[H & M Final]
[Translation]
SECURITIES REGISTRATION STATEMENT
(NAV SALE)
(INCLUDING THE AMENDMENT)
PUTNAM EUROPE GROWTH FUND
SECURITIES REGISTRATION STATEMENT
To: Director of Kanto Local Finance Bureau
Filing Date of SRS: June 18, 1999
Filing Date of Amendment to SRS: June 21 and 25,
1999
Name of the Registrant Trust: PUTNAM EUROPE GROWTH FUND
Name of Trustees: George Putnam
John A. Hill
William F. Pounds
Jameson A. Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin, III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
Address of Principal Office: One Post Office Square
Boston, Massachusetts 02109
U.S.A.
Name and Title of Registration Agent: Harume Nakano
Attorney-at-Law
Signature [Harume Nakano]
(Seal)
Ken Miura
Attorney-at-Law
Signature [Ken Miura]
(Seal)
Address or Place of Business Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Name of Liaison Contact: Harume Nakano
Ken Miura
Attorneys-at-Law
Place of Liaison Contact: Hamada & Matsumoto
Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
Phone Number: 03-3580-3377
Public Offering or Sale for Registration
Name of the Fund Making Public PUTNAM EUROPE GROWTH FUND
Offering or Sale of Foreign
Investment Fund Securities:
Type and Aggregate Amount of Up to 50 million Class M shares.
Foreign Investment Fund Securities Up to the total amount obtained by
to be Publicly Offered or Sold: aggregating the net asset value
per Class M share in respect of
30 million Class M shares
(The maximum amount expected to be
sold is 1,102.5 million U.S.
dollars (yen131.6 billion.)
Note 1: U.S. $ amount is translated into Japanese Yen at the
rate of U.S.$l.00=yen119.35, the mean of the exchange rate
quotations by The Bank of Tokyo-Mitsubishi, Ltd. for
buying and selling spot dollars by telegraphic transfer
against yen on April 30, 1999.
Note 2: The maximum amount expected to be sold is an amount
calculated by multiplying the net asset value per Class M
share as of April 30, 1999(U.S.$22.05) by 30 million
Class M shares for convenience.
Places where a copy of this Securities Registration
Statement is available for Public Inspection
Not applicable.
(Total number of pages of this Securities Registration
Statement is 92.)
C O N T E N T S
Japanese This
OriginalEnglish
Translation
PART I. INFORMATION CONCERNING SECURITIES 1 1
PART II. INFORMATION CONCERNING ISSUER 4 6
I. DESCRIPTION OF THE FUND 4 6
1. General Information 4 6
2. Investment Policy 9 12
3. Management Structure 13 18
4. Information Concerning the Exercise of Rights by
Shareholders, etc. 23 31
5. Status of Investment Fund 25 34
II. OUTLINE OF THE FUND 28 37
III. OUTLINE OF THE OTHER RELATED COMPANIES 68 71
IV. FINANCIAL CONDITION OF THE FUND 70 73
V. SUMMARY OF INFORMATION CONCERNING
FOREIGN INVESTMENT TRUST SECURITIES 147 79
VI. MISCELLANEOUS 147 79
PART III. SPECIAL INFORMATION 149 81
I. OUTLINE OF THE SYSTEM OF INVESTMENT TRUSTS
IN MASSACHUSETTS 149 81
II. FINANCIAL CONDITION OF THE INVESTMENT
MANAGEMENT COMPANY 155 88
III. FORM OF FOREIGN INVESTMENT
FUND SECURITIES 172 88
PART I. INFORMATION CONCERNING SECURITIES
1. NAME OF FUND: PUTNAM EUROPE GROWTH FUND
(hereinafter referred to as the "Fund")
2. NATURE OF FOREIGN Three classes of shares (Class A shares, Class B
INVESTMENT FUND SECU- shares and Class M shares) being all registered
RITIES CERTIFICATES: without par value. In Japan, Class M shares
(all hereinafter referred to as the
"Shares") are for public offering.
No rating has been acquired.
3. NUMBER OF SHARES TO Up to 30 million Shares
BE OFFERED FOR SALE
(IN JAPAN)
4. TOTAL AMOUNT OF Up to the total amount obtained by aggregating the
OFFERING PRICE: the respective net asset value of each
Share in respect of 30 million Shares
(The maximum amount expected to be sold
is 1,102.5 million U.S. Dollars (yen131.6 billion).
Note 1: The maximum amount expected to be sold is the
amount calculated, for convenience, by multiplying the
larger of the net asset value per Share of Class M
Shares as of April 30, 1999 ($22.05) by the number of
Shares to be offered (30 million).
Note 2: Dollar amount is translated, for convenience, at
the rate of $1.00=yen119.35 (the mean of the exchange
rate quotations by The Bank of Tokyo-Mitsubishi, Ltd.
for buying and selling spot dollars by telegraphic
transfer against yen on April 30, 1999). The same
applies hereinafter.
Note 3: In this document, money amounts and percentages
have been rounded. Therefore, there are cases in which
the amount of the "total column" is not equal to the
aggregate amount. Also, simply multiplying the
corresponding amount makes translation into yen by the
conversion rate specified and rounding up when
necessary. As a result, in this document, there are
cases in which Japanese yen figures for the same
information differ from each other.
5. ISSUE PRICE: The Net Asset Value per Share next
calculated after the application
for purchase is received by the
Fund.
6. SALES CHARGE: Class M Shares:
Sales charge (in Japan) is 3.50% of the
net asset value.
Note: 0.50% of the amount calculated by dividing
the net asset value by (1-0.035) and rounding to three
decimal places will be retained by Putnam Mutual Funds
Corp.
7. MINIMUM AMOUNT OR The minimum amount for purchase of
NUMBER OF SHARES Shares is 100 Shares. Shares may be purchased
FOR SUBSCRIPTION: in integral multiples of 10 Shares.
8. PERIOD OF SUBSCRIPTION: From: July 5, 1999 (Monday)
To: December 31, 1999 (Friday),
provided that the subscription is handled
only on a day that is both a Fund
Business Day and a business day
when securities companies are open
for business in Japan.
Note:A "Fund Business Day" means a day on which the New York
Stock Exchange is open for business.
9. DEPOSIT FOR SUBSCRIPTION: None.
10.PLACE OF SUBSCRIPTION: Yamatane Securities Co., Ltd. (hereinafter
referred to as " Yamatane" or the
"Distributor") 7-12, Nihonbashi-kabutocho,
Chuo-ku, Tokyo
Note:The subscription is handled at the head office and the
branch offices in Japan of the above-mentioned
securities company.
11. DATE AND PLACE Investors shall pay the Issue Price and Sales
OF PAYMENT: Charge to Yamatane within 4 business days in
Japan from the day when Yamatane
confirms the execution of the
order (the "Trade Day").
The total issue price for each Application
Day will be transferred by
Yamatane to the account of the
Fund at Putnam Fiduciary Trust
Company, the transfer agent,
within 4 Fund Business Days
(hereinafter referred to as
"Payment Date") from (and
including) the Application Day.
12. OUTLINE OF UNDERWRITING, ETC.:
(A) Yamatane undertakes to make a public offering of
Shares in accordance with an agreement dated June 22, 1998
with Putnam Mutual Funds Corp. in connection with the sale
of the Shares in Japan.
(B) Yamatane will execute or forward purchase orders and
repurchase requests relating to the Shares received
directly or indirectly through other sales and repurchase
handling companies (each hereinafter referred to as a
"Sales Handling Company") to the Fund.
Note: A "Sales Handling Company" means a securities agent
company and/or registration agent financial institution
which shall conclude the agreement with a Distributor
concerning agency business of shares of the Fund, act as
agent for a Distributor for subscription or repurchase of
shares of the Fund from investors and handle the
business, etc. concerning receipt of subscription money
from investors or payment of repurchase proceeds to
investors, etc.
(C) The Fund has appointed Yamatane as the Agent Company
in Japan.
Note: The "Agent Company" shall mean the company which, under a
contract made with a foreign issuer of investment
securities, makes public the net asset value per Share
and submits or forwards the financial reports or other
documents to the Japan Securities Dealers Association
("JSDA") or other Sales Handling Companies rendering
other services.
13. MISCELLANEOUS:
(A) Method of Subscription:
Investors who subscribe to Shares shall enter into an
agreement with a Sales Handling Company concerning
transactions of foreign securities. A Sales Handling
Company shall provide to the investors a Contract
Concerning a Foreign Securities Transactions Account and
other prescribed contracts (the "Contracts"), and the
investors shall submit to the Sales Handling Company an
application for requesting the opening of a transactions
account under the Contracts. The subscription amount shall
be paid in yen in principle and the yen exchange rate shall
be the foreign exchange rate quoted in the Tokyo Foreign
Exchange Market on the Trade Day of each subscription,
which shall be determined by such Sales Handling Company.
Yamatane shall pay the subscription amount in dollars
to the account of the Fund with Putnam Fiduciary Trust
Company as custodian for the Fund on the Payment Date.
(B) PERFORMANCE INFORMATION
The following information provides some indication of
the fund's risks. The chart shows year-to-year changes in
the performance of one of the fund's classes of shares,
class M shares. The table following the chart compares the
fund's performance to that of 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 M shares
1991 13.46%
1992 -1.81
1993 30.32
1994 5.99
1995 21.16
1996 22.16
1997 21.32
1998 23.12
During the periods shown in the bar chart, the highest
return for a quarter was 19.92% (quarter ending 3/31/98)
and the lowest return for a quarter was -18.38% (quarter
ending 9/30/98).
Average Annual Total Returns (for periods ending 12/31/98)
Past 1 year Past 5 years Since Inception
*
Class M 18.82% NA 20.85%
MSCI Europe 28.53% 19.11% 23.35%
Index
* Inception date: 12/1/94
Unlike the bar chart, this performance information
reflects the impact of sales charges. Class M share
performance reflects the current maximum initial sales
charge. Performance of Class M shares in the bar chart and
table following the chart, for periods prior to their
inception on December 1, 1994, is derived from the
historical performance of the Fund's class A shares (not
offered in Japan), adjusted to reflect the appropriate
sales charge and the higher 12b-1 fees paid by class M
shares. The Fund's performance is compared to the Morgan
Stanley Capital International Europe Index (MSCI), an
unmanaged list of approximately 627 equity securities
originating in one of the fifteen European countries.
(C) FEES AND EXPENSES
This table summarizes the fees and expenses investors
may pay if they invest in the fund. Expenses are based on
the fund's last fiscal year.
Shareholder Fees (fees paid directly from investor's
investment)
Class M
Shares
Maximum Sales Charge (Load) Imposed on 3.50%
Purchases
(as a percentage of the offering price)
Maximum Deferred Sales Charge (Load) (as a NONE
percentage of the original purchase price or
redemption proceeds, whichever is lower)
Annual Fund Operating Expenses (expenses that are deducted
from fund assets)
Management Distribu Other Expenses Total Annual
Fees tion Fund Operating
(12b-1) Expenses
Fees
Class M 0.75% 0.75% 0.32% 1.82%
(D) EXAMPLE
This example translates the "Total Annual Fund
Operating Expenses" shown in the preceding table into
dollar amounts. By doing this, investors can more easily
compare the cost of investing in the fund to the cost of
investing in other mutual funds. The example makes certain
assumptions. It assumes that an investor invests $10,000
in the fund for the time periods shown and then redeems all
shares at the end of those periods. It also assumes a 5%
return on an investor's investment each year and that the
fund's operating expenses remain the same. The example is
hypothetical; actual costs and returns may be higher or
lower.
1 year 3 years 5 years 10 years
Class M $528 $902 $1,301 $2,412
(E) Offerings other than in Japan:
Shares are simultaneously offered in the United States
of America.
PART II. INFORMATION CONCERNING ISSUER
I. DESCRIPTION OF THE FUND
1. GENERAL INFORMATION
(A) Outline of Laws Regulating the Fund in the Jurisdiction
Where Established:
(1) Name of the Fund: Putnam Europe Growth Fund (the
"Fund")
(2) Form of the Fund
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 divided into series. Only the Fund's Class M
Shares are currently offered in Japan. The Fund also
offers in the United States of America other classes of
shares with different sales charges and expenses. Because
of these different sales charges and expenses, the
investment performance of the classes will vary.
Each share has one vote, with fractional shares voting
proportionally. Shares of all classes will vote together
as a single class except when otherwise required by law or
as determined by the Trustees. Shares are freely
transferable, are entitled to dividends as declared by the
Trustees, and, if the Fund were liquidated, would receive
the net assets of the Fund. The Fund may suspend the sale
of shares at any time and may refuse any order to purchase
shares. Although the Fund is not required to hold annual
meetings of its shareholders, shareholders holding at least
10% of the outstanding shares entitled to vote have the
right to call a meeting to elect or remove Trustees, or to
take other actions as provided in the Agreement and
Declaration of Trust.
If a shareholder owns fewer shares than the minimum
set by the Trustees (presently 20 shares), the Fund may
choose to redeem the shareholders' shares. Shareholders
will receive at least 30 days' written notice before the
Fund redeems their shares, and shareholders may purchase
additional shares at any time to avoid a redemption. The
Fund may also redeem shares if shareholders own shares
above a maximum amount set by the Trustees. There is
presently no maximum, but the Trustees may, at any time,
establish one, which could apply to both present and future
shareholders.
(3) Governing Laws
The Fund was created under, and is subject to, the
laws of The Commonwealth of Massachusetts. The sale of the
Fund's shares is subject to, among other things, the
Securities Act of 1933, as amended, and certain state
securities laws. The Fund also attempts to qualify each
year and elect to be taxed as a regulated investment
company under the United States Internal Revenue Code of
1986, as amended.
The following is a broad outline of certain of the
principal statutes regulating the operations of the Fund in
the U.S.:
a. Massachusetts General Laws, Chapter 182 -
Voluntary Associations and Certain Trusts
Chapter 182 provides in part as follows:
A copy of the declaration of trust must be filed
with the Secretary of State of The Commonwealth of
Massachusetts and with the Clerk of the City of Boston.
Any amendment of the declaration of trust must be filed
with the Secretary and the Clerk within thirty days
after the adoption of such amendment.
A trust must annually file with the Secretary of
State on or before June 1 a report providing the name
of the trust, its address, number of shares outstanding
and the names and addresses of its trustees.
Penalties may be assessed against the trust for
failure to comply with certain of the provisions of
Chapter 182.
b. Investment Company Act of 1940
The Investment Company Act of 1940, as amended
(the "1940 Act"), in general, requires investment
companies to register as such with the U.S. Securities
and Exchange Commission (the "SEC"), and to comply with
a number of substantive regulations of their
operations. The 1940 Act requires an investment
company, among other things, to provide periodic
reports to its shareholders.
c. Securities Act of 1933
The Securities Act of 1933, as amended (the "1933
Act"), regulates many sales of securities. The 1933
Act, among other things, imposes various registration
requirements upon sellers of securities and provides
for various liabilities for failures to comply with its
provisions or in respect of other specified matters.
d. Securities Exchange Act of 1934
The Securities Exchange Act of 1934, as amended
(the "1934 Act"), regulates a variety of matters
involving, among other things, the secondary trading of
securities, periodic reporting by the issuers of
securities, and certain of the activities of transfer
agents and brokers and dealers.
e. The Internal Revenue Code
The Fund intends to qualify as a "regulated
investment company" for federal income tax purposes and
to meet all other requirements necessary for it to be
relieved of federal taxes on income and gains it
distributes to shareholders.
f. Other laws
The Fund is subject to the provisions of other
laws, rules, and regulations applicable to the Fund or
its operations, such as, for example, various state
laws regarding the sale of the Fund's shares.
(B) Outline of the Supervisory Authorities
Among the regulatory authorities having jurisdiction
over the Fund or certain of its operations are the SEC and
state regulatory agencies or authorities.
a. The SEC has broad authority to oversee the
application and enforcement of the federal securities
laws, including the 1940 Act, the 1933 Act, and the
1934 Act, among others, to the Fund. The 1940 Act
provides the SEC broad authority to inspect the records
of investment companies, to exempt investment companies
or certain practices from the provisions of the Act,
and otherwise to enforce the provisions of the Act.
b. State authorities typically have broad
authority to regulate the activities of broker,
dealers, or other persons directly or indirectly
engaged in activities relating to the offering and sale
of securities to their residents or within their
jurisdictions.
(C) Objects and Basic Nature of the Fund:
GOAL
The Fund seeks capital appreciation.
MAIN INVESTMENT STRATEGIES- EUROPEAN GROWTH AND VALUE
STOCKS
Under normal market conditions, the Fund will seek its
goal by investing mostly in common stocks issued by
European companies. The Fund may invest in both growth and
value stocks. Growth stocks are issued by companies whose
earnings Putnam Investment Management, Inc. (the
"Investment Management Company") believes are likely to
grow faster than the economy as a whole. Growth in
earnings may lead to an increase in the price of the stock.
Value stocks are those that the Investment Management
Company believes are currently undervalued compared to
their true worth. If the Investment Management Company is
correct and other investors recognize this discount, the
price of these stocks may rise. The Fund invests mainly in
medium and large-sized companies, although it can invest in
companies of any size. Although the Fund emphasizes
investments in developed countries, it may also invest in
companies located in emerging markets, such as those in
Eastern Europe.
MAIN RISKS
The main risks that could adversely affect the value
of this Fund's shares and the total return on investor's
investment include;
- The risks of investing outside the United States, such
as currency fluctuations, economic or financial
instability, or unfavorable political or legal
developments in foreign markets. These risks are
increased when investing in emerging markets.
- The risk of investing mostly in one geographic region.
Investments in a single region, even though
representing a number of different countries within the
region, may be affected by common economic forces and
other factors. The vulnerability of the Fund to
factors affecting European investments will be
significantly greater than that of a more
geographically diversified fund, which may result in
greater losses and volatility.
- 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 the Investment
Management Company. Many factors can adversely affect a
stock's performance. This risk is generally greater
for small and medium-sized companies, which tend to be
more vulnerable to adverse developments.
- The risk that movements in the securities markets will
adversely affect the price of the Fund's investments,
regardless of how well the companies in which the Fund
invests perform.
Investors can lose money by investing in the Fund.
The Fund may not achieve its goal, and is not intended as a
complete investment program. An investment in the Fund is
not a deposit of a bank and is not insured or guaranteed by
the U.S. Federal Deposit Insurance Corporation or any other
government agency.
