGO II, L.P., First Reserve
Secured Energy Assets Fund, L.P., First Reserve Fund V., L.P.,
First Reserve Fund VI, L.P., and First Reserve Fund VII, L.P.
+WILLIAM F. POUNDS (70), Vice Chairman. Professor Emeritus of
Management, Alfred P. Sloan School of Management, Massachusetts
Institute of Technology. Director of IDEXX Laboratories, Inc. (a
provider of diagnostic products and services for the animal
health and food and environmental industries), Management
Sciences for Health, Inc. (a non-profit organization), and Sun
Company, Inc. (a petroleum refining and marketing company).
JAMESON A. BAXTER (54), Trustee. President, Baxter Associates,
Inc. (a management and financial consulting firm). Director of
Avondale Federal Savings Bank, ASHTA Chemicals, Inc. and Banta
Corporation (printing and digital imaging). Chairman Emeritus of
the Board of Trustees, Mount Holyoke College.
+HANS H. ESTIN (69), Trustee. Chartered Financial Analyst and
Vice Chairman, North American Management Corp. (a registered
investment adviser).
RONALD J. JACKSON (53), Trustee. Former Chairman, President and
Chief Executive Officer of Fisher-Price, Inc. (a major toy
manufacturer).
PAUL L. JOSKOW (51), Trustee. Professor Emeritus of Economics
and Management and former Chairman of the Department of
Economics, Massachusetts Institute of Technology. Director, New
England Electric System (a public utility holding company), State
Farm Indemnity Company (an automobile insurance company) and
Whitehead Institute for Biomedical Research (a non-profit
research institution).
ELIZABETH T. KENNAN (59), Trustee. President Emeritus and
Professor, Mount Holyoke College. Director, Bell Atlantic (a
telecommunications company), the Kentucky Home Life Insurance
Companies, NYNEX Corporation, Northeast Utilities and Talbots (a
distributor of women's apparel).
*LAWRENCE J. LASSER (54), Trustee and Vice President. President,
Chief Executive Officer and Director of Putnam Investments, Inc.
and Putnam Investment Management, Inc. Director of Marsh &
McLennan Companies, Inc. and the United Way of Massachusetts Bay.
JOHN H. MULLIN, III (56), Trustee. Chairman and CEO of Ridgeway
Farm, Director of ACX Technologies, Inc. (a company engaged in
the manufacture of industrial ceramics and packaging products),
Alex. Brown Realty, Inc. and The Liberty Corporation (a company
engaged in the life insurance and broadcasting industries).
+ROBERT E. PATTERSON (52), Trustee. President and Trustee of
Cabot Industrial Trust (a publicly traded real estate investment
trust). Director of Brandywine Trust Company.
*DONALD S. PERKINS (71), Trustee. Director of various
corporations, including AON Corp. (an insurance company), Cummins
Engine Company, Inc. (an engine and power generator manufacturer
and assembler), Parsons Group L.L.C. (a corporation providing
financial staffing services), LaSalle Street Fund, Inc. and
LaSalle U.S. Realty Income and Growth Fund, Inc. (real estate
investment trusts), Lucent Technologies Inc. (a global provider
of telecommunications equipment), Nanophase Technologies Inc. (a
producer of nano crystalline materials), Ryerson Tull, Inc.
(America's largest steel service corporation) and Springs
Industries, Inc. (a textile manufacturer).
*#GEORGE PUTNAM III (46), Trustee. President, New Generation
Research, Inc. (a publisher of financial advisory and other
research services relating to bankrupt and distressed companies)
and New Generation Advisers, Inc. (a registered investment
adviser). Director, Massachusetts Audubon Society and The Boston
Family Office, L.L.C. (a registered investment advisor).
*A.J.C. SMITH (64), Trustee. Chairman and Chief Executive
Officer, Marsh & McLennan Companies, Inc. Director, Trident
Partnership (a $667 million 10-year limited partnership with over
30 institutional investors).
W. THOMAS STEPHENS (55), Trustee. President and Chief Executive
Officer of MacMillan Bloedel Ltd. (a major forest products
company). Director, Qwest Communications (a fiber optics
manufacturer) and New Century Energies (a public utility
company).
W. NICHOLAS THORNDIKE (64), Trustee. Director of various
corporations and charitable organizations, including Courier
Corporation (a book manufacturer), Data General Corporation (a
provider of customized computer solutions), Bradley Real Estate,
Inc., and Providence Journal Co.
OFFICERS NAME (AGE)
CHARLES E. PORTER (59), Executive Vice President. Managing
Director of Putnam Investments, Inc. and Putnam Management.
PATRICIA C. FLAHERTY (50), Vice President. Senior Vice President
of Putnam Investments, Inc. and Putnam Management.
WILLIAM N. SHIEBLER (55), Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. President and
Director of Putnam Mutual Funds.
GORDON H. SILVER (50), Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. and Putnam
Management.
BRETT C. BROWCHUK (35), Managing Director of Putnam Management.
Prior to April, 1994, Mr. Browchuk was Managing Director at
Fidelity Investments.
IAN C. FERGUSON (40), Vice President. Senior Managing Director
of Putnam Investments, Inc. and Putnam Management.
JOHN R. VERANI (58), Vice President. Senior Vice President of
Putnam Investments, Inc. and Putnam Management.
JOHN D. HUGHES (62), Senior Vice President and Treasurer.
BEVERLY MARCUS (53), Clerk and Assistant Treasurer.
*Trustees who are or may be deemed to be "interested persons" (as
defined in the Investment Company Act of 1940) of the fund,
Putnam Management or Putnam Mutual Funds.
+Members of the Executive Committee of the Trustees. The
Executive Committee meets between regular meetings of the
Trustees as may be required to review investment matters and
other affairs of the fund and may exercise all of the powers of
the Trustees.
#George Putnam, III is the son of George Putnam.
-----------------
Certain other officers of Putnam Management are officers of the
fund. SEE "ADDITIONAL OFFICERS" IN PART I OF THIS SAI. The
mailing address of each of the officers and Trustees is One Post
Office Square, Boston, Massachusetts 02109.
Except as stated below, the principal occupations of the officers
and Trustees for the last five years have been with the employers
as shown above, although in some cases they have held different
positions with such employers. Prior to July, 1998, Mr.
Joskow was Chairman of the Department of Economics, Massachusetts
Institute of Technology, and he was a consultant to National
Economic Research Associates prior to September, 1998. Prior
to June, 1995, Ms. Kennan was President of Mount Holyoke College.
Prior to 1996, Mr. Stephens was Chairman of the Board of
Directors, President and Chief Executive Officer of Johns
Manville Corporation. Prior to April, 1996, Mr. Ferguson was CEO
at Hong Kong Shanghai Banking Corporation. Prior to February,
1998, Mr. Patterson was Executive Vice President and Director of
Acquisitions of Cabot Partners Limited Partnership.
Each Trustee of the fund receives an annual fee and an additional
fee for each Trustees' meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings and for special services rendered
in that connection. All of the Trustees are Trustees of all the
Putnam funds and each receives fees for his or her services. FOR
DETAILS OF TRUSTEES' FEES PAID BY THE FUND AND INFORMATION
CONCERNING RETIREMENT GUIDELINES FOR THE TRUSTEES, SEE "CHARGES
AND EXPENSES" IN PART I OF THIS SAI.
The Agreement and Declaration of Trust of the fund provides that
the fund will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the
fund, except if it is determined in the manner specified in the
Agreement and Declaration of Trust that they have not acted in
good faith in the reasonable belief that their actions were in
the best interests of the fund or that such indemnification would
relieve any officer or Trustee of any liability to the fund or
its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties. The
fund, at its expense, provides liability insurance for the
benefit of its Trustees and officers.
PUTNAM MANAGEMENT AND ITS AFFILIATES
Putnam Management is one of America's oldest and largest money
management firms. Putnam Management'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. Putnam Management has been managing mutual funds
since 1937. Today, the firm serves as the investment manager for
the funds in the Putnam Family, with nearly $182 billion in
assets in over 9 million shareholder accounts at December 31,
1997. An affiliate, The Putnam Advisory Company, Inc., manages
domestic and foreign institutional accounts and mutual funds,
including the accounts of many Fortune 500 companies. Another
affiliate, Putnam Fiduciary Trust Company, provides investment
advice to institutional clients under its banking and fiduciary
powers. At December 31, 1997, Putnam Management and its
affiliates managed over $235 billion in assets, including over
$19 billion in tax-exempt securities and over $57 billion in
retirement plan assets.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are, except for a minority stake owned by employees,
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.
Trustees and officers of the fund who are also officers of Putnam
Management or its affiliates or who are stockholders of Marsh &
McLennan Companies, Inc. will benefit from the advisory fees,
sales commissions, distribution fees, custodian fees and transfer
agency fees paid or allowed by the fund.
THE MANAGEMENT CONTRACT
Under a Management Contract between the fund and Putnam
Management, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes
continuously an investment program for the fund and makes
investment decisions on behalf of the fund. Subject to the
control of the Trustees, Putnam Management also manages,
supervises and conducts the other affairs and business of the
fund, furnishes office space and equipment, provides bookkeeping
and clerical services (including determination of the fund's net
asset value, but excluding shareholder accounting services) and
places all orders for the purchase and sale of the fund's
portfolio securities. Putnam Management may place fund portfolio
transactions with broker-dealers which furnish Putnam Management,
without cost to it, certain research, statistical and quotation
services of value to Putnam Management and its affiliates in
advising the fund and other clients. In so doing, Putnam
Management may cause the fund to pay greater brokerage
commissions than it might otherwise pay.
FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER THE
MANAGEMENT CONTRACT, SEE "CHARGES AND EXPENSES" IN PART I OF THIS
SAI. Putnam Management's compensation under the Management
Contract may be reduced in any year if the fund's expenses exceed
the limits on investment company expenses imposed by any statute
or regulatory authority of any jurisdiction in which shares of
the fund are qualified for offer or sale. The term "expenses" is
defined in the statutes or regulations of such jurisdictions, and
generally excludes brokerage commissions, taxes, interest,
extraordinary expenses and, if the fund has a distribution plan,
payments made under such plan.
Under the Management Contract, Putnam Management may reduce its
compensation to the extent that the fund's expenses exceed such
lower expense limitation as Putnam Management may, by notice to
the fund, declare to be effective. The expenses subject to this
limitation are exclusive of brokerage commissions, interest,
taxes, deferred organizational and extraordinary expenses and, if
the fund has a distribution plan, payments required under such
plan. For the purpose of determining any such limitation on
Putnam Management's compensation, expenses of the fund shall not
reflect the application of commissions or cash management credits
that may reduce designated fund expenses. THE TERMS OF ANY
EXPENSE LIMITATION FROM TIME TO TIME IN EFFECT ARE DESCRIBED IN
THE PROSPECTUS AND/OR PART I OF THIS SAI.
In addition to the fee paid to Putnam Management, the fund
reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their assistants who
provide certain administrative services for the fund and the
other Putnam funds, each of which bears an allocated share of the
foregoing costs. The aggregate amount of all such payments and
reimbursements is determined annually by the Trustees.
THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S MOST RECENT
FISCAL YEAR IS INCLUDED IN "CHARGES AND EXPENSES" IN PART I OF
THIS SAI. Putnam Management pays all other salaries of officers
of the fund. The fund pays all expenses not assumed by Putnam
Management including, without limitation, auditing, legal,
custodial, investor servicing and shareholder reporting expenses.
The fund pays the cost of typesetting for its prospectuses and
the cost of printing and mailing any prospectuses sent to its
shareholders. Putnam Mutual Funds pays the cost of printing and
distributing all other prospectuses.
The Management Contract provides that Putnam Management shall not
be subject to any liability to the fund or to any shareholder of
the fund for any act or omission in the course of or connected
with rendering services to the fund in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its duties on the part of Putnam Management.
The Management Contract may be terminated without penalty by vote
of the Trustees or the shareholders of the fund, or by Putnam
Management, on 30 days' written notice. It may be amended only
by a vote of the shareholders of the fund. The Management
Contract also terminates without payment of any penalty in the
event of its assignment. The Management Contract provides that
it will continue in effect only so long as such continuance is
approved at least annually by vote of either the Trustees or the
shareholders, and, in either case, by a majority of the Trustees
who are not "interested persons" of Putnam Management or the
fund. In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of the
outstanding voting securities" as defined in the Investment
Company Act of 1940.
PERSONAL INVESTMENTS BY EMPLOYEES OF PUTNAM MANAGEMENT
Employees of Putnam Management are permitted to engage in
personal securities transactions, subject to requirements and
restrictions set forth in Putnam Management's Code of Ethics.
The Code of Ethics contains provisions and requirements designed
to identify and address certain conflicts of interest between
personal investment activities and the interests of investment
advisory clients such as the funds. Among other things, the Code
of Ethics, consistent with standards recommended by the
Investment Company Institute's Advisory Group on Personal
Investing, prohibits certain types of transactions absent prior
approval, imposes time periods during which personal transactions
may not be made in certain securities, and requires the
submission of duplicate broker confirmations and quarterly
reporting of securities transactions. Additional restrictions
apply to portfolio managers, traders, research analysts and
others involved in the investment advisory process. Exceptions
to these and other provisions of the Code of Ethics may be
granted in particular circumstances after review by appropriate
personnel.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS. Investment decisions for the fund and for
the other investment advisory clients of Putnam Management and
its affiliates are made with a view to achieving their respective
investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular
client involved. Thus, a particular security may be bought or
sold for certain clients even though it could have been bought or
sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more
other clients are selling the security. In some instances, one
client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously
purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged
as to price and allocated between such clients in a manner which
in Putnam Management's opinion is equitable to each and in
accordance with the amount being purchased or sold by each.
There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on
other clients.
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S. stock
exchanges, commodities markets and futures markets and other
agency transactions involve the payment by the fund of negotiated
brokerage commissions. Such commissions vary among different
brokers. A particular broker may charge different commissions
according to such factors as the difficulty and size of the
transaction. Transactions in foreign investments often involve
the payment of fixed brokerage commissions, which may be higher
than those in the United States. There is generally no stated
commission in the case of securities traded in the
over-the-counter markets, but the price paid by the fund usually
includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the fund includes a
disclosed, fixed commission or discount retained by the
underwriter or dealer. It is anticipated that most purchases and
sales of securities by funds investing primarily in tax-exempt
securities and certain other fixed-income securities will be with
the issuer or with underwriters of or dealers in those
securities, acting as principal. Accordingly, those funds would
not ordinarily pay significant brokerage commissions with respect
to securities transactions. SEE "CHARGES AND EXPENSES" IN PART I
OF THIS SAI FOR INFORMATION CONCERNING COMMISSIONS PAID BY THE
FUND.
It has for many years been a common practice in the investment
advisory business for advisers of investment companies and other
institutional investors to receive brokerage and research
services (as defined in the Securities Exchange Act of 1934, as
amended (the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements.
Consistent with this practice, Putnam Management receives
brokerage and research services and other similar services from
many broker-dealers with which Putnam Management places the
fund's portfolio transactions and from third parties with which
these broker-dealers have arrangements. These services include
such matters as general economic and market reviews, industry and
company reviews, evaluations of investments, recommendations as
to the purchase and sale of investments, newspapers, magazines,
pricing services, quotation services, news services and personal
computers utilized by Putnam Management's managers and analysts.
Where the services referred to above are not used exclusively by
Putnam Management for research purposes, Putnam Management, based
upon its own allocations of expected use, bears that portion of
the cost of these services which directly relates to their
non-research use. Some of these services are of value to Putnam
Management and its affiliates in advising various of their
clients (including the fund), although not all of these services
are necessarily useful and of value in managing the fund. The
management fee paid by the fund is not reduced because Putnam
Management and its affiliates receive these services even though
Putnam Management might otherwise be required to purchase some of
these services for cash.
Putnam Management places all orders for the purchase and sale of
portfolio investments for the fund and buys and sells investments
for the fund through a substantial number of brokers and dealers.
In so doing, Putnam Management uses its best efforts to obtain
for the fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable
price and execution, Putnam Management, having in mind the fund's
best interests, considers all factors it deems relevant,
including, by way of illustration, price, the size of the
transaction, the nature of the market for the security or other
investment, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the
broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by the
Management Contract, Putnam Management may cause the fund to pay
a broker-dealer which provides "brokerage and research services"
(as defined in the 1934 Act) to Putnam Management an amount of
disclosed commission for effecting securities transactions on
stock exchanges and other transactions for the fund on an agency
basis in excess of the commission which another broker-dealer
would have charged for effecting that transaction. Putnam
Management's authority to cause the fund to pay any such greater
commissions is also subject to such policies as the Trustees may
adopt from time to time. Putnam Management does not currently
intend to cause the fund to make such payments. It is the
position of the staff of the Securities and Exchange Commission
that Section 28(e) does not apply to the payment of such greater
commissions in "principal" transactions. Accordingly Putnam
Management will use its best effort to obtain the most favorable
price and execution available with respect to such transactions,
as described above.
The Management Contract provides that commissions, fees,
brokerage or similar payments received by Putnam Management or an
affiliate in connection with the purchase and sale of portfolio
investments of the fund, less any direct expenses approved by the
Trustees, shall be recaptured by the fund through a reduction of
the fee payable by the fund under the Management Contract.
Putnam Management seeks to recapture for the fund soliciting
dealer fees on the tender of the fund's portfolio securities in
tender or exchange offers. Any such fees which may be recaptured
are likely to be minor in amount.
Consistent with the Conduct Rules of the National Association of
Securities Dealers, Inc. and subject to seeking the most
favorable price and execution available and such other policies
as the Trustees may determine, Putnam Management may consider
sales of shares of the fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the fund.
PRINCIPAL UNDERWRITER
Putnam Mutual Funds is the principal underwriter of shares of the
fund and the other continuously offered Putnam funds. Putnam
Mutual Funds is not obligated to sell any specific amount of
shares of the fund and will purchase shares for resale only
against orders for shares. SEE "CHARGES AND EXPENSES" IN PART I
OF THIS SAI FOR INFORMATION ON SALES CHARGES AND OTHER PAYMENTS
RECEIVED BY PUTNAM MUTUAL FUNDS.
INVESTOR SERVICING AGENT AND CUSTODIAN
Putnam Investor Services, a division of Putnam Fiduciary Trust
Company ("PFTC"), is the fund's investor servicing agent
(transfer, plan and dividend disbursing agent), for which it
receives fees which are paid monthly by the fund as an expense of
all its shareholders. The fee paid to Putnam Investor Services
is determined on the basis of the number of shareholder accounts,
the number of transactions and the assets of the fund. Putnam
Investor Services won the DALBAR Quality Tested Service Seal in
1990, 1991, 1992, 1993, 1994, 1995 and 1997. Over 10,000 tests
of 38 separate shareholder service components demonstrated that
Putnam Investor Services tied for highest scores, with two other
mutual fund companies, in all categories.
PFTC is the custodian of the fund's assets. In carrying out its
duties under its custodian contract, PFTC may employ one or more
subcustodians whose responsibilities include safeguarding and
controlling the fund's cash and securities, handling the receipt
and delivery of securities and collecting interest and dividends
on the fund's investments. PFTC and any subcustodians employed
by it have a lien on the securities of the fund (to the extent
permitted by the fund's investment restrictions) to secure
charges and any advances made by such subcustodians at the end of
any day for the purpose of paying for securities purchased by the
fund. The fund expects that such advances will exist only in
unusual circumstances. Neither PFTC nor any subcustodian
determines the investment policies of the fund or decides which
securities the fund will buy or sell. PFTC pays the fees and
other charges of any subcustodians employed by it. The fund may
from time to time pay custodial expenses in full or in part
through the placement by Putnam Management of the fund's
portfolio transactions with the subcustodians or with a third-
party broker having an agreement with the subcustodians. The
fund pays PFTC an annual fee based on the fund's assets,
securities transactions and securities holdings and reimburses
PFTC for certain out-of-pocket expenses incurred by it or any
subcustodian employed by it in performing custodial services.
SEE "CHARGES AND EXPENSES" IN PART I OF THIS SAI FOR INFORMATION
ON FEES AND REIMBURSEMENTS FOR INVESTOR SERVICING AND CUSTODY
RECEIVED BY PFTC. THE FEES MAY BE REDUCED BY CREDITS ALLOWED BY
PFTC.
DETERMINATION OF NET ASSET VALUE
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 holidays: New Year's Day,
Rev. Dr. 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.
However, equity options held by the fund are priced as of the
close of trading at 4:10 p.m., and futures contracts on U.S.
government and other fixed-income securities and index options
held by the fund are priced as of their close of trading at 4:15
p.m.
Securities for which market quotations are readily available are
valued at prices which, in the opinion of Putnam Management, most
nearly represent the market values of such securities.
Currently, such prices are determined using the last reported
sale price or, if no sales are reported (as in the case of some
securities traded over-the-counter), the last reported bid price,
except that certain securities are valued at the mean between the
last reported bid and asked prices. Short-term investments
having remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following
procedures approved by the Trustees. Liabilities are deducted
from the total, and the resulting amount is divided by the number
of shares of the class outstanding.
Reliable market quotations are not considered to be readily
available for long-term corporate bonds and notes, certain
preferred stocks, tax-exempt securities, and certain foreign
securities. These investments are valued at fair value on the
basis of valuations furnished by pricing services, which
determine valuations for normal, institutional-size trading units
of such securities using methods based on market transactions for
comparable securities and various relationships between
securities which are generally recognized by institutional
traders.
If any securities held by the fund are restricted as to resale,
Putnam Management 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 foreign
securities) is substantially completed each day at various times
prior to the close of the Exchange. The values of these
securities used in determining the net asset value of the fund's
shares are computed as of such times. Also, because of the
amount of time required to collect and process trading
information as to large numbers of securities issues, the values
of certain securities (such as convertible bonds, U.S. government
securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will
not be reflected in the computation of the fund's net asset
value. If events materially affecting the value of such
securities occur during such period, then these securities will
be valued at their fair value following procedures approved by
the Trustees. In addition, securities held by some of the funds
may be traded in foreign markets that are open for business on
days that a fund is not, and the trading of such securities on
those days may have an impact on the value of a shareholder's
investment at a time when the shareholder cannot buy and sell
shares of the fund.
Money market funds generally value their portfolio securities at
amortized cost according to Rule 2a-7 under the Investment
Company Act of 1940.
HOW TO BUY SHARES
GENERAL
The prospectus contains a general description of how investors
may buy shares of the fund and states whether the fund offers
more than one class of shares. This SAI contains additional
information which may be of interest to investors.
Class A shares and class M shares are generally sold with a sales
charge payable at the time of purchase (except for class A shares
and class M shares of money market funds). As used in this SAI
and unless the context requires otherwise, the term "class A
shares" includes shares of funds that offer only one class of
shares. The prospectus contains a table of applicable sales
charges. For information about how to purchase class A or class
M shares of a Putnam fund at net asset value through an employer-
sponsored retirement plan, please consult your employer. Certain
purchases of class A shares and class M shares may be exempt from
a sales charge or, in the case of class A shares, may be subject
to a contingent deferred sales charge ("CDSC"). See "General--
Sales without sales charges or contingent deferred sales
charges," "Additional Information About Class A and Class M
shares," and "Contingent Deferred Sales Charges--Class A shares."
Class B shares and class C shares are sold subject to a CDSC
payable upon redemption within a specified period after purchase.
The prospectus contains a table of applicable CDSCs.
Class B shares will automatically convert into class A shares no
later than the end of the month eight years after the purchase
date, and may, in the discretion of the Trustees, convert to
class A shares earlier. Class B shares acquired by exchanging
class B shares of another Putnam fund will convert into class A
shares based on the time of the initial purchase. Class B shares
acquired through reinvestment of distributions will convert into
Class A shares based on the date of the initial purchase to which
such shares relate. For this purpose, class B shares acquired
through reinvestment of distributions will be attributed to
particular purchases of class B shares in accordance with such
procedures as the Trustees may determine from time to time. The
conversion of class B shares to class A shares is subject to the
condition that such conversions will not constitute taxable
events for Federal tax purposes.
Class Y shares, which are not subject to sales charges or a CDSC,
are available only to certain defined contribution plans. See
the prospectus that offers class Y shares for more information.
Certain purchase programs described below are not available to
defined contribution plans. Consult your employer for
information on how to purchase shares through your plan.
The fund is currently making a continuous offering of its shares.
The fund receives the entire net asset value of shares sold. The
fund will accept unconditional orders for shares to be executed
at the public offering price based on the net asset value per
share next determined after the order is placed. In the case of
class A shares and class M shares, the public offering price is
the net asset value plus the applicable sales charge, if any. No
sales charge is included in the public offering price of other
classes of shares. In the case of orders for purchase of shares
placed through dealers, the public offering price will be based
on the net asset value determined on the day the order is placed,
but only if the dealer receives the order before the close of
regular trading on the Exchange. If the dealer receives the
order after the close of the Exchange, the price will be based on
the net asset value next determined. If funds for the purchase
of shares are sent directly to Putnam Investor Services, they
will be invested at the public offering price based on the net
asset value next determined after receipt. Payment for shares of
the fund must be in U.S. dollars; if made by check, the check
must be drawn on a U.S. bank.
Initial and subsequent purchases must satisfy the minimums stated
in the prospectus, except that (i) individual investments under
certain employee benefit plans or Tax Qualified Retirement Plans
may be lower, (ii) persons who are already shareholders may make
additional purchases of $50 or more by sending funds directly to
Putnam Investor Services (see "Your investing account" below),
and (iii) for investors participating in systematic investment
plans and military allotment plans, the initial and subsequent
purchases must be $25 or more. Information about these plans is
available from investment dealers or from Putnam Mutual Funds.
As a convenience to investors, shares may be purchased through a
systematic investment plan. Pre-authorized monthly bank drafts
for a fixed amount (at least $25) are used to purchase fund
shares at the applicable public offering price next determined
after Putnam Mutual Funds receives the proceeds from the draft.
A shareholder may choose any day of the month and, if a given
month (for example, February) does not contain that particular
date, or if the date falls on a weekend or holiday, the draft
will be processed on the next business day. Further information
and application forms are available from investment dealers or
from Putnam Mutual Funds.
Except for funds that declare a distribution daily, distributions
to be reinvested are reinvested without a sales charge in shares
of the same class as of the ex-dividend date using the net asset
value determined on that date, and are credited to a
shareholder's account on the payment date. Dividends for Putnam
money market funds are credited to a shareholder's account on the
payment date. Distributions for all other funds that declare a
distribution daily are reinvested without a sales charge as of
the last day of the period for which distributions are paid using
the net asset value determined on that date, and are credited to
a shareholder's account on the payment date.
PAYMENT IN SECURITIES. In addition to cash, the fund may accept
securities as payment for fund shares at the applicable net asset
value. Generally, the fund will only consider accepting
securities to increase its holdings in a portfolio security, or
if Putnam Management determines that the offered securities are a
suitable investment for the fund and in a sufficient amount for
efficient management.
While no minimum has been established, it is expected that the
fund would not accept securities with a value of less than
$100,000 per issue as payment for shares. The fund may reject in
whole or in part any or all offers to pay for purchases of fund
shares with securities, may require partial payment in cash for
such purchases to provide funds for applicable sales charges, and
may discontinue accepting securities as payment for fund shares
at any time without notice. The fund will value accepted
securities in the manner described in the section "Determination
of Net Asset Value" for valuing shares of the fund. The fund
will only accept securities which are delivered in proper form.
The fund will not accept options or restricted securities as
payment for shares. The acceptance of securities by certain
funds in exchange for fund shares is subject to additional
requirements. For federal income tax purposes, a purchase of
fund shares with securities will be treated as a sale or exchange
of such securities on which the investor will generally realize a
taxable gain or loss. The processing of a purchase of fund
shares with securities involves certain delays while the fund
considers the suitability of such securities and while other
requirements are satisfied. For information regarding procedures
for payment in securities, contact Putnam Mutual Funds.
Investors should not send securities to the fund except when
authorized to do so and in accordance with specific instructions
received from Putnam Mutual Funds.
SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED SALES CHARGES.
The fund may sell shares without a sales charge or CDSC to:
(i) current and retired Trustees of the fund; officers of
the fund; directors and current and retired U.S. full-time
employees of Putnam Management, Putnam Mutual Funds, their
parent corporations and certain corporate affiliates;
family members of and employee benefit plans for the
foregoing; and partnerships, trusts or other entities in
which any of the foregoing has a substantial interest;
(ii) employer-sponsored retirement plans, for the
repurchase of shares in connection with repayment of plan
loans made to plan participants (if the sum loaned was
obtained by redeeming shares of a Putnam fund sold with a
sales charge) (not offered by tax-exempt funds);
(iii) clients of administrators of tax-qualified employer-
sponsored retirement plans which have entered into
agreements with Putnam Mutual Funds (not offered by
tax-exempt funds);
(iv) registered representatives and other employees of
broker-dealers having sales agreements with Putnam Mutual
Funds; employees of financial institutions having sales
agreements with Putnam Mutual Funds or otherwise having an
arrangement with any such broker-dealer or financial
institution with respect to sales of fund shares; and
their spouses and children under age 21 (Putnam Mutual
Funds is regarded as the dealer of record for all such
accounts);
(v) investors meeting certain requirements who sold shares
of certain Putnam closed-end funds pursuant to a tender
offer by such closed-end fund;
(vi) a trust department of any financial institution
purchasing shares of the fund in its capacity as trustee
of any trust, if the value of the shares of the fund and
other Putnam funds purchased or held by all such trusts
exceeds $1 million in the aggregate; and
(vii) "wrap accounts" maintained for clients of broker-
dealers, financial institutions or financial
intermediaries who have entered into agreements with
Putnam Mutual Funds with respect to such accounts, which
in all cases shall be subject to a wrap fee economically
comparable to a sales charge. Fund shares offered
pursuant to this waiver may not be advertised as "no
load," or otherwise offered for sale at NAV without a wrap
fee.
In addition, the fund may issue its shares at net asset value
without an initial sales charge or a CDSC in connection with the
acquisition of substantially all of the securities owned by other
investment companies or personal holding companies, and the CDSC
will be waived on redemptions of shares arising out of death or
post-purchase disability or in connection with certain
withdrawals from IRA or other retirement plans. Up to 12% of the
value of shares subject to a systematic withdrawal plan may also
be redeemed each year without a CDSC. The fund may sell class M
shares at net asset value to members of qualified groups. See
"Group purchases of class A and class M shares" below. Class A
shares are available without an initial sales charge to eligible
employer-sponsored retirement plans, as described below.
PAYMENTS TO DEALERS. Putnam Mutual Funds may, at its expense,
pay concessions in addition to the payments disclosed in the
prospectus to dealers which satisfy certain criteria established
from time to time by Putnam Mutual Funds relating to increasing
net sales of shares of the Putnam funds over prior periods, and
certain other factors.
ADDITIONAL INFORMATION ABOUT CLASS A AND CLASS M SHARES
The underwriter's commission is the sales charge shown in the
prospectus less any applicable dealer discount. Putnam Mutual
Funds will give dealers ten days' notice of any changes in the
dealer discount. Putnam Mutual Funds retains the entire sales
charge on any retail sales made by it.
Putnam Mutual Funds offers several plans by which an investor may
obtain reduced sales charges on purchases of class A shares and
class M shares. The variations in sales charges reflect the
varying efforts required to sell shares to separate categories of
purchasers. These plans may be altered or discontinued at any
time.
The public offering price of class A and class M shares is the
net asset value plus a sales charge that varies depending on the
size of your purchase. The fund receives the net asset value.
The sales charge is allocated between your investment dealer and
Putnam Mutual Funds as shown in the following table, except when
Putnam Mutual Funds, in its discretion, allocates the entire
amount to your investment dealer.
For Growth Funds, Growth and Income Funds and Asset Allocation
Funds only:
CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES
CHARGE SALES CHARGE
AS A REALLOWED TO AS A
REALLOWED TO
PERCENTAGE DEALERS AS A
PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF
OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE
OFFERING PRICE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Under 50,000 5.75% 5.00% 3.50% 3.00%
50,000 but under 100,000 4.50 3.75 2.50 2.00
100,000 but under 250,000 3.50 2.75 1.50 1.00
250,000 but under 500,000 2.50 2.00 1.00 1.00
500,000 but under 1,000,000 2.00 1.75 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
For Income Funds only (except for Putnam U.S. Government Income
Fund and Putnam Preferred Income Fund:
CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES
CHARGE SALES CHARGE
AS A REALLOWED TO AS A
REALLOWED TO
PERCENTAGE DEALERS AS A
PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF
OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE
OFFERING PRICE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
Under 50,000 4.75% 4.25% 3.25% 3.00%
50,000 but under 100,000 4.50 4.00 2.25 2.00
100,000 but under 250,000 3.50 3.00 1.50 1.25
250,000 but under 500,000 2.50 2.25 1.00 1.00
500,000 but under 1,000,000 2.00 1.75 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
For Putnam Intermediate U.S. Government Income Fund and Putnam
Preferred Income Fund only:
CLASS A CLASS M
AMOUNT OF AMOUNT OF
SALES CHARGE SALES CHARGE SALES
CHARGE SALES CHARGE
AS A REALLOWED TO AS A
REALLOWED TO
PERCENTAGE DEALERS AS A
PERCENTAGE DEALERS AS A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE OF OF
OFFERING PERCENTAGE OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE PRICE
OFFERING PRICE
- -----------------------------------------------------------------
- -----------------------------------------------------
Under 100,000 3.25% 3.00% 2.00% 1.80%
100,000 but under 250,000 2.50 2.25 1.50 1.30
250,000 but under 500,000 2.00 1.75 1.00 1.00
500,000 but under 1,000,000 1.50 1.25 NONE NONE
1,000,000 and above NONE NONE NONE NONE
- -----------------------------------------------------------------
- -----------------------------------------------------------------
For Tax Free Funds only:
CLASS A ONLY
AMOUNT OF
SALES CHARGE SALES
CHARGE
AS A REALLOWED TO
PERCENTAGE DEALERS AS
A
AMOUNT OF TRANSACTION OF OFFERING PERCENTAGE
OF
AT OFFERING PRICE ($) PRICE OFFERING PRICE
- -----------------------------------------------------------------
- -----------------------------------------------------
Under 25,000 4.75% 4.50%
25,000 but under 100,000 4.50 4.25
100,000 but under 250,000 3.75 3.50
250,000 but under 500,000 3.00 2.75
500,000 but under 1,000,000 2.00 1.85
1,000,000 and above NONE NONE
- -----------------------------------------------------------------
- -----------------------------------------------------
COMBINED PURCHASE PRIVILEGE. The following persons may qualify
for the sales charge reductions or eliminations shown in the
prospectus by combining into a single transaction the purchase of
class A shares or class M shares with other purchases of any
class of shares:
(i) an individual, or a "company" as defined in Section
2(a)(8) of the Investment Company Act of 1940 (which
includes corporations which are corporate affiliates of
each other);
(ii) an individual, his or her spouse and their children
under twenty-one, purchasing for his, her or their own
account;
(iii) a trustee or other fiduciary purchasing for a single
trust estate or single fiduciary account (including a
pension, profit-sharing, or other employee benefit trust
created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the
"Code"));
(iv) tax-exempt organizations qualifying under Section
501(c)(3) of the Internal Revenue Code (not including tax-
exempt organizations qualifying under Section 403(b)(7) (a
"403(b) plan") of the Code; and
(v) employee benefit plans of a single employer or of
affiliated employers, other than 403(b) plans.
A combined purchase currently may also include shares of any
class of other continuously offered Putnam funds (other than
money market funds) purchased at the same time through a single
investment dealer, if the dealer places the order for such shares
directly with Putnam Mutual Funds.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A
purchaser of class A shares or class M shares may qualify for a
cumulative quantity discount by combining a current purchase (or
combined purchases as described above) with certain other shares
of any class of Putnam funds already owned. The applicable sales
charge is based on the total of:
(i) the investor's current purchase; and
(ii) the maximum public offering price (at the close of
business on the previous day) of:
(a) all shares held by the investor in all of the
Putnam funds (except money market funds); and
(b) any shares of money market funds acquired by
exchange from other Putnam funds; and
(iii) the maximum public offering price of all shares
described in paragraph (ii) owned by another shareholder
eligible to participate with the investor in a "combined
purchase" (see above).
To qualify for the combined purchase privilege or to obtain the
cumulative quantity discount on a purchase through an investment
dealer, when each purchase is made the investor or dealer must
provide Putnam Mutual Funds with sufficient information to verify
that the purchase qualifies for the privilege or discount. The
shareholder must furnish this information to Putnam Investor
Services when making direct cash investments.
STATEMENT OF INTENTION. Investors may also obtain the reduced
sales charges for class A shares or class M shares shown in the
prospectus for investments of a particular amount by means of a
written Statement of Intention, which expresses the investor's
intention to invest that amount (including certain "credits," as
described below) within a period of 13 months in shares of any
class of the fund or any other continuously offered Putnam fund
(excluding money market funds). Each purchase of class A shares
or class M shares under a Statement of Intention will be made at
the public offering price applicable at the time of such purchase
to a single transaction of the total dollar amount indicated in
the Statement of Intention. A Statement of Intention may include
purchases of shares made not more than 90 days prior to the date
that an investor signs a Statement; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
An investor may receive a credit toward the amount indicated in
the Statement of Intention equal to the maximum public offering
price as of the close of business on the previous day of all
shares he or she owns on the date of the Statement of Intention
which are eligible for purchase under a Statement of Intention
(plus any shares of money market funds acquired by exchange of
such eligible shares). Investors do not receive credit for
shares purchased by the reinvestment of distributions. Investors
qualifying for the "combined purchase privilege" (see above) may
purchase shares under a single Statement of Intention.
The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum
initial investment under a Statement of Intention is 5% of such
amount, and must be invested immediately. Class A shares or
class M shares purchased with the first 5% of such amount will be
held in escrow to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount
indicated is not purchased. When the full amount indicated has
been purchased, the escrow will be released. If an investor
desires to redeem escrowed shares before the full amount has been
purchased, the shares will be released from escrow only if the
investor pays the sales charge that, without regard to the
Statement of Intention, would apply to the total investment made
to date.
To the extent that an investor purchases more than the dollar
amount indicated on the Statement of Intention and qualifies for
a further reduced sales charge, the sales charge will be adjusted
for the entire amount purchased at the end of the 13-month
period, upon recovery from the investor's dealer of its portion
of the sales charge adjustment. Once received from the dealer,
which may take a period of time or may never occur, the sales
charge adjustment will be used to purchase additional shares at
the then current offering price applicable to the actual amount
of the aggregate purchases. These additional shares will not be
considered as part of the total investment for the purpose of
determining the applicable sales charge pursuant to the Statement
of Intention. No sales charge adjustment will be made unless and
until the investor's dealer returns any excess commissions
previously received.
To the extent that an investor purchases less than the dollar
amount indicated on the Statement of Intention within the 13-
month period, the sales charge will be adjusted upward for the
entire amount purchased at the end of the 13-month period. This
adjustment will be made by redeeming shares from the account to
cover the additional sales charge, the proceeds of which will be
paid to the investor's dealer and Putnam Mutual Funds in
accordance with the prospectus. If the account exceeds an amount
that would otherwise qualify for a reduced sales charge, that
reduced sales charge will be applied.
Statements of Intention are not available for certain employee
benefit plans.
Statement of Intention forms may be obtained from Putnam Mutual
Funds or from investment dealers. Interested investors should
read the Statement of Intention carefully.
GROUP PURCHASES OF CLASS A AND CLASS M SHARES. Members of
qualified groups may purchase class A shares of the fund at a
group sales charge rate of 4.50% of the public offering price
(4.71% of the net amount invested). The dealer discount on such
sales is 3.75% of the offering price. Members of qualified
groups may also purchase class M shares at net asset value.
To receive the class A or class M group rate, group members must
purchase shares through a single investment dealer designated by
the group. The designated dealer must transmit each member's
initial purchase to Putnam Mutual Funds, together with payment
and completed application forms. After the initial purchase, a
member may send funds for the purchase of shares directly to
Putnam Investor Services. Purchases of shares are made at the
public offering price based on the net asset value next
determined after Putnam Mutual Funds or Putnam Investor Services
receives payment for the shares. The minimum investment
requirements described above apply to purchases by any group
member. Only shares purchased under the class A group discount
are included in calculating the purchased amount for the purposes
of these requirements.
Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or
association, or other organized groups of persons (the members of
which may include other qualified groups) provided that: (i) the
group has at least 25 members of which, with respect to the class
A discount only, at least 10 members participate in the initial
purchase; (ii) the group has been in existence for at least six
months; (iii) the group has some purpose in addition to the
purchase of investment company shares at a reduced sales charge;
(iv) the group's sole organizational nexus or connection is not
that the members are credit card holders of a company, policy
holders of an insurance company, customers of a bank or
broker-dealer, clients of an investment adviser or security
holders of a company; (v) with respect to the class A discount
only, the group agrees to provide its designated investment
dealer access to the group's membership by means of written
communication or direct presentation to the membership at a
meeting on not less frequently than an annual basis; (vi) the
group or its investment dealer will provide annual certification
in form satisfactory to Putnam Investor Services that the group
then has at least 25 members and, with respect to the class A
discount only, that at least ten members participated in group
purchases during the immediately preceding 12 calendar months;
and (vii) the group or its investment dealer will provide
periodic certification in form satisfactory to Putnam Investor
Services as to the eligibility of the purchasing members of the
group.
Members of a qualified group include: (i) any group which meets
the requirements stated above and which is a constituent member
of a qualified group; (ii) any individual purchasing for his or
her own account who is carried on the records of the group or on
the records of any constituent member of the group as being a
good standing employee, partner, member or person of like status
of the group or constituent member; or (iii) any fiduciary
purchasing shares for the account of a member of a qualified
group or a member's beneficiary. For example, a qualified group
could consist of a trade association which would have as its
members individuals, sole proprietors, partnerships and
corporations. The members of the group would then consist of the
individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, and the
corporations and their employees, as well as the trustees of
employee benefit trusts acquiring class A shares for the benefit
of any of the foregoing.
A member of a qualified group may, depending upon the value of
class A shares of the fund owned or proposed to be purchased by
the member, be entitled to purchase class A shares of the fund at
non-group sales charge rates shown in the prospectus which may be
lower than the group sales charge rate, if the member qualifies
as a person entitled to reduced non-group sales charges. Such a
group member will be entitled to purchase at the lower rate if,
at the time of purchase, the member or his or her investment
dealer furnishes sufficient information for Putnam Mutual Funds
or Putnam Investor Services to verify that the purchase qualifies
for the lower rate.
Interested groups should contact their investment dealer or
Putnam Mutual Funds. The fund reserves the right to revise the
terms of or to suspend or discontinue group sales at any time.