(D) History of the Fund:
November 10, 1988:
Organization of the Fund as a
Massachusetts business trust.
Adoption of the Agreement and
Declaration of Trust.
July 13, 1990:
Adoption of the Amended and
Restated Agreement and Declaration
of Trust
(E) Affiliated Companies of the Fund:
Names and related business of the affiliated companies
of the Fund are as follows:
(1) Putnam Investment Management, Inc. (the
"Investment Management Company") renders investment
management services to the Fund.
(2) Putnam Fiduciary Trust Company (the "Custodian"
and the "Investor Servicing Agent") acts as Custodian
and Investor Servicing Agent.
(3) Putnam Mutual Funds Corp. (the "Principal
Underwriter") engages in providing marketing services
to the Fund.
(4) Yamatane Securities Co., Ltd. ("Distributor in
Japan" and "Agent Company") engages in forwarding the
purchase or repurchase orders for the Shares in Japan
and also acts as the agent company.
Related Companies of the Fund
Fund
Putnam Europe Growth Fund
Trustees Investor Servicing
(Agreement and Declaration Agreement
of Trust)
Distribution Custodian
Agreement Agreement
Principal Custodian Investor
underwriter Servicing Agent
Putnam Mutual Putnam Fiduciary
Funds Corp. Trust Company
(acts as distributor) (acts as custodian and
investor servicing agent
of the fund)
Japan Dealer
Sales Agreement
Agent Company Management
Agreement Agreement
Distributor in Japan Investment Management
Agent Company Company
Yamatane Securities Co., Ltd. Putnam Investment Management, Inc.
(forwarding of sales in Japan and (acts as investment manager of the
rendering of service as agent company.) Fund and invetment adviser
concerning the Fund's assets.)
2. INVESTMENT POLICY
(A) Basic Policy for Investment and Objects of Investment
(including risk factors):
Any investment carries with it some level of risk that
generally reflects its potential for reward. The Fund
pursues its goal of capital appreciation by investing
mainly in growth and value stocks issued by European
companies . The Investment Management Company will
consider, among other things, a company's financial
strength, competitive position in its industry and
projected future earnings and dividends when deciding
whether to buy or sell investments. A description of the
risks associated with the Fund's main investment strategies
follows.
COMMON STOCKS
Common stock represents an ownership interest in a
company. 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. Similarly, 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 be affected by 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 the
Investment Management Company believes have earnings that
will grow faster than the economy as a whole. 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. If
the Investment Management Company's assessment of the
prospects for the company's earnings growth is wrong, or if
its judgment of how other investors will value the
company's earnings growth is wrong, than the price of the
company's stock may fall or not approach the value that the
Investment Management Company has placed on it.
VALUE STOCKS
The Fund may also invest in companies that are not
expected to experience significant earnings growth, but
whose stock the Investment Management Company believes is
undervalued compared to its true worth. 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 the Investment Management Company's
assessment of a company's prospects is wrong, or if other
investors do not eventually recognize the value of the
company, then price of the company's stock may fall or may
not approach the value that the Investment Management
Company has placed on it.
NON-U.S. INVESTMENTS
The Fund may invest without limit in securities of non-
U.S. issuers. Non-U.S. investments involve certain special
risks, including;
- Unfavorable changes in currency exchange rates: Non-
U.S. investments are normally issued and traded in non-
U.S. currencies. As a result, their values may be
affected by changes in the exchange rates between
particular non-U.S. currencies and the U.S. dollar.
- Political and economic developments: Non-U.S.
investments may be subject to the risks of seizure by a
non-U.S. government, imposition of restrictions on the
exchange or transport of non-U.S. currency, and tax
increases.
- Unreliable or untimely information: There may be less
information publicly available about a non-U.S. company
than about most U.S. companies, and non-U.S. companies
are usually not subject to accounting, auditing and
financial reporting standards and practices comparable
to those in the United States.
- Limited legal recourse: Legal remedies for investors
such as the Fund may be more limited than those
available in the United States.
- Limited markets: Certain non-U.S. investments may be
less liquid (harder to buy and sell) and more volatile
than domestic investments, which means the Fund may at
times be unable to sell these non-U.S. investments at
desirable prices. For the same reason, the Fund may at
times find it difficult to value its non-U.S.
investments.
- Trading practices: Brokerage commissions and other fees
are generally higher for non-U.S. investments than for
U.S. investments. The procedures and rules for
settling non-U.S. transactions may also involve delays
in payment, delivery or recovery of money or
investments.
Common stocks of non-U.S. 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 common stocks of
U.S. companies.
Certain of these risks may also apply to some extent
to U.S.-traded investments that are denominated in non-U.S.
currencies, investments in U.S. companies that are traded
in foreign markets, or to investments in U.S. companies
that have significant non-U.S. operations. Special U.S.
tax considerations may apply to the Fund's non-U.S.
investments.
EMERGING MARKETS
The risks of non-U.S. 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 and
other reasons, investments in emerging markets are often
considered speculative.
GEOGRAPHIC FOCUS
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 a
securities exchange in Europe.
The Fund anticipates that under normal market
conditions it will invest 85% of its assets in European
companies and at least 65% of its assets will be invested
in securities of issuers that meet at least one of the
first two of these criteria.
Developments in European economies will generally have
a greater effect on the Fund than if it were more
geographically diversified, which may result in greater
losses and volatility. This risk may be heightened by
efforts of the member countries of the European Union to
unify their economic and monetary policies. This may
increase the potential for similarities in the movement of
European markets and reduce the benefits of diversification
within the region.
DERIVATIVES
The Fund may engage in a variety of transactions using
"derivatives", such as futures, options, warrants, forwards
and swap contracts. Derivatives are financial instruments
whose value depends upon, or is derived from, the value of
something else, such as one or more underlying investments,
indexes or currencies. Derivatives may be traded on
organized exchanges, or in individually negotiated
transactions with other parties (these are known as "over
the counter"). The Fund may use derivatives both for
hedging and non-hedging purposes.
Derivatives involve special risks and costs and may
result in losses to the Fund. The successful use of
derivatives requires sophisticated management and the Fund
will depend on the Investment Management Company's ability
to analyze and manage derivatives transactions. The prices
of derivatives may move in unexpected ways, especially in
abnormal market conditions. Some derivatives are
"leveraged" and therefore may magnify or otherwise increase
investment losses to the Fund. The Fund's use of
derivatives may also increase the amount of taxes payable
by shareholders.
Other risks arise from the potential inability to
terminate or sell derivatives positions. A liquid
secondary market may not always exist for the Fund's
derivatives positions at any time. In fact, many over-the-
counter instruments will not be liquid. Over-the-counter
instruments also involve the risk that the other party will
not meet its obligations to the Fund.
SMALLER COMPANIES
The Fund can invest in small and medium-sized
companies, including companies with market capitalizations
of less than $500 million. 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 these companies
may trade less frequently and in limited volume, and their
prices may fluctuate more than stocks of other companies.
Stocks of these companies may therefore be more vulnerable
to adverse developments than those of larger companies.
OTHER INVESTMENTS
In addition to the main investment strategies
described above, the Fund may also make other types of
investments, such as investments in preferred stocks,
convertible securities and fixed income securities and,
therefore, may be subject to other risks.
ALTERNATIVE STRATEGIES
At times the Investment Management Company may judge
that market conditions make pursuing the Fund's investment
strategies inconsistent with the best interests of its
shareholders. The Investment Management Company then may
temporarily use alternative strategies that are mainly
designed to limit the Fund's losses, including investing
solely in the United States. Although the Investment
Management Company has the flexibility to use these
strategies, it may choose not to for a variety of reasons,
even in very volatile market conditions. These strategies
may cause the Fund to miss out on investment opportunities,
and may prevent the Fund from achieving its goal.
CHANGES IN POLICIES
The Fund's Trustees may change the Fund's goal,
investment strategies and other policies without
shareholder approval, except as otherwise indicated.
(B) Restrictions on Investment:
Except as otherwise specifically designated, the
investment restrictions described in this document are not
fundamental investment restrictions. The Trustees may
change any non-fundamental restrictions without shareholder
approval. As fundamental investment restrictions, which
may not be changed without a vote of a majority of the
outstanding voting securities, the Fund may not and will
not:
(1) 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 laws.
(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 therein.
(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 securities.
(6) With respect to 75% of its total assets, invest in the
securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the Fund
(taken at current value) would be invested in the
securities of such issuer; provided that this limitation
does not apply to obligations issued or guaranteed as to
interest or principal by the U.S. government or its
agencies or instrumentalities.
(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,
it 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 shares of the Fund, 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 addition, the Fund will, so long as shares of the
Fund are being offered for sale by the Fund in Japan and
such standards are required as a condition of such offer
for sale, comply with the following standards of selection
of the Japan Securities Dealers Association.
1. The Fund will not invest more than 15% of its net
assets in securities that are not traded on an official
exchange or other regulated market including without
limitation, the National Association of Securities Dealers
Automated Quotation System (this restriction shall not be
applicable to bonds determined by Putnam Investment
Management, Inc. to be liquid and for which a market price
(including a dealer quotation) is generally obtainable or
determinable);
2. The Fund will not borrow money in excess of 10% of
the value of its total assets;
3. The Fund will not make short sales of securities in
excess of the Fund's net asset value; and
4. The Fund will not together with other mutual funds
managed by Putnam Investment, Inc., acquire more than 50%
of the outstanding voting securities of any issuer.
If any violation of the foregoing standards occurs,
the Fund will, promptly after discovery of the violation,
take such action as may be necessary to cause the violation
to cease, which shall be the only obligation of the Fund
and the only remedy in respect of the violation.
All percentage limitations on investments (other than
pursuant to non-fundamental restriction (1)) will apply at
the time of the making of an investment and shall not be
considered violated unless an excess or deficiency occurs
or exists immediately after and as a result of such
investment.
(C) Distribution Policy:
The Fund distributes any net investment income and any
net realized capital gains at least annually.
Distributions from net investment income, if any, are
expected to be small. Distributions from capital gains are
made after applying any available capital loss carryovers.
The payment to Japanese investors may be made, in
principle, in accordance with the record date in December
each year by Yamatane.
3. MANAGEMENT STRUCTURE
(A) Outline of Management of Assets, etc.:
A. Valuation of assets:
The Fund determines the net asset value per share of
each class of shares once each day the New York Stock
Exchange (the "Exchange") is open. Currently, the Exchange
is closed Saturdays, Sundays and the following U.S.
holidays: New Year's Day, 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 the net asset value of each class as of the
close of regular trading on the Exchange, currently 4:00
p.m., New York time. However, equity options held by the
Fund are priced as of the close of trading at 4:10 p.m.,
New York time, and futures contracts on U.S. government and
other fixed-income securities and index options held by the
Fund are priced as of their close of trading at 4:15 p.m.,
New York time.
Securities for which market quotations are readily
available are valued at prices which, in the opinion of
Investment Management Company, most nearly represent the
market values of such securities. Currently, such prices
are determined using the last reported sale price or, if no
sales are reported (as in the case of some securities
traded over-the-counter), the last reported bid price,
except that certain securities are valued at the mean
between the last reported bid and asked prices. Short-term
investments having remaining maturities of 60 days or less
are valued at amortized cost, which approximates market
value. All other securities and assets are valued at their
fair value following procedures approved by the Trustees.
Liabilities are deducted from the total value of the assets
attributable to a class, and the resulting amount is
divided by the number of shares of the class outstanding.
Reliable market quotations are not considered to be
readily available for long-term corporate bonds and notes,
certain preferred stocks, tax-exempt securities, and
certain foreign securities. These investments are valued
at fair value on the basis of valuations furnished by
pricing services, which determine valuations for normal,
institutional-size trading units of such securities using
methods based on market transactions for comparable
securities and various relationships between securities
which are generally recognized by institutional traders.
If any securities held by the Fund are restricted as
to resale, Investment Management Company determines their
fair value using procedures approved by the Trustees. The
fair value of such securities is generally determined as
the amount which the Fund could reasonably expect to
realize from an orderly disposition of such securities over
a reasonable period of time. The valuation procedures
applied in any specific instance are likely to vary from
case to case. However, consideration is generally given to
the financial position of the issuer and other fundamental
analytical data relating to the investment and to the
nature of the restrictions on disposition of the securities
(including any registration expenses that might be borne by
the Fund in connection with such disposition). In
addition, specific factors are also generally considered,
such as the cost of the investment, the market value of any
unrestricted securities of the same class, the size of the
holding, the prices of any recent transactions or offers
with respect to such securities and any available analysts'
reports regarding the issuer.
Generally, trading in certain securities (such as non-
U.S. securities) is substantially completed each day at
various times prior to the close of the Exchange. The
values of these securities used in determining the net
asset value of the Fund's shares are computed as of such
times. Also, because of the amount of time required to
collect and process trading information as to large numbers
of securities issues, the values of certain securities
(such as convertible bonds, U.S. government securities, and
tax-exempt securities) are determined based on market
quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such securities
may occur between such times and the close of the Exchange
which will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then
these securities will be valued at their fair value using
procedures approved by the Trustees.
B. Management Fee, etc.:
(1) Management Fee:
(a) Management and Agent Securities Company Fees
Under a Management Contract dated October 21, 1996, the
Fund pays a quarterly fee to Investment Management Company
based on the average net assets of the Fund, as determined
at the close of each business day during the quarter, at an
annual rate of 0.80% 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 fiscal year ending on June 30, 1998, 1997 and
1996, the Fund paid $6,715,370, $2,875,190 and $1,411,198,
respectively, as a management fee.
(b) Custodian Fee and Charges of the Investor Servicing
Agent
Putnam Fiduciary Trust Company, the Fund's Custodian, shall
be entitled to receive, out of the assets of the Fund,
reasonable compensation for its services and expenses as
Custodian, as agreed from time to time between the Fund and
the Custodian, not including fees paid by the Custodian to
any sub-custodian, payable monthly based on the average
daily total net assets of the Fund during the relevant
month. Any reasonable disbursements and out-of-pocket
expenses (including without limitation telephone, telex,
cable and postage expenses) incurred by the Custodian, and
any custody charges of banks and financial institutions to
whom the custody of assets of the Fund is entrusted, will be
borne by the Fund.
The Fund will pay to Putnam Investor Services, a
division of Putnam Fiduciary Trust Company, the Fund's
Investor Servicing Agent, such fee, out of the assets of the
Fund, as is mutually agreed upon in writing from time to
time, in the amount, at the time and in the manner of
payment mutually agreed.
For the fiscal year ending on June 30, 1998, the Fund
paid $2,339,412 as a custodian fee and investor servicing
agent fee.
(c) Fees under Class M Distribution Plan
The Class M distribution plan provides for payments by
the Fund to Putnam Mutual Funds Corp. at the annual rate of
1.00% of average net assets attributable to Class M shares.
The Trustees currently limit payments under the Class M plan
to the annual rate of 0.75% of such assets.
Payments under the plan are intended to compensate
Putnam Mutual Funds Corp. for services provided and expenses
incurred by it as principal underwriter of the Fund's
shares, including payments to dealers mentioned below.
Payments to dealers are subject to the continuation of the
Class M distribution plan and the terms of an agreement
between Yamatane and Putnam Mutual Funds Corp.
The payments to dealers are based on the average net
asset value of Class M shares attributable to shareholders
for whom Yamatane and other dealers are designated as the
dealer of record. Putnam Mutual Funds Corp. makes quarterly
payments to dealers (including Yamatane) at the annual rate
of 0.25% of the average net asset value of Class M shares.
Putnam Mutual Funds Corp. also pays to Yamatane and
other dealers, as additional compensation with respect to
the sale of Class M shares, 0.40% of such average net asset
value of Class M shares, respectively. For Class M shares,
the total annual payment to Yamatane and other dealers
equals 0.65% of such average net asset value.
For the fiscal year ending on June 30, 1998, the Fund
paid fees under the distribution plan of $176,038 for Class
M shares.
(d) Other Expenses:
The Fund pays all expenses not assumed by Investment
Management Company, including Trustees' fees, auditing,
legal, custodial, investor servicing and shareholder
reporting expenses, and payments under its distribution
plans (which are in turn allocated to the relevant class of
shares). The Fund also reimburses Investment Management
Company for the compensation and related expenses of certain
Fund officers and their staff who provide administrative
services. The total reimbursement is determined annually by
the Trustees and was $16,268 for fiscal 1998.
Each Trustee receives a fee for his or her services.
Each Trustee also receives fees for serving as Trustee of
other Putnam funds. The Trustees periodically review their
fees to assure that such fees continue to be appropriate in
light of their responsibilities as well as in relation to
fees paid to trustees of other mutual fund complexes. The
Trustees meet monthly over a two-day period, except in
August. The Board Policy Committee, which consists solely
of Trustees not affiliated with the Investment Management
Company and is responsible for recommending Trustee
compensation, estimates that Committee and Trustee meeting
time, together with the appropriate preparation, requires
the equivalent of at least three business days per Trustee
meeting. The following table shows the year each Trustee
was first elected a Trustee of the Putnam funds, the fees
paid to each Trustee by the Fund for fiscal 1998 and the
fees paid to each Trustee by all of the Putnam funds during
calendar 1997:
<TABLE><CAPTION>
COMPENSATION TABLE
<S> <C> <C> <C> <C>
Pension or Estimated Total
Aggregate retirement annual benefits compensation
compensation benefits accrued from all from all
from the as part of Putnam funds Putnam
Trustees/Year fund (1) fund expenses upon retirement (2) funds (3)
Jameson A. Baxter/1994 (4)$1,528 $302 $87,500 $176,000
Hans H. Estin/1972 1,331 637 87,500 175,000
John A. Hill/1985 (4) 1,315 239 98,000 (6) 175,000
Ronald J. Jackson/1996 (4) 1,476 149 87,500 176,000
Paul L. Joskow/1997 (4)(5)* 915 15 87,500 25,500
Elizabeth T. Kennan/1992 1,476 339 87,500 174,000
Lawrence J. Lasser/1992 * 1,300 253 87,500 172,000
John H. Mullin, III/1997 (4) 915 23 87,500 25,500
Robert E. Patterson/1984 1,323 191 87,500 176,000
Donald S. Perkins/1982 * 1,331 689 87,500 176,000
William F. Pounds/1971 (6) 1,456 715 98,000 201,000
George Putnam/1957 * 1,308 729 87,500 175,000
George Putnam, III/1984 * 1,324 126 87,500 174,000
A.J.C. Smith/1986 * 1,300 429 87,500 170,000
W. Thomas Stephens/1997 (4)1,145 21 87,500 53,000
W. Nicholas Thorndike/1992 1,331 487 87,500 176,000
</TABLE>
* Trustee who is or may be deemed to be an "interested person"
(as defined in the Investment Company Act of 1940) of the
Fund, Investment Management Company or Putnam Mutual Funds
Corp.