QUALIFIED BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS. The terms
"class A qualified benefit plan" and "class M qualified benefit
plan" mean any employer-sponsored plan or arrangement, whether or
not tax-qualified, for which Putnam Fiduciary Trust Company or
its affiliates provide recordkeeping or other services in
connection with the purchase of class A shares or class M shares,
respectively. The term "affiliated employer" means employers who
are affiliated with each other within the meaning of Section
2(a)(3)(C) of the Investment Company Act of 1940. The term
"individual account plan" means any employee benefit plan whereby
(i) class A shares are purchased through payroll deductions or
otherwise by a fiduciary or other person for the account of
participants who are employees (or their spouses) of an employer,
or of affiliated employers, and (ii) a separate investing account
is maintained in the name of such fiduciary or other person for
the account of each participant in the plan.
The table of sales charges in the prospectus applies to sales to
employer-sponsored retirement plans that are not class A
qualified benefit plans, except that the fund may sell class A
shares at net asset value to employee benefit plans, including
individual account plans, of employers or of affiliated employers
which have at least 750 employees to whom such plan is made
available, in connection with a payroll deduction system of plan
funding (or other system acceptable to Putnam Investor Services)
by which contributions or account information for plan
participation are transmitted to Putnam Investor Services by
methods acceptable to Putnam Investor Services. The fund may
also sell class A shares at net asset value to employer-sponsored
retirement plans that initially invest at least $1 million in the
fund or that have at least 200 eligible employees. In addition,
the fund may sell class M shares at net asset value to class M
qualified benefit plans.
An employer-sponsored retirement plan participating in a "multi-
fund" program approved by Putnam Mutual Funds may include amounts
invested in the other mutual funds participating in such program
for purposes of determining whether the plan may purchase class A
shares at net asset value based on the size of the purchase.
These investments will also be included for purposes of the
discount privileges and programs described above.
Additional information about qualified benefit plans and
individual account plans is available from investment dealers or
from Putnam Mutual Funds.
CONTINGENT DEFERRED SALES CHARGES; COMMISSIONS
CLASS A SHARES. Except as described below, a CDSC of 0.75%
(1.00% in the case of plans for which Putnam Mutual Funds and its
affiliates do not act as trustee or record-keeper) of the total
amount redeemed is imposed on redemptions of shares purchased by
class A qualified benefit plans if, within two years of a plan's
initial purchase of class A shares, it redeems 90% or more of its
cumulative purchases. Thereafter, such plan is no longer liable
for any CDSC. The two-year CDSC applicable to class A qualified
benefit plans for which Putnam Mutual Funds or its affiliates
serve as trustee or recordkeeper ("full service plans") is 0.50%
of the total amount redeemed, for full service plans that
initially invest at least $5 million but less than $10 million in
Putnam funds and other investments managed by Putnam Management
or its affiliates ("Putnam Assets"), and is 0.25% of the total
amount redeemed for full service plans that initially invest at
least $10 million but less than $20 million in Putnam Assets.
Class A qualified benefit plans that initially invest at least
$20 million in Putnam Assets, or whose dealer of record has, with
Putnam Mutual Funds' approval, waived its commission or agreed to
refund its commission to Putnam Mutual Funds in the event a CDSC
would otherwise be applicable, are not subject to any CDSC.
Similarly, class A shares purchased at net asset value by any
investor other than a class A qualified benefit plan, including
purchases pursuant to any Combined Purchase Privilege, Right of
Accumulation or Statement of Intention, are subject to a CDSC of
1.00% or 0.50%, respectively, if redeemed within the first or
second year after purchase, unless the dealer of record waived
its commission with Putnam Mutual Funds' approval. The class A
CDSC is imposed on the lower of the cost and the current net
asset value of the shares redeemed.
Except as described below for sales to class A qualified benefit
plans, Putnam Mutual Funds pays investment dealers of record
commissions on sales of class A shares of $1 million or more and
sales to employer-sponsored benefit plans that have at least 200
eligible employees and that are not class A qualified benefit
plans based on cumulative purchases of such shares, including
purchases pursuant to any Combined Purchase Privilege, Right of
Accumulation or Statement of Intention, during the one-year
period beginning with the date of the initial purchase at net
asset value. Each subsequent one-year measuring period for these
purposes will begin with the first net asset value purchase
following the end of the prior period. Such commissions are paid
at the rate of 1.00% of the amount under $3 million, 0.50% of the
next $47 million and 0.25% thereafter.
On sales at net asset value to a class A qualified benefit plan,
Putnam Mutual Funds pays commissions to the dealer of record at
the time of the sale on net monthly purchases at the following
rates: 1.00% of the first $1 million, 0.75% of the next $1
million, 0.50% of the next $3 million, 0.20% of the next $5
million, 0.15% of the next $10 million, 0.10% of the next $10
million and 0.05% thereafter, except that commissions on sales to
class A qualified benefit plans initially investing less than $20
million in Putnam funds and other investments managed by Putnam
Management or its affiliates pursuant to a proposal made by
Putnam Mutual Funds on or before April 15, 1997 are based on
cumulative purchases over a one-year measuring period at the rate
of 1.00% of the first $2 million, 0.80% of the next $1 million,
and 0.50% thereafter. On sales at net asset value to all other
class A qualified benefit plans receiving proposals from Putnam
Mutual Funds on or before April 15, 1997, Putnam Mutual Funds
pays commissions on the initial investment and on subsequent net
quarterly sales (gross sales minus gross redemptions during the
quarter) at the rate of 0.15%. Money market fund shares are
excluded from all commission calculations, except for determining
the amount initially invested by a qualified benefit plan.
Commissions on sales at net asset value to such plans are subject
to Putnam Mutual Funds' right to reclaim such commissions if the
shares are redeemed within two years.
Different CDSC and commission rates may apply to shares purchased
prior to December 1, 1995.
ALL SHARES. Investors who set up an Automatic Cash Withdrawal
Plan ("ACWP") for a share account (see "Plans available to
shareholders -- Automatic Cash Withdrawal Plan") may withdraw
through the ACWP up to 12% of the net asset value of the account
(calculated as set forth below) each year without incurring any
CDSC. Shares not subject to a CDSC (such as shares representing
reinvestment of distributions) will be redeemed first and will
count toward the 12% limitation. If there are insufficient
shares not subject to a CDSC, shares subject to the lowest CDSC
liability will be redeemed next until the 12% limit is reached.
The 12% figure is calculated on a pro rata basis at the time of
the first payment made pursuant to an ACWP and recalculated
thereafter on a pro rata basis at the time of each ACWP payment.
Therefore, shareholders who have chosen an ACWP based on a
percentage of the net asset value of their account of up to 12%
will be able to receive ACWP payments without incurring a CDSC.
However, shareholders who have chosen a specific dollar amount
(for example, $100 per month from a fund that pays income
distributions monthly) for their periodic ACWP payment should be
aware that the amount of that payment not subject to a CDSC may
vary over time depending on the net asset value of their account.
For example, if the net asset value of the account is $10,000 at
the time of payment, the shareholder will receive $100 free of
the CDSC (12% of $10,000 divided by 12 monthly payments).
However, if at the time of the next payment the net asset value
of the account has fallen to $9,400, the shareholder will receive
$94 free of any CDSC (12% of $9,400 divided by 12 monthly
payments) and $6 subject to the lowest applicable CDSC. This
ACWP privilege may be revised or terminated at any time.
No CDSC is imposed on shares of any class subject to a CDSC
("CDSC Shares") to the extent that the CDSC Shares redeemed (i)
are no longer subject to the holding period therefor, (ii)
resulted from reinvestment of distributions on CDSC Shares, or
(iii) were exchanged for shares of another Putnam fund, provided
that the shares acquired in such exchange or subsequent exchanges
(including shares of a Putnam money market fund) will continue to
remain subject to the CDSC, if applicable, until the applicable
holding period expires. In determining whether the CDSC applies
to each redemption of CDSC Shares, CDSC Shares not subject to a
CDSC are redeemed first.
The fund will waive any CDSC on redemptions, in the case of
individual, joint or Uniform Transfers to Minors Act accounts, in
the event of death or post-purchase disability of a shareholder,
for the purpose of paying benefits pursuant to tax-qualified
retirement plans ("Benefit Payments"), or, in the case of living
trust accounts, in the event of the death or post-purchase
disability of the settlor of the trust). Benefit payments
currently include, without limitation, (1) distributions from an
IRA due to death or disability, (2) a return of excess
contributions to an IRA or 401(k) plan, and (3) distributions
from retirement plans qualified under Section 401(a) of the Code
or from a 403(b) plan due to death, disability, retirement or
separation from service. These waivers may be changed at any
time. Additional waivers may apply to IRA accounts opened prior
to February 1, 1994.
DISTRIBUTION PLANS
If the fund or a class of shares of the fund has adopted a
distribution plan, the prospectus describes the principal
features of the plan. This SAI contains additional information
which may be of interest to investors.
Continuance of a plan is subject to annual approval by a vote of
the Trustees, including a majority of the Trustees who are not
interested persons of the fund and who have no direct or indirect
interest in the plan or related arrangements (the "Qualified
Trustees"), cast in person at a meeting called for that purpose.
All material amendments to a plan must be likewise approved by
the Trustees and the Qualified Trustees. No plan may be amended
in order to increase materially the costs which the fund may bear
for distribution pursuant to such plan without also being
approved by a majority of the outstanding voting securities of
the fund or the relevant class of the fund, as the case may be.
A plan terminates automatically in the event of its assignment
and may be terminated without penalty, at any time, by a vote of
a majority of the Qualified Trustees or by a vote of a majority
of the outstanding voting securities of the fund or the relevant
class of the fund, as the case may be.
Putnam Mutual Funds pays service fees to qualifying dealers at
the rates set forth in the prospectus, except with respect to
shares held by class A qualified benefit plans. Putnam Mutual
Funds pays service fees to the dealer of record for plans for
which Putnam Fiduciary Trust or its affiliates serve as trustee
and recordkeeper at the following annual rates (expressed as a
percentage of the average net asset value (as defined below) of
the plan's class A shares): 0.25% of the first $5 million, 0.20%
of the next $5 million, 0.15% of the next $10 million, 0.10% of
the next $30 million, and 0.05% thereafter. For class A
qualified benefit plans for which Putnam Fiduciary Trust Company
or its affiliates provide some services but do not act as trustee
and recordkeeper, Putnam Mutual Funds will pay service fees to
the dealer of record of up to 0.25% of average net assets,
depending on the level of service provided by Putnam Fiduciary
Trust Company or its affiliates, by the dealer of record, and by
third parties. Service fees are paid quarterly to the dealer of
record for that quarter.
Financial institutions receiving payments from Putnam Mutual
Funds as described above may be required to comply with various
state and federal regulatory requirements, including among others
those regulating the activities of securities brokers or dealers.
Except as otherwise agreed between Putnam Mutual Funds and a
dealer, for purposes of determining the amounts payable to
dealers for shareholder accounts for which such dealers are
designated as the dealer of record, "average net asset value"
means the product of (i) the average daily share balance in such
account(s) and (ii) the average daily net asset value of the
relevant class of shares over the quarter.
Financial institutions receiving payments from Putnam Mutual
Funds as described above may be required to comply with various
state and federal regulatory requirements, including among others
those regulating the activities of securities brokers or dealers.
INVESTOR SERVICES
SHAREHOLDER INFORMATION
Each time shareholders buy or sell shares, they will receive a
statement confirming the transaction and listing their current
share balance. (Under certain investment plans, a statement may
only be sent quarterly.) Shareholders will receive a statement
confirming reinvestment of distributions in additional fund
shares (or in shares of other Putnam funds for Dividends Plus
accounts) promptly following the quarter in which the
reinvestment occurs. To help shareholders take full advantage of
their Putnam investment, they will receive a Welcome Kit and a
periodic publication covering many topics of interest to
investors. The fund also sends annual and semiannual reports
that keep shareholders informed about its portfolio and
performance, and year-end tax information to simplify their
recordkeeping. Easy-to-read, free booklets on special subjects
such as the Exchange Privilege and IRAs are available from Putnam
Investor Services. Shareholders may call Putnam Investor
Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m.
and 7:00 p.m. Boston time for more information, including account
balances.
YOUR INVESTING ACCOUNT
The following information provides more detail concerning the
operation of a Putnam Investing Account. For further information
or assistance, investors should consult Putnam Investor Services.
Shareholders who purchase shares through a defined contribution
plan should note that not all of the services or features
described below may be available to them, and they should contact
their employer for details.
A shareholder may reinvest a cash distribution without a
front-end sales charge or without the reinvested shares being
subject to a CDSC, as the case may be, by delivering to Putnam
Investor Services the uncashed distribution check, endorsed to
the order of the fund. Putnam Investor Services must receive the
properly endorsed check within 1 year after the date of the
check.
The Investing Account also provides a way to accumulate shares of
the fund. In most cases, after an initial investment of $500, a
shareholder may send checks to Putnam Investor Services for $50
or more, made payable to the fund, to purchase additional shares
at the applicable public offering price next determined after
Putnam Investor Services receives the check. Checks must be
drawn on a U.S. bank and must be payable in U.S. dollars.
Putnam Investor Services acts as the shareholder's agent whenever
it receives instructions to carry out a transaction on the
shareholder's account. Upon receipt of instructions that shares
are to be purchased for a shareholder's account, shares will be
purchased through the investment dealer designated by the
shareholder. Shareholders may change investment dealers at any
time by written notice to Putnam Investor Services, provided the
new dealer has a sales agreement with Putnam Mutual Funds.
Shares credited to an account are transferable upon written
instructions in good order to Putnam Investor Services and may be
sold to the fund as described under "How do I sell fund shares?"
in the prospectus. Money market funds and certain other funds
will not issue share certificates. A shareholder may send to
Putnam Investor Services any certificates which have been
previously issued for safekeeping at no charge to the
shareholder.
Putnam Mutual Funds, at its expense, may provide certain
additional reports and administrative material to qualifying
institutional investors with fiduciary responsibilities to assist
these investors in discharging their responsibilities.
Institutions seeking further information about this service
should contact Putnam Mutual Funds, which may modify or terminate
this service at any time.
Putnam Investor Services may make special services available to
shareholders with investments exceeding $1,000,000. Contact
Putnam Investor Services for details.
The fund pays Putnam Investor Services' fees for maintaining
Investing Accounts.
REINSTATEMENT PRIVILEGE
An investor who has redeemed shares of the fund may reinvest
(within 1 year) the proceeds of such sale in shares of the same
class of the fund, or may be able to reinvest (within 1 year) the
proceeds in shares of the same class of one of the other
continuously offered Putnam funds (through the exchange privilege
described in the prospectus), including, in the case of shares
subject to a CDSC, the amount of CDSC charged on the redemption.
Any such reinvestment would be at the net asset value of the
shares of the fund(s) the investor selects, next determined after
Putnam Mutual Funds receives a Reinstatement Authorization. The
time that the previous investment was held will be included in
determining any applicable CDSC due upon redemptions and, in the
case of class B shares, the eight-year period for conversion to
class A shares. Shareholders will receive from Putnam Mutual
Funds the amount of any CDSC paid at the time of redemption as
part of the reinstated investment, which may be treated as
capital gains to the shareholder for tax purposes. Exercise of
the Reinstatement Privilege does not alter the federal income tax
treatment of any capital gains realized on a sale of fund shares,
but to the extent that any shares are sold at a loss and the
proceeds are reinvested in shares of the fund, some or all of the
loss may be disallowed as a deduction. Consult your tax adviser.
Investors who desire to exercise the Reinstatement Privilege
should contact their investment dealer or Putnam Investor
Services.
EXCHANGE PRIVILEGE
Except as otherwise set forth in this section, by calling Putnam
Investor Services, investors may exchange shares valued up to
$500,000 between accounts with identical registrations, provided
that no certificates are outstanding for such shares and no
address change has been made within the preceding 15 days.
During periods of unusual market changes and shareholder
activity, shareholders may experience delays in contacting Putnam
Investor Services by telephone to exercise the Telephone Exchange
Privilege.
Putnam Investor Services also makes exchanges promptly after
receiving a properly completed Exchange Authorization Form and,
if issued, share certificates. If the shareholder is a
corporation, partnership, agent, or surviving joint owner, Putnam
Investor Services will require additional documentation of a
customary nature. Because an exchange of shares involves the
redemption of fund shares and reinvestment of the proceeds in
shares of another Putnam fund, completion of an exchange may be
delayed under unusual circumstances if the fund were to suspend
redemptions or postpone payment for the fund shares being
exchanged, in accordance with federal securities laws. Exchange
Authorization Forms and prospectuses of the other Putnam funds
are available from Putnam Mutual Funds or investment dealers
having sales contracts with Putnam Mutual Funds. The prospectus
of each fund describes its investment objective(s) and policies,
and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
Shares of certain Putnam funds are not available to residents of
all states. The fund reserves the right to change or suspend the
Exchange Privilege at any time. Shareholders would be notified
of any change or suspension. Additional information is available
from Putnam Investor Services.
Shareholders of other Putnam funds may also exchange their shares
at net asset value for shares of the fund, as set forth in the
current prospectus of each fund.
For federal income tax purposes, an exchange is a sale on which
the investor generally will realize a capital gain or loss
depending on whether the net asset value at the time of the
exchange is more or less than the investor's basis. The Exchange
Privilege may be revised or terminated at any time. Shareholders
would be notified of any such change or suspension.
DIVIDENDS PLUS
Shareholders may invest the fund's distributions of net
investment income or distributions combining net investment
income and short-term capital gains in shares of the same class
of another continuously offered Putnam fund (the "receiving
fund") using the net asset value per share of the receiving fund
determined on the date the fund's distribution is payable. No
sales charge or CDSC will apply to the purchased shares unless
the fund paying the distribution is a money market fund. The
prospectus of each fund describes its investment objective(s) and
policies, and shareholders should obtain a prospectus and
consider these objective(s) and policies carefully before
investing their distributions in the receiving fund. Shares of
certain Putnam funds are not available to residents of all
states.
The minimum account size requirement for the receiving fund will
not apply if the current value of your account in the fund paying
the distribution is more than $5,000.
Shareholders of other Putnam funds (except for money market
funds, whose shareholders must pay a sales charge or become
subject to a CDSC) may also use their distributions to purchase
shares of the fund at net asset value.
For federal tax purposes, distributions from the fund which are
reinvested in another fund are treated as paid by the fund to the
shareholder and invested by the shareholder in the receiving fund
and thus, to the extent comprised of taxable income and deemed
paid to a taxable shareholder, are taxable.
The Dividends PLUS program may be revised or terminated at any
time.
PLANS AVAILABLE TO SHAREHOLDERS
The plans described below are fully voluntary and may be
terminated at any time without the imposition by the fund or
Putnam Investor Services of any penalty. All plans provide for
automatic reinvestment of all distributions in additional shares
of the fund at net asset value. The fund, Putnam Mutual Funds or
Putnam Investor Services may modify or cease offering these plans
at any time.
AUTOMATIC CASH WITHDRAWAL PLAN ("ACWP"). An investor who owns or
buys shares of the fund valued at $10,000 or more at the current
public offering price may open an ACWP plan and have a designated
sum of money ($50 or more) paid monthly, quarterly, semi-annually
or annually to the investor or another person. (Payments from
the fund can be combined with payments from other Putnam funds
into a single check through a designated payment plan.) Shares
are deposited in a plan account, and all distributions are
reinvested in additional shares of the fund at net asset value
(except where the plan is utilized in connection with a
charitable remainder trust). Shares in a plan account are then
redeemed at net asset value to make each withdrawal payment.
Payment will be made to any person the investor designates;
however, if shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary,
except in the case of a profit-sharing or pension plan where
payment will be made to a designee. As withdrawal payments may
include a return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor.
The redemption of shares in connection with a plan generally will
result in a gain or loss for tax purposes. Some or all of the
losses realized upon redemption may be disallowed pursuant to the
so-called wash sale rules if shares of the same fund from which
shares were redeemed are purchased (including through the
reinvestment of fund distributions) within a period beginning 30
days before, and ending 30 days after, such redemption. In such
a case, the basis of the replacement shares will be increased to
reflect the disallowed loss. Continued withdrawals in excess of
income will reduce and possibly exhaust invested principal,
especially in the event of a market decline. The maintenance of
a plan concurrently with purchases of additional shares of the
fund would be disadvantageous to the investor because of the
sales charge payable on such purchases. For this reason, the
minimum investment accepted while a plan is in effect is $1,000,
and an investor may not maintain a plan for the accumulation of
shares of the fund (other than through reinvestment of
distributions) and a plan at the same time. The cost of
administering these plans for the benefit of those shareholders
participating in them is borne by the fund as an expense of all
shareholders. The fund, Putnam Mutual Funds or Putnam Investor
Services may terminate or change the terms of the plan at any
time. A plan will be terminated if communications mailed to the
shareholder are returned as undeliverable.
Investors should consider carefully with their own financial
advisers whether the plan and the specified amounts to be
withdrawn are appropriate in their circumstances. The fund and
Putnam Investor Services make no recommendations or
representations in this regard.
TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS. (NOT
OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-EXEMPT SECURITIES.)
Investors may purchase shares of the fund through the following
Tax Qualified Retirement Plans, available to qualified
individuals or organizations:
Standard and variable profit-sharing (including 401(k))
and money purchase pension plans; and
Individual Retirement Account Plans (IRAs).
Each of these Plans has been qualified as a prototype plan by the
Internal Revenue Service. Putnam Investor Services will furnish
services under each plan at a specified annual cost. Putnam
Fiduciary Trust Company serves as trustee under each of these
Plans.
Forms and further information on these Plans are available from
investment dealers or from Putnam Mutual Funds. In addition,
specialized professional plan administration services are
available on an optional basis; contact Putnam Defined
Contribution Plan Services at 1-800-225-2465, extension 8600.
A 403(b) Retirement Plan is available for employees of public
school systems and organizations which meet the requirements of
Section 501(c)(3) of the Internal Revenue Code. Forms and
further information on the 403(b) Plan are also available from
investment dealers or from Putnam Mutual Funds. Shares of the
fund may also be used in simplified employee pension (SEP) plans.
For further information on the Putnam prototype SEP plan, contact
an investment dealer or Putnam Mutual Funds.
Consultation with a competent financial and tax adviser regarding
these Plans and consideration of the suitability of fund shares
as an investment under the Employee Retirement Income Security
Act of 1974, or otherwise, is recommended.
SIGNATURE GUARANTEES
Redemption requests for shares having a net asset value of
$100,000 or more must be signed by the registered owners or their
legal representatives and must be guaranteed by a bank,
broker/dealer, municipal securities dealer or broker, government
securities dealer or broker, credit union, national securities
exchange, registered securities association, clearing agency,
savings association or trust company, provided such institution
is acceptable under and conforms with Putnam Fiduciary Trust
Company's signature guarantee procedures. A copy of such
procedures is available upon request. If you want your
redemption proceeds sent to an address other than your address as
it appears on Putnam's records, you must provide a signature
guarantee. Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
SUSPENSION OF REDEMPTIONS
The fund may not suspend shareholders' right of redemption, or
postpone payment for more than seven days, unless the 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.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the fund. However, the Agreement and Declaration of Trust
disclaims shareholder liability for acts or obligations of the
fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the fund or the Trustees. The Agreement and Declaration of Trust
provides for indemnification out of fund property for all loss
and expense of any shareholder held personally liable for the
obligations of the fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the fund would be unable to
meet its obligations. The likelihood of such circumstances is
remote.
STANDARD PERFORMANCE MEASURES
Yield and total return data for the fund may from time to time be
presented in Part I of this SAI and in advertisements. In the
case of funds with more than one class of shares, all performance
information is calculated separately for each class. The data is
calculated as follows.
Total return for one-, five- and ten-year periods (or for such
shorter periods as the fund has been in operation or shares of
the relevant class have been outstanding) is determined by
calculating the actual dollar amount of investment return on a
$1,000 investment in the fund made at the beginning of the
period, at the maximum public offering price for class A shares
and class M shares and net asset value for other classes of
shares, and then calculating the annual compounded rate of return
which would produce that amount. Total return for a period of
one year is equal to the actual return of the fund during that
period. Total return calculations assume deduction of the fund's
maximum sales charge or CDSC, if applicable, and reinvestment of
all fund distributions at net asset value on their respective
reinvestment dates.
The fund's yield is presented for a specified thirty-day period
(the "base period"). Yield is based on the amount determined by
(i) calculating the aggregate amount of dividends and interest
earned by the fund during the base period less expenses for that
period, and (ii) dividing that amount by the product of (A) the
average daily number of shares of the fund outstanding during the
base period and entitled to receive dividends and (B) the per
share maximum public offering price for class A shares or class M
shares, as appropriate, and net asset value for other classes of
shares on the last day of the base period. The result is
annualized on a compounding basis to determine the yield. For
this calculation, interest earned on debt obligations held by the
fund is generally calculated using the yield to maturity (or
first expected call date) of such obligations based on their
market values (or, in the case of receivables-backed securities
such as the Government National Mortgage Association ("GNMAs"),
based on cost). Dividends on equity securities are accrued daily
at their stated dividend rates. The amount of expenses used in
determining the fund's yield includes, in addition to expenses
actually accrued by the fund, an estimate of the amount of
expenses that the fund would have incurred if brokerage
commissions had not been used to reduce such expenses.
If the fund is a money market fund, yield is computed by
determining the percentage net change, excluding capital changes,
in the value of an investment in one share over the seven-day
period for which yield is presented (the "base period"), and
multiplying the net change by 365/7 (or approximately 52 weeks).
Effective yield represents a compounding of the yield by adding 1
to the number representing the percentage change in value of the
investment during the base period, raising that sum to a power
equal to 365/7, and subtracting 1 from the result.
If the fund is a tax-exempt fund, the tax-equivalent yield during
the base period may be presented for shareholders in one or more
stated tax brackets. Tax-equivalent yield is calculated by
adjusting the tax-exempt yield by a factor designed to show the
approximate yield that a taxable investment would have to earn to
produce an after-tax yield equal, for that shareholder, to the
tax-exempt yield. The tax-equivalent yield will differ for
shareholders in other tax brackets.
At times, Putnam Management may reduce its compensation or assume
expenses of the fund in order to reduce the fund's expenses. The
per share amount of any such fee reduction or assumption of
expenses during the fund's past five fiscal years (or for the
life of the fund, if shorter) is set forth in the footnotes to
the table in the section entitled "Financial highlights" in the
prospectus. Any such fee reduction or assumption of expenses
would increase the fund's yield and total return for periods
including the period of the fee reduction or assumption of
expenses.
All data are based on past performance and do not predict future
results.
COMPARISON OF PORTFOLIO PERFORMANCE
Independent statistical agencies measure the fund's investment
performance and publish comparative information showing how the
fund, and other investment companies, performed in specified time
periods. Three agencies whose reports are commonly used for such
comparisons are set forth below. From time to time, the fund may
distribute these comparisons to its shareholders or to potential
investors. THE AGENCIES LISTED BELOW MEASURE PERFORMANCE BASED
ON THEIR OWN CRITERIA RATHER THAN ON THE STANDARDIZED PERFORMANCE
MEASURES DESCRIBED IN THE PRECEDING SECTION.
LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund
rankings monthly. The rankings are based on total return
performance calculated by Lipper, generally reflecting
changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a
variety of performance periods, including year-to-date,
1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset
category.
MORNINGSTAR, INC. distributes mutual fund ratings twice a
month. The ratings are divided into five groups:
highest, above average, neutral, below average and lowest.
They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as
determined by Morningstar, Inc. Morningstar ratings cover
a variety of performance periods, including 1-year, 3-
year, 5-year, 10-year and overall performance. The
performance factor for the overall rating is a
weighted-average assessment of the fund's 1-year, 3-year,
5-year, and 10-year total return performance (if
available) reflecting deduction of expenses and sales
charges. Performance is adjusted using quantitative
techniques to reflect the risk profile of the fund. The
ratings are derived from a purely quantitative system that
does not utilize the subjective criteria customarily
employed by rating agencies such as Standard & Poor's and
Moody's Investor Service, Inc.
CDA/WIESENBERGER'S MANAGEMENT RESULTS publishes mutual
fund rankings and is distributed monthly. The rankings
are based entirely on total return calculated by
Weisenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year. Mutual funds are ranked in
general categories (e.g., international bond,
international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of
sales charges or fees.
Independent publications may also evaluate the fund's
performance. The fund may from time to time refer to results
published in various periodicals, including Barrons, Financial
World, Forbes, Fortune, Investor's Business Daily, Kiplinger's
Personal Finance Magazine, Money, U.S. News and World Report and
The Wall Street Journal.
Independent, unmanaged indexes, such as those listed below, may
be used to present a comparative benchmark of fund performance.
The performance figures of an index reflect changes in market
prices, reinvestment of all dividend and interest payments and,
where applicable, deduction of foreign withholding taxes, and do
not take into account brokerage commissions or other costs.
Because the fund is a managed portfolio, the securities it owns
will not match those in an index. Securities in an index may
change from time to time.
THE CONSUMER PRICE INDEX, prepared by the U.S. Bureau of
Labor Statistics, is a commonly used measure of the rate
of inflation. The index shows the average change in the
cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
THE DOW JONES INDUSTRIAL AVERAGE is an index of 30 common
stocks frequently used as a general measure of stock
market performance.
THE DOW JONES UTILITIES AVERAGE is an index of 15 utility
stocks frequently used as a general measure of stock
market performance.
CS FIRST BOSTON HIGH YIELD INDEX is a market-weighted
index including publicly traded bonds having a rating
below BBB by Standard & Poor's and Baa by Moody's.
THE LEHMAN BROTHERS AGGREGATE BOND INDEX is an index
composed of securities from The Lehman Brothers
Government/Corporate Bond Index, The Lehman Brothers
Mortgage-Backed Securities Index and The Lehman Brothers
Asset-Backed Securities Index and is frequently used as a
broad market measure for fixed-income securities.
THE LEHMAN BROTHERS ASSET-BACKED SECURITIES INDEX is an
index composed of credit card, auto, and home equity
loans. Included in the index are pass-through, bullet
(noncallable), and controlled amortization structured debt
securities; no subordinated debt is included. All
securities have an average life of at least one year.
THE LEHMAN BROTHERS CORPORATE BOND INDEX is an index of
publicly issued, fixed-rate, non-convertible
investment-grade domestic corporate debt securities
frequently used as a general measure of the performance of
fixed-income securities.
THE LEHMAN BROTHERS GOVERNMENT/CORPORATE BOND INDEX is an
index of publicly issued U.S. Treasury obligations, debt
obligations of U.S. government agencies (excluding
mortgage-backed securities), fixed-rate, non-convertible,
investment-grade corporate debt securities and U.S.
dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international
agencies used as a general measure of the performance of
fixed-income securities.
THE LEHMAN BROTHERS INTERMEDIATE TREASURY BOND INDEX is an
index of publicly issued U.S. Treasury obligations with
maturities of up to ten years and is used as a general
gauge of the market for intermediate-term fixed-income
securities.
THE LEHMAN BROTHERS LONG-TERM TREASURY BOND INDEX is an
index of publicly issued U.S. Treasury obligations
(excluding flower bonds and foreign-targeted issues) that
are U.S. dollar-denominated and have maturities of 10
years or greater.
THE LEHMAN BROTHERS MORTGAGE-BACKED SECURITIES INDEX
includes 15- and 30-year fixed rate securities backed by
mortgage pools of the Government National Mortgage
Association, Federal Home Loan Mortgage Corporation, and
Federal National Mortgage Association.
THE LEHMAN BROTHERS MUNICIPAL BOND INDEX is an index of
approximately 20,000 investment-grade, fixed-rate
tax-exempt bonds.
THE LEHMAN BROTHERS TREASURY BOND INDEX is an index of
publicly issued U.S. Treasury obligations (excluding
flower bonds and foreign-targeted issues) that are U.S.
dollar denominated, have a minimum of one year to
maturity, and are issued in amounts over $100 million.
THE MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX is an
index of approximately 1,482 equity securities listed on
the stock exchanges of the United States, Europe, Canada,
Australia, New Zealand and the Far East, with all values
expressed in U.S. dollars.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EMERGING MARKETS
INDEX is an index of approximately 1,100 securities
representing 20 emerging markets, with all values
expressed in U.S. dollars.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EAFE INDEX is an
index of approximately 1,045 equity securities issued by
companies located in 18 countries and listed on the stock
exchanges of Europe, Australia, and the Far East. All
values are expressed in U.S. dollars.
THE MORGAN STANLEY CAPITAL INTERNATIONAL EUROPE INDEX is
an index of approximately 627 equity securities issued by
companies located in one of 13 European countries, with
all values expressed in U.S. dollars.
THE MORGAN STANLEY CAPITAL INTERNATIONAL PACIFIC INDEX is
an index of approximately 418 equity securities issued by
companies located in 5 countries and listed on the
exchanges of Australia, New Zealand, Japan, Hong Kong,
Singapore/Malaysia. All values are expressed in U.S.
dollars.
THE NASDAQ INDUSTRIAL AVERAGE is an index of stocks traded
in The Nasdaq Stock Market, Inc. National Market System.
THE RUSSELL 2000 INDEX is composed of the 2,000 smallest
companies in the Russell 3000 Index, representing
approximately 11% of the Russell 3000 total market
capitalization. The Russell 3000 Index is composed of
the 3,000 largest U.S. companies ranked by
total market capitalization, representing approximately
98% of the U.S. investable equity market.
THE RUSSELL MIDCAP INDEXis composed of the 800 smallest
companies in the Russell 1000 Index, representing
approximately 35% of the Russell 1000 total market
capitalization. The Russell 1000 Index is composed of the
1,000 largest companies in the Russell 3000 Index, which
represents approximately 89% of the market capitalization
of the Russell 3000 Index.
THE RUSSELL MIDCAP GROWTH INDEXis composed of securities
with greater-than-average growth orientation within the
Russell Midcap Index. Each security ' s growth
orientation is determined by a composite score of the
security ' s price-to-book ratio and forecasted
growth rate. Growth stocks tend to have a higher price-to-
book ratios and forecasted growth rates than value stocks.
This index is composed of approximately 450 companies from
the Russell 1000 Growth Index, representing 20% of the
total market capitalization of the Russell 1000 Growth
Index.
THE SALOMON BROTHERS LONG-TERM HIGH-GRADE CORPORATE BOND
INDEX is an index of publicly traded corporate bonds
having a rating of at least AA by Standard & Poor's or Aa
by Moody's and is frequently used as a general measure of
the performance of fixed-income securities.
THE SALOMON BROTHERS LONG-TERM TREASURY INDEX is an index
of U.S. government securities with maturities greater than
10 years.
THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX is an
index that tracks the performance of the 14 government
bond markets of Australia, Austria, Belgium Canada,
Denmark, France, Germany, Italy, Japan, Netherlands,
Spain, Sweden, United Kingdom and the United States.
Country eligibility is determined by market capitalization
and investability criteria.
THE SALOMON BROTHERS WORLD GOVERNMENT BOND INDEX (non
$U.S.) is an index of foreign government bonds calculated
to provide a measure of performance in the government bond
markets outside of the United States.
STANDARD & POOR'S 500 COMPOSITE STOCK PRICE INDEX is an
index of common stocks frequently used as a general
measure of stock market performance.
STANDARD & POOR'S 40 UTILITIES INDEX is an index of 40
utility stocks.
STANDARD & POOR'S/BARRA VALUE INDEX is an index
constructed by ranking the securities in the Standard &
Poor's 500 Composite Stock Price Index by price-to-book
ratio and including the securities with the lowest price-
to-book ratios that represent approximately half of the
market capitalization of the Standard & Poor's 500
Composite Stock Price Index.
In addition, Putnam Mutual Funds may distribute to shareholders
or prospective investors illustrations of the benefits of
reinvesting tax-exempt or tax-deferred distributions over
specified time periods, which may include comparisons to fully
taxable distributions. These illustrations use hypothetical
rates of tax-advantaged and taxable returns and are not intended
to indicate the past or future performance of any fund.
SECURITIES RATINGS
THE FOLLOWING RATING SERVICES DESCRIBE RATED SECURITIES AS
FOLLOWS:
MOODY'S INVESTORS SERVICE, INC.
BONDS
AAA -- Bonds which are rated AAA are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged." Interest payments are
protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most
unlikely to impair the fundamentally strong position of such
issues.
AA -- Bonds which are rated AA are judged to be of high quality
by all standards. Together with the AAA group they comprise what
are generally known as high grade bonds. They are rated lower
than the best bonds because margins of protection may not be as
large as in AAA securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements
present which make the long-term risk appear somewhat larger than
the AAA securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present which
suggest a susceptibility to impairment sometime in the future.
BAA -- Bonds which are rated BAA are considered as medium grade
obligations, (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
BA -- Bonds which are rated BA are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate, and thereby not well safeguarded during both good
and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
CAA -- Bonds which are rated CAA are of poor standing. Such
issues may be in default or there may be present elements of
danger with respect to principal or interest.
CA -- Bonds which are rated CA represent obligations which are
speculative in a high degree. Such issues are often in default
or have other marked shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds,
and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.
NOTES (FOR MONEY MARKET FUNDS ONLY)
MIG 1/VMIG 1 -- This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins
of protection are ample although not so large as in the preceding
group.
COMMERCIAL PAPER (FOR MONEY MARKET FUNDS ONLY)
Issuers rated PRIME-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced
by the following characteristics:
- -- Leading market positions in well established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- -- Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- -- Well established access to a range of financial markets
and assured sources of alternate liquidity.
Issuers rated PRIME-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
STANDARD & POOR'S
BONDS
AAA -- An obligation rated AAA has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial
commitment on the obligation is extremely strong.
AA -- An obligation rated AA differs from the highest-rated
obligations only in small degree. The obligor's capacity to meet
its financial commitment on the obligation is very strong.
A -- An obligation rated A is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than obligations in higher-rated categories. However,
the obligor's capacity to meet its financial commitment on the
obligation is still strong.
BBB -- An obligation rated BBB exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.
Obligations rated BB, B, CCC, CC and C are regarded as having
significant speculative characteristics. BB indicates the lowest
degree of speculation and C the highest. While such obligations
will likely have some quality and protective characteristics,
these are outweighed by large uncertainties or major exposures to
adverse conditions.
BB -- An obligation rated BB is less vulnerable to nonpayment
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to the obligor's inadequate
capacity to meet its financial commitment on the obligation.
B -- An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity
to meet its financial commitment on the obligations. Adverse
business, financial, or economic conditions will likely impair
the obligor's capacity or willingness to meet its financial
commitment on the obligation.
CCC -- An obligation rated CCC is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial
commitment on the obligation. In the event of adverse business,
financial, or economic conditions, the obligor is not likely to
have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated CC is currently highly vulnerable to
nonpayment.
C -- The C rating may be used to cover a situation where a
bankruptcy petition has been filed, or similar action has been
taken, but payments on this obligation are being continued.
D -- An obligation rated D is in payment default. The D rating
category is used when interest payments or principal payments are
not made on the date due even if the applicable grace period has
not expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition, or the taking of a
similar action if payments on an obligation are jeopardized.
NOTES (FOR MONEY MARKET FUNDS ONLY)
SP-1 -- Strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics
are given a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
SP-3 -- Speculative capacity to pay principal and interest.
COMMERCIAL PAPER (FOR MONEY MARKET FUNDS ONLY)
A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated `A-1'.
A-3 -- Issues carrying this designation have adequate capacity
for timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
DUFF & PHELPS CORPORATION
LONG-TERM DEBT
AAA -- Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- -- High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A+, A, A- -- Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
BBB+, BBB, BBB- -- Below-average protection factors but still
considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.
B+, B, B- -- Below investment grade and possessing risk that
obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a
higher or lower rating grade.
CCC -- Well below investment-grade securities. Considerable
uncertainty exists as to timely payment of principal, interest or
preferred dividends. Protection factors are narrow and risk can
be substantial with unfavorable economic/industry conditions,
and/or with unfavorable company developments.
DD -- Defaulted debt obligations. Issuer failed to meet
scheduled principal and/or interest payments.
FITCH INVESTORS SERVICE, INC.
AAA -- Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
AA -- Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated AAA.
A -- Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB -- Bonds considered to be speculative. The obligor's ability
to pay interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in
satisfying its debt service requirements.
B -- Bonds are considered highly speculative. Bonds in this class
are lightly protected as to the obligor's ability to pay interest
over the life of the issue and repay principal when due.
CCC -- Bonds have certain characteristics which, with passing of
time, could lead to the possibility of default on either
principal or interest payments.
CC -- Bonds are minimally protected. Default in payment of
interest and/or principal seems probable.
C -- Bonds are in actual or imminent default in payment of
interest or principal.
DDD -- Bonds are in default and in arrears in interest and/or
principal payments. Such bonds are extremely speculative and
should be valued only on the basis of their value in liquidation
or reorganization of the obligor.
DEFINITIONS
"Putnam Management" -- Putnam Investment
Management, Inc., the fund's
investment manager.
"Putnam Mutual Funds" -- Putnam Mutual Funds Corp.,
the fund's principal
underwriter.
"Putnam Fiduciary Trust -- Putnam Fiduciary Trust
Company,
Company" the fund's custodian.
"Putnam Investor Services" -- Putnam Investor Services, a
division of Putnam Fiduciary
Trust Company, the fund's
investor servicing agent.
PUTNAM EUROPE GROWTH FUND
FORM N-1A
PART C[/R]
OTHER INFORMATION
ITEM 23. EXHIBITS
1. Amended and Restated Agreement and Declaration of Trust dated
April 11, 1990, as amended July 13, 1990 -- Incorporated by reference to
Post-Effective Amendment No. 2 to the Registrant's Registration Statement.
2. By-Laws, as amended through February 1, 1994 -- Incorporated by reference
to Post-Effective Amendment No. 5 to the Registrant's Registration Statement.
3a. Portions of Agreement and Declaration of Trust Relating to
Shareholders' Rights -- Incorporated by reference to Post-Effective
Amendment No. 4 to the Registrant's Registration Statement.
3b. Portions of By-Laws Relating to Shareholders' Rights -- Incorporated by
reference to Post-Effective Amendment No. 5 to the Registrant's Registration
Statement.
4. Management Contract dated October 21, 1996 -- Incorporated by reference
to Post-Effective Amendment No. 7 to the Registrant's Registration Statement.
5a. Distributor's Contract dated May 6, 1994 -- Incorporated by reference
to Post-Effective Amendment No. 5 to the Registrant's Registration Statement.
5b. Form of Specimen Dealer Sales Contract - - Exhibit 1.
5c. Form of Specimen Financial Institution Sales
Contract - - Exhibit 2.
6. Trustee Retirement Plan dated October 4, 1996 - -Incorporated by
reference to Post-Effective Amendment No. 7 to the Registrant ' s
Registration Statement.
7. Custodian Agreement with Putnam Fiduciary Trust Company dated
May 3, 1991, as amended July 13, 1992 -- Incorporated by reference to
Post-Effective Amendment No. 5 to the Registrant's Registration Statement.
8. Investor Servicing Agreement dated June 3, 1991 with Putnam Fiduciary
Trust Company -- Incorporated by reference to Post-Effective Amendment No. 2
to the Registrant's Registration Statement.