(1) Includes an annual retainer and an attendance fee for each
meeting attended.
(2) Assumes that each Trustee retires at the normal retirement
date. Estimated benefits for each Trustee are based on
Trustee fee rates in effect during calendar 1997.
(3) As of December 31, 1997, there were 101 funds in the Putnam
family.
(4) Includes compensation deferred pursuant to a Trustee
Compensation Deferral Plan. The total amounts of deferred
compensation payable by the fund to Ms. Baxter 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.
Under a Retirement Plan for Trustees of the Putnam
funds (the "Plan") each Trustee who retires with at least
five years of service as a Trustee of the funds is entitled
to receive an annual retirement benefit equal to one-half of
the average annual compensation paid to such Trustee for the
last three years of service prior to retirement. This
retirement benefit is payable during a Trustee's lifetime,
beginning the year following retirement, for a number of
years equal to such Trustee's years of service. A death
benefit is also available under the Plan which assures that
the Trustee and his or her beneficiaries will receive
benefit payments for the lesser of an aggregate period of
(i) ten years or (ii) such Trustee's total years of service.
The Plan Administrator (a committee comprised of
Trustees who are not "interested persons" of the Fund, as
defined in the Investment Company Act of 1940) may terminate
or amend the Plan at any time, but no termination or
amendment will result in a reduction in the amount of
benefits (i) currently being paid to a Trustee at the time
of such termination or amendment, or (ii) to which a current
Trustee would have been entitled had he or she retired
immediately prior to such termination or amendment.
Investment Management Company places all orders for
purchases and sales of Fund securities. In selecting broker-
dealers, Investment Management Company may consider research
and brokerage services furnished to it and its affiliates.
Subject to seeking the most favorable price and execution
available, Investment Management Company may consider sales
of Fund shares (and, if permitted by law, of the other
Putnam Funds) as a factor in the selection of broker-
dealers. During fiscal 1996, 1997 and 1998, the Fund paid
$488,749, $1,427,191, and 2,893,467 in brokerage
commissions, respectively. During fiscal 1998 the Fund did
not pay any fee to brokers and dealers to recognize
research, statistical and quotation services provided to
Investment Management Company and its affiliates.
For the fiscal year ending June 30, 1998, the Fund paid
$5,783,380 in total other expenses (including payments under
its distribution plan but excluding Management Fees,
investor servicing agent expenses and custodian expenses.)
C. Sales, Repurchases and Custody:
(1) Sales of Shares:
a. Sales in the United States
Investors residing in the U.S. can open a fund account
with as little as $500 and make additional investments at
any time with as little as $50. The Fund sells its shares
at the offering price, which is the NAV plus any applicable
sales charge. Investors' financial advisor or Putnam
Investor Services generally must receive their completed
buy order before the close of regular trading on the New
York Stock Exchange for investors' shares to be bought at
that day's offering price.
Investors residing in the U.S. can buy shares
- THROUGH A FINANCIAL ADVISOR
Your advisor will be responsible for furnishing all
necessary documents to Putnam Investor Services, and may
charge you for his or her services.
- THROUGH SYSTEMATIC INVESTING
Investors can make regular investments of $25 or more
per month through automatic deductions from investors' bank
checking or savings account. Application forms are
available through investor's advisor or Putnam Investor
Services at 1-800-225-1581.
Investors may also complete an order form and write a
check for the amount they wish to invest payable to the
Fund. Return the check and completed form to Putnam Mutual
Funds.
The Fund may periodically close to new purchases of
shares or refuse any order to buy shares if the Fund
determines that doing so would be in the best interests of
the Fund and its shareholders.
CLASS M SHARES
- Initial sales charge of up to 3.50%
- Lower sales charges for larger investments of $50,000
or more
- No deferred sales charge
- Lower annual expenses, and higher dividends, than
class B shares because of lower 12b-1 fee
- Higher annual expenses, and lower dividends, than
class A shares because of higher 12b-1 fee
- No conversion to class A shares, so future 12b-1 fee does
not decrease
INITIAL SALES CHARGES FOR CLASS M SHARES
Sales charge as a percentage of:
Net
Amount of purchase amount Offering
at offering price ($) invested price *
Under 50,000 3.63 % 3.50%
50,000 but under 100,000 2.56 2.50
100,000 but under 250,000 1.52 1.50
250,000 but under 500,000 1.01 1.00
500,000 but under 1,000,000 NONE NONE
1,000,000 and above NONE NONE
* Offering price includes sales charge.
DISTRIBUTION (12B-1) PLANS
The Fund has adopted distribution plans to pay for the
marketing of Fund shares and for services provided to
shareholders. The plans provide for payments at annual
rates (based on average net assets) of up to 1.00% on class
M shares. The Trustees currently limit payments on class 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, they will increase
the cost of investors' investments. The higher fees for
class B and class M shares may cost investors 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
investors more over time than class B shares.
An investor may be eligible to buy Class M Shares at
reduced sales charges. For fiscal 1998, Putnam Mutual
Funds Corp. received $268,590 in sales charges for Class M
Shares, of which it retained $44,390.
b. Sales in Japan
In Japan, Shares of the Fund are offered on any day
that is both a Business Day and any business day of
securities companies in Japan during the Subscription
Period mentioned in "8. Period of Subscription, Part I
Information concerning Securities" of a securities
registration statement pursuant to the terms set forth in
"Part I. Information concerning Securities" of the relevant
securities registration statement. The Sales Handling
Company shall provide to the investors a contract
Concerning a Foreign Securities Transactions Account and
other prescribed contracts (the "Contracts") and receive
from such investors an application for requesting the
opening of a transactions account under the Contracts. The
purchase shall be made in the minimum investment amount of
100 shares. Purchases may be made in integral multiples of
10 shares.
The issue price for Shares shall be, in principle, the
Net Asset Value per Share next calculated on the day on
which the Fund has received such application. The Trade Day
in Japan is the day when the Sales Handling Company confirms
the execution of the order (ordinarily the business day in
Japan next following the placement of orders), and the
payment and delivery shall be made on the fourth Business
Day after and including the Trade Day. The sales charge
applicable to Class M Shares in Japan shall be 3.5% of the
net asset value of such shares. From such amount, 0.50% of
the amount calculated by dividing the net asset value by (1-
0.035) and rounded to three decimal places shall be retained
by Putnam Mutual Fund Corp., principal underwriter of the
Fund.
The Investors having entrusted a Sales Handling Company
with safekeeping of the certificates for Fund shares will
receive a certificate of safekeeping in exchange for the
purchase price. In such case payment shall be made in yen
in principle and the applicable exchange rate shall be the
foreign exchange rate quoted in the Tokyo Foreign Exchange
Market on the Trade Day, which shall be determined by such
Sales Handling Company. The payment may be made in dollars
to the extent that the Sales Handling Company can agree.
In addition, Sales Handling Company in Japan who are
members of the Japan Securities Dealers' Association cannot
continue sales of the Shares in Japan when the net assets of
the Fund are less than yen100,000,000 or the Shares otherwise
cease to comply with the "Standards of Selection of Foreign
Investment Fund Securities" contained in the "Regulations
Concerning the Transactions of Foreign Securities"
established by the Association.
(2) Repurchase of Shares:
a. Repurchase in the United States
Investors residing in the U.S. can sell their shares
back to the Fund any day the New York Stock Exchange is
open, either through investors' financial advisor or
directly to the Fund. Payment for redemptions may be
delayed until the Fund collects the purchase price of shares
which may take up to 15 calendar days after the purchase
date.
SELLING SHARES THROUGH INVESTORS' FINANCIAL ADVISOR
An investor's advisor must receive the investor's
request in proper form before the close of regular trading
on the New York Stock Exchange for the investor to receive
that day's NAV, less any applicable deferred sales charge.
An investor's advisor will be responsible for furnishing all
necessary documents to Putnam Investor Services on a timely
basis and may charge the investor for his or her services.
SELLING SHARES DIRECTLY TO THE FUND
Putnam Investor Services must receive an investor's
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 an investor has certificates for the shares
the investor want to sell, the investor must include them
along with completed stock power forms.
BY TELEPHONE
An investor may use Putnam's Telephone redemption
Privilege to redeem shares valued at less than $100,000
unless the investor has notified Putnam Investor Services of
an address change within the preceding 15 days. Unless an
investor indicates 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 an investor's shares. The
Telephone Redemption Privilege may be modified or terminated
without notice.
ADDITIONAL DOCUMENTS
If investors
- sell shares with a value of $100,000 or more,
- want investors' redemption proceeds sent to an
address other than the investor's address as it appears
on Putnam's records, or
- have notified Putnam of a change in address within the
preceding 15 days,
the signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer
or certain other financial institutions. Stock power forms
are available from investors' financial advisor, Putnam
Investor Services and many commercial banks.
Putnam Investor Services usually requires additional
documents for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
WHEN WILL THE FUND PAY INVESTORS?
The Fund generally sends an investor payment for the
investor's shares the business day after the investor's
request is received. Under unusual circumstances, the Fund
may suspend redemptions, or postpone payment for more than
seven days as permitted by federal securities laws.
REDEMPTION BY THE FUND
If an investor owns fewer shares than the minimum set
by the Trustees (presently 20 shares), the Fund may redeem
the investor's shares without the investor's permission and
send the investor the proceeds. The Fund may also redeem
shares if an investor owns 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.
b. Repurchase in Japan
Shareholders in Japan may at any time request
repurchase of their Shares. Repurchase requests in Japan
may be made to Investor Servicing Agent through the Sales
Handling Company on a Fund Business Day that is a business
day of securities companies in Japan without a contingent
deferred sales charge. The repurchase shall be made in
integral multiples of 10 shares
The price a shareholder in Japan will receive is the
next net asset value calculated after the Fund receives the
repurchase request from Yamatane, provided the request is
received before the close of regular trading on the New York
Stock Exchange. The payment of the price shall be made in
yen through the Sales Handling Company pursuant to the
Contracts or, if the Sales Handling Company agree, in
dollars. The payment for repurchase proceeds shall be made
on the fourth business day of securities companies in Japan
after and including the Trade Day.
(3) Suspension of Repurchase:
The Fund may suspend shareholders' right of redemption,
or postpone payment for more than seven days, if the New
York Stock Exchange is closed for other than customary
weekends or holidays, or if permitted by the rules of the
U.S. Securities and Exchange Commission during periods when
trading on the Exchange is restricted or during any
emergency which makes it impracticable for the Fund to
dispose of its securities or to determine fairly the value
of its net assets, or during any other period permitted by
order of the U.S. Securities and Exchange Commission for
protection of investors.
(4) Custody of Shares:
Share certificates shall be held by shareholders at
their own risk.
The custody of the Share certificates (if issued)
representing Shares sold to Japanese shareholders shall,
unless otherwise instructed by the shareholder, be held, in
the name of the custodian, by the custodian of Yamatane.
The Sales Handling Company to the Japanese shareholders
shall deliver certificates of custody for the Shares.
D. Miscellaneous:
(1) Duration and Liquidation:
Unless terminated, the Fund shall continue without
limitation of time. The Fund may be terminated at any time
by vote of Shareholders holding at least 66 2/3% of the
Shares entitled to vote or by the Trustees of the Fund by
written notice to the Shareholders.
(2) Accounting Year:
The accounts of the Fund will be closed each year on
30th June.
(3) Authorized Shares:
There is no prescribed authorized number of Shares, and
Shares may be issued from time to time.
(4) Agreement and Declaration of Trust:
Originals or copies of the Agreement and Declaration of
Trust, as amended are maintained in the office of the Fund
and are made available for public inspection for the
Shareholders. Originals or copies of the Agreement and
Declaration of Trust, as amended are on file in the United
States with the Secretary of State of The Commonwealth of
Massachusetts and with the Clerk of the City of Boston.
The Agreement and Declaration of Trust may be amended
at any time by an instrument in writing signed by a majority
of the then Trustees when authorized to do so by vote of
Shareholders holding a majority of the Shares entitled to
vote, except that an amendment which shall affect the
holders of one or more series or classes of Shares but not
the holders of all outstanding series and classes shall be
authorized by vote of the Shareholders holding a majority of
the Shares entitled to vote of each series and class
affected and no vote of Shareholders of a series or class
not affected shall be required. Amendments having the
purpose of changing the name of the Fund or of supplying any
omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision
contained herein shall not require authorization by
Shareholder vote.
In Japan, material changes in the Agreement and
Declaration of Trust shall be published and sent to the
Japanese Shareholders.
(5) Issue of Warrants, Subscription Rights, etc.:
The Fund may not grant privileges to purchase shares of
the Fund to shareholders or investors by issuing warrants,
subscription rights or options, or other similar rights.
(6) How Performance Is Shown:
FUND ADVERTISEMENTS MAY, FROM TIME TO TIME, INCLUDE
PERFORMANCE INFORMATION.
"Total return" for the one-, five- and ten-year periods
(or for the life of the Fund, if shorter) through the most
recent calendar quarter represents the average annual
compounded rate of return on an investment of $1,000 in the
Fund invested at the maximum public offering price (in the
case of Class M Shares). Total return may also be presented
for other periods or based on investment at reduced sales
charge levels. Any quotation of investment performance not
reflecting the maximum initial sales charge or contingent
deferred sales charge would be reduced if the sales charge
were used.
For the one-year, five-year and the life of the Fund
periods ended June 30, 1998, the average annual total return
for Class M shares was 29.87%, 22.83% and 17.08%,
respectively. Returns for Class M shares for periods prior
to their inception are derived from the performance of the
Fund's Class A Shares, adjusted to reflect the deduction of
the initial sales charge currently applicable to Class M
Shares.
ALL DATA ARE BASED ON PAST INVESTMENT RESULTS AND DO
NOT PREDICT FUTURE PERFORMANCE. Investment performance,
which will vary, is based on many factors, including market
conditions, portfolio composition, Fund operating expenses
and the class of shares the investor purchases. Investment
performance also often reflects the risks associated with
the Fund's investment objective and policies. These factors
should be considered when comparing the Fund's investment
results with those of other mutual funds and other
investment vehicles.
Quotations of investment performance for any period
when an expense limitation was in effect will be greater
than if the limitation had not been in effect. Fund
performance may be compared to that of various indexes.
(B) Outline of Disclosure System:
(1) Disclosure in U.S.A.:
(i) Disclosure to shareholders
In accordance with the Investment Company Act of
1940, the Fund is required to send to its shareholders
annual and semi-annual reports containing financial
information.
(ii) Disclosure to the SEC
The Fund has filed a registration statement with
the SEC on Form N-1A; the Fund updates that
registration statement annually in accordance with the
Investment Company Act of 1940.
(2) Disclosure in Japan:
a. Disclosure to the Supervisory Authority:
(i) Disclosure Required under the Securities and Exchange
Law:
When the Fund intends to offer the Shares amounting to
more than certain amount in yen in Japan, it shall submit to
the Director of Kanto Local Finance Bureau of the Ministry
of Finance of Japan securities registration statements
together with the copies of the Agreement and Declaration of
the Fund and the agreements with major related companies as
attachments thereto. The said documents are made available
for public inspection for investors and any other persons
who desire at the Kanto Local Finance Bureau of the Ministry
of Finance.
The Sales Handling Company of the Shares shall deliver
to the investors prospectuses the contents of which are
substantially identical to Part I and Part II of the
securities registration statements. For the purpose of
disclosure of the financial conditions, etc., the Trustees
shall submit to the Director of Kanto Local Finance Bureau
of the Ministry of Finance of Japan securities reports
within 6 months of the end of each fiscal year, semi-annual
reports within 3 months of the end of each semi-annual
period and extraordinary reports from time to time when
changes occur as to material subjects of the Fund. These
documents are available for public inspection for the
investors and any other persons who so desire at the Kanto
Local Finance Bureau of the Ministry of Finance.
(ii) Notifications, etc. under the Law Concerning Securities
Investment Trusts and Securities Investment Companies
If the Investment Management Company conducts the
business of offering for sale shares of the Fund, it must
file in advance certain information relating to the Fund
with the Commissioner of Financial Supervisory Agent under
the Law Concerning Securities Investment Trusts and
Securities Investment Companies (the Law No. 198, 1951)
(hereinafter referred to the "Investment Trusts Law"). In
addition, if the Investment Management Company amends the
Agreement and Declaration of Trust of the Fund, it must file
in advance such amendment and the details thereof with the
Commissioner of Financial Supervisory Agent. Further, the
Investment Management Company must prepare the Management
Report on the prescribed matters concerning the assets of
the Fund under the Investment Trusts Law immediately after
the end of each calculation period of the Fund and must file
such Report with the Commissioner of Financial Supervisory
Agent.
b. Disclosure to Japanese Shareholders:
If the Investment Management Company makes any
amendment to the Agreement and Declaration of Trust of the
Fund, the substance of which is important, it must give in
advance public notice concerning its intention to make such
amendment and the substance of such amendment at least 30
days prior to such amendment, and must deliver written
documents containing the amendment to the shareholders known
in Japan. Provided, however, that if the said written
documents are delivered to all the shareholders in Japan,
the relevant public notice is not required to be given.
The Japanese Shareholders will be notified of changes
in material facts which would change their position,
including notices from the Trustees, through the Sales
Handling Companies.
The above-described Management Report on the Fund will
be sent to the shareholders known in Japan.
(C) Restrictions on Transactions with Interested Parties:
Portfolio securities of the Fund may not be purchased
from or sold or loaned to any Trustee of the Fund, Putnam
Investment Management, Inc., acting as investment adviser
of the Fund, or any affiliate thereof or any of their
directors, officers, or employees, or any major shareholder
thereof (meaning a shareholder who holds to the actual
knowledge of Investment Management Company, on his own
account whether in his own or other name (as well as a
nominee's name), 10% or more of the total issued
outstanding shares of such a company) acting as principal
or for their own account unless the transaction is made
within the investment restrictions set forth in the Fund's
prospectus and statement of additional information and
either (i) at a price determined by current publicly
available quotations (including a dealer quotation) or
(ii) at competitive prices or interest rates prevailing
from time to time on internationally recognized securities
markets or internationally recognized money markets
(including a dealer quotation).