9. Opinion of Ropes & Gray, including consent --Incorporated by reference
to Pre-Effective Amendment No. 2 to the Registrant's Registration Statement.
10. Not applicable.
11. Not applicable.
12. Investment Letter from Putnam Financial Services, Inc. to the
Registrant for Class A shares -- Incorporated by reference to Pre-Effective
Amendment No. 2 to the Registrant's Registration Statement.
13a. Class A Distribution Plan and Agreement dated July 13, 1990, as
amended, February 1, 1994 -- Incorporated by reference to Post-Effective
Amendment No. 5 to the Registrant's Registration Statement.
13b. Class B Distribution Plan and Agreement dated February 1, 1994 --
Incorporated by reference to Post-Effective Amendment No. 5 to the
Registrant's Registration Statement.
13c. Class M Distribution Plan and Agreement -- Incorporated by reference
to Post-Effective Amendment No. 6 to the Registrant's Registration Statement.
13d. Form of Specimen Dealer Service Agreement -- Exhibit 3.
13e. Form of Specimen Financial Institution Service Agreement -- Exhibit 4.
14a. Financial Data Schedule for Class A shares -- Exhibit 5.
14b. Financial Data Schedule for Class B shares -- Exhibit 6.
14c. Financial Data Schedule for Class M shares -- Exhibit 7.
15. Rule 18f-3(d) Plan - Incorporated by reference to
Post-Effective Amendment No. 6 to the Registrant ' s Registration
Statement.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND
None.
ITEM 25. INDEMNIFICATION
The information required by this item is incorporated herein by reference to
the Registrant's Initial Registration Statement on Form N-1A under the
Investment Company Act of 1940 (File No. 811-5693).
ITEM 26 AND 27.
<PAGE>
6/17/1998
TEM 26 . BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
<TABLE>
<CAPTION>
Except as set forth below, the directors and officers of the Registrant's
investment adviser have been engaged during the past two fiscal years in no
business, vocation or employment of a substantial nature other than as directors
or officers of the investment adviser or certain of its corporate affiliates.
Certain officers of the investment adviser serve as officers of some or all of
the Putnam funds. The address of the investment adviser, its corporate
affiliates and the Putnam Funds is One Post Office Square, Boston, Massachusetts
02109.
NON - PUTNAM BUSINESS AND OTHER
NAME CONNECTIONS
<S> <C>
Michael J. Abata Prior to May, 1997, Assistant Vice President,
Alliance Capital
Assistant Vice President Management Corp., 1345 Avenue of the
Americas, New York, NY 10020
Barry R. Allen Prior to December, 1997, Analyst/Director of
Research,
Vice President Harbor Capital Management, 125 High St.,
Boston, MA 02110
Jennifer Antill Prior to November, 1996, Director, IAI
International/Hill
Managing Director Samuel Investment Advisors, 10 Fleet Place,
London, England
Nikesh Arora Prior to April, 1997, Chief Financial Officer,
Fidelity
Vice President Fidelity Investments, 82 Devonshire St.,
Boston, MA 02110
Michael Arends Prior to May, 1997, Managing Director, Equities,
Phoenix
Senior Vice President Duff & Phelps, 56 Prospect St., Hartford, CT
06101
Michael J. Atkin Prior to July, 1997, Director of Latin America
Institute
Senior Vice President of International Finance, 2000 Pennsylvania Avenue,
Washington, D.C. 20006
Jeffrey B. Augustine Prior to January, 1998, Vice President, Investment
Consulting,
Senior Vice President Investor Tools, Inc., 100 Bridge St. Plaza,
Yorkville, IL 60560. Prior to April, 1996,
Consultant, 110 Aletha Rd., Needham, MA 02192.
Rowland T. Bankes Prior to July, 1997, Senior Fixed-Income Trader,
Jennison,
Vice President Jennison Associates Capital Corp., One
Financial Center, Boston, MA 02110
Robert R. Beck Director, Charles Bridge Publishing, 85 Main St.,
Watertown,
Senior Vice President MA 02172
Carl D. Bell Prior to January,
1998, Principal,
Smith Breedon
Association,
Vice President 100 Europa
Drive, Suite 200,
Chapel Hill, NC
27514
Geoffrey C. Blaisdell Prior to October, 1997, Vice President, Blackrock
Financial
Senior Vice President Financial, 345 Park Avenue, New York, NY 10010
Jeffrey M. Bray Prior to October, 1997, Analyst, Lehman Brothers, 3
World
Vice President Financial Center, New York, NY 10285
David J. Buckle Prior to March, 1998, Vice President, J.P. Morgan
Investment
Vice President Management, 28 King St., London, England SW1
YXA
Ronald J. Bukovac Prior to October, 1997, Senior Manager, Valuation,
Price
Vice President Waterhouse, 200 E. Randolph Drive, Chicago, IL
60601
Robert W. Burke Member-Executive Committee, The Ridge Club, Country
Club Road,
Senior Managing Director Sandwich, MA 02563; Member-Advisory Board,
Cathedral High
School, 74 Union Park St., So. Boston, MA 02118
Jack P. Chang Prior to July, 1997, Vice President, Columbia
Management
Vice President Company, 1300 S.W. 6th Ave., Portland, OR
97207
Mary Claire Chase Prior to January, 1997, Director of Staff
Development,
Vice President Arthur D. Little Co., 25 Acorn Park,
Cambridge, MA 02140
James E. Corning Prior to October, 1996, Assistant Vice President of
Plan
Vice President Investments at State Street Bank & Trust, 1776
Heritage Dr., Quincy, MA 02171
C. Beth Cotner Director, The Lyric Stage Theater, 140 Clarendon St.,
Senior Vice President Boston, MA
Kevin M. Cronin Prior February, 1997, Vice President and Portfolio
Manager,
Managing Director MFS Investment Management, 500 Boylston St.,
Boston, MA 02117
William J. Curtin Prior to August, 1996, Managing Director, Chief
Global Fixed-
Managing Director Income Strategist, Lehman Brothers, 3 World
Financial Center, New York, NY 10285
Michael W. Davis Prior to August, 1997, Technical Finance Consultant,
Bank of
Vice President America Mortgage, 50 California St., San
Francisco, CA 94111
Edwin M. Denson Prior to November, 1997, Vice President and Senior
Economist
Vice President Primark Decision Economics, 260 Franklin St.,
Boston, MA 02110; Prior to August, 1996, Senior
Economist, Lehman Brothers, Inc. 260 Franklin St.,
Boston, MA 02110
Ralph C. Derbyshire Prior to November, 1997, Partner, Palmer & Dodge,
One Beacon
Senior Vice President Street, Boston, MA 02108
Michael G. Dolan Chairman-Finance Council, St. Mary's Parish, 44
Myrtle St.,
Assistant Vice President Melrose, MA 02176; Member, School Advisory Board,
St. Mary's
School, 44 Myrtle St., Melrose, MA 02176
Martha A. Donovan Prior to July, 1996, Assistant Treasurer, CBS Inc.,
Vice President 51 W. 52nd St., New York, NY 10020
Mark E. Dow Prior to November, 1997, Economist, International
Monetary
Vice President Fund, Washington, DC
Nathan Eigerman Prior to July, 1996, Quantitative Analyst, Fidelity
Management
Vice President & Research, 82 Devonshire St., Boston, MA
02110
Irene M. Esteves Prior to January, 1997,
Vice President, Miller
Brewing Co.,
Managing Director 3939 West Highland Blvd. Milwaukee, WI 53201
Edward R. Finch Prior to December, 1997, Managing Director, M.A.
Weatherbie
Vice President & Co., 265 Franklin St., Boston, MA 02110
Kate Fleisher Prior to January, 1998, Director of Human
Resources, Laura
Vice President Ashley, 6 St. James Ave, Suite 410, Boston, MA
02116
J. Peter Grant Trustee, The Dover Church, Dover, MA, 02030
Senior Vice President
Patrice Graviere Prior to March, 1998, Regional Director for Latin
America,
Senior Vice President MFS International, LTD, Buenos Aires, Brazil
Donnalee Guerin Prior to September, 1996, Corporate Service Manager,
Assistant Vice President Haemonetics Corp., 400 Wood Rd., Braintree, MA
02184.
Paul E. Haagensen Director, Haagensen Research Foundation, 630 West
168th St.,
Senior Vice President New York, NY 10032
James B. Haines Prior to February, 1997, Associate, Benefit
Department
Assistant Vice President Ropes & Gray, One International Place, Boston,
MA 02110
Mary S. Hapij Prior to March, 1997, Research Library Manager,
Pioneering
Assistant Vice President Management Corp., 60 State Street, Boston, MA
02109
Nigel P. Hart Prior to October, 1997, Senior Vice President and
Portfolio
Vice President Manager, Investment Advisers, 3700 First Bank
Place, Minneapolis, MN 55402
Thomas R. Haslett Prior to December, 1996, Managing Director and
Senior
Managing Director Portfolio Manager, Montgomery Asset
Management, LTD, 101 California St., San
Franscisco, CA 94111
Marianne P. Isgur Prior to March, 1998, Executive Recruiter,
Professions,
Assistant Vice President 2 Villa Rd., So. Hamilton, MA 01982
Jerome J. Jacobs Prior to September, 1996, Head of Municipal Bond
Group,
Managing Director Vanguard Group Investments, 100 Vanguard
Blvd., Malvern, PA 19482
Ira C. Kalus-Bystricky Prior to March, 1998, Consultant, Arthur D. Little,
25 Acorn
Vice President Park, Cambridge, MA 02140
Mary E. Kearney Trustee, Massachusetts Eye and Ear Infirmary, 243
Charles St.,
Managing Director Boston, MA 02114
Catherine Kennedy Prior to September, 1997, Principal, Morgan Stanley,
1585
Vice President Broadway, New York, NY 10036
Jeffrey K. Kerrigan Prior to June, 1997, Vice President, Fleet
Investments,
Assistant Vice President 75 State St., Boston, MA 02109
David R. King Prior to October, 1997, Vice President, Massachusetts
Financial
Vice President Services, 500 Boylston St., Boston, MA
William P. King Prior to November, 1997, Portfolio Manager, TSA
Global Asset
Vice President Management, 700 South Flower St., Los Angeles,
CA 90017
Deborah F. Kuenstner Prior to March, 1997, Senior Portfolio Manager,
DuPont Pension
Managing Director Fund Investment, 1 Right Parkway, Wilmington,
DE 19850
Thomas J. Kurey Prior to August, 1997, Vice President, Evergreen
Securities,
Vice President 77 W. Wacker, Chicago, IL 60601
Kenneth W. Lang Prior to April, 1997, Vice President, Montgomery
Securities,
Vice President 600 Montgomery St., San Francisco, CA 94111
Coleman N. Lannum, III Prior to June, 1997, Director-Investor Relations,
Mallinckrodt,
Senior Vice President Inc., 7733 Forsyth Blvd., St. Louis, MO 63105
Leonard LaPorta, Jr. Prior to March, 1998, Assistant Vice President,
State Street
Vice President Global Advisors, Two International Place,
Boston, MA 02110
Lawrence J. Lasser Director, Marsh & McLennan Companies, Inc., 1221
Avenue of the
President, Director Americas, New York, NY 10020; Board Member, Artery
Business
and Chief Executive Committee, One Beacon Street, Boston, MA
02108; Board of Managers, Investment and Finance
Committees, Beth Israel Hospital, 330 Brookline
Avenue, Boston, MA 02215; Board of Governors,
Executive Committee, Investment Company Institute,
1401 H. St., N.W., Suite 1200, Washington, DC
20005; Board of Overseers, Museum of Fine Arts, 465
Huntington Ave., Boston, MA 02115; Board Member,
Trust for City Hall Plaza, Three Center Plaza,
Boston, MA 02108; Board Member, The Vault
Coordinating Committee, c/o John Hancock Mutual
Life Insurance Company, Law Sector, T-55, P.O. Box
111, Boston, MA 02117
Joan M. Leary Prior to January, 1997, Senior Tax Manager, KMPG, 99
High
Vice President High St., Boston, MA 02110
Christine Leonardo Prior to January, 1998, Employment Manager, Lotus
Development
Vice President Corp., 55 Cambridge Parkway, Canton, MA 02021
Craig s. Lewis Prior to January, 1998, Analyst, Keystone
Investments, 200
Vice President Berkeley Street, Boston, MA 02101
Geirulv Lode Prior to July, 1997, Vice President, Chancellor Lgt.
Asset
Vice President Management, 1166 Avenue of the Americas, New
York, NY 10036
Elizabeth M. MacElwee Prior to January, 1998, Principal, Morgan Stanley,
1585
Senior Vice President Broadway, New York, NY 10036
Diana R. Madonna Prior to January, 1997, Librarian, Lipper Analytical
Services,
Assistant Vice President Inc., 1380 Lawrence St., Denver CO 80204
Saba Malak Prior to October, 1997, Consultant, The Boston
Consultant,
Vice President Exchange Place, Boston, MA 02109
Bruce D. Martin Prior to April, 1997, Vice President, Eaton Vance, 29
Vice President Boston, MA 02110
Kevin Maloney Trustee, Town of Hanover, NH Trust Funds, Hanover, NH
03755;
Managing Director President and Board Member, Hampshire
Cooperative Nursery School, Dartmouth College
Highway, Hanover, NH 03755
Scott M. Maxwell Prior to March, 1997, Chief Financial Officer-Equity
Division,
Managing Director Lehman Brothers, 3 World Financial Center, New
York, NY 10285
Bridget McCavoy Prior to October, 1997, Senior Recruiter,
BankBoston,
Assistant Vice President 100 Federal St., Boston, MA 02110; Prior to
October, 1996, Executive Recruiter, HI Hunt & Co.,
99 Summer St., Boston, MA 02110
Mary G. McNamee Prior to December, 1996, Recruitment Consultant, 171
Walnut
Assistant Vice President Boston, MA 02110
Paul K. Michaud Prior to December, 1997, Assistant Vice President,
Union Bank
Vice President of Switzerland, Bahnhofstrasse 45, 8021
Zurich, Switzerland
Carol H. Miller Board Member, The Lyric Stage Theater, 140 Clarendon
St.,
Assistant Vice President Boston, MA 02116
Christopher G. Miller Prior to January, 1998, Portfolio Manager, Analytic
TSA
Vice President Global Asset Management, 700 So. Flower St.,
Los Angeles, CA 90017
William H. Miller Prior to October, 1997, Vice President and Asset
Portfolio
Senior Vice President Manager, Delaware Management, One Commerce
Square, Philadelphia, PA; Prior to January, 1995,
Vice President and Analyst, Janney, Montgomery,
Scott, 1801 Market St., Philadelphia, PA 19104
Jeanne L. Mockard Trustee, The Bryn Mawr School, 109, W. Melorose
Avenue,
Senior Vice President Baltimore, MD 21210
Gerard I. Moore Prior to August, 1997, Vice President/Equity
Research,
Vice President Boston Company Asset Management, One Boston,
Place, Boston, MA 02109
Kelly A. Morgan Prior to September, 1996, Senior Vice President and
Senior Vice President International Portfolio Manager, Alliance
Capital Management, 1345 Avenue of the Americas,
New York, NY 10020
David D. Motill Prior to April, 1996, Independent Consultant, 417
Valley
Vice President Wayne, PA 19087; Prior to July, 1995, Senior
Investment Analyst, SEI Investments, One Freedom
Valley Drive, Oaks, PA 19456
Ellen E. Natale Prior to November, 1996, Human Resources Recruiter,
Assistant Vice President Strategic Outsourcing, 175 Federal St.,
Boston, MA 02110
Gayle M. O'Connell Prior to March, 1997, Assistant Director of Human
Resources,
Assistant Vice President ITT Sheraton Corporation, 60 State St., Boston, MA
02109
Stephen S. Oler Prior to June, 1997, Vice President, Templeton
Investment
Senior Vice President Counsel, 500 E. Broward Blvd., Ft. Lauderdale,
FL 33394; Prior to February, 1996, Senior Vice
President, Baring Asset Management, 125 High St.,
Boston, MA 02110
Kimberly A.M. Page Prior to February, 1998, Senior Consulting,
Andersen
Assistant Vice President Consulting, 100 Williams St., Wellesley, MA
02181
Margery C. Parker Prior to December, 1997, Vice President and
Portfolio Manager,
Senior Vice President Keystone Investments 200 Berkeley Street,
Boston, MA 02101
Carmel Peters Prior to April, 1997, Managing Director/Chief
Investment
Senior Vice President Asia Pacific, Wheelock NatWest Investment
Management, Ltd, NatWest Tower, Times Square,
Causeway Bay, Hong Kong, China
William Perry Prior to September, 1997, Senior Trader, Fidelity
Management &
Senior Vice President Research, 82 Devonshire St., Boston, MA 02110
Keith Plapinger Vice Chairman and Trustee, Advent School, 17 Brimmer
St.,
Vice President Boston, MA 02108
Charles E. Porter Director, The Boston Fulbright Committee, 99 Garden
St.,
Executive Vice President Cambridge, MA; Trustee, Anatolia College and
The American College of Thessaloniki, 555 10 Pycea,
Thessaloniki, Greece
George Putnam Chairman and Director, Putnam Mutual Funds Corp.;
Chairman and Director Director, The Boston Company, Inc., One Boston
Place, Boston, MA 02108; Director, Boston Safe
Deposit and Trust Company, One Boston Place,
Boston, MA 02108; Director, Freeport-McMoRan, Inc.,
200 Park Avenue, New York, NY 10166; Director,
General Mills, Inc., 9200 Wayzata Boulevard,
Minneapolis, MN 55440; Director, Houghton Mifflin
Company, One Beacon Street, Boston, MA 02108;
Director, Marsh & McLennan Companies, Inc., 1221
Avenue of the Americas, New York, NY 10020;
Director, Rockefeller Group, Inc., 1230 Avenue of
the Americas, New York, NY 10020
Robert A. Piepenburg Prior to December, 1997, Assistant Vice President,
BankBoston
Vice President Corp./Boston Security, 100 Federal St.,
Boston, MA 02106
Elizabeth Price Prior to January, 1998, Investment Analyst,
Schroder Investment
Assistant Vice President Management Limited, 33 Gutter Lane, London,
EC2V 8AS, England
Edward Qian Prior to February, 1998, Back Bay Advisors, 399
Boylston St.,
Vice President Boston, MA 02116; Prior to September, 1996,
Post-Doctorate Research, Massachusetts Institute of
Technology, 77 Massachusetts Avenue, Cambridge, MA
02109
Keith Quinton Director, Eleazar, Inc., West Wheelock St., Hanover,
NH 03755
Senior Vice President
Marc J. Ritenhouse Prior to January, 1998, Director of Finance,
Fidelity
Vice President Investments, Inc. 82 Devonshire St., Boston,
MA 02109
Paul A. Rokosz Prior to November,
1996, Analyst,
Kemper Financial
Services,
Vice President 120 S. Casalle St., Chicago, IL 60606
Olivier Rudigoz Prior to April, 1998, Portfolio Manager, Paribas
Asset
Vice President Management, #3 Rue D'Antin, Paris, France,
75002
Michael V. Salm Prior to November, 1997, Mortgage Analyst, Blackrock
Financial
Vice President 345 Park Ave., New York, NY 10010; Prior to
May, 1996, Trader, Nomura Securities, 2 World
Financial Center, New York, NY 10048
Robert J. Schoen Prior to June, 1997, Sole Proprietor, Schoen Timing
Strategies,
Assistant Vice President 315 E. 21st St., New York, NY 10010
Justin M. Scott Director, DSI Properties (Neja) Ltd., Epping Rd.,
Reydon,
Managing Director Reydon, Essex CM19 5RD; Director, DSI
Management (Neja) Ltd., Epping Rd., Reydon, Essex
CM19 5RD
Max S. Senter General Partner, M.S. Senter & Sons Partnership, 4900
Senior Vice President Fayetteville, Rd., Raleigh, NC 27611
Mitchell D. Schultz Prior to September, 1996, Vice President, Human
Resources
Managing Director The Walt Disney Co., 500 South Buena Vista
St., Burbank, CA 91510
Edward Shadek, Jr. Prior to March, 1997, Portfolio Manager, Newhold
Asset
Vice President Management, 950 Haverford Rd., Bryn Mawr, PA
19010
Raj Ken Sharma Prior to January, 1998, Vice President and
Portfolio Manager,
Vice President Fleet Financial, 75 State Street, Boston, MA
02106
Saied Simozar Prior to March, 1998, Manager, Portfolio Analytics,
Dupont
Senior Vice President Pension Fund Investment, Wilmington, DE 19801
Gordon H. Silver Trustee, Wang Center for the Performing Arts, 270
Tremont St.,
Managing Director Boston, MA 02116
Steven Spiegel Director, Ultra Corp., 29 East Madison St., Chicago,
IL 60602;
Senior Managing Director Trustee, Babson College, One College Drive,
Wellesley, MA 02157
Christopher A. Spurlock Prior to May, 1997, Sales Trader, J.P. Morgan, 60
Wall St.,
Vice President New York, NY
Michael P. Stack Prior to November, 1997, Senior Vice President and
Portfolio
Senior Vice President Manager, Independence Investment Associates,
53 State St., Boston, MA 02109
Casey Strumpf Prior to January, 1997, Director, Blue Cross and Blue
Shield,
Senior Vice President 100 Summer St., Boston, MA 02110
Maryann Sullivan Prior to August,
1996, Unit
Manager, First
Data Services,
Assistant Vice President 4400 Computer Dr., Westboro, MA 01581
Robert E. Sweeney Prior to February, 1998, Vice President, Corporate
Research
Vice President Smith Barney, One New York Plaza, New York, NY
10004
Judith H. Swirbalus Prior to January, 1998, Alex, Brown & Sons, One
South St.,
Vice President Baltimore, MD 21202
Robert J. Toner Prior to September, 1998, Associate, Goodwin Procter
& Hoar,
Assistant Vice President LLP, Exchange Place, Boston, MA 02109
John R. Tonkin Prior to January, 1998, Analyst, Credit Suisse First
Boston
Assistant Vice President Celtic Towers, The Terrace, Wellington, New Zealand
Wendy S. Trowbridge Prior to June, 1996, Senior HRIS Analyst, New England
Medical
Assistant Vice President Center, 750 Washington, St., Boston, 02110
Heidi A. Tuchen Prior to December 1996, Vice President and Credit
Officer,
Assistant Vice President Fleet Financial Group, 75 State St., Boston,
MA 02109
Scott G. Vierra Prior to September, 1997, Staffing Lead, Cisco
Systems, 250
Vice President 250 Apollo Drive, Chelmsford, MA 01824
David L. Waldman Prior to June, 1997, Senior Portfolio Manager, Lazard
Feres
Managing Director Asset Management, 30 Rockefeller Center, New
York, NY 10112
Paul C. Warren Prior to May, 1997, Director, IDS Fund Management,
LT,
Senior Vice President One Pacific Place, Squuensway, Hong Kong,
China
Eric Wetlaufer Prior to November, 1997, Managing Director and
Portfolio
Managing Director Manager, Cadence Capital Management, Exchange
Place, Boston, MA 02109
Burton Wilson Prior to March, 1997, Associate Investments-Banking,
Vice President Robertson Stephens & Co., 555 California St.,
Suite 2600, San Francisco, CA 94104
Michael R. Yogg Prior to November, 1996, Portfolio Manager, State
Street
Senior Vice President Research & Management, One Financial Center,
Boston, MA 02111
Scott D. Zaleski Prior to May, 1997, Investment Officer, State Street
Bank &
Assistant Vice President Trust, 1776 Heritage Dr., Quincy, MA 02171;
Prior to September, 1996, Investment Associate
Fidelity Investments, 82 Devonshire St., Boston, MA
02109
Michael P. Zeller Prior to July, 1997, Sales Manager, NYNEX Information
Vice President Resources, 35 Village Rd., Middleton, MA 01949
William E. Zieff Prior to December, 1996, Global Asset Allocation,
Grantham,
Managing Director Mayo, Van Otterloo & Co., 40 Rowes Wharf,
Boston, MA 02110
ITEM 27. PRINCIPAL UNDERWRITER
(a) Putnam Mutual Funds Corp. is the principal underwriter for each of the
following investment companies, including the Registrant:
Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income Fund,
Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds, Putnam Balanced
Retirement Fund, Putnam California Tax Exempt Income Fund, Putnam California Tax
Exempt Money Market Fund, Putnam Capital Appreciation Fund, Putnam Convertible
Income-Growth Trust, Putnam Diversified Equity Trust, Putnam Diversified Income
Trust, Putnam Diversified Income Trust II, Putnam Equity Income Fund, Putnam
Europe Growth Fund, Putnam Federal Income Trust, Putnam Florida Tax Exempt
Income Fund, Putnam Funds Trust, The George Putnam Fund of Boston, Putnam Global
Governmental Income Trust, Putnam Global Growth Fund, Putnam Global Natural
Resources Fund, The Putnam Fund for Growth and Income, Putnam Growth and Income
Fund II, Putnam Health Sciences Trust, Putnam High Yield Trust, Putnam High
Yield Advantage Fund, Putnam High Yield Municipal Trust, Putnam Income Fund,
Putnam Intermediate U.S. Government Income Fund, Putnam Investment Funds, Putnam
Investors Fund, Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax
Exempt Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam Money Market
Fund, Putnam Municipal Income Fund, Putnam New Jersey Tax Exempt Income Fund,
Putnam New Opportunities Fund, Putnam New York Tax Exempt Income Fund, Putnam
New York Tax Exempt Money Market Fund, Putnam New York Tax Exempt Opportunities
Fund, Putnam Ohio Tax Exempt Income Fund, Putnam OTC & Emerging Growth Fund,
Putnam Pennsylvania Tax Exempt Income Fund, Putnam Preferred Income Fund, Putnam
Tax Exempt Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Tax-Free
Income Trust, Putnam U.S. Government Income Trust, Putnam Utilities Growth and
Income Fund, Putnam Variable Trust, Putnam Vista Fund, Putnam Voyager Fund,
Putnam Voyager Fund II.