4. INFORMATION CONCERNING THE EXERCISE OF RIGHTS BY
SHAREHOLDERS, ETC.
(A) Rights of Shareholders and Procedures for Their Exercise:
Shareholders must register their shares in their own
name in order to exercise directly their rights as
Shareholders. Therefore, the Shareholders in Japan who
entrust the custody of their Shares to the Sales Handling
Company cannot exercise directly their Shareholder rights,
because their Shares are registered in the name of the
custodian. Shareholders in Japan may have the Sales
Handling Company exercise their rights on their behalf in
accordance with the Contracts with the Sales Handling
Company.
Shareholders in Japan who do not entrust the custody
of their Shares to the Sales Handling Companies may
exercise their rights in accordance with their own
arrangement under their own responsibility.
The major rights enjoyed by Shareholders are as
follows:
(i) Voting rights
Each share has one vote, with fractional shares voting
proportionally. Shares of each class will vote together as
a single class except when otherwise required by law or as
determined by the Trustees. Although the Fund is not
required to hold annual meetings of its shareholders,
shareholders holding at least 10% of the outstanding shares
entitled to vote have the right to call a meeting to elect
or remove Trustees, or to take other actions as provided in
the Agreement and Declaration of Trust.
(ii) Repurchase rights
Shareholders are entitled to request repurchase of
Shares at their Net Asset Value at any time.
(iii) Rights to receive dividends
Shareholders are entitled to receive any distributions
from net investment income and any net realized capital
gains at least annually. Distributions from net investment
income, if any, are expected to be small. Distributions
from capital gains are made after applying any available
capital loss carryovers.
Shareholders may choose from three distribution
options, though investors in Japan may only choose the last
alternative.
- Reinvest all distributions in additional shares
without a sales charge;
- Receive distributions from net investment income in
cash while reinvesting
capital gains distributions in additional shares
without a sales charge; or
- Receive all distributions in cash.
(iv) Right to receive distributions upon dissolution
Shareholders of the Fund are entitled to receive
distributions upon dissolution in proportion to the number
of shares then held by them, except as otherwise required.
(v) Right to inspect accounting books and the like
Shareholders are entitled to inspect the Agreement and
Declaration of Trust, the accounting books at the discretion
of the Court and the minutes of any shareholders' meetings.
(vi) Right to transfer shares
Shares are transferable without restriction except as
limited by applicable law.
(vii) Rights with respect to the U.S. registration
statement
If, under the 1933 Act, there is, at any time it became
effective, any material false statement in the U.S.
registration statement, or any omission of any material
statement required to be stated therein or necessary to
cause the statements made therein to be materially
misleading, shareholders are generally entitled to institute
a lawsuit, against the person who had signed the relevant
Registration Statement, the trustees of the issuer (or any
person placed in the same position), any person involved in
preparing such Statement or any underwriter of the relevant
shares.
(B) Tax Treatment of Shareholders in Japan:
The tax treatment of Shareholders in Japan shall be as
follows:
(1) The distributions to be made by the Fund will be
treated as distributions made by a domestic investment
trust.
a. The distributions to be made by the Fund to Japanese
individual shareholders will be subject to separate
taxation from other income (i.e. withholding of income tax
at the rate of 15% and withholding of local taxes at the
rate of 5% in Japan). In this case, no report concerning
distributions will be filed with the Japanese tax
authorities.
b. The distributions to be made by the Fund to Japanese
corporate shareholders will be subject to withholding of
income tax at the rate of 15% and to withholding of local
taxes at the rate of 5% in Japan. In certain cases, the
Sales Handling Companies will prepare a report concerning
distributions and file such report with the Japanese tax
authorities.
c. Net investment returns such as dividends, etc. and
distributions of short-term net realized capital gain,
among distributions on Shares of the Fund, will be, in
principle, subject to withholding of U.S. federal income
tax at the rate of 15% and the amount obtained after such
deduction will be paid in Japan.
Distributions of long-term net realized capital gain
will not be subject to withholding of U.S. federal income
tax and the full amount thereof will be paid in Japan. The
amount subject to withholding of U.S. federal income tax
may be deducted from the tax levied on a foreign entity in
Japan.
The Japanese withholding tax imposed on distributions
as referred to in a. and b. above will be collected by way
of so-called "difference collecting method." In this
method only the difference between the amount equivalent to
20% of the distributions before U.S. withholding tax and
the amount of U.S. withholding tax withheld in the U.S.
will be collected in Japan.
(2) The provisions of Japanese tax laws giving the
privilege of a certain deduction from taxable income to
corporations, which may apply to dividends paid by a
domestic corporation, shall not apply.
(3) Capital gains and losses arising from purchase and
repurchase of the Shares shall be treated in the same way
as those arising from purchase and sale of a domestic
investment trust. The distribution of the net liquidation
assets shall be also treated in the same way as those
arising from liquidation of a domestic investment trust.
(4) The Japanese securities transaction tax will not be
imposed so far as the transactions concerned are conducted
outside Japan. Such tax, however, is applicable to
dealers' transactions for their own account and to
privately negotiated transactions conducted in Japan.
(C) Foreign Exchange Control in U.S.A.:
In U.S.A., there are no foreign exchange control
restrictions on remittance of dividends, repurchase money,
etc. of the Shares to Japanese shareholders.
(D) Agent in Japan:
Hamada & Matsumoto
Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki 3-chome
Chiyoda-ku, Tokyo
The foregoing law firm is the true and lawful agent of
the Fund to represent and act for the Fund in Japan for the
purpose of;
(1) the receipt of any and all communications, claims,
actions, proceedings and processes as to matters involving
problems under the laws and the rules and regulations of
the JSDA and
(2) representation in and out of court in connection with
any and all disputes, controversies or differences
regarding the transactions relating to the public offering,
sale and repurchase in Japan of the Shares of the Fund.
The agent for the registration with the Director of
Kanto Local Finance Bureau of the Ministry of Finance of
the initial public offering concerned as well as for the
continuous disclosure is each of the following persons:
Harume Nakano
Ken Miura
Attorneys-at-law
Hamada & Matsumoto
Kasumigaseki Building, 25th Floor
2-5, Kasumigaseki, 3-chome
Chiyoda-ku, Tokyo
(E) Jurisdiction:
Limited only to litigation brought by Japanese
investors regarding transactions relating to (D)(2) above,
the Fund has agreed that the following court has
jurisdiction over such litigation and the Japanese law is
applicable thereto:
Tokyo District Court
1-4, Kasumigaseki 1-chome
Chiyoda-ku, Tokyo
5. STATUS OF INVESTMENT FUND
(A) Diversification of Investment Portfolio
(As of the end of April 1999)
Investment
Types of Assets Name of Country Total US dollar Ratio %
Common Stock United Kingdom 617,205,371 33.05
France 307,829,519 16.48
Switzerland 196,651,350 10.53
Netherlands 165,532,752 8.87
Germany 149,907,773 8.03
Italy 109,153,656 5.84
Spain 77,025,613 4.12
Ireland 74,221,353 3.97
Sweden 62,165,891 3.33
Portugal 46,163,249 2.47
Finland 35,613,521 1.91
Greece 14,034,349 0.75
Sub-total 1,855,504,397 99.35
Cash, Deposit and Other
Assets (after deduction
of liabilities) 12,226,409 0.65
Total 1,867,730,806 100.00
(yen222,914 million)
Note:Investment ration is calculated by dividing each asset
at its market value by the total Net Asset Value of the
Fund. The same applies hereinafter.
(B) Results of Past Operations
(1) Record of Changes in Net Assets (Class M Shares)
Record of changes in net assets at the end of the
following fiscal years and at the end of each month within
one year prior to the end of April 1999 is as follows:
Total Net Asset Value Net Asset Value per Share
Dollar Yen
(thousands) (millions) Dollar Yen
1st Fiscal Year 746 89 13.90 1,659
(June 30, 1995)
2nd Fiscal Year 4,047 483 15.86 1,893
(June 30, 1996)
3rd Fiscal Year 15,811 1,887 18.85 2,250
(June 30, 1997)
4th Fiscal Year 42,614 5,086 23.51 2,806
(June 30, 1998)
1998 End of May 36,768 4,388 23.45 2,799
June 42,614 5,086 23.51 2,806
July 114,329 13,645 23.96 2,860
August 163,573 19,522 20.31 2,424
September 137,523 16,413 19.19 2,290
October 124,309 14,836 20.93 2,498
November 142,392 16,994 21.92 2,616
December 212,900 25,410 21.56 2,573
1999 End of January 140,921 16,819 21.97 2,622
February 171,214 20,434 21.43 2,558
March 156,614 18,692 21.41 2,555
April 128,110 15,290 22.05 2,632
(Note) Operations of Class M Shares were commenced on December 1, 1994.
(2) Record of Distributions Paid
Class M Shares
Period Amount of Dividend paid per Share
Income Capital Gains
1st Fiscal Year(12/1/94-6/30/95) -- -- $0.16 yen19.10
2nd Fiscal Year(7/1/95-6/30/96) -- -- 0.40 yen47.74
3rd Fiscal Year(7/1/96-6/30/97) $0.17 yen20.29 1.06 yen126.51
4th Fiscal Year(7/1/97-6/30/98) 0.30 yen35.81 1.13 yen134.87
(Note) Record of distribution paid from December 1994 to
December 1998 are as follows:
Dividend NAV per Share
Ex-Dividend Date Dollar Yen Dollar
1996 December 20 $1.230 146.80 $16.11
1997 December 19 1.430 170.67 18.09
1998 December 18 1.196 142.74 20.76
(C) Record of Sales and Repurchases
Record of sales and repurchases during the following fiscal
years and number of outstanding Shares of the Fund as of the end
of such Fiscal Years are as follows:
Class M Shares
Number of Number of Net Increase Number of
Shares Sold Shares (Decrease) in Outstanding
Repurchased Shares Shares
Outstanding
1st Fiscal 91,235 37,562 53,673 53,673
Year (0) (0) (0)
(12/1/94-
6/30/95)
2nd Fiscal 297,970 96,466 201,504 255,177
Year (0) (0) (0)
(7/1/95-
6/30/96)
3rd Fiscal 1,962,484 1,378,637 583,847 839,024
Year (0) (0) (0)
(7/1/96-
6/30/97)
4th Fiscal 2,299,229 1,325,283 973,946 1,812,970
Year (0) (0) (0)
(7/1/97-
6/30/98)
Note: The number of Shares sold, repurchased and outstanding
in the parentheses represents those sold, repurchased and
outstanding in Japan. The Shares have started to sell in
Japan since July 1, 1998.
II. OUTLINE OF THE FUND
1. Fund
(A) Law of Place of Incorporation
The Fund is a Massachusetts business trust organized
in Massachusetts, U.S.A. on November 10, 1988.
Chapter 182 of the Massachusetts General Laws
prescribes the fundamental matters in regard to the
operations of certain business trusts constituting
voluntary associations under that chapter.
The Fund is an open-end, diversified management
company under the Investment Company Act of 1940.
(B) Outline of the Supervisory Authority
Refer to I - l (B) Outline of the Supervisory
Authority.
(C) Purpose of the Fund
The purpose of the Fund is to provide investors a
managed investment primarily in securities, debt
instruments and other instruments and rights of a financial
character.
(D) History of the Fund
Organization of the Fund as a Massachusetts business trust.
Adoption of the Agreement and Declaration of Trust.
November 10, 1988: Adoption of the Amended and Restated Agreement
and Declaration of Trust July 13, 1990
(E) Amount of Capital Stock
Not applicable.
(F) Structure of the management of the Fund
The Trustees are responsible for generally overseeing
the conduct of the Fund's business. The Agreement and
Declaration of Trust provides that they shall have all
powers necessary or convenient to carry out that
responsibility. The number of Trustees is fixed by the
Trustees and may not be less than three. A Trustee may be
elected either by the Trustees or by the shareholders. At
any meeting called for the purpose, a Trustee may be
removed by vote of two-thirds of the outstanding shares of
the Fund. Each Trustee elected by the Trustees or the
shareholders shall serve until he or she retires, resigns,
is removed, or dies or until the next meeting of
shareholders called for the purpose of electing Trustees
and until the election and qualification of his or her
successor.
The Trustees of the Fund are authorized by the
Agreement and Declaration of Trust to issue shares of the
Fund in one or more series, each series being preferred
over all other series in respect of the assets allocated to
that series. The Trustees may, without shareholder
approval, divide the shares of any series into two or more
classes, with such preferences and special or relative
rights and privileges as the Trustees may determine.
Under the Agreement and Declaration of Trust the
shareholders shall have power, as and to the extent
provided therein, to vote only (i) for the election of
Trustees, to the extent provided therein, (ii) for the
removal of Trustees, to the extent provided therein, (iii)
with respect to any investment adviser, to the extent
provided therein, (iv) with respect to any termination of
the Fund, to the extent provided therein, (v) with respect
to certain amendments of the Agreement and Declaration of
Trust, (vi) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a
court action, proceeding, or claim should or should not be
brought or maintained derivatively or as a class action on
behalf of the Fund or the shareholders, and (vii) with
respect to such additional matters relating to the Fund as
may be required by the Agreement and Declaration of Trust,
the Bylaws of the Fund, or any registration of the Fund
with the U.S. Securities and Exchange Commission (or any
successor agency) or any state, or as the Trustees may
consider necessary or desirable. Certain of the foregoing
actions may, in addition, be taken by the Trustees without
vote of the shareholders of the Fund.
On any matter submitted to a vote of shareholders, all
shares of the Fund then entitled to vote are voted in the
aggregate as a single class without regard to series or
classes of shares, except (1) when required by the
Investment Company Act of 1940, as amended, or when the
Trustees hall have determined that the matter affects one
or more series or classes of shares materially differently,
share are voted by individual series or class; and (2) when
the Trustees have determined that the matter affects only
the interests of one or more series or classes, then only
shareholders of such series or classes are entitled to vote
thereon. There is no cumulative voting.
Meetings of shareholders may be called by the Clerk
whenever ordered by the Trustees, the Chairman of the
Trustees, or requested in writing by the holder or holders
of at least one-tenth of the outstanding shares entitled to
vote at the meeting. Written notice of any meeting of
shareholders must be given by mailing the notice at least
seven days before the meeting. Thirty percent of shares
entitled to vote on a particular matter is a quorum for the
transaction of business on that matter at a shareholders'
meeting, except that, where any provision of law or of the
Agreement and Declaration of Trust permits or requires that
holders of any series or class vote as an individual series
or class, then thirty percent of the aggregate number of
shares of that series or class entitled to vote are
necessary to constitute a quorum for the transaction of
business by that series or class. For the purpose of
determining the shareholders of any class or series of
shares who are entitled to vote or act at any meeting, or
who are entitled to receive payment of any dividend or
other distribution, the Trustees are authorized to fix
record dates, which may not be more then 90 days before the
date of any meeting of shareholders or more than 60 days
before the date of payment of any dividend or other
distribution.
The Trustees are authorized by the Agreement and
Declaration of Trust to adopt Bylaws not inconsistent with
the Agreement and Declaration of Trust providing for the
conduct of the business of the Fund. The Bylaws
contemplate that the Trustees shall elect a Chairman of the
Trustees, the President, the Treasurer, and the Clerk of
the Fund, and that other officers, if any, may be elected
or appointed by the Trustees at any time. The Bylaws may
be amended or repealed, in whole or in part, by a majority
of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a
majority.
Regular meetings of the Trustees may be held without
call or notice at such places and at such times as the
Trustees may from time to time determine. It shall be
sufficient notice to a Trustee of a special meeting to send
notice by mail at least forty-eight hours or by telegram at
least twenty-four hours before the meeting or to give
notice to him or her in person or by telephone at least
twenty-four hours before the meeting.
At any meeting of Trustees, a majority of the Trustees
then in office shall constitute a quorum. Except as
otherwise provided in the Agreement and Declaration of
Trust or Bylaws, any action to be taken by the Trustees may
be taken by a majority of the Trustees present at a meeting
(a quorum being present), or by written consents of a
majority of the Trustees then in office.
Subject to a favorable majority shareholder vote (as
defined in the Agreement and Declaration of Trust), the
Trustees may contract for exclusive or nonexclusive
advisory and/or management services with any corporation,
trust, association, or other organization.
The Agreement and Declaration of Trust contains
provisions for the indemnification of Trustees, officers,
and shareholders of the Fund under the circumstances and on
the terms specified therein.
The Fund may be terminated at any time by vote of
shareholders holding at least two-thirds of the shares
entitled to vote or by the trustees by written notice to
the shareholders. Any series of shares may be terminated
at any time by vote of shareholders holding at least two-
thirds of the shares of such series entitled to vote or by
the Trustees by written notice to the shareholders of such
series.
The foregoing is a general summary of certain
provisions of the Agreement and Declaration of Trust and
Bylaws of the Fund, and is qualified in its entirety by
reference to each of those documents.
(G) Information Concerning Major Shareholders
Not applicable.
(H) Information Concerning Directors, Officers and Employees
(1) Trustees and Officers of the Fund (as of
the end of April 1999)
Shares
Name Office and Resume Owned
Title
George Putnam Chairman and present: Chairman and
President Director of 5,388.128
Putnam Investment
Management, Inc.
and Putnam Mutual
Funds Corp.
Director, Marsh &
McLennan
Companies, Inc.
John A. Hill Vice present: Chairman and
Chairman Managing 4,517.433
Director, First
Reserve
Corporation
William F. Vice present: Professor of
Pounds Chairman Management, 8,803.172
Alfred P. Sloan
School of
Management,
Massachusetts
Institute of
Technology
Jameson Adkins Trustee present: President,
Baxter Baxter 679.714
Associates, Inc.
Hans H. Estin Trustee present: Vice Chairman,
North American 414.931
Management Corp.
Ronald J. Trustee present: Former
Jackson Chairman, 1,190.857
President and
Chief Executive
Officer of Fisher-
Price, Inc.,
Trustee of Salem
Hospital and the
Peabody Essex
Museum
Paul. L. Trustee present: Professor of 0
Joskow Economics and
Management and
former Head of
the Department of
Economics at the
Massachusetts
Institute of
Technology,
Director of New
England Electric
System, State
Farm Indemnity
Company and
Whitehead
Institute for
Biomedical
Research
Elizabeth T. Trustee present: President
Kennan Emeritus of Mount 313.030
Holyoke College
Lawrence J. Trustee and present: President,
Lasser Vice Chief Executive 107.696
President Officer and
Director of
Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
Director, Marsh &
McLennan
Companies, Inc.
John H. Trustee present: Chairman and
Mullin, III Chief Executive 577.126
Officer of
Ridgeway Farm,
Director of ACX
Technologies,
Inc., Alex. Brown
Realty, Inc. and
The Liberty
Corporation
Robert E. Trustee present: President and
Patterson Trustee of Cabot 1,709.320
Industrial Trust
and Chairman of
the Joselin
Diabetes Center
and Trustee of
SEA Education
Association
Donald S. Trustee present: Director of
Perkins various 1,614.516
corporations,
including Cummins
Engine Company,
Lucent
Technologies,
Inc., Nanophase
Technologies,
Inc. and Springs
Industries, Inc.
George Putnam, Trustee present: President, New
III Generation 326.955
Research, Inc.
A.J.C. Smith Trustee present: Chairman and
Chief Executive 138.313
Officer, Marsh &
McLennan
Companies, Inc.
W. Thomas Trustee present: President and
Stephens Chief Executive 116.541
Officer of
MacMillan
Bloedel, Ltd.
Director of Qwest
Communications
and New Century
Energies
W. Nicholas Trustee present: Director of
Thorndike various 128.588
corporations and
charitable
organizations,
including Data
General
Corporation,
Bradley Real
Estate, Inc. and
Providence
Journal Co.
Trustee of Cabot
Industrial Trust,
Massachusetts
General Hospital
and Eastern
Utilities
Associations
Charles E. Executive present: Managing 0
Porter Vice Director of
President Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
John D. Hughes Senior Vice present: Senior Vice 0
President President of
and Putnam
Treasurer Investments, Inc.
and Putnam
Investment
Management, Inc.
Patricia C. Senior Vice present: Senior Vice 0
Flaherty President President of
Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
Ian C. Vice present: Senior 0
Ferguson President Managing Director
of Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
Gordon H. Vice present: Director and 10,755
Silver President Senior Managing .734
Director of
Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
Brett C. Vice present: Managing 0
Browchuk President Director of
Putnam Investment
Management, Inc.
John R. Verani Vice present: Senior Vice 0
President President of
Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
John J. Vice present: Managing 0
Morgan, Jr. President Director of
Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
Richard Vice present: Managing 0
Monaghan President Director of
Putnam
Investments, Inc.
and Putnam Mutual
Funds Corp.
Nigel P. Hart Vice present: Senior Vice
President President of 201.428
Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
Omid Kamshad Vice present: Managing 0
President Director of
Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
Mark D. Vice present: Managing
Pollard President Director of 4,740.581
Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
Justin M. Vice present: Managing
Scott President Director of 2,670.087
Putnam
Investments, Inc.
and Putnam
Investment
Management, Inc.
Paul G. Assistant present: N/A 0
Bucuvalas Treasurer
Beverly Marcus Clerk and present: N/A
Assistant 124.406
Treasurer
(2) Employees of the Fund
The Fund does not have any employees.
(I) Description of Business and Outline of Operation
The Fund may carry out any administrative and
managerial act, including the purchase, sale, subscription
and exchange of any securities and the exercise of all
rights directly or indirectly pertaining to the Fund's
assets. The Fund has retained Putnam Investment
Management, Inc., the investment adviser, to render
investment advisory services and Putnam Fiduciary Trust
Company, to hold the assets of the Fund in custody and act
as Investor Servicing Agent.
(J) Miscellaneous
(1) Changes of Trustees and Officers
Trustees may be removed or replaced by, among other
things, a resolution adopted by a vote of two-thirds of the
outstanding shares at a meeting called for the purpose. In
the event of vacancy, the remaining Trustees may fill such
vacancy by appointing for the remaining term of the
predecessor Trustee such other person as they in their
discretion shall see fit. The Trustees may add to their
number as they consider appropriate. The Trustees may elect
and remove officers as they consider appropriate.
(2) Amendment to the Agreement and Declaration of Trust
Generally, approval of shareholders is required to
amend the Agreement and Declaration of Trust, except for
certain matters such as change of name, curing any ambiguity
or curing any defective or inconsistent provision.
(3) Litigation and Other Significant Events
Nothing which has or which would have a material
adverse effect on the Fund has occurred which is required to
be disclosed and has not been disclosed. The fiscal year
end of the Fund is June 30. The Fund is established for an
indefinite period and may be dissolved at any time by vote
of the shareholders holding at least two-thirds of the
shares entitled to vote or by the Trustees by written notice
to shareholders.
2. Putnam Investment Management, Inc. (Investment Management
Company)
(A) Law of Place of Incorporation
Putnam is incorporated under the General Corporation
Law of The Commonwealth of Massachusetts, U.S.A. Its
investment advisory business is regulated under the
Investment Advisers Act of 1940.
Under the Investment Advisers Act of 1940, an
investment adviser means, with certain exceptions, any
person who, for compensation, engages in the business of
advising others, either directly or through publications or
writings, as to the value of securities or as to the
advisability of investing in, purchasing or selling
securities, or who, for compensation and as part of a
regular business, issues analyses or reports concerning
securities. Investment advisers under the Act may not
conduct their business unless they are registered with the
SEC.
(B) Outline of the Supervisory Authority
Investment Management Company is registered as an
investment adviser under the Investment Advisers Act of
1940.
(C) Purpose of the Company
Investment Management Company's sole business is
investment management, which includes the buying, selling,
exchanging and trading of securities of all descriptions on
behalf of mutual funds in any part of the world.
(D) History of the Company
Investment Management Company is one of America's
oldest and largest money management firms. Investment
Management Company's staff of experienced portfolio
managers and research analysts selects securities and
constantly supervises the fund's portfolio. By pooling an
investor's money with that of other investors, a greater
variety of securities can be purchased than would be the
case individually: the resulting diversification helps
reduce investment risk. Investment Management Company has
been managing mutual funds since 1937. Today, the firm
serves as the Investment Management Company for the funds
in the Putnam Family, with over $238 billion in assets in
over 11 million shareholder accounts at the end of April
1999. An affiliate, The Putnam Advisory Company, Inc.,
manages domestic and foreign institutional accounts and
mutual funds, including the accounts of many Fortune 500
companies. Another affiliate, Putnam Fiduciary Trust
Company, provides investment advice to institutional
clients under its banking and fiduciary powers as well as
shareholder and custody services to the Putnam Funds.
Putnam Investment Management Inc., Putnam Mutual Funds
and Putnam Fiduciary Trust Company are subsidiaries of
Putnam Investments, Inc., which is located at One Post
Office Square, Boston, Massachusetts 02109 and except for a
minority stake owned by employees, is owned by Marsh &
McLennan Companies, Inc., a publicly-owned holding company
whose principal businesses are international insurance and
reinsurance brokerage, employee benefit consulting and
investment management.
(E) Amount of Capital Stock (as of the end of April 1999)
1. Amount of Capital (issued capital stock at par value):
Common Stock 1,000 shares at $1 par value
2. Number of authorized shares of capital stock:
Common Stock 1,000 shares
3. Number of outstanding shares of capital stock:
Common Stock 1,000 shares
4. Amount of capital (for the purposes of this Item,
"Amount of Capital" means total stockholders' equity
for the past five years):
Amount of Capital
Year (Total Stockholders' Equity)
End of 1994 $48,149,491
End of 1995 $45,521,351
End of 1996 $45,817,658
End of 1997 $48,617,160
End of 1998 $425,782,008
(F) Structure of the Management of the Company
Investment Management Company is ultimately managed by
its Board of Directors, which is elected by its
shareholders.
Each fund managed by Investment Management Company is
managed by one or more portfolio managers. These managers,
in coordination with analysts who research specific
securities and other members of the relevant investment
group (in the case of the Fund, Investment Management
Company's Global Core and Growth Equities Group), provide a
continuous investment program for the Fund and place all
orders for the purchase and sale of portfolio securities.
The investment performance and portfolio of each Fund
is overseen by its Board of Trustees, a majority of whom
are not affiliated with Investment Management Company. The
Trustees meet 11 times a year and review the performance of
each fund with its manager at least quarterly.
In selecting portfolio securities for the Fund,
Investment Management Company looks for securities that
represent attractive values based on careful issue-by-issue
credit analysis and hundreds of onsite visits and other
contacts with issuers every year. Investment Management
Company is one of the largest managers of equity, high
yield and other debt securities in the United States.
The following officers of Investment Management
Company have had primary responsibility for the day-to-day
management of the Fund's portfolio since the years stated
below. Their recent professional experience is also shown.
(as of the end of April 1999)
Manager Sinc Experience
e
Omid Kamshad 1996 Employed as an investment professional by
Managing Investment Management Company since January
Director 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. 1995 Employed as an investment professional by
Pollard Putnam Investment Management Company since
Managing 1990.
Director
Nigel P. Hart 1998 Employed as an investment professional by
Senior Vice Investment Management Company since 1997.
President Prior to November, 1997, Mr. Hart was a Vice
President and Portfolio Manager at IAI
International.
(G) Information Concerning Major Stockholders
As of the end of April 1999, all the outstanding
shares of capital stock of Investment Management Company
were owned by Putnam Investments, Inc. See subsection D above.
(H) Information Concerning Officers and Employees
The following table lists the names of various
officers and directors of Investment Management Company and
their respective positions with Investment Management
Company. For each named individual, the table lists: (i)
any other organizations (excluding other Investment
Management Company's funds) with which the officer and/or
director has recently had or has substantial involvement;
and (ii) positions held with such organization:
List of Officers and Directors of Investment Management Company
(as of the end of April 1999)
Position
with
Name Investment Other Business Affiliation
Management
Company
1 Putnam, George Chairman Director of Putnam Mutual
Funds Corp.
2 Lasser, Lawrence President
J. and
Director,
CEO
3 Silver, Gordon Director Director of Putnam
H. and Senior Fiduciary Trust Company and
Managing Senior Managing Director of
Director Putnam Mutual Funds Corp.
4 Burke, Robert W. Senior Senior Managing Director of
Managing Putnam Mutual Funds Corp.
Director
5 Collman, Senior Senior Managing Director of
Kathleen M. Managing Putnam Mutual Funds Corp.
Director
6 Ferguson, Ian C. Senior
Managing
Director
7 Regan, Anthony Senior
W. Managing
Director
8 Spiegel, Steven Senior Senior Managing Director of
Managing Putnam Mutual Funds Corp.
Director
9 Anderson, Blake Managing
E. Director
10 Antill, Jennifer Managing
Director
11 Beck, Robert R. Managing
Director
12 Browchuk, Brett Managing
C. Director
13 Cassaro, Joseph Managing
A. Director
14 Cotner, C. Beth Managing
Director
15 Cronin, Kevin M. Managing Managing Director of Putnam
Director Fiduciary Trust Company
16 D'Alelio, Edward Managing
H. Director
17 Daly, Kenneth L. Managing Managing Director of Putnam
Director Mutual Funds Corp.
18 DeTore, John A. Managing Managing Director of Putnam
Director Fiduciary Trust Company
19 Durgarian, Managing Director and Managing
Karnig H. Director Director of Putnam
and Chief Fiduciary Trust Company
Financial
Officer
20 Esteves, Irene Managing Treasurer of Putnam
M. Director Fiduciary Trust Company
and Chief
Financial
Officer
21 Farrell, Deborah Managing Managing Director of Putnam
S. Director Mutual Funds Corp.
22 Gillis, Roland Managing
Director
23 Haslett, Thomas Managing
R. Director
24 Holding, Pamela Managing
Director
25 Hurley, William Managing Managing Director and CFO
J. Director of Putnam Mutual Funds
Corp.
26 Jacobs, Jerome Managing
J. Director
27 Joseph, Joseph Managing
P. Director
28 Kamshad, Omid Managing
Director
29 King, David L. Managing Managing Director of Putnam
Director Mutual Funds Corp.
30 Kohli, D. Managing
William Director
31 Kreisel, Anthony Managing
I. Director
32 Kuenstner, Managing
Deborah F. Director
33 Landes, William Managing
J. Director
34 Leibovitch, Managing
Richard G. Director
35 Leichter, Managing
Jennifer E. Director
36 Maloney, Kevin Managing
J. Director
37 Martino, Michael Managing Managing Director of Putnam
Director Fiduciary Trust Company
38 Maxwell, Scott Managing
M. Director
39 McGue, William Managing
F. Director
40 McMullen, Carol Managing
C. Director
41 Memani, Krishna Managing
K. Director
42 Miller, Daniel Managing
L. Director
43 Morgan Jr., John Managing Managing Director of Putnam
J. Director Fiduciary Trust Company
44 Morgan, Kelly A. Managing
Director
45 Oristaglio, Managing
Stephen Director
46 Peacher, Stephen Managing
C. Director
47 Pollard, Mark D. Managing
Director
48 Porter, Charles Managing
E. Director
49 Price, Quintin Managing
I. Director
50 Reilly, Thomas Managing
V. Director
51 Schultz, Managing Managing Director of Putnam
Mitchell D. Director Mutual Funds Corp.
52 Scott, Justin M. Managing Managing Director of Putnam
Director Fiduciary Trust Company
53 Shadek Jr., Managing
Edward T. Director
54 Starr, Loren Managing Managing Director of Putnam
Director Mutual Funds Corp.
55 Swift, Robert Managing
Director
56 Talanian, John Managing Managing Director of Putnam
C. Director Mutual Funds Corp.
57 Tibbetts, Managing Managing Director of Putnam
Richard B. Director Mutual Funds Corp.
58 Waldman, David Managing
L. Director
and Chief
Financial
Officer
59 Wetlaufer, Eric Managing
Director
60 Woolverton, Managing Managing Director of Putnam
William H. Director Mutual Funds Corp.
61 Arends, Michael Senior Vice Senior Vice President of
K. President Putnam Mutual Funds Corp.
62 Asher, Steven E. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
and Senior Vice President
of Putnam Fiduciary Trust
Company
63 Atkin, Michael Senior Vice
J. President
64 Augustine, Senior Vice
Jeffrey B. President
65 Bakshi, Manjit Senior Vice
S. President
66 Bamford, Dolores Senior Vice
Snyder President
67 Baumbach, Robert Senior Vice
K. President
68 Berka, Sharon A. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
69 Block, Richard Senior Vice
L. President
70 Boselli, John A. Senior Vice
President
71 Bousa, Edward P. Senior Vice
President
72 Bresnahan, Senior Vice Senior Vice President of
Leslee R. President Putnam Mutual Funds Corp.
73 Burke, Andrea Senior Vice
President
74 Burns, Cheryl A. Senior Vice
President
75 Byrne, Joshua L. Senior Vice
President
76 Callahan, Ellen Senior Vice
S. President
77 Carlson, David Senior Vice
G. President
78 Chang, Jack P. Senior Vice
President
79 Chrostowski, Senior Vice Senior Vice President of
Louis F. President Putnam Mutual Funds Corp.
80 Curran, Peter J. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
81 Dalferro, John Senior Vice
R. President
82 Derbyshire, Senior Vice Senior Vice President of
Ralph C. President Putnam Mutual Funds Corp.
83 Eigerman, Nathan Senior Vice
W. President
84 England, Richard Senior Vice
B. President
85 Epke, Laura L. Senior Vice
President
86 Finch, Edward R. Senior Vice
President
87 Flaherty, Senior Vice Senior Vice President of
Patricia C. President Putnam Mutual Funds Corp.
88 Fontana, Forrest Senior Vice
N. President
89 Francis, Senior Vice
Jonathan H. President
90 Frost, Karen T. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
91 Frucci, Richard Senior Vice Senior Vice President of
M. President Putnam Fiduciary Trust
Company
92 Fullerton, Brian Senior Vice Senior Vice President of
J. President Putnam Mutual Funds Corp.
93 Gorman, Stephen Senior Vice
A. President
94 Grant, Peter J. Senior Vice Senior Vice President of
President Putnam Fiduciary Trust
Company
95 Graviere, Senior Vice
Patrice President
96 Grim, Daniel J. Senior Vice
President
97 Haagensen, Paul Senior Vice
E. President
98 Hadden, Peter J. Senior Vice
President
99 Halperin, Senior Vice
Matthew C. President
100 Hart, Nigel P. Senior Vice
President
101 Healey, Deborah Senior Vice
R. President
102 Hotchkiss, Senior Vice
Michael F. President
103 Kaufman, Jeffrey Senior Vice
President
104 Kay, Karen R. Senior Vice Clerk, Director and Senior
President Vice President of Putnam
Fiduciary Trust Company and
Senior Vice President of
Putnam Mutual Funds Corp.
105 Kirson, Steven Senior Vice
L. President
106 Knight, Jeffrey Senior Vice
L. President
107 Kobylarz, Senior Vice
Jeffrey J. President
108 Koontz, Jill A. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
109 Korn, Karen R. Senior Vice
President
110 Kurey, Thomas J. Senior Vice
President
111 Lannum III, Senior Vice
Coleman N. President
112 Lindsey, Jeffrey Senior Vice
R. President
113 Lode, Geirulv Senior Vice
President
114 Lomba, Rufino R. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
115 MacElwee, Jones, Senior Vice
Elizabeth M. President
116 Madore, Robert Senior Vice Senior Vice President of
A. President Putnam Fiduciary Trust
Company
117 Malloy, Julie M. Senior Vice
President
118 Manuel Jr., Senior Vice
Richard D. President
119 Marrkand, Paul Senior Vice
E. President
120 Marshall, Senior Vice
William L. President
121 Matteis, Andrew Senior Vice
S. President
122 McDonald, Senior Vice
Richard E. President
123 Meehan, Thalia Senior Vice
President
124 Mehta, Sandeep Senior Vice
President
125 Miller, William Senior Vice
H. President
126 Mockard, Jeanne Senior Vice
L. President
127 Mufson, Michael Senior Vice
J. President
128 Mullen, Donald Senior Vice Senior Vice President of
E. President Putnam Mutual Funds Corp.
129 Mullin, Hugh H. Senior Vice
President
130 Nance, Michael Senior Vice
E. President
131 Netols, Jeffrey Senior Vice Senior Vice President of
W. President Putnam Fiduciary Trust
Company
132 Oler, Stephen S. Senior Vice
President
133 Paine, Robert M. Senior Vice
President
134 Parker, Margery Senior Vice
C. President
135 Perry, William Senior Vice
President
136 Peters, Carmel Senior Vice
President
137 Petralia, Senior Vice Senior Vice President of
Randolph S. President Putnam Mutual Funds Corp.