(b) The directors and officers of the Registrant's principal underwriter are
listed below. The principal business address of each person is One Post Office
Square, Boston, MA 02109:
NAME POSITIONS AND OFFICES WITH POSITIONS AND
UNDERWRITER OFFICES WITH
REGISTRANT
Aaron,Jeff F. Asst. Vice President None
Adduci,John V. Vice President None
Albanese,Frank Vice President None
Alberts,Richard W. Asst. Vice President None
Alden,Donald F. Vice President None
Alders,Christopher A. Senior Vice President None
Alpaugh,Christopher S. Vice President None
Amisano,Paulette C. Vice President None
Andrews,Margaret Vice President None
Antill,Jeanne Vice President None
Arends,Michael K. Senior Vice President None
Asher,Steven E. Senior Vice President None
Avery,Scott A. Senior Vice President None
Aymond,Christian E. Senior Vice President None
Aymond,Colin C. Vice President None
Battit,Suzanne J Vice President None
Beatty,Steven M. Senior Vice President None
Bent,John J. Vice President None
Beringer,Thomas A. Vice President None
Berka,Sharon A. Senior Vice President None
Boneparth,John F. Managing Director None
Bonfilio Jr.,Peter J. Asst. Vice President None
Bouchard,Keith R. Senior Vice President None
Bradford Jr.,Linwood E. Senior Vice President None
Brady,Linda M. Asst. Vice President None
Bray,Jeffrey M. Vice President None
Brennan,Mary Ann Asst. Vice President None
Bresnahan,Leslee R. Senior Vice President None
Brockelman,James D. Senior Vice President None
Brookman,Joel S. Vice President None
Brown,Timothy K. Senior Vice President None
Buckner,Gail D. Senior Vice President None
Burke,Robert W. Sr Managing Director None
Cabana,Susan D. Vice President None
Callahan,Thomas C. Asst. Vice President None
Capone,Robert G. Senior Vice President None
Cartwright,Patricia A. Asst. Vice President None
Casale-Sweeney,Janet Senior Vice President None
Casey,David M. Vice President None
Castle Jr.,James R. Vice President None
Chase,Mary Claire Vice President None
Chrostowski,Louis F. Senior Vice President None
Church,Daniel J. Vice President None
Clark,Richard B. Senior Vice President None
Clermont,Mary Asst. Vice President None
Clinton,John C. Asst. Vice President None
Collman,Kathleen M. Sr Managing Director None
Commane,Karen L. Asst. Vice President None
Coneeny,Mark L. Senior Vice President None
Connelly,Clare D. Vice President None
Connelly,Donald A. Senior Vice President None
Connolly,Karen E. Asst. Vice President None
Conyers,Barry M. Vice President None
Corbett,Dennis Vice President None
Corvinus,F. Nicholas Senior Vice President None
Cosmer,Thomas A. Senior Vice President None
Cristo,Chad H. Vice President None
Cropper,Joy Bacher Asst. Vice President None
Crowley,Colleen J. Asst. Vice President None
Curran,Peter J. Senior Vice President None
Dahill,Jessica E. Vice President None
Daly,Kenneth L. Managing Director None
Dane,Edward H. Senior Vice President None
Daylor,Donna M. Vice President None
Days,Nancy M. Asst. Vice President None
De Oliveira-Smith,Pamela Asst. Vice President None
Deluse,Laura R. Asst. Vice President None
DeMont,Lisa M. Vice President None
Dennehy,Teresa F. Vice President None
DiRe,Lisa M. Asst. Vice President None
DiStasio,Karen E. Vice President None
Dolan,Michael G. Vice President None
Donaldson,Scott M. Vice President None
Duffy,Deirdre E. Senior Vice President None
Durbin,Emily J. Vice President None
Edlin,David B. Managing Director None
Eisenkraft,Gail A. Managing Director None
English,James M. Senior Vice President None
Esposito,Vincent Managing Director None
Fechter,Michael J. Vice President None
Feldman,Susan H. Senior Vice President None
Fisher,C. Nancy Managing Director None
Fishman,Mitchell B. Senior Vice President None
Fiumara,Joseph C. Vice President None
Flaherty,Patricia C. Senior Vice President None
Fleisher,Kate Vice President None
Ford,William D. Asst. Vice President None
Fullerton,Brian J. Senior Vice President None
Gates,Judy S. Senior Vice President None
Gennaco,Joseph P. Senior Vice President None
Gindel,Caroline E. Asst. Vice President None
Goodfellow,Mark D. Vice President None
Goodman,Robert Managing Director None
Gould,Carol J. Asst. Vice President None
Grace,Anthony J. Asst. Vice President None
Grace,Linda K. Vice President None
Grossberg,Jill Asst. Vice President None
Grove,Denise Vice President None
Guay,Timothy R. Asst. Vice President None
Gubala,Jeffrey P. Vice President None
Guerin,Donnalee Asst. Vice President None
Guerra,Salvatore F. Vice President None
Hall,Debra L. Vice President None
Halloran,James E. Vice President None
Halloran,Thomas W. Senior Vice President None
Harbeck,John D. Vice President None
Harrington,Bruce D. Vice President None
Hartigan,Craig W. Vice President None
Hartley,Deborah M. Asst. Vice President None
Hawkins III,Howard W. Vice President None
Hayes-Castro,Deanna R. Vice President None
Hearns,Dennis P. Senior Vice President None
Hedstrom,Gayle A. Asst. Vice President None
Heffernan,Paul P. Senior Vice President None
Heimanson,Susan M. Senior Vice President None
Hochstein,Bess J.M. Senior Vice President None
Holly Sr.,Jeremiah K. Vice President None
Holmes,Maureen A. Asst. Vice President None
Hooley,Daniel F Jr. Asst. Vice President None
Hoyt,Paula J. Asst. Vice President None
Hurley,William J. Managing Director & CFO None
Isgur,Marianne P. Asst. Vice President None
Jacobsen,Dwight D. Managing Director None
Jennings,Susan M. Asst. Vice President None
Jordan,Stephen R. Asst. Vice President None
Kapinos,Peter J. Vice President None
Kay,Karen R. Senior Vice President None
Kelley,Brian J. Vice President None
Kelly,A.Siobhan Asst. Vice President None
Kennedy,Alicia C. Asst. Vice President None
Kennedy,Charlotte B. Senior Vice President None
King,David R. Vice President None
Kinsman,Anne Senior Vice President None
Kirk,Deborah H. Senior Vice President None
Koontz,Jill A. Senior Vice President None
Kreutzberg,Howard H. Senior Vice President None
Krieger,Marjorie B. Vice President None
Lacascia,Charles Vice President None
Lane,Linda Asst. Vice President None
LaPierre,Christopher W Asst. Vice President None
Lathrop,James D. Senior Vice President None
Lawlor,Stephanie T. Asst. Vice President None
Leary,Joan M. Vice President None
Ledbetter,Charles C. Vice President None
Leipsitz,Margaret Asst. Vice President None
Lemire,Kevin Vice President None
Leonardo,Christine A. Vice President None
Levy,Eric S. Senior Vice President None
Lewandowski Jr.,Edward V. Vice President None
Lewandowski,Edward V. Senior Vice President None
Li,Mei Asst. Vice President None
Lieberman,Samuel L. Vice President None
Lifsitz,David M. Vice President None
Lilien,David R. Vice President None
Linehan,Ann-Marie Asst. Vice President None
Litant,Lisa M. Asst. Vice President None
Lockwood,Maura A. Senior Vice President None
Lomba,Rufino R. Senior Vice President None
Long,Gregory T. Vice President None
Lucey,Kevin J Vice President None
Lucey,Robert F. Director None
Lyons,Robert F. Asst. Vice President None
Malatos,Ann Vice President None
Mallin,Bonnie J. Senior Vice President None
Mancini,Dana Asst. Vice President None
Manthorne,Heather M. Asst. Vice President None
Maravel,Alexi A. Asst. Vice President None
Marius,Frederick S. Vice President None
McAvoy,Bridget Asst. Vice President None
McCafferty,Karen A. Vice President None
McCarthy,Anne B. Asst. Vice President None
McConville,Paul D. Senior Vice President None
McCracken,Brian Asst. Vice President None
McCutcheon,Bruce A Senior Vice President None
McDermott,Daniel E. Asst. Vice President None
McKenna,Mark J. Senior Vice President None
McNamara,Laura Vice President None
McNamee,Mary G. Asst. Vice President None
Metelmann,Claye A. Vice President None
Milgroom,Eric D. Asst. Vice President None
Miller,Bart D. Senior Vice President None
Miller,Janis E. Managing Director None
Miller,Jeffrey M. Managing Director None
Mills,Ronald K. Vice President None
Minsk,Judith Asst. Vice President None
Mintzer,Matthew P. Senior Vice President None
Monahan,Kimberly A. Vice President None
Moody,Paul R. Vice President None
Moret,Mitchell L. Senior Vice President None
Mosher,Barry L. Asst. Vice President None
Mullen,Donald E. Senior Vice President None
Murphy,Paul G. Vice President None
Murray,Brendan R. Vice President None
Nadherny,Robert Senior Vice President None
Natale,Ellen E. Asst. Vice President None
Neary,Ellen R. Vice President None
Nelson,Alexander L. Managing Director None
Newell,Amy Jane Vice President None
Nickodemus,John P. Senior Vice President None
Nickse,Gail A. Asst. Vice President None
O'Brien,Lois C. Vice President None
O'Brien,Nancy E. Vice President None
O'Connell,Gayle M. Asst. Vice President None
Onofrio,Ellen Asst. Vice President None
Page,Kimberly A.M. Asst. Vice President None
Palmer,Patrick J. Vice President None
Palombo,Joseph R. Managing Director None
Papes,Scott A. Vice President None
Parr,Cynthia O. Vice President None
Pelletier,Dale M. Vice President None
Peterson,Jennifer H. Asst. Vice President None
Peterson,Kate Vice President None
Phoenix,John G. Senior Vice President None
Phoenix,Joseph Senior Vice President None
Plapinger,Keith Senior Vice President None
Pollock,Jeffrey F. Vice President None
Potorski,Margaret J. Asst. Vice President None
Present,Howard B. Senior Vice President None
Pulkrabek,Scott M. Vice President None
Putnam,George Director Chairman and
President
Raynor,Kimberly Vice President None
Rezabek,Joseph L. Asst. Vice President None
Riley,Megan G. Asst. Vice President None
Ritenhouse,Marc J. Vice President None
Rodammer,Kris Vice President None
Rogers,Deborah A. Vice President None
Rothman,Debra V. Vice President None
Rowe,Robert B. Vice President None
Rowell,Kevin A. Senior Vice President None
Ruys de Perez,Charles A. Senior Vice President None
Ryan,Carolyn M. Asst. Vice President None
Ryan,Deborah A. Vice President None
Salm,Michael V. Vice President None
Saunders,Catherine A. Senior Vice President None
Saunders,Robbin L. Vice President None
Saur,Karl W. Vice President None
Scanlon,Michael M. Vice President None
Schaefer,Jennifer L. Asst. Vice President None
Schofield,Shannon D. Vice President None
Schroeder,Paul R. Asst. Vice President None
Schultz,Mitchell D. Managing Director None
Scordato,Christine A. Senior Vice President None
Scott,Joseph W. Asst. Vice President None
Segers,Elizabeth R. Senior Vice President None
Shamburg,John B. Vice President None
Sharpless,Kathy G. Managing Director None
Shea,Terence B. Asst. Vice President None
Shiebler,William N. President & Director Vice President
Silver,Gordon H. Sr Managing Director Vice President
Skistimas Jr,John J. Vice President None
Smith,Stuart C. Asst. Vice President None
Southard,Peter J. Vice President None
Spiegel,Steven Sr Managing Director None
Stack,Michael P. Senior Vice President None
Stanojev,Nicholas T. Senior Vice President None
Steinberg,Lauren B. Asst. Vice President None
Stern,Derek A. Asst. Vice President None
Stickney,Paul R. Senior Vice President None
Strumpf,Casey Senior Vice President None
Sullivan,Brian L. Senior Vice President None
Sullivan,Donna G Vice President None
Sullivan,Elaine M. Senior Vice President None
Sullivan,Guy Managing Director None
Sullivan,Kevin J. Senior Vice President None
Sullivan,Maryann Asst. Vice President None
Sullivan,Moira Vice President None
Sutherland,George C. Vice President None
Tanner,B Iris Vice President None
Tavares,April M. Asst. Vice President None
Taylor,David S. Vice President None
Telling,John R. Senior Vice President None
Tercha,Cynthia Vice President None
Thomas,Tracy A. Asst. Vice President None
Tibbetts,Richard B. Managing Director None
Tirado,Patrice M. Vice President None
Tosi,Janet E. Vice President None
Troped,Bonnie L. Senior Vice President None
Trowbridge,Wendy S. Asst. Vice President None
Twigg,Christine M. Asst. Vice President None
Vander Linde,Douglas J. Senior Vice President None
Verani,John R. Senior Vice President Vice President
Vierra,Scott G. Vice President None
Vora,Rajeshri Vice President None
Waters,Mitchell J. Vice President None
Waystack,Karen M. Asst. Vice President None
West-Smith,Deirdre Asst. Vice President None
Wetlaufer,Eric Managing Director None
Whalen,Brian Vice President None
Whalen,Edward F. Senior Vice President None
Whitaker,J. Greg Vice President None
White,J. Bennett Vice President None
Williams,Robert A. Vice President None
Williamson,Leigh T. Vice President None
Wolfson,Jane Senior Vice President None
Woloshin,Benjamin I. Senior Vice President None
Woolverton,William H. Managing Director None
Zeller,Michael P. Vice President None
Zografos,Laura J. Vice President None
Zukowski,Virginia A. Senior Vice President None
</TABLE>
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are Registrant's
Clerk, Beverly Marcus; Registrant's investment adviser, Putnam Investment
Management, Inc.; Registrant's principal underwriter, Putnam Mutual Funds
Corp.; Registrant's custodian, Putnam Fiduciary Trust Company ("PFTC"); and
Registrant's transfer and dividend disbursing agent, Putnam Investor Servi
The address of the Clerk, investment adviser, principal underwriter,
custodian and transfer and dividend disbursing agent is One Post Office
Square, Boston, Massachusetts 02109.
ITEM 29. MANAGEMENT SERVICES
None.
ITEM 30. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus of
the Registrant is delivered a copy of the Registrant's latest annual report
to shareholders, upon request and without charge.
------------------------ ----
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 9 to the Registration Statement on Form N-1A
(File No. 33-25658) (the "Registration Statement") of our report dated
August 17, 1998, relating to the financial statements and financial
highlights appearing in the June 30, 1998 Annual Report of Putnam Europe
Growth Fund, which financial statements and financial highlights are also
incorporated by stration Statement. We also consent to the references to us
under the heading "Independent Accountants and Financial Statements" in such
Statement of Additional Information and under the heading "Financial
highlights" in such Prospectus.
PricewaterhouseCoopers LLP
Boston, Massachusetts
August 25, 1998
NOTICE
A copy of the Agreement and Declaration of Trust of Putnam Europe Growth Fund
is on file with the Secretary of State of The Commonwealth of Massachusetts
and notice is hereby given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not individually
and the obligations of or arising out of this instrument are not binding upon
any of the Trustees, officers or shareholders individually but are binding
only upon the assets and property of the Registrant.
POWER OF ATTORNEY
I, the undersigned Trustee of Putnam Europe Growth Fund, hereby severally
constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver,
Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of
them singly, my true and lawful attorneys, with full power to them and each
of them, to sign for me, and in my name and in the capacity indicated below,
the Registration Statement on Form N-1A of Putnam Europe Growth Fund and any
and all amendments (including post-effective amendments) to
d thing requisite or necessary to be done in the premises, as fully to all
intents and purposes as he might or could do in person, and hereby ratify and
confirm all that said attorneys or any of them may lawfully do or cause to be
done by virtue thereof.
WITNESS my hand and seal on the date set forth below.
SIGNATURE TITLE DATE
/s/ Paul L. Joskow
- --------------------- Trustee January 9, 1998
Paul L. Joskow
POWER OF ATTORNEY
I, the undersigned Trustee of Putnam Europe Growth Fund, hereby severally
constitute and appoint George Putnam, Charles E. Porter, Gordon H. Silver,
Edward A. Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of
them singly, my true and lawful attorneys, with full power to them and each
of them, to sign for me, and in my name and in the capacity indicated below,
the Registration Statement on Form N-1A of Putnam Europe Growth Fund and any
and all amendments (including post-effective amendments) to
ment and to file the same with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting
unto my said attorneys, and each of them acting alone, full power and
authority to do and perform each and every act and thing requisite or
necessary to be done in the premises, as fully to all intents and purposes as
he might or could do in person, and hereby ratify and confirm all that said
attorneys or any of them may lawfully do or cause to be done by vi
WITNESS my hand and seal on the date set forth below.
SIGNATURE TITLE DATE
/s/ John H. Mullin, III
- --------------------------- Trustee January 9, 1998
John H. Mullin, III
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the fund has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and The Commonwealth of
Massachusetts, on the 28th day of August, 1998.