138 Plapinger, Keith Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
139 Pohl, Charles G. Senior Vice
President
140 Prusko, James M. Senior Vice Senior Vice President of
President Putnam Fiduciary Trust
Company
141 Quistberg, Paul Senior Vice
T. President
142 Ray, Christopher Senior Vice
A. President
143 Ravera, David A. Senior Vice
President
144 Rogers, Kevin J. Senior Vice
President
145 Ruys de Perez, Senior Vice Senior Vice President of
Charles A. President Putnam Fiduciary Trust
Company and Senior Vice
President of Putnam Mutual
Funds Corp.
146 Santos, David J. Senior Vice Senior Vice President of
President Putnam Fiduciary Trust
Company
147 Santosus, Senior Vice
Anthony C. President
148 Schwister, Jay Senior Vice Senior Vice President of
E. President Putnam Fiduciary Trust
Company
149 Scordato, Senior Vice Senior Vice President of
Christine A. President Putnam Mutual Funds Corp.
150 Sievert, Jean I. Senior Vice
President
151 Simon, Sheldon Senior Vice
N. President
152 Simozar, Saied Senior Vice
President
153 Smith Jr., Leo Senior Vice
J. President
154 Smith, Margaret Senior Vice
D. President
155 Spatz, Erin J. Senior Vice
President
156 Stack, Michael Senior Vice Senior Vice President of
P. President Putnam Mutual Funds Corp.
157 Stairs, George Senior Vice
W. President
158 Strumpf, Casey Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
159 Sugimoto, Senior Vice Senior Vice President of
Toshifumi President Putnam Mutual Funds Corp.
160 Sullivan, Roger Senior Vice
R. President
161 Svensson, Lisa Senior Vice
H. President
162 Swanberg, Senior Vice
Charles H. President
163 Thomsen, Senior Vice Senior Vice President of
Rosemary H. President Putnam Fiduciary Trust
Company
164 Troped, Bonnie Senior Vice Senior Vice President of
L. President Putnam Mutual Funds Corp.
165 Verani, John R. Senior Vice Senior Vice President of
President Putnam Mutual Funds Corp.
166 Walsh, Francis Senior Vice
P. President
167 Warren, Paul C. Senior Vice
President
168 Weinstein, Senior Vice
Michael R. President
169 Weiss, Manuel Senior Vice
President
170 Whalen, Edward Senior Vice Senior Vice President of
F. President Putnam Mutual Funds Corp.
171 Wheeler, Diane Senior Vice
D.F. President
172 Wyke, Richard P. Senior Vice
President
173 Yogg, Michael R. Senior Vice
President
174 Zukowski, Gerald Senior Vice
S. President
(I) Summary of Business Lines and Business Operation
Investment Management Company is engaged in the business of
providing investment management and investment advisory
services to mutual funds. As of the end of April 1999,
Investment Management Company managed, advised, and/or
administered the following 114 funds and fund portfolios
(having an aggregate net asset value of over $238 billion):
(As of April 30, 1999)
Name Month/Da Principal Total Net
te/Year Characteris Net Asset
Establis tics Asset Value
hed Value per
($ share
million ($)
)
1 The George Putnam Fund of 11/5/37 Open/Equity 4,067.8 19.16
Boston; A 0
2 The George Putnam Fund of 32256 Open/Equity 1,638.8 19.00
Boston; B 0
3 The George Putnam Fund of 33207 Open/Equity 302.88 19.00
Boston; M
4 The George Putnam Fund of 32873 Open/Equity 583.49 19.20
Boston; Y
5 Putnam American Government 29645 Open/Bond 1,392.9 8.72
Income Fund; A 8
6 Putnam American Government 33012 Open/Bond 118.10 8.69
Income Fund; B
7 Putnam American Government 33282 Open/Bond 3.91 8.74
Income Fund; M
8 Putnam Asia Pacific Growth 31827 Open/Equity 159.35 10.88
Fund; A
9 Putnam Asia Pacific Growth 32659 Open/Equity 141.82 10.67
Fund; B
10 Putnam Asia Pacific Growth 33269 Open/Equity 10.12 10.78
Fund; M
11 Putnam Asia Pacific Fund 34415 Open/Equity 2.66 9.30
II
12 Putnam Asset Allocation: 32910 Open/Balanc 990.74 12.44
Balanced Portfolio; A ed
13 Putnam Asset Allocation: 32914 Open/Balanc 569.76 12.37
Balanced Portfolio; B ed
14 Putnam Asset Allocation: 33116 Open/Balanc 116.43 12.30
Balanced Portfolio; C ed
15 Putnam Asset Allocation: 33274 Open/Balanc 68.26 12.41
Balanced Portfolio; M ed
16 Putnam Asset Allocation: 33067 Open/Balanc 322.07 12.45
Balanced Portfolio; Y ed
17 Putnam Asset Allocation : 32910 Open/Balanc 428.43 10.65
Conservative Portfolio; A ed
18 Putnam Asset Allocation : 32921 Open/Balanc 187.65 10.60
Conservative Portfolio; B ed
19 Putnam Asset Allocation : 33116 Open/Balanc 56.47 10.58
Conservative Portfolio; C ed
20 Putnam Asset Allocation : 33275 Open/Balanc 23.83 10.61
Conservative Portfolio; M ed
21 Putnam Asset Allocation : 33067 Open/Balanc 65.68 10.66
Conservative Portfolio; Y ed
22 Putnam Asset Allocation: 32911 Open/Balanc 777.42 14.33
Growth Portfolio; A ed
23 Putnam Asset Allocation: 32919 Open/Balanc 480.49 14.14
Growth Portfolio; B ed
24 Putnam Asset Allocation: 33116 Open/Balanc 106.41 14.03
Growth Portfolio; C ed
25 Putnam Asset Allocation: 33269 Open/Balanc 63.91 14.16
Growth Portfolio; M ed
26 Putnam Asset Allocation: 33067 Open/Balanc 300.30 14.41
Growth Portfolio; Y ed
27 Putnam Arizona Tax Exempt 31806 Open/Bond 109.07 9.30
Income Fund; A
28 Putnam Arizona Tax Exempt 32703 Open/Bond 33.61 9.29
Income Fund; B
29 Putnam Arizona Tax Exempt 33421 Open/Bond 0.52 9.33
Income Fund; M
30 Putnam Balanced Fund 33512 Open/Balanc 3.93 12.47
ed
31 Putnam Balanced Retirement 29694 Open/Balanc 700.70 11.34
Fund; A ed
32 Putnam Balanced Retirement 32904 Open/Balanc 191.44 11.24
Fund; B ed
33 Putnam Balanced Retirement 33313 Open/Balanc 15.28 11.28
Fund; M ed
34 Putnam Balanced Retirement 34697 Open/Balanc 1.78 11.34
Fund; Y ed
35 Putnam California 32473 Closed/Bond 71.39 15.50
Investment Grade Municipal
Trust
36 Putnam California Tax 28973 Open/Bond 3,004.2 8.72
Exempt Income Fund; A 6
37 Putnam California Tax 32511 Open/Bond 663.02 8.71
Exempt Income Fund; B
38 Putnam California Tax 33282 Open/Bond 19.26 8.71
Exempt Income Fund; M
39 Putnam California Tax 30614 Open/Bond 29.59 1.00
Exempt Money Market Fund
40 Putnam Capital 32724 Open/Equity 60.66 8.07
Opportunities Fund; A
41 Putnam Capital 33178 Open/Equity 82.92 8.04
Opportunities Fund; B
42 Putnam Capital 33624 Open/Equity 4.28 8.05
Opportunities Fund; M
43 Putnam Capital 32724 Open/Equity 1,312.2 22.24
Appreciation Fund; A 3
44 Putnam Capital 33178 Open/Equity 1,435.0 21.97
Appreciation Fund; B 8
45 Putnam Capital 33624 Open/Equity 94.58 22.01
Appreciation Fund; M
46 Putnam Convertible 33417 Closed/Bond 88.74 23.90
Opportunity and Income
Trust
47 Putnam Convertible Income- 6/29/72 Open/Balanc 1,061.8 20.58
Growth Trust; A ed 9
48 Putnam Convertible Income- 32703 Open/Balanc 300.09 20.34
Growth Trust; B ed
49 Putnam Convertible Income- 33309 Open/Balanc 17.52 20.45
Growth Trust; M ed
50 Putnam Convertible Income- 34697 Open/Balanc 35.81 20.58
Growth Trust; Y ed
51 Putnam Diversified Equity 33054 Open/Equity 337.87 14.85
Trust; A
52 Putnam Diversified Equity 33055 Open/Equity 415.94 14.60
Trust; B
53 Putnam Diversified Equity 34730 Open/Equity 2.25 14.84
Trust; C
54 Putnam Diversified Equity 33421 Open/Equity 33.74 14.69
Trust; M
55 Putnam Dividend Income 31317 Closed/Bond 123.84 11.44
Fund
56 Putnam Diversified Income 30957 Open/Bond 1,738.1 11.51
Trust; A 4
57 Putnam Diversified Income 32567 Open/Bond 1,986.5 11.46
Trust; B 4
58 Putnam Diversified Income 34730 Open/Bond 3.35 11.49
Trust; C
59 Putnam Diversified Income 33207 Open/Bond 976.71 11.47
Trust; M
60 Putnam Diversified Income 33795 Open/Bond 17.99 11.52
Trust ; Y
61 Putnam Emerging Markets 33512 Open/Equity 47.73 8.76
Fund; A
62 Putnam Emerging Markets 33512 Open/Equity 35.86 8.70
Fund; B
63 Putnam Emerging Markets 33512 Open/Equity 4.20 8.72
Fund; M
64 Putnam Equity Fund 98 34332 Open/Equity 7.75 12.87
65 Putnam Equity Income Fund; 26829 Open/Balanc 1,263.7 17.20
A ed 3
66 Putnam Equity Income Fund; 32763 Open/Balanc 706.80 17.09
B ed
67 Putnam Equity Income Fund; 34730 Open/Balanc 5.18 17.19
C ed
68 Putnam Equity Income Fund; 33208 Open/Balanc 67.12 17.11
M ed
69 Putnam Europe Growth Fund; 31661 Open/Equity 920.28 22.27
A
70 Putnam Europe Growth Fund; 32904 Open/Equity 819.34 21.71
B
71 Putnam Europe Growth Fund; 33207 Open/Equity 128.11 22.05
M
72 Putnam Florida Tax Exempt 31647 Open/Bond 239.29 9.40
Income Fund; A
73 Putnam Florida Tax Exempt 32511 Open/Bond 82.46 9.40
Income Fund; B
74 Putnam Florida Tax Exempt 33358 Open/Bond 1.80 9.40
Income Fund; M
75 Putnam Global Natural 27964 Open/Equity 212.72 20.00
Resources Fund; A
76 Putnam Global Natural 32904 Open/Equity 149.72 19.68
Resources Fund; B
77 Putnam Global Natural 33421 Open/Equity 10.14 19.88
Resources Fund; M
78 Putnam Global Equity Fund 34459 Open/Equity 4.01 13.67
79 Putnam Global Growth and 33240 Open/Equity 32.17 14.34
Income Fund; A
80 Putnam Global Growth and 33240 Open/Equity 23.89 14.24
Income Fund; B
81 Putnam Global Growth and 33240 Open/Equity 2.61 14.29
Income Fund; M
82 Putnam Global Governmental 30467 Open/Bond 240.35 12.70
Income Trust; A
83 Putnam Global Governmental 32904 Open/Bond 35.31 12.66
Income Trust; B
84 Putnam Global Governmental 33313 Open/Bond 234.63 12.64
Income Trust; M
85 Putnam Global Growth Fund; 9/1/67 Open/Equity 3,518.3 12.96
A 2
86 Putnam Global Growth Fund; 32259 Open/Equity 1,991.3 12.46
B 9
87 Putnam Global Growth Fund; 34730 Open/Equity 6.21 12.95
C
88 Putnam Global Growth Fund; 33297 Open/Equity 65.42 12.85
M
89 Putnam Global Growth Fund; 33038 Open/Equity 122.36 13.17
Y
90 Putnam Growth and Income 33242 Open/Balanc 1,376.5 15.36
Fund II; A ed 5
91 Putnam Growth and Income 33242 Open/Balanc 1,630.2 15.23
Fund II; B ed 7
92 Putnam Growth and Income 34730 Open/Balanc 14.39 15.34
Fund II; C ed
93 Putnam Growth and Income 33242 Open/Balanc 185.27 15.28
Fund II; M ed
94 The Putnam Fund for Growth 11/6/57 Open/Balanc 22,831. 22.35
and Income; A ed 15
95 The Putnam Fund for Growth 32259 Open/Balanc 16,841. 22.06
and Income; B ed 91
96 The Putnam Fund for Growth 33358 Open/Balanc 501.31 22.22
and Income; M ed
97 The Putnam Fund for Growth 33038 Open/Balanc 1,169.9 22.39
and Income; Y ed 6
98 Putnam Growth Fund 34454 Open/Equity 2.56 10.42
99 Putnam Growth 33512 Open/Equity 1,133.3 21.36
Opportunities; A 1
100 Putnam Growth 34181 Open/Equity 1,301.2 21.09
Opportunities; B 0
101 Putnam Growth 34730 Open/Equity 39.98 21.37
Opportunities; C
102 Putnam Growth 34181 Open/Equity 81.11 21.19
Opportunities; M
103 Putnam High Income 30505 Closed/Bond 114.65 8.42
Convertible and Bond Fund
104 Putnam High Yield 30034 Open/Bond 1,165.3 8.40
Advantage Fund; A 2
105 Putnam High Yield 33008 Open/Bond 980.81 8.36
Advantage Fund; B
106 Putnam High Yield 33207 Open/Bond 983.53 8.39
Advantage Fund; M
107 Putnam High Yield 34697 Open/Bond 9.85 8.40
Advantage Fund; Y
108 Putnam High Yield Total 33969 Open/Bond 51.07 7.67
Return Fund; A
109 Putnam High Yield Total 33969 Open/Bond 57.43 7.60
Return Fund; B
110 Putnam High Yield Total 33969 Open/Bond 3.58 7.61
Return Fund; M
111 Putnam High Quality Bond 30103 Open/Bond 323.44 9.88
Fund; A
112 Putnam High Quality Bond 33029 Open/Bond 39.48 9.83
Fund; B
113 Putnam High Quality Bond 33339 Open/Bond 3.00 9.88
Fund; M
114 Putnam High Yield Fund II; 34333 Open/Bond 538.16 8.00
A
115 Putnam High Yield Fund II; 34333 Open/Bond 776.69 8.01
B
116 Putnam High Yield Fund II; 34333 Open/Bond 37.61 8.00
M
117 Putnam High Yield Trust; A 27073 Open/Bond 2,679.5 11.08
5
118 Putnam High Yield Trust; B 32567 Open/Bond 858.45 11.03
119 Putnam High Yield Trust; M 33421 Open/Bond 17.96 11.07
120 Putnam High Yield Trust; Y 34697 Open/Bond 23.22 11.07
121 Putnam Health Sciences 28637 Open/Equity 2,784.8 57.25
Trust; A 3
122 Putnam Health Sciences 32567 Open/Equity 2,026.7 54.93
Trust; B 2
123 Putnam Health Sciences 33421 Open/Equity 86.36 56.33
Trust; M
124 Putnam High Yield 31191 Closed/Bond 201.18 9.11
Municipal Trust
125 Putnam Income Fund; A 11/1/54 Open/Bond 1,374.9 6.76
0
126 Putnam Income Fund; B 32567 Open/Bond 505.48 6.73
127 Putnam Income Fund; M 33220 Open/Bond 1,757.1 6.73
9
128 Putnam Income Fund; Y 32915 Open/Bond 252.81 6.78
129 Putnam Intermediate U.S. 32554 Open/Bond 254.45 4.92
Government Income Fund; A
130 Putnam Intermediate U.S. 32554 Open/Bond 148.98 4.93
Government Income Fund; B
131 Putnam Intermediate U.S. 33330 Open/Bond 11.15 4.93
Government Income Fund; M
132 Putnam Intermediate U.S. 34242 Open/Bond 116.60 4.92
Government Income Fund; Y
133 Putnam International Fund 33599 Open/Equity 5.10 11.82
134 Putnam International 33816 Open/Equity 447.87 12.50
Growth and Income Fund; A
135 Putnam International 33816 Open/Equity 439.44 12.40
Growth and Income Fund; B
136 Putnam International 34730 Open/Equity 4.46 12.48
Growth and Income Fund; C
137 Putnam International 33816 Open/Equity 36.70 12.46
Growth and Income Fund; M
138 Putnam International 31835 Open/Equity 2,611.5 21.22
Growth Fund; A 8
139 Putnam International 33024 Open/Equity 1,709.9 20.81
Growth Fund; B 3
140 Putnam International 33207 Open/Equity 193.14 21.05
Growth Fund; M
141 Putnam International 33796 Open/Equity 219.58 21.29
Growth Fund; Y
142 Putnam International New 33240 Open/Equity 762.56 14.32
Opportunities Fund; A
143 Putnam International New 33439 Open/Equity 938.06 13.98
Opportunities Fund; B
144 Putnam International New 34730 Open/Equity 1.95 14.31
Opportunities Fund; C
145 Putnam International New 33439 Open/Equity 74.45 14.12
Opportunities Fund; M
146 Putnam International 33599 Open/Equity 152.73 15.03
Voyager Fund; A
147 Putnam International 33906 Open/Equity 114.91 14.89
Voyager Fund; B
148 Putnam International 33906 Open/Equity 13.03 14.96
Voyager Fund; M
149 Putnam Investment Grade 31345 Closed/Bond 246.38 11.78
Municipal Trust
150 Putnam Investment Grade 32473 Closed/Bond 186.23 13.94
Municipal Trust II
151 Putnam Investment Grade 32840 Closed/Bond 53.32 13.31
Municipal Trust III
152 Putnam Investors Fund; A 8005 Open/Equity 5,472.7 15.68
4
153 Putnam Investors Fund; B 32567 Open/Equity 2,665.0 14.99
9
154 Putnam Investors Fund; M 33208 Open/Equity 180.67 15.38
155 Putnam Investors Fund; Y 33975 Open/Equity 478.92 15.73
156 Putnam Latin America Fund 34415 Open/Equity 1.99 6.54
157 Putnam Massachusetts Tax 31342 Open/Bond 303.55 9.57
Exempt Income Fund; A
158 Putnam Massachusetts Tax 32703 Open/Bond 124.21 9.56