PUTNAM EUROPE GROWTH FUND
By: Gordon H. Silver, Vice President
Pursuant to the requirements of the Securities Act of 1933, this Amendment to
the Registration Statement of Putnam Europe Growth Fund has been signed below
by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE
George Putnam President and Chairman of the Board; Principal Executive
Officer; Trustee
John D. Hughes Senior Vice President; Treasurer and Principal Financial
Officer
Paul G. Bucuvalas Assistant Treasurer and Principal Accounting Officer
Jameson A. Baxter Trustee
Hans H. Estin Trustee[/R]
John A. Hill Trustee[/R]
Ronald J. Jackson Trustee
Paul L. Joskow Trustee[/R]
Elizabeth T. Kennan Trustee[/R]
Lawrence J. Lasser Trustee
John H. Mullin, III Trustee[/R]
Robert E. Patterson Trustee[/R]
Donald S. Perkins Trustee[/R]
William F. Pounds Trustee[/R]
George Putnam, III Trustee[/R]
A.J.C. Smith Trustee
W. Thomas Stephens Trustee
W. Nicholas Thorndike Trustee
By: Gordon H. Silver,
as Attorney-in-Fact
August 28, 1998
DEALER SALES CONTRACT
Between: PUTNAM MUTUAL FUNDS CORP. and
General Distributor of
The Putnam Family of Mutual Funds
One Post Office Square
Boston, MA 02109
As general distributor of The Putnam Family of Mutual Funds (the
"Funds"), we agree to sell you shares of beneficial interest
issued by the Funds (the "Shares"), subject to any limitations
imposed by any of the Funds and to confirmation by us in each
instance of such sales. By your acceptance hereof, you agree to
all of the following terms and conditions:
1. OFFERING PRICE AND FEES
The public offering price at which you may offer the Shares is
the net asset value thereof, as computed from time to time, plus
any applicable sales charge described in the then-current
Prospectus of the applicable Fund. As compensation for each sale
of Shares made by you, you will be allowed the dealer discount if
any, on such Shares described in the then-current Prospectus of
the Fund whose Shares are sold. We reserve the right to revise
the dealer discount referred to herein upon ten days' written
notice to you. We will furnish you upon request with the public
offering prices for the Shares, and you agree to quote such
prices in connection with any Shares offered by you for sale.
Your attention is specifically called to the fact that each sale
is always made subject to confirmation by us at the public
offering price next computed after receipt of the order. There
is no sales charge or dealer discount to dealers on the
reinvestment of dividends and distributions.
In addition to the dealer discount, if any, allowed pursuant to
the foregoing provisions of this Section 1, we may, at our
expense, provide additional promotional incentives or payments to
dealers. If non-cash concessions are provided, each dealer
earning such a concession may elect to receive an amount in cash
equivalent to the cost of providing such concessions. Notice of
the availability of concessions will be given to you by us. All
dealer discounts, promotional incentives, payments and
concessions will be made by us in accordance with National
Association of Securities Dealers, Inc. ("NASD") guidelines and
rules.
2. MANNER OF OFFERING,
SELLING AND PURCHASING SHARES
We have delivered to you a copy of each Fund's current Prospectus
and will provide you with such number of copies of each Fund's
Prospectus, Statement of Additional Information and shareholder
reports and of supplementary sales materials prepared by us, as
you may reasonably request. You will offer and sell the Shares
only in accordance with the terms and conditions of the current
Prospectus and Statement of Additional Information of the
applicable Fund. Neither you nor any other person is authorized
to give any information or to make any representations other than
those contained in such Prospectuses, Statements of Additional
Information and shareholder reports or in such supplementary
sales materials. You agree that you will not use any other
offering materials for the Funds without our written consent.
You hereby agree:
(i) to exercise your best efforts to find purchasers for the
Shares of the Funds,
(ii) to furnish to each person to whom any sale is made a
copy of the then-current Prospectus of the applicable fund,
(iii) to transmit to us promptly upon receipt any and all
orders received by you, and
(iv) to pay to us the offering price, less any dealer
discount to which you are entitled, within three (3)
business days of our confirmation of your order, or such
shorter time as may be required by law. If such payment is
not received within said time period, we reserve the right,
without prior notice, to cancel the sale, or at our option
to return the Shares to the issuer for redemption or
repurchase. In the latter case, we shall have the right to
hold you responsible for any loss resulting to us. Should
payment be made by check, liquidation of Shares may be
delayed pending clearance of the check. In the event your
check is dishonored for any reason, you shall remain liable
for the purchase price and any loss incurred by us. In
addition, should payment be made by means of a second or
third party check, you shall be deemed to have made all
presentment, transfer and other applicable warranties set
forth in the Uniform Commercial Code, and in the event such
check is either dishonored or subsequently determined to be
invalid for any reason (including without limitation as a
result of such check having been lost, stolen or
unauthorized) you shall remain liable for the purchase price
and any loss incurred by us.
3. COMPLIANCE WITH LAW
You hereby represent that you are registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended, and are
licensed and qualified as a broker-dealer or otherwise authorized
to offer and sell the Shares under the laws of each jurisdiction
in which the Shares will be offered and sold by you. You further
confirm that you are a member in good standing of the NASD and
agree to maintain such membership in good standing or, in the
alternative, you are a foreign dealer not eligible for membership
in the NASD.
You agree that in selling Shares you will comply with all
applicable laws, rules and regulations, including the applicable
provisions of the Securities Act of 1933, as amended, the
applicable rules and regulations of the NASD, and the applicable
rules and regulations of any jurisdiction in which you sell,
directly or indirectly, any Shares. You agree not to offer for
sale or sell the Shares in any jurisdiction in which the Shares
are not qualified for sale or in which you are not qualified as a
broker-dealer.
4. RELATIONSHIP WITH DEALERS
In offering and selling Shares under this Contract, you shall be
acting as principal and nothing herein shall be construed to
constitute you or any of your agents, employees or
representatives as our agent or employee, or as an agent or
employee of the Funds. As general distributor of the Funds, we
shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the
distribution of the Shares. We shall not be under any obligation
to you, except for obligations expressly assumed by us in this
Contract.
5. TERMINATION
Either party hereto may terminate this Contract, without cause,
upon ten days' written notice to the other party. We may
terminate this Contract for cause upon the violation by you of
any of the provisions hereof, such termination to become
effective on the date such notice of termination is mailed to
you. This Contract shall terminate automatically if either Party
ceases to be a member of the NASD.
6. ASSIGNABILITY
This Contract is not assignable or transferable, except that we
may assign or transfer this Contract to any successor which
becomes general distributor of the Funds.
7. GOVERNING LAW
This Contract and the rights and obligations of the parties
hereunder shall be governed by and construed under the laws of
The Commonwealth of Massachusetts.
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for
that purpose, whereupon this letter shall constitute a binding
agreement between us.
Very truly yours,
PUTNAM MUTUAL FUNDS CORP.
By:
------------------------------
William N. Shiebler, President
and Chief Executive Officer
We accept and agree to the foregoing Contract as of the date set
forth below.
Please indicate which best Dealer:__________________
describes your firm's entity:
/ / Partnership --------------------
/ / Corporation
By: ____________________
/ / Other - please specify: Authorized
Signature, Title
---------------------
-------------------------
Please provide your organization's
Tax Identification Number on the -------------------------
following line: Address
- ---------------------------- Dated:___________________
Please return the signed Putnam copy to Putnam Mutual Funds
Corp., P.O. Box 41203, Providence, RI 02940-1203
Approval:_____________________
Date required:________________
NF-1 9
FINANCIAL INSTITUTION SALES CONTRACT
Between: and
PUTNAM MUTUAL FUNDS CORP.
General Distributor of
The Putnam Family of Mutual Funds
One Post Office Square
Boston, MA 02109
As general distributor of The Putnam Family of Mutual Funds (the
"Funds"), we agree that you will make available to your
customers, under an agency relationship with your customers,
shares of beneficial interest issued by the Funds (the "Shares"),
subject to any limitations imposed by any of the Funds and to
confirmation by us of each transaction. By your acceptance
hereof, you agree to all of the following terms and conditions:
1. OFFERING PRICES AND FEES
The public offering price at which you may make the Shares
available to your customers is the net asset value thereof, as
computed from time to time, plus any applicable sales charge
described in the then-current Prospectus of the applicable Fund.
In the case of purchases by you, as agent for your customers, of
Shares sold with a sales charge, you shall receive an agency
commission consisting of a portion of the public offering price,
determined on the same basis as the "dealer discount" described
in the then-current Prospectus of the Fund, and such other
compensation to dealers as may be described therein, which shall
be payable to you at the same time and on the same basis as the
same is paid to such dealers, consistent with applicable law,
rules and regulations. In determining the amount of any agency
commission payable to you hereunder, we reserve the right to
exclude any purchases for any accounts which we reasonably
determine are not made in accordance with the terms of the
applicable Fund Prospectus and the provisions of this Contract.
We reserve the right to revise the agency commission referred to
herein upon ten days' written notice to you. We will furnish you
upon request with the public offering prices for the Shares, and
you agree to quote such prices in connection with any Shares made
available by you as agent for your customers. Your attention is
specifically called to the fact that each purchase of Shares by
your customers is always made subject to confirmation by us at
the public offering price next computed after receipt of the
order. There is no sales charge or agency commission to you on
the reinvestment of dividends and distributions.
2. MANNER OF MAKING SHARES AVAILABLE FOR PURCHASE
We will, upon request, deliver to you a copy of each Fund's then-
current Prospectus and will provide you with such number of
copies of each Fund's then-current Prospectus, Statement of
Additional Information and shareholder reports and of
supplementary sales materials prepared by us, as you may
reasonably request. It shall be your obligation to ensure that
all such information and materials are distributed to your
customers who own Shares, in accordance with securities and/or
banking law and regulations and any other applicable regulations.
Neither you nor any other person is authorized to give any
information or to make any representations other than those
contained in such Prospectuses, Statements of Additional
Information and shareholder reports or in such supplementary
sales materials. You shall not furnish or cause to be furnished
to any person, display or publish any information or materials
relating to any Fund (including, without limitation, promotional
materials and sales literature, advertisements, press releases,
announcements, statements, posters, signs or other similar
material), except such information and materials as may be
furnished to you by us or the Fund, and such other information
and materials as may be approved in writing by us.
You hereby agree:
(i) to not purchase any Shares as agent for any customer,
unless you deliver or cause to be delivered to such
customer, at or prior to the time of such purchase, a copy
of the then-current Prospectus of the applicable Fund unless
such customer has acknowledged receipt of the Prospectus of
such Fund. You hereby represent that you understand your
obligation to deliver a prospectus to customers who purchase
Shares pursuant to federal securities laws and you have
taken all necessary steps to comply with such prospectus
delivery requirements;
(ii) to transmit to us promptly upon receipt any and all
orders received by you, it being understood that no
conditional orders will be accepted;
(iii) to obtain from each customer for whom you act as agent
for the purchase of Shares any taxpayer identification
number certification and backup withholding information
required under the Internal Revenue Code of 1986, as amended
from time to time (the "Code"), and the regulations
promulgated thereunder, or other sections of the Code which
may become applicable, and to provide us or our designee
with timely written notice of any failure to obtain such
taxpayer identification number certification or information
in order to enable the implementation of any required backup
withholding in accordance with the Code and the regulations
thereunder; and
(iv) to pay to us the offering price, less any agency
commission to which you are entitled, within three (3)
business days of our confirmation of your customer's order,
or such shorter time as may be required by law. You may,
subject to our approval, remit the total public offering
price to us, and we will return to you your agency
commission. If such payment is not received within said
time period, we reserve the right, without prior notice, to
cancel the sale, or at our option to return the Shares to
the issuer for redemption or repurchase. In the latter
case, we shall have the right to hold you responsible for
any loss resulting to us. Should payment be made by local
bank check, liquidation of Shares may be delayed pending
clearance of your check.
Unless otherwise mutually agreed in writing or except as provided
below, each transaction placed by you shall be promptly confirmed
by us in writing to you, and shall be confirmed to the customer
promptly upon receipt by us of instructions from you as to such
customer. In the case of a purchase order by customer's
application, each transaction shall be promptly confirmed in
writing directly to the customer and a copy of each confirmation
shall be sent simultaneously to you. We reserve the right, at
our discretion and without notice, to suspend the sale of Shares
or withdraw entirely the sale of Shares of any or all of the
Funds. All orders are subject to acceptance or rejection by us
in our sole discretion, and by the Funds in their sole
discretion. The procedure stated herein relating to the pricing
and handling of orders shall be subject to instructions which we
may forward to you from time to time.
3. COMPLIANCE WITH LAW
You hereby represent that you are either (1) a "bank" as defined
in Section 3(a)(6) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and at the time of each transaction
in shares of the Funds, are not required to register as a broker-
dealer under the Exchange Act or regulations thereunder; or (2)
registered as a broker-dealer under the Exchange Act, a member in
good standing of the National Association of Securities Dealers,
Inc. ("NASD") and affiliated with a bank.
(a) If you are a bank, not required to register as a broker-
dealer under the Exchange Act: You further represent and warrant
to us that with respect to any sales in the United States, you
will use your best efforts to ensure that any purchase of Shares
by your customers constitutes a suitable investment for such
customers. You shall not effect any transaction in, or induce
any purchase or sale of, any Shares by means of any manipulative,
deceptive or other fraudulent device or contrivance, and shall
otherwise deal equitably and fairly with your customers with
respect to transactions in Shares of a Fund.
(b) If you are a NASD member broker-dealer affiliated with a
bank and registered under the Exchange Act: You further
represent and warrant to us that with respect to any sales in the
United States, you agree to abide by all of the applicable laws,
rules and regulations including applicable provisions of the
Securities Act of 1933, as amended, and the applicable rules and
regulations of the NASD, including, without limitation, its Rules
of Fair Practice, and the applicable rules and regulations of any
jurisdiction in which you make Shares available for sale to your
customers. You agree not to make available for sale to your
customers the Shares in any jurisdiction in which the Shares are
not qualified for sale or in which you are not qualified as a
broker-dealer. We shall have no obligation or responsibility as
to your right to make Shares of any Funds available to your
customers in any jurisdiction. You agree to notify us
immediately in the event of (i) your expulsion or suspension from
the NASD or your becoming subject to any enforcement action by
the Securities and Exchange Commission, NASD, or any other self-
regulatory organization, or (ii) your violation of any applicable
federal or state law, rule or regulation including, but not
limited to, those of the SEC, NASD or other self-regulatory
organization, arising out of or in connection with this
Agreement, or which may otherwise affect in any material way your
ability to act in accordance with the terms of this Contract.
You shall not make Shares of any Fund available to your
customers, including your fiduciary customers, except in
compliance with all federal and state laws and rules and
regulations of regulatory agencies or authorities applicable to
you, or any of your affiliates engaging in such activity, which
may affect your business practices. You confirm that you are not
in violation of any banking law or regulations as to which you
are subject.
4. RELATIONSHIP WITH CUSTOMER
With respect to any and all transactions in the Shares of any
Fund pursuant to this Contract, it is understood and agreed in
each case that: (a) you shall be acting solely as agent for the
account of your customer; (b) each transaction shall be initiated
solely upon the order of your customer; (c) we shall execute
transactions only upon receiving instructions from you acting as
agent for your customer or upon receiving instructions directly
from your customer; (d) as between you and your customer, your
customer will have full beneficial ownership of all Shares; (e)
each transaction shall be for the account of your customer and
not for your account; and (f) unless otherwise agreed in writing
we will serve as a clearing broker for you on a fully disclosed
basis, and you shall serve as the introducing agent for your
customers' accounts. Subject to the foregoing, however, and
except for Shares sold subject to a contingent deferred sales
charge, you may maintain record ownership of such customers'
Shares in an account registered in your name or the name of your
nominee, for the benefit of such customers. With respect to
Shares sold subject to a contingent deferred sales charge, you
agree not to hold shares of such Funds in an account registered
in your name or in the name of your nominee for the benefit of
certain of your customers. You understand that such Shares must
be held in a separate account for each shareholder of such Funds.
Each transaction shall be without recourse to you provided that
you act in accordance with the terms of this Agreement. You
represent and warrant to us that you will have full right, power
and authority to effect transactions (including, without
limitation, any purchases and redemptions) in Shares on behalf of
all customer accounts provided by you.
5. RELATIONSHIP WITH FINANCIAL INSTITUTION
Neither this Contract nor the performance of the services of the
respective parties hereunder shall be considered to constitute an
exclusive arrangement, or to create a partnership, association or
joint venture between you and us. In making available Shares of
the Funds under this Contract, nothing herein shall be construed
to constitute you or any of your agents, employees or
representatives as our agent or employee, or as an agent or
employee of the Funds, and you shall not make any representations
to the contrary. As general distributor of the Funds, we shall
have full authority to take such action as we may deem advisable
in respect of all matters pertaining to the distribution of the
Shares. We shall not be under any obligation to you, except for
obligations expressly assumed by us in this Contract.
6. TERMINATION
Either party hereto may terminate this Contract, without cause,
upon ten days' written notice to the other party. We may
terminate this Contract for cause upon the violation by you of
any of the provisions hereof, such termination to become
effective on the date such notice of termination is mailed to
you. If you are registered as a broker-dealer and affiliated
with a bank, this Contract shall terminate automatically if
either Party ceases to be a member of the NASD.
7. ASSIGNABILITY
This Contract is not assignable or transferable, except that we
may assign or transfer this Contract to any successor which
becomes general distributor of the Funds.
8. MISCELLANEOUS
(a) All communications mailed to us should be sent to the above
address. Any notice to you shall be duly given if mailed or
delivered to you at the address specified by you below.
(b) This Contract constitutes the entire agreement and
understanding between the parties and supercedes any and all
prior agreements between the parties.
(c) This Contract and the rights and obligations of the parties
hereunder shall be governed by and construed under the laws of
The Commonwealth of Massachusetts.
Very truly yours,
PUTNAM MUTUAL FUNDS CORP.
By: ------------------------------
William N. Shiebler, President and Chief Executive
Officer
We accept and agree to the foregoing Contract as of the date
set forth below.
Financial Institution: ---------------------------
By: ----------------------------
Authorized Signature, Title
----------------------------
----------------------------
Address
Dated: ----------------------------
Please return the signed Putnam copy of this sales Contract to
Putnam Mutual Funds Corp., P. O. Box 41203, Providence, RI 02940-
1203
NF-5 4
DEALER SERVICE AGREEMENT
Between: and
PUTNAM MUTUAL FUNDS CORP.
General Distributor of
The Putnam Family of Mutual Funds
One Post Office Square
Boston, MA 02109
We are pleased to inform you that, pursuant to the terms of this
Dealer Service Agreement, we are authorized to pay you service
fees in connection with the accounts of your customers that hold
shares of certain Putnam Funds listed in SCHEDULE 1 that have
adopted distribution plans pursuant to Rule 12b-1 (the "12b-1
Funds"). Payment of the service fees is subject to your initial
and continuing satisfaction of the following terms and conditions
which may be revised by us from time to time:
1. QUALIFICATION REQUIREMENTS
(a) You have entered into a Sales Contract with us with respect
to the Putnam Family of Mutual Funds (the "Putnam Funds").
(b) You are the dealer of record for accounts in Putnam Funds
having an aggregate average net asset value of at least the
minimum amount set forth in SCHEDULE 2 (DEALER FIRM REQUIREMENTS)
during the period for which a service fee is to be paid. Putnam
Fund accounts are accounts in any open-end Putnam Fund, but
excluding any accounts for your firm's own retirement plans.
(c) One or more of your current employees must be the designated
registered representative(s) on accounts in Putnam Funds having
an aggregate average net asset value of at least the minimum
amount set forth in SCHEDULE 2 (REGISTERED REPRESENTATIVE
REQUIREMENTS) during the period for which a service fee is to be
paid.
(d) You will provide the following information and agree that we
will be entitled to rely on the accuracy of such information in
updating our records for determining the levels of service fees
payable to you under the terms of this Agreement. You understand
that such payments will be based solely on Putnam's records.
For each Putnam Fund account registered in the name of
one of your customers, you will advise us, preferably
by electronic means, before the end of the second month
in each calendar quarter, of the registered
representative's name, identification number, branch
number, and telephone number.
2. SERVICE FEES
(a) If you meet the qualification requirements set forth above
in Paragraph 1, you will be paid a service fee on assets in the
12b-1 Funds for which you are the dealer of record and which are
serviced by a registered representative of your firm meeting the
Registered Representative Requirements, if any, at the annual
rates specified (excluding any accounts for your firm's own
retirement plans).
(b) You understand and agree that:
(i) all service fee payments are subject to the
limitations contained in each 12b-1 Fund's Distribution
Plan, which may be varied or discontinued at any time;
(ii) you shall waive the right to receive service fee
payments to the extent any 12b-1 Fund fails to make
payments to us under its distribution plan with us;
(iii) your failure to provide the services described in
Paragraph 4 below as may be amended by us from time to
time, or otherwise comply with the terms of this
Agreement, will render you ineligible to receive
service fees; and
(iv) failure of an assigned registered representative
to provide services required by this Agreement will
render that representative's accounts ineligible as
accounts on which service fees are paid.
3. PAYMENTS AND COMMUNICATIONS TO REGISTERED REPRESENTATIVES
(a) You will pass through to your registered representatives a
significant share of the service fees paid to you pursuant to
this Agreement.
(b) You will assist us in distributing to your registered
representatives periodic statements which we will have prepared
showing the aggregate average net asset value of shares in Putnam
Funds with which they are credited on our records.
4. REQUIRED SERVICES
(a) You will assign one of your registered representatives to
each Putnam Fund account on your records and reassign the Putnam
Fund account should that representative leave your firm.