Exempt Income Fund; B
159 Putnam Massachusetts Tax 33369 Open/Bond 5.38 9.56
Exempt Income Fund; M
160 Putnam Master Income Trust 30800 Closed/Bond 443.50 8.35
161 Putnam Managed High Yield 32683 Closed/Bond 94.72 12.62
Trust
162 Putnam Michigan Tax Exempt 31342 Open/Bond 147.15 9.23
Income Fund; A
163 Putnam Michigan Tax Exempt 32703 Open/Bond 46.52 9.22
Income Fund; B
164 Putnam Michigan Tax Exempt 33344 Open/Bond 1.94 9.23
Income Fund; M
165 Putnam Minnesota Tax 31342 Open/Bond 103.70 9.15
Exempt Income Fund; A
166 Putnam Minnesota Tax 32703 Open/Bond 51.50 9.12
Exempt Income Fund; B
167 Putnam Minnesota Tax 33330 Open/Bond 1.56 9.15
Exempt Income Fund; M
168 Putnam Managed Municipal 31101 Closed/Bond 445.82 9.61
Income Trust
169 Putnam Money Market Fund; 26572 Open/Bond 3,269.9 1.00
A 0
170 Putnam Money Market Fund; 32259 Open/Bond 766.52 1.00
B
171 Putnam Money Market Fund; 34730 Open/Bond 2.33 1.00
C
172 Putnam Money Market Fund; 33214 Open/Bond 101.15 1.00
M
173 Putnam Master Intermediate 30800 Closed/Bond 805.09 8.04
Income Trust
174 Putnam Municipal Income 31188 Open/Bond 833.52 9.24
Fund; A
175 Putnam Municipal Income 32511 Open/Bond 507.39 9.23
Fund; B
176 Putnam Municipal Income 34730 Open/Bond 5.20 9.24
Fund; C
177 Putnam Municipal Income 33207 Open/Bond 16.04 9.24
Fund; M
178 Putnam Municipal 32655 Closed/Bond 228.14 14.12
Opportunities Trust
179 Putnam New Opportunities 31654 Open/Equity 11,280. 62.39
Fund; A 11
180 Putnam New Opportunities 32567 Open/Equity 8,108.8 59.51
Fund; B 6
181 Putnam New Opportunities 33207 Open/Equity 472.96 60.97
Fund; M
182 Putnam New Opportunities 33072 Open/Equity 880.71 63.20
Fund; Y
183 Putnam New Value Fund; A 33605 Open/Equity 420.88 15.22
184 Putnam New Value Fund; B 33659 Open/Equity 424.13 15.07
185 Putnam New Value Fund; M 33659 Open/Equity 40.98 15.14
186 Putnam New Jersey Tax 31462 Open/Bond 212.08 9.25
Exempt Income Fund; A
187 Putnam New Jersey Tax 32511 Open/Bond 101.75 9.24
Exempt Income Fund; B
188 Putnam New Jersey Tax 33358 Open/Bond 1.13 9.25
Exempt Income Fund; M
189 Putnam New York Investment 32473 Closed/Bond 39.96 14.04
Grade Municipal Trust
190 Putnam New York Tax Exempt 29099 Open/Bond 1,565.8 8.87
Income Fund; A 8
191 Putnam New York Tax Exempt 32511 Open/Bond 226.91 8.86
Income Fund; B
192 Putnam New York Tax Exempt 33337 Open/Bond 2.28 8.87
Income Fund; M
193 Putnam New York Tax Exempt 30614 Open/Bond 37.93 1.00
Money Market Fund
194 Putnam New York Tax Exempt 31722 Open/Bond 161.37 9.12
Opportunities Fund; A
195 Putnam New York Tax Exempt 32904 Open/Bond 70.29 9.12
Opportunities Fund; B
196 Putnam New York Tax Exempt 33278 Open/Bond 2.50 9.11
Opportunities Fund; M
197 Putnam Ohio Tax Exempt 31342 Open/Bond 187.86 9.09
Income Fund; A
198 Putnam Ohio Tax Exempt 32703 Open/Bond 58.93 9.08
Income Fund; B
199 Putnam Ohio Tax Exempt 33330 Open/Bond 2.15 9.09
Income Fund; M
200 Putnam OTC & Emerging 28794 Open/Equity 2,701.8 19.24
Growth Fund; A 7
201 Putnam OTC & Emerging 32703 Open/Equity 1,306.5 18.28
Growth Fund; B 3
202 Putnam OTC & Emerging 33208 Open/Equity 283.72 18.75
Growth Fund; M
203 Putnam OTC & Emerging 33796 Open/Equity 107.18 19.40
Growth Fund; Y
204 Putnam Pennsylvania Tax 31248 Open/Bond 182.35 9.23
Exempt Income Fund; A
205 Putnam Pennsylvania Tax 32703 Open/Bond 99.31 9.22
Exempt Income Fund; B
206 Putnam Pennsylvania Tax 33421 Open/Bond 3.44 9.23
Exempt Income Fund; M
207 Putnam Preferred Income 29223 Open/Bond 117.79 8.80
Fund; A
208 Putnam Preferred Income 33347 Open/Bond 12.44 8.78
Fund; M
209 Putnam Premier Income 2/29/95 Closed/Bond 1,128.1 8.01
Trust 9
210 Putnam Research Fund; A 33512 Open/Equity 393.71 16.53
211 Putnam Research Fund; B 34499 Open/Equity 405.75 16.42
212 Putnam Research Fund; C 34730 Open/Equity 16.65 16.52
213 Putnam Research Fund; M 34499 Open/Equity 35.71 16.46
214 Putnam Strategic Income 33287 Open/Bond 81.05 7.73
Fund; A
215 Putnam Strategic Income 33652 Open/Bond 127.59 7.74
Fund; B
216 Putnam Strategic Income 34730 Open/Bond 2.73 7.74
Fund; C
217 Putnam Strategic Income 33652 Open/Bond 9.11 7.73
Fund; M
218 Putnam Tax Exempt Income 26663 Open/Bond 1,899.8 9.11
Fund; A 7
219 Putnam Tax Exempt Income 32511 Open/Bond 240.00 9.11
Fund; B
220 Putnam Tax Exempt Income 33284 Open/Bond 9.97 9.13
Fund; M
221 Putnam Tax Exempt Money 30614 Open/Bond 76.32 1.00
Market Fund
222 Putnam Tax - Free Health 32322 Closed/Bond 202.02 14.63
Care Fund
223 Putnam Tax - Free Income 32770 Open/Bond 1,126.6 14.53
Trust 2
Tax - Free High Yield
Fund; A
224 Putnam Tax - Free Income 29837 Open/Bond 851.93 14.55
Trust
Tax - Free High Yield Fund
B
225 Putnam Tax - Free Income 34730 Open/Bond 2.39 14.53
Trust
Tax - Free High Yield Fund
C
226 Putnam Tax - Free Income 33235 Open/Bond 24.95 14.53
Trust
Tax - Free High Yield Fund
M
227 Putnam Tax - Free Income 32780 Open/Bond 251.11 15.27
Trust
Tax - Free Insured Fund; A
228 Putnam Tax - Free Income 29837 Open/Bond 351.52 15.29
Trust
Tax - Free Insured Fund; B
229 Putnam Tax - Free Income 33389 Open/Bond 1.95 15.29
Trust
Tax - Free Insured Fund; M
230 Putnam U.S. Core Fund 34454 Open/Equity 3.25 10.71
231 Putnam U.S. Government 29258 Open/Bond 2,059.7 12.93
Income Trust; A 1
232 Putnam U.S. Government 32259 Open/Bond 1,270.5 12.88
Income Trust; B 0
233 Putnam U.S. Government 33274 Open/Bond 147.73 12.91
Income Trust; M
234 Putnam U.S. Government 32973 Open/Bond 20.58 12.93
Income Trust; Y
235 Putnam Utilities Growth 31734 Open/Balanc 902.69 13.67
and Income Fund; A ed
236 Putnam Utilities Growth 32259 Open/Balanc 670.76 13.59
and Income Fund; B ed
237 Putnam Utilities Growth 33297 Open/Balanc 13.76 13.65
and Income Fund; M ed
238 Putnam Value Fund 34454 Open/Balanc 2.36 9.46
ed
239 Putnam Vista Fund; A 6/3/68 Open/Equity 3,678.6 14.03
9
240 Putnam Vista Fund; B 32567 Open/Equity 1,750.8 13.27
1
241 Putnam Vista Fund; M 33207 Open/Equity 145.39 13.67
242 Putnam Vista Fund; Y 33324 Open/Equity 389.80 14.23
243 Putnam Voyager Fund II; A 32611 Open/Equity 844.93 24.60
244 Putnam Voyager Fund II; B 33512 Open/Equity 780.13 23.92
245 Putnam Voyager Fund II; C 34730 Open/Equity 13.32 24.58
246 Putnam Voyager Fund II; M 33512 Open/Equity 92.26 24.17
247 Putnam Voyager Fund; A 33694 Open/Equity 17,027. 23.93
87
248 Putnam Voyager Fund; B 32259 Open/Equity 8,408.1 22.31
7
249 Putnam Voyager Fund; M 33207 Open/Equity 379.41 23.32
250 Putnam Voyager Fund; Y 32963 Open/Equity 2,028.8 24.34
7
251 Putnam VT Asia Pacific 33358 Open/Equity 115.66 9.83
Growth Fund; IA
252 Putnam VT Asia Pacific 34453 Open/Equity 0.17 9.81
Growth Fund; IB
253 Putnam VT Diversified 32765 Open/Bond 670.15 9.98
Income Fund; IA
254 Putnam VT Diversified 34429 Open/Bond 4.28 9.96
Income Fund; IB
255 Putnam VT Global Asset 30712 Open/Balanc 1,015.8 18.16
Allocation Fund; IA ed 9
256 Putnam VT Global Asset 34453 Open/Balanc 2.05 18.17
Allocation Fund; IB ed
257 Putnam VT George Putnam 34453 Open/Equity 190.44 10.90
Fund; IA
258 Putnam VT George Putnam 34453 Open/Equity 5.61 10.90
Fund; IB
259 Putnam VT Global Growth 31532 Open/Equity 2,034.7 19.27
Fund; IA 9
260 Putnam VT Global Growth 34453 Open/Equity 2.75 19.25
Fund; IB
261 Putnam VT Growth and 30712 Open/Balanc 10,792. 28.95
Income Fund; IA ed 66
262 Putnam VT Growth and 34429 Open/Balanc 18.22 28.92
Income Fund; IB ed
263 Putnam VT High Yield Fund; 30712 Open/Bond 1,082.6 11.07
IA 6
264 Putnam VT High Yield Fund; 34453 Open/Bond 4.72 11.06
IB
265 Putnam VT Health and 34453 Open/Equity 171.97 9.84
Sciences Fund; IA
266 Putnam VT Health and 34453 Open/Equity 3.22 9.82
Sciences Fund; IB
267 Putnam VT Income Fund IA 30712 Open/Bond 1,037.1 12.77
3
268 Putnam VT Income Fund IB 34453 Open/Bond 4.85 12.77
269 Putnam VT International 33969 Open/Balanc 335.35 13.77
Growth and Income; IA ed
270 Putnam VT International 34429 Open/Balanc 1.42 13.76
Growth and Income; IB ed
271 Putnam VT International 33969 Open/Equity 143.69 12.73
New Opportunities Fund; IA
272 Putnam VT International 34453 Open/Equity 0.16 12.73
New Opportunities Fund; IB
273 Putnam VT International 33969 Open/Equity 366.56 14.88
Growth Fund; IA
274 Putnam VT International 34453 Open/Equity 2.82 14.86
Growth Fund; IB
275 Putnam VT Investors Fund; 34453 Open/Equity 472.29 12.34
IA
276 Putnam VT Investors Fund; 34453 Open/Equity 7.30 12.33
IB
277 Putnam VT Money Market 30712 Open/Bond 661.88 1.00
Fund; IA
278 Putnam VT Money Market 34453 Open/Bond 8.72 1.00
Fund; IB
279 Putnam VT New 32994 Open/Equity 3,896.1 27.49
Opportunities Fund; IA 5
280 Putnam VT New 34453 Open/Equity 3.55 27.45
Opportunities Fund; IB
281 Putnam VT New Value Fund; 33970 Open/Equity 281.98 13.36
IA
282 Putnam VT New Value Fund; 34453 Open/Equity 1.10 13.36
IB
283 Putnam VT OTC & Emerging 34453 Open/Equity 41.24 11.41
Growth Fund; IA
284 Putnam VT OTC & Emerging 34453 Open/Equity 1.05 11.41
Growth Fund; IB
285 Putnam VT Research; IA 34606 Open/Equity 56.46 12.89
286 Putnam VT Research; IB 34606 Open/Equity 1.15 12.88
287 Putnam VT Utilities Growth 32263 Open/Balanc 996.25 16.83
and Income Fund; IA ed
288 Putnam VT Utilities Growth 34453 Open/Balanc 3.14 16.83
and Income Fund; IB ed
289 Putnam VT Vista Fund; IA 33970 Open/Equity 354.33 15.82
290 Putnam VT Vista Fund; IB 34453 Open/Equity 1.86 15.82
291 Putnam VT Voyager Fund; IA 30712 Open/Equity 6,349.3 45.81
5
292 Putnam VT Voyager Fund; IB 34453 Open/Equity 11.51 45.76
(J) Miscellaneous
1. Election and Removal of Directors
Directors of Investment Management Company are elected
to office or removed from office by vote of either
stockholders or directors, in accordance with Articles of
Organization and By-Laws of Investment Management Company.
2. Results of Operations
Officers are elected by the Board of Directors. The
Board of Directors may remove any officer without cause.
3. Supervision by SEC of Changes in Directors and Certain
Officers
Investment Management Company files certain reports
with the SEC in accordance with Sections 203 and 204 of the
Investment Advisers Act of 1940, which reports list and
provide certain information relating to directors and
officers of Investment Management Company.
Under Section 9 (b) of the Investment Company Act of
1940 the SEC may prohibit the directors and officers from
remaining in office, if the SEC judges that such directors
and officers have willfully violated any provision of the
federal securities law.
4. Amendment to the Articles of Organization, Transfer of
Business and Other Important Matters.
a. Articles of Organization of Investment Management
Company may be amended, under the General
Corporation Law of The Commonwealth of
Massachusetts, by appropriate shareholders' vote.
b. Under the General Corporation Law of The
Commonwealth of Massachusetts, transfer of
business requires a vote of 2/3 of the
stockholders entitled to vote thereon.
c. Investment Management Company has no direct
subsidiaries.
5. Litigation, etc.
There are no known facts, such as legal proceedings,
which are expected to materially affect the Fund and/or
Investment Management Company within the six-month period
preceding the filing of this Registration Statement.
III. OUTLINE OF THE OTHER RELATED COMPANIES
(A) Putnam Fiduciary Trust Company (the Transfer Agent,
Shareholder Service Agent and Custodian)
(1) Amount of Capital
U.S.$40,377,825.64 (approximately \4,819,093,490) as of
the end of April 1999
(2) Description of Business
Putnam Fiduciary Trust Company is a Massachusetts trust
company and is a wholly-owned subsidiary of Putnam
Investments, Inc., parent of Investment Management
Company. Putnam Fiduciary Trust Company has been
providing paying agent and shareholder service agent
services to mutual funds, including the Fund, since its
inception and custody services since 1990.
(3) Outline of Business Relationship with the Fund
Putnam Fiduciary Trust Company provides transfer agent
services, shareholder services and custody services to
the Fund.
(B) Putnam Mutual Funds Corp. (the Principal Underwriter)
(1) Amount of Capital
U.S.$186,095,932.46 (approximately \22,210,549,539) as
of the end of April 1999
(2) Description of Business
Putnam Mutual Funds Corp. is the Principal Underwriter
of the shares of Putnam Funds including the Fund.
(3) Outline of Business Relationship with the Fund
Putnam Mutual Funds Corp. engages in providing
marketing services to the Fund.
(C) Yamatane Securities Co., Ltd. (Distributor in Japan and
Agent Company)
(1) Amount of Capital
yen14,760,035,531 billion as of the end of April 1999
(2) Description of Business
Yamatane Securities Co., Ltd. is a diversified
securities company in Japan. Also, it engages the fund
units for the investment trust funds of Asahi
Investment Trust Management Co., Ltd., Sakura
Investment Trust Management Co., Ltd., Nissei
Investment Trust Management Co., Ltd., NCG Investment
Trust Management Co., Ltd. and Nomura Investment Trust
Management Co., Ltd., and acts as the Agent Company and
engages in handling the sales and repurchase for
Fidelity Funds International Fund.
(3) The Company acts as a Distributor in Japan and Agent
Company for the Fund in connection with the offering of
shares in Japan.
(D) Capital Relationships
100% of the shares of Investment Management Company
are held by Putnam Investments, Inc.
(E) Interlocking Directors and Officers
Names and functions of officers of the Fund who also
are officers of the related companies are as follows:
(as of the filing date)
Name of Investment Transfer Agent
Officer Management and
or Fund Company Shareholder
Trustee Service Agent
George Chairman and Chairman and None
Putnam Trustee Director
Charles Executive Vice Managing None
E. Porter President Director
Patricia Senior Vice Senior Vice None
C. President President
Flaherty
Lawrence Trustee and President and None
J. Lasser Vice President CEO
Gordon H. Vice President Senior Director
Silver Managing
Director
John R. Vice President Senior Vice None
Verani President
Ian C. Vice President Senior None
Ferguson Managing
Director
Brett C. Vice President Managing None
Browchuk Director
John J. Vice President Managing None
Morgan, Director
Jr.