(b) You and your registered representatives will assist us and
our affiliates in providing the following services to
shareholders of the Putnam Funds:
(i) Maintain regular contact with shareholders in
assigned accounts and assist in answering inquiries
concerning the Putnam Funds.
(ii) Assist in distributing sales and service
literature provided by us, particularly to the
beneficial owners of accounts registered in your name
(nominee name accounts).
(iii)Assist us and our affiliates in the
establishment and maintenance of shareholder accounts
and records.
(iv) Assist shareholders in effecting administrative
changes, such as changing dividend options, account
designations, address, automatic investment programs or
systematic investment plans.
(v) Assist in processing purchase and
redemption transactions.
(vi) Provide any other information or
services as the customer or we may reasonably request.
(c) You will support our marketing efforts by granting
reasonable requests for visits to your offices by our wholesalers
and by including all Putnam Funds on your "approved" list.
(d) Your compliance with the service requirements set forth in
this Agreement will be evaluated by us from time to time by
surveying shareholder satisfaction with service, by monitoring
redemption levels of shareholder accounts assigned to you and by
such other methods as we deem appropriate.
(e) The provisions of this Paragraph 4 may be amended by us from
time to time upon notice to you.
5. AMENDMENT
This Agreement, including any Schedule hereto, shall be deemed
amended as provided in any written notice delivered by us to you.
6. EFFECTIVE PERIOD AND TERMINATION
The provisions of this Agreement shall remain in effect for not
more than one year from the date of its execution or adoption and
thereafter for successive annual periods only so long as such
continuance is specifically approved at least annually by the
Trustees of each of the 12b-1 Funds in conformity with Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act"). This
Agreement shall automatically terminate in the event of its
assignment (as defined by the 1940 Act). In addition, this
Agreement may be terminated at any time, without the payment of
any penalty, by either party upon written notice delivered or
mailed by registered mail, postage prepaid, to the other party,
or, as provided in Rule 12b-1 under the 1940 Act, by the Trustees
of any 12b-1 Fund or by the vote of the holders of the
outstanding voting securities of any 12b-1 Fund.
7. WRITTEN REPORTS
Putnam Mutual Funds Corp. shall provide the Trustees of each of
the 12b-1 Funds, and such Trustees shall review at least
quarterly, a written report of the amounts paid to you under this
Agreement and the purposes for which such expenditures were made.
8. MISCELLANEOUS
(a) All communications mailed to us should be sent to the
address listed below. Any notice to you shall be duly given if
mailed or delivered to you at the address specified by you below.
(b) The provisions of this Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts.
Very truly yours,
PUTNAM MUTUAL FUNDS CORP.
By: ------------------------------
William N. Shiebler, President
and Chief Executive Officer
We accept and agree to the foregoing Agreement as of the date set
forth below.
Dealer: -------------------------
By: ----------------------------
Authorized Signature, Title
------------------------------
------------------------------
Address
Dated: -------------------------
Please return the signed Putnam copy of this Agreement to Putnam
Mutual Funds Corp., P.O. Box 41203, Providence, RI 02940-1203.
SCHEDULE 1: THE 12B-1 FUNDS
Service fees will be paid on the following Putnam Funds at the
rates set forth in the Prospectus of that Fund:
Putnam American Government Income Fund
Putnam Arizona Tax Exempt Income Fund
Putnam Asia Pacific Growth Fund
Putnam Asset Allocation Funds
-Putnam Asset Allocation: Growth Portfolio
-Putnam Asset Allocation: Balanced Portfolio
-Putnam Asset Allocation: Conservative Portfolio
Putnam Balanced Retirement Fund
Putnam California Tax Exempt Income Fund
Putnam Capital Appreciation Fund
Putnam Convertible Income-Growth Trust
Putnam Diversified Equity Trust
Putnam Diversified Income Trust
Putnam Equity Income Fund
Putnam Europe Growth Fund
Putnam Florida Tax Exempt Income Fund
Putnam Funds Trust
-Putnam Asia Pacific Fund II
-Putnam Equity Fund 98
-Putnam High Yield Total Return
-Putnam High Yield Trust II
-Putnam International Growth and Income Fund
-Putnam Investment Fund 98
-Putnam Latin America Fund
The George Putnam Fund of Boston
Putnam Global Governmental Income Trust
Putnam Global Growth Fund
Putnam Global Natural Resources Fund
The Putnam Fund for Growth and Income
Putnam Growth and Income Fund II
Putnam Health Sciences Trust
Putnam High Quality Bond Fund
Putnam High Yield Advantage Fund
Putnam High Yield Trust
Putnam High Yield Total Return Fund
Putnam High Yield Trust II
Putnam Income Fund
Putnam Intermediate U.S. Government Fund
Putnam International Growth Fund
Putnam Investment Funds
-Putnam Balanced Fund
-Putnam Emerging Markets Fund
-Putnam Global Growth and Income Fund
-Putnam Growth Opportunities Fund
-Putnam International Fund
-Putnam International New Opportunities Fund
-Putnam International Voyager Fund
-Putnam Japan Fund
-Putnam New Value Fund
-Putnam Research Fund
Putnam Investors Fund
Putnam Massachusetts Tax Exempt Income Fund
Putnam Michigan Tax Exempt Income Fund
Putnam Minnesota Tax Exempt Income Fund
Putnam Municipal Income Fund
Putnam New Jersey Tax Exempt Income Fund
Putnam New Opportunities Fund
Putnam New York Tax Exempt Income Fund
Putnam New York Tax Exempt Opportunities Fund
Putnam Ohio Tax Exempt Income Fund
Putnam OTC & Emerging Growth Fund
Putnam Pennsylvania Tax Exempt Income Fund
Putnam Preferred Income Trust
Putnam Strategic Income Fund
Putnam Tax Exempt Income Fund
Putnam Tax-Free Income Trust
-Putnam Tax-Free High Yield Fund
-Putnam Tax-Free Insured Fund
Putnam U.S. Government Income Trust
Putnam Utilities Growth and Income Fund
Putnam Vista Fund
Putnam Voyager Fund
Putnam Voyager Fund II
SCHEDULE 2: MINIMUM ASSETS
DEALER FIRM REQUIREMENTS. The minimum aggregate average net
asset value of all accounts in Putnam Funds specified by
Paragraph 1(b) is $250,000. We will review this requirement
prior to the start of each year and inform you of any changes.
REGISTERED REPRESENTATIVE REQUIREMENTS. With respect to
Paragraph 1(c), there is no minimum asset qualification
requirement in the Putnam Funds applicable to each of your
representatives. We will review this requirement prior to the
start of each year and inform you of any changes.
NF-52
FINANCIAL INSTITUTION
SERVICE AGREEMENT
Between: and
PUTNAM MUTUAL FUNDS CORP.
General Distributor of
The Putnam Family of Mutual Funds
One Post Office Square
Boston, MA 02109
We are pleased to inform you that, pursuant to the terms of this
FINANCIAL INSTITUTION SERVICE AGREEMENT, we are authorized to pay
you service fees in connection with the accounts of your
customers that hold shares of certain Putnam funds listed in
SCHEDULE 1 that have adopted distribution plans pursuant to Rule
12b-1 (the "12b-1 Funds"). Payment of the service fees is
subject to your initial and continuing satisfaction of the
following terms and conditions which may be revised by us from
time to time:
1. QUALIFICATION REQUIREMENTS
(a) You have entered into a Financial Institution Sales Contract
with us with respect to the Putnam Family of Mutual Funds (the
"Putnam Funds"), whose shares you have agreed to make available
to your customers on an agency basis.
(b) You are the financial institution of record for accounts in
Putnam Funds having an aggregate average net asset value of at
least the minimum amount set forth in SCHEDULE 2 (FINANCIAL
INSTITUTION REQUIREMENTS) during the period for which a service
fee is to be paid. Putnam Fund accounts are accounts in any open-
end Putnam Fund but excluding any accounts for your
organization's own retirement plans.
(c) One or more of your current employees must be the designated
registered representative(s) in the case of a bank affiliated
dealer, or agent representative(s) in the case of a bank (both
referred to as "representatives"), on accounts in Putnam Funds
having an aggregate average net asset value of at least the
minimum amount set forth in SCHEDULE 2 (REPRESENTATIVE
REQUIREMENTS) during the period for which a service fee is to be
paid.
(d) You will provide the following information and agree that we
will be entitled to rely on the accuracy of such information in
updating our records for determining the levels of service fees
payable to you under the terms of this Agreement. You understand
that such payments will be based solely on Putnam's records:
For each Putnam Fund account registered in the name of one
of your customers, you will advise us, preferably by
electronic means, before the end of the second month in each
calendar quarter, of the representative's name,
identification number, branch number, and telephone number.
2. SERVICE FEES
(a) If you meet the qualification requirements set forth above in
Paragraph 1, you will be paid, at the end of each calendar
quarter, a service fee on assets of your customers in the 12b-1
Funds for which you are the financial institution of record and
which are serviced by a representative of your organization
meeting the Representative Requirements, if any at the annual
rates specified (excluding any accounts for your organization's
own retirement plans), provided that you have evaluated such
service fees and have concluded that it is consistent with
applicable laws, rules, regulations and regulatory
interpretations for you to receive such service fees.
(b) You understand and agree that:
(i) all service fee payments are subject to the limitations
contained in each 12b-1 Fund's Distribution Plan, which may
be varied or discontinued at any time;
(ii) you shall waive the right to receive service fee payments to the
extent any 12b-1 Fund fails to make payments to us under its distribution
plan with us;
(iii)your failure to provide the services described in
Paragraph 4 below as may be amended by us from time to time,
or otherwise comply with the terms of this Agreement, will
render you ineligible to receive service fees; and
(iv) failure of an assigned representative to provide
services required by this Agreement will render that
representative's accounts ineligible as accounts on which
service fees are paid.
3. PAYMENTS AND COMMUNICATIONS TO REPRESENTATIVES
(a) Where consistent with applicable laws, rules, regulations and
regulatory interpretations, you will pass through to your
representatives a significant share of the service fees paid to
you pursuant to this Agreement, or you will otherwise use the
payments of service fees to advance the objective of providing
and improving service to shareholders of the Putnam Funds in a
manner specifically approved by Putnam Mutual Funds (for example,
via training courses for representatives or shareholder
seminars).
(b) You will assist us in distributing to your representatives
periodic statements which we will have prepared showing the
aggregate average net asset value of shares in Putnam Funds with
which they are credited on our records.
4. REQUIRED SERVICES
(a) You will assign one of your representatives to each Putnam
Fund account on your records and reassign the Putnam Fund account
should that representative leave your organization.
(b) You and your representatives will assist us and our
affiliates in providing the following services to shareholders of
the Putnam Funds:
(i) Maintain regular contact with shareholders in assigned
accounts and assist in answering inquiries concerning the
Putnam Funds.
(ii) Assist in distributing sales and service literature
provided by us, particularly to the beneficial owners of
accounts registered in your name (nominee name accounts).
(iii) Assist us and our affiliates in the establishment and
maintenance of shareholder accounts and records.
(iv) Assist shareholders in effecting administrative
changes, such as changing dividend options, account
designations, address, automatic investment programs or
systematic investment plans.
(v) Assist in processing purchase and redemption
transactions.
(vi) Provide any other information or services as the
customer or we may reasonably request.
(c) You will grant reasonable requests for visits to your offices
by our wholesalers and include all Putnam Funds on your menu or
list of investments made available by you to your customers.
(d) Your compliance with the service requirements set forth in
this Agreement will be evaluated by us from time to time by
surveying shareholder satisfaction with service, by monitoring
redemption levels of shareholder accounts assigned to you and by
such other methods as we deem appropriate.
(e) The provisions of this Paragraph 4 may be amended by us from
time to time upon notice to you.
5. AMENDMENT
This Agreement, including any Schedule hereto, shall be deemed
amended as provided in any written notice delivered by us to you.
6. EFFECTIVE PERIOD AND TERMINATION
The provisions of this Agreement shall remain in effect for one
year from the date of its execution or adoption and thereafter
for successive annual periods only so long as such continuance is
specifically approved at least annually by the Trustees of each
of the 12b-1 Funds in conformity with Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). This Agreement
shall automatically terminate in the event of its assignment (as
defined by the 1940 Act). In addition, this Agreement may be
terminated at any time, without the payment of any penalty, by
either party upon written notice to the other party, or, as
provided in Rule 12b-1 under the 1940 Act, by the Trustees of any
12b-1 Fund or by the vote of the holders of the outstanding
voting securities of any 12b-1 Fund.
7. WRITTEN REPORTS
Putnam Mutual Funds Corp. shall provide the Trustees of each of
the 12b-1 Funds, and such Trustees shall review at least
quarterly, a written report of the amounts paid to you under this
Agreement and the purposes for which such expenditures were made.
8. COMPLIANCE WITH LAWS
With respect to the receipt of service fees under the terms of
this Agreement, you will comply with all applicable federal and
state laws and rules, and all applicable regulations and
interpretations of regulatory agencies or authorities, which may
affect your business practices, including any requirement of
written authorization or consent by your customers to your
receipt of service fees, and any requirement to provide
disclosure to your customers of such service fees.
9. MISCELLANEOUS
(a) All communications mailed to us should be sent to the address
listed below. Any notice to you shall be duly given if mailed or
delivered to you at the address specified by you below.
(b) The provisions of this Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts.
Very truly yours,
PUTNAM MUTUAL FUNDS CORP.
By: --------------------------
William N. Shiebler,
President and
Chief Executive Officer
We accept and agree to the foregoing Agreement as of the date set
forth below.
Financial Institution: --------------------------
By: --------------------------
Authorized Signature, Title
--------------------------
--------------------------
Address
Dated: --------------------------
Please return the signed Putnam copy of this Agreement to Putnam
Mutual Funds Corp., P.O. Box 41203, Providence, RI 02940-1203.
SCHEDULE 1: THE 12B-1 FUNDS
Service fees will be paid on the following Putnam Funds at the
rates set forth in the Prospectus of that Fund:
Putnam American Government Income Fund
Putnam Arizona Tax Exempt Income Fund
Putnam Asia Pacific Growth Fund
Putnam Asset Allocation Funds
-Putnam Asset Allocation: Growth Portfolio
-Putnam Asset Allocation: Balanced Portfolio
-Putnam Asset Allocation: Conservative Portfolio
Putnam Balanced Retirement Fund
Putnam California Tax Exempt Income Fund
Putnam California Tax Exempt Money Market Fund
Putnam Capital Appreciation Fund
Putnam Convertible Income-Growth Trust
Putnam Diversified Equity Trust
Putnam Diversified Income Trust
Putnam Equity Income Fund
Putnam Europe Growth Fund
Putnam Florida Tax Exempt Income Fund
Putnam Funds Trust
-Putnam Asia Pacific Fund II
-Putnam Equity Fund 98
-Putnam High Yield Total Return
-Putnam High Yield Trust II
-Putnam International Growth and Income Fund
-Putnam Investment Fund 98
-Putnam Latin America Fund
The George Putnam Fund of Boston
Putnam Global Governmental Income Trust
Putnam Global Growth Fund
Putnam Global Natural Resources Fund
The Putnam Fund for Growth and Income
Putnam Growth and Income Fund II
Putnam Health Sciences Trust
Putnam High Quality Bond Fund
Putnam High Yield Advantage Fund
Putnam High Yield Trust
Putnam High Yield Total Return Fund
Putnam High Yield Trust II
Putnam Income Fund
Putnam Intermediate U.S. Government Fund
Putnam International Growth Fund
Putnam Investment Funds
-Putnam Balanced Fund
-Putnam Emerging Markets Fund
-Putnam Global Growth and Income Fund
-Putnam Growth Opportunities Fund
-Putnam International Fund
-Putnam International New Opportunities Fund
-Putnam International Voyager Fund
-Putnam Japan Fund
-Putnam New Value Fund
-Putnam Research Fund
Putnam Investors Fund
Putnam Massachusetts Tax Exempt Income Fund
Putnam Michigan Tax Exempt Income Fund
Putnam Minnesota Tax Exempt Income Fund
Putnam Money Market Fund
Putnam Municipal Income Fund
Putnam New Jersey Tax Exempt Income Fund
Putnam New Opportunities Fund
Putnam New York Tax Exempt Income Fund
Putnam New York Tax Exempt Money Market Fund
Putnam New York Tax Exempt Opportunities Fund
Putnam Ohio Tax Exempt Income Fund
Putnam OTC & Emerging Growth Fund
Putnam Pennsylvania Tax Exempt Income Fund
Putnam Preferred Income Trust
Putnam Strategic Income Fund
Putnam Tax Exempt Income Fund
Putnam Tax Exempt Money Market Fund
Putnam Tax-Free Income Trust
-Putnam Tax-Free High Yield Fund
-Putnam Tax-Free Insured Fund
Putnam U.S. Government Income Trust
Putnam Utilities Growth and Income Fund
Putnam Vista Fund
Putnam Voyager Fund
Putnam Voyager Fund II
SCHEDULE 2: MINIMUM ASSETS
FINANCIAL INSTITUTION REQUIREMENTS. The minimum aggregate
average net asset value of all accounts in Putnam Funds specified
by Paragraph 1(b) is $250,000. We will review this requirement
prior to the start of each year and inform you of any changes.
REPRESENTATIVE REQUIREMENTS. With respect to Paragraph
1(c), there is no minimum asset qualification requirement in the
Putnam Funds applicable to each of your representatives. We will
review this requirement prior to the start of each year and
inform you of any changes. We reserve the right to set a minimum
at any time.
NF-53
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<FISCAL-YEAR-END> JUNE-30-1998
<PERIOD-END> JUNE-30-1998
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<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 270,484,414
<NET-ASSETS> 1,467,779,504
<DIVIDEND-INCOME> 22,158,596
<INTEREST-INCOME> 2,238,907
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<EXPENSES-NET> 14,476,757
<NET-INVESTMENT-INCOME> 9,920,746
<REALIZED-GAINS-CURRENT> 86,038,453
<APPREC-INCREASE-CURRENT> 178,406,624
<NET-CHANGE-FROM-OPS> 274,365,823
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<DISTRIBUTIONS-OF-INCOME> (7,640,645)
<DISTRIBUTIONS-OF-GAINS> (23,126,779)
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<AVG-DEBT-PER-SHARE> 0
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<LEGEND>
Putnam Europe Growth Fund
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> CLASS B
<S> <C>
<PERIOD-TYPE> YEAR END
<FISCAL-YEAR-END> JUNE-30-1998
<PERIOD-END> JUNE-30-1998
<INVESTMENTS-AT-COST> 1,202,476,697
<INVESTMENTS-AT-VALUE> 1,472,976,834
<RECEIVABLES> 38,761,281
<ASSETS-OTHER> 109,454
<OTHER-ITEMS-ASSETS> 0
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<PAYABLE-FOR-SECURITIES> 34,431,891
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,636,174
<TOTAL-LIABILITIES> 44,068,065
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,125,017,479
<SHARES-COMMON-STOCK> 27,407,713
<SHARES-COMMON-PRIOR> 14,084,174
<ACCUMULATED-NII-CURRENT> 10,855,424
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 61,422,187
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 270,484,414
<NET-ASSETS> 1,467,779,504
<DIVIDEND-INCOME> 22,158,596
<INTEREST-INCOME> 2,238,907
<OTHER-INCOME> 0
<EXPENSES-NET> 14,476,757
<NET-INVESTMENT-INCOME> 9,920,746
<REALIZED-GAINS-CURRENT> 86,038,453
<APPREC-INCREASE-CURRENT> 178,406,624
<NET-CHANGE-FROM-OPS> 274,365,823
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,471,018)
<DISTRIBUTIONS-OF-GAINS> (19,048,225)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,984,899
<NUMBER-OF-SHARES-REDEEMED> (10,853,484)
<SHARES-REINVESTED> 1,192,124
<NET-CHANGE-IN-ASSETS> 877,022,256
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<GROSS-ADVISORY-FEES> 6,715,370
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 14,838,162
<AVERAGE-NET-ASSETS> 384,572,717
<PER-SHARE-NAV-BEGIN> 18.56
<PER-SHARE-NII> .14
<PER-SHARE-GAIN-APPREC> 5.80
<PER-SHARE-DIVIDEND> (.26)
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<PER-SHARE-NAV-END> 23.11
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<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
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<LEGEND>
Putnam Europe Growth Fund
</LEGEND>
<SERIES>
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<NAME> CLASS M
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<FISCAL-YEAR-END> JUNE-30-1998
<PERIOD-END> JUNE-30-1998
<INVESTMENTS-AT-COST> 1,202,476,697
<INVESTMENTS-AT-VALUE> 1,472,976,834
<RECEIVABLES> 38,761,281
<ASSETS-OTHER> 109,454
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,511,847,569
<PAYABLE-FOR-SECURITIES> 34,431,891
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 9,636,174
<TOTAL-LIABILITIES> 44,068,065
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,125,017,479
<SHARES-COMMON-STOCK> 1,812,970
<SHARES-COMMON-PRIOR> 839,024
<ACCUMULATED-NII-CURRENT> 10,855,424
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 61,422,187
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 270,484,414
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<DIVIDEND-INCOME> 22,158,596
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<EXPENSES-NET> 14,476,757
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<REALIZED-GAINS-CURRENT> 86,038,453
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<NET-CHANGE-FROM-OPS> 274,365,823
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<DISTRIBUTIONS-OF-INCOME> (297,933)
<DISTRIBUTIONS-OF-GAINS> (1,128,746)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,224,241
<NUMBER-OF-SHARES-REDEEMED> (1,325,283)
<SHARES-REINVESTED> 74,988
<NET-CHANGE-IN-ASSETS> 877,022,256
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