Justin M. Vice President Managing None
Scott Director
Omid Vice President Managing None
Kamshad Director
Mark D. Vice President Managing None
Pollard Director
Nigel P. Vice President Senior Vice None
Hart President
IV. FINANCIAL CONDITION OF THE FUND
1. FINANCIAL STATEMENTS
[Omitted, in Japanese version, financial statements of the
Fund and Japanese translations thereof are incorporated
here]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help
investors 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
derived from the Fund's Financial Statements, which have
been audited by PricewaterhouseCoopers LLP. Its report and
the Fund's financial statements are included in the Fund's
annual report to shareholders, which is available upon
request.
CLASS M
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
YEAR ENDED JUNE 30
1998 1997 1996 1995 +
NET ASSET VALUE,
BEGINNING OF PERIOD $18.85 $15.86 $13.90 $12.35
INVESTMENT OPERATIONS
NET INVESTMENT INCOME .20 (c) .19 (c) .24 (c) .09
NET REALIZED AND
UNREALIZED GAIN ON 5.89 4.03 2.12 1.62
INVESTMENTS
TOTAL FROM INVESTMENT
OPERATIONS 6.09 4.22 2.36 1.71
LESS DISTRIBUTIONS:
FROM NET INVESTMENT (.30) (.17) - -
INCOME
FROM NET REALIZED GAIN
ON INVESTMENTS (1.13) (1.06) (.40) (.16)
TOTAL DISTRIBUTIONS (1.43) (1.23) (.40) (.16)
NET ASSET VALUE, END OF $23.51 $18.85 $15.86 $13.90
PERIOD
RATIOS AND SUPPLEMENTAL
DATA
TOTAL INVESTMENT RETURN
AT NET ASSET VALUE 34.56 27.91 17.28 14.06 *
(%)(A)
NET ASSETS, END OF
PERIOD $42,614 $15,811 $4.047 $746
(IN THOUSANDS)
RATIO OF EXPENSES TO
AVERAGE NET ASSETS 1.82 1.95 2.02 1.08 *
(%)(B)
RATIO OF NET INVESTMENT
INCOME (LOSS) TO .99 1.10 1.59 1.61 *
AVERAGE NET ASSETS (%)
PORTFOLIO TURNOVER RATE 48.86 55.45 38.85 44.33
(%)
AVERAGE COMMISSION RATE
PAID (D) $.0416 $.0435 - -
+ For the period from the commencement of operations on
December 1, 1994 through June 30, 1995.
* Not annualized.
(a) Total 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.
(d) Average commission rate paid on security trades is required
for fiscal periods beginning on or after September 1, 1995.
The following financial documents are omitted here.
Statement of assets and liabilities June 30, 1998
Statement of operations Year ended June 30, 1998
Statement of changes in net assets
Financial highlights (For a share outstanding throughout the period)
Notes to financial statements June 30, 1998
Portfolio of investments owned June 30, 1998
Statement of assets and liabilities June 30, 1997
Statement of operations Year ended June 30, 1997
Statement of changes in net assets
Financial highlights (For a share outstanding throughout the period)
Notes to financial statements June 30, 1997
Report of independent accountants for the fiscal year ended June 30, 1998
Report of independent accountants for the year ended June 30, 1997
2. CONDITION OF THE FUND
(a) Statement of Net Assets
(As of the end of April 1999)
$ Yen
a. Total Assets 2,152,342,073 256,882,026
b. Total Liabilities 284,611,267 33,968,355
c. Total Net Assets 1,867,730,806 222,913,672
(a-b)
d. Total Number of Shares Class A 41,317,331 Shares
Outstanding Class B 37,740,706 Shares
Class M 5,810,486 Shares
e. Net Asset Value Class A 22.27 yen2,657.92
per Share (c/d) Class B 21.71 yen2,591.09
Class M 22.05 yen2,631.67
<TABLE><caption
b. Names of Major Portfolio Equity Shares (Top 30 Equity Shares)
(As of the end of April 1999)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Quantity U.S. Invest-
Dollars
(Number Acquisit Current Value ment
ion Cost
Name of of per per Ratio
Name of Issue Country Business Shares) Share Total Share Total (%)
1. Telecom Italia SPA Italy Telecommunication 4,381,51 8.22 36,032,011 10.65 46,680,934 2.50
s 6
2. United Bank of Switzerland Insurance and 134,654 273.64 36,846,288 340.01 45,783,244 2.45
Switzerland (UBS) AG Finance
3. Diageo PLC United Food and 3,856,50 11.05 42,613,410 11.54 44,521,734 2.38
Kingdom Beverages 7
4. Elf Aquitaine S.A. France Oil and Gas 271,101 118.21 32,047,558 155.53 42,163,254 2.26
5. Mannesmann AG Germany Business 317,401 67.52 21,431,631 131.83 41,841,958 2.24
Equipment &
Services
6. Hoechst AG Germany Chemicals 873,809 42.61 37,229,584 47.45 41,463,373 2.22
7. British United Telecommunication 2,461,43 16.61 40,892,035 16.80 41,347,087 2.21
Telecommunications PLC Kingdom s 5
ADR
8. Internationale Netherlands Insurance and 621,595 45.60 28,341,891 61.68 38,340,850 2.05
Nederlanden Groep Finance
(ING)
9. Allied Zurich AG Switzerland Insurance and 2,709,87 12.79 34,670,005 13.66 37,017,983 1.98
Finance 4
10 Swisscom AG ADR Switzerland Telecommunication 98,175 297.64 29,220,331 367.57 36,086,341 1.93
. s
11 Oy Nokia AB Class A Finland Telecommunication 461,428 27.19 12,544,511 77.18 35,613,521 1.91
. s
12 Akzo-Nobel N.V. Netherlands Chemicals 735,596 43.01 31,640,207 45.23 33,270,639 1.78
.
13 Cable & Wireless PLC United Telecommunication 2,254,67 12.66 28,538,921 14.35 32,359,398 1.73
. Kingdom s 3
14 DaimlerChrysler AG Germany Automotive 325,658 93.58 30,475,106 98.87 32,197,839 1.72
.
15 Cie Finance Richemont Switzerland Insurance and 18,584 1,399.01 25,999,137 1,702.66 31,642,203 1.69
. Finance
16 Tefefonaktiebolaget LM Sweden Telecommunication 1,180,77 23.64 27,910,479 26.33 31,092,103 1.66
. Ericsson Class B s 0
17 Novartis AG ADR Switzerland Pharmaceuticals 21,144 1,380.43 29,187,718 1,465.70 30,990,845 1.66
.
18 Bass PLC United Food and 1,909,28 15.27 29,151,288 15.72 30,013,762 1.61
. Kingdom Beverages 1
19 CRH PLC Ireland Building and 1,520,20 9.87 15,001,902 19.73 29,996,288 1.61
. Construct 8
20 Allied Irish Banks PLC Ireland Insurance and 1,824,13 6.76 12,332,793 16.19 29,528,019 1.58
. Finance 6
21 National Westminster United Insurance and 1,213,11 19.58 23,750,780 24.09 29,219,877 1.56
. Bancorp Inc. Kingdom Finance 1
22 Smithkline Beecham PLC United Kigdom Pharmaceuticals 2,183,49 13.38 29,213,688 13.23 28,878,822 1.55
. ADR 2
23 Telefonica S.A. Spain Telecommunication 598,815 48.78 29,212,058 46.92 28,097,777 1.50
. s
24 Axa S.A. France Insurance and 216,702 126.84 27,486,244 129.29 28,016,882 1.50
. Finance
25 Vivendi S.A. France Environmental 119,156 130.09 15,500,720 233.92 27,873,424 1.49
. Control
26 Portugal Telecom S.A. Portugal Telecommunication 654,451 42.20 27,619,787 41.74 27,315,541 1.46
. s
27 Koninklijke Ahold N.V. Netherland Retail 734,293 30.01 22,036,054 37.19 27,307,402 1.46
.
28 Peninsular and United Transportation 1,861,62 12.28 22,869,453 14.54 27,063,056 1.45
. Oriental Steam Kingdom 7
Navigation Co.
29 TNT Post Group N.V. Netherlands Transportation 931,111 26.87 25,016,190 26.98 25,120,444 1.34
.
30 Banque Nationale de France Insurance and 302,269 63.24 19,114,850 83.00 25,088,357 1.34
. Paris Finance
</TABLE>
V. SUMMARY OF INFORMATION CONCERNING FOREIGN INVESTMENT TRUST
SECURITIES
1. Transfer of the Shares
The transfer agent for the registered share
certificates is Putnam Fiduciary Trust Company, P.O. Box
41203, Providence, RI 02940-1203, U. S. A.
The Japanese investors who entrust the custody of
their shares to the Distributor or a Sales Handling Company
shall have their shares transferred under the
responsibility of such company, and the other investors
shall make their own arrangements.
No fee is chargeable for the transfer of shares.
2. The Closing Period of the Shareholders' Book
No provision is made.
3. There are no annual shareholders' meetings. Special
shareholders' meetings may be held from time to time as
required by the Agreement and Declaration of Trust and the
Investment Company Act of 1940.
4. No special privilege is granted to Shareholders.
The acquisition of Shares by any person may be restricted.
VI. MISCELLANEOUS
(1) The following documents in relation to the Fund were filed
with the Director of Kanto Local Finance Bureau.
December 18, 1998: Securities Registration Statement
March 31, 1999: Semi-annual Report (during the fifth term)
Amendment to Securities Registration Statement
(2) The ornamental design is used in cover page of the Japanese
Prospectus.
(3) The following must be set forth in the Prospectus.
Outline of the Prospectus will be included at the beginning
of the Prospectus, summarizing the content of Part I.,
Information on the securities, "I. Descriptions of the
Fund", "III. Outline of Other Related Companies" and "IV.
Financial Condition of the Fund" in Part II, Information on
the Issuer, of the SRS.
(4) Summarized Preliminary Prospectus will be used.
Attached document (Summarized Preliminary Prospectus) will
be used pursuant to the below, as the document (Summarized
Preliminary Prospectus) as set forth at Item 1.(1)(b), of
Article 12 of the Ordinance Concerning the Disclosure of
the Content, etc. of the Specified Securities.
(a) The content of the summarized Preliminary Prospectus
may be publicized by leaflets, pamphlets, direct mails
(post cards and mails in envelopes) or at newspapers,
magazines and other books.
(b) The layout, quality of papers, printing color,
design etc. of the Summarized Preliminary Prospectus may
vary depending on manner of usage. Photos and
illustrations set forth in the attached may be used.
(c) For information of the Fund's achievements, the changes of
the net asset value per share and the fluctuation rates since the
establishment of the Fund or for the latest 3 months, 6 months,
one year, two years, three years or five years may be set out in
the figures or graphs. Such information regarding the Fund's
achievement may be converted into and presented in yen.
(d) For information of the status of the Fund,
diversification of investment portfolio on type of
assets and/or the name of country may be set out in the
figures or graphs. As to such information the latest
information which is available from time to time after
the filing of the Securities Registration Statement may
be set out.
PART III. SPECIAL INFORMATION
I. OUTLINE OF THE SYSTEM OF INVESTMENT TRUSTS IN MASSACHUSETTS
Below is an outline of certain general information about open-
end U.S. investment companies. This outline is not intended to
provide comprehensive information about such investment
companies or the various laws, rules or regulations applicable
to them, but provides only a brief summary of certain
information which may be of interest to investors. The
discussion below is qualified in its entirety by the complete
registration statement of the fund and the full text of any
referenced statutes and regulations.
I. Massachusetts Business Trusts
A. General Information
Many investment companies are organized as
Massachusetts business trusts. A Massachusetts business
trust is organized pursuant to a declaration of trust,
setting out the general rights and obligations of the
shareholders, trustees, and other related parties.
Generally, the trustees of the trust oversee its business,
and its officers and agents manage its day-to-day affairs.
Chapter 182 of the Massachusetts General Laws applies
to certain "voluntary associations", including many
Massachusetts business trusts. Chapter 182 provides for,
among other things, the filing of the declaration of trust
with the Secretary of State of the Commonwealth of
Massachusetts and the filing by the trust of an annual
statement regarding, among other things, the number of its
shares outstanding and the names and addresses of its
trustees.
B. Shareholder Liability
Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the
obligations of a trust. Typically, a declaration of trust
disclaims shareholder liability for acts or obligations of
the trust and provides for indemnification out of trust
property for all loss and expense of any shareholder held
personally liable for the obligations of a trust. Thus,
the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to
circumstances in which a particular trust would be unable
to meet its obligations.
II. United States Investment Company Laws and Enforcement
A. General
In the United States, pooled investment management
arrangements which offer shares to the public are governed
by a variety of federal statutes and regulations. Most
mutual funds are subject to these laws. Among the more
significant of these statutes are:
1. Investment Company Act of 1940
The Investment Company Act of 1940, as amended
(the "1940 Act"), in general, requires investment
companies to register as such with the U.S. Securities
and Exchange Commission (the "SEC"), and to comply with
a number of substantive regulations of their
operations. The 1940 Act requires an investment
company, among other things, to provide periodic
reports to its shareholders.
2. Securities Act of 1933
The Securities Act of 1933, as amended (the "1933
Act"), regulates many sales of securities. The Act,
among other things, imposes various registration
requirements upon sellers of securities and provides
for various liabilities for failures to comply with its
provisions or in respect of other specified matters.
3. Securities Exchange Act of 1934
The Securities Exchange Act of 1934, as amended
(the "1934 Act"), regulates a variety of matters
involving, among other things, the secondary trading of
securities, periodic reporting by the issuers of
securities, and certain of the activities of transfer
agents and brokers and dealers.
4. The Internal Revenue Code
An investment company is an entity subject to
federal income taxation under the Internal Revenue
Code. However, under the Code, an investment company
may be relieved of federal taxes on income and gains it
distributes to shareholders if it qualifies as a
"regulated investment company" under the Code for
federal income tax purposes and meets all other
necessary requirements.
5. Other laws
The Fund is subject to the provisions of other
laws, rules, and regulations applicable to the Fund or
its operations, such as, for example, various state
laws regarding the sale of the Fund's shares.
B. Outline of the Supervisory Authorities
Among the regulatory authorities having jurisdiction
over the Fund or certain of its operations are the SEC and
state regulatory agencies or authorities.
1. The SEC has broad authority to oversee the
application and enforcement of the federal securities
laws, including the 1940 Act, the 1933 Act, and the
1934 Act, among others, to the Fund. The 1940 Act
provides the SEC broad authority to inspect the records
of investment companies, to exempt investment companies
or certain practices from the provisions of the Act,
and otherwise to enforce the provisions of the Act.
2. State authorities typically have broad authority
to regulate the activities of brokers, dealers, or
other persons directly or indirectly engaged in
activities relating to the offering and sale of
securities to their residents or within their
jurisdictions.
C. Offering Shares to the Public
An investment company ("investment company" or fund)
offering its shares to the public must meet a number of
requirements, including, among other things, registration
as an investment company under the 1940 Act; registration
of the sale of its shares under the 1933 Act; registration
of the fund, the sale of its shares, or both, with state
securities regulators; delivery of a current prospectus to
current or prospective investors; and so forth. Many of
these requirements must be met not only at the time of the
original offering of the fund's shares, but compliance must
be maintained or updated from time to time throughout the
life of the fund.
D. Ongoing Requirements
Under U.S. law, a fund that continuously offers its
shares is subject to numerous ongoing requirements,
including, but not limited to;
1. Updating its prospectus if it becomes materially
inaccurate or misleading;
2. Annual update of its registration statement;
3. Filing semi-annual and annual financial reports
with the SEC and distributing them to shareholders;
4. Annual trustee approval of investment advisory
arrangements, distribution plans, underwriting
arrangements, errors and omissions/director and officer
liability insurance, foreign custody arrangements, and
auditors;
5. Maintenance of a code of ethics; and
6. Periodic board review of certain fund
transactions, dividend payments, and payments under a
fund's distribution plan.
III. Management of a Fund
The board of directors or trustees of a fund are
responsible for generally overseeing the conduct of a fund's
business. The officers and agents of a fund are generally
responsible for the day-to-day operations of a fund. The
trustees and officers of a fund may or may not receive a fee for
their services.
The investment adviser to a fund is typically responsible
for implementing the fund's investment program. The adviser
typically receives a fee for its services based on a percentage
of the net assets of a fund. Certain rules govern the
activities of investment advisers and the fees they may charge.
In the United States, investment advisers to investment
companies must be registered under the Investment Advisers Act
of 1940, as amended.
IV. Share Information
A. Valuation
Shares of a fund are generally sold at the net asset
value next determined after an order is received by a fund,
plus any applicable sales charges. A fund normally
calculates its net asset value per share by dividing the
total value of its assets, less liabilities, by the number
of its shares outstanding. Shares are typically valued as
of the close of regular trading on the New York Stock
Exchange (4:00 p.m. , New York time) each day the Exchange
is open.
B. Redemption
Shareholders may generally sell shares of an open-end
fund to that fund any day the fund is open for business at
the net asset value next computed after receipt of the
shareholders' order. Under unusual circumstances, a fund
may suspend redemptions, or postpone payment for more than
seven days, if permitted by U.S. securities laws. A fund
may charge redemption fees as described in its prospectus.
C. Transfer agency
The transfer agent for a fund typically processes the
transfer of shares, redemption of shares, and payment
and/or reinvestment of distributions.
V. Shareholder Information, Rights and Procedures for the
Exercise of Such Rights
A. Voting Rights
Voting rights vary from fund to fund. In the case of
many funds organized as Massachusetts business trusts,
shareholders are entitled to vote on the election of
trustees, approval of investment advisory agreements,
underwriting agreements, and distribution plans (or
amendments thereto), certain mergers or other business
combinations, and certain amendments to the declaration of
trust. Shareholder approval is also required to modify or
eliminate a fundamental investment policy.
B. Dividends
Shareholders are typically entitled to receive
dividends when and if declared by a fund's trustees. In
declaring dividends, the trustees will normally set a
record date, and all shareholders of record on that date
will be entitled to receive the dividend paid.
C. Dissolution
Shareholders would normally be entitled to receive the
net assets of a fund which were liquidated in accordance
with the proportion of the fund's outstanding shares he
owns.
D. Transferability
Shares of a fund are typically transferable without
restriction.
E. Right to Inspection
Shareholders of a Massachusetts business trust have
the right to inspect the records of the trust as provided
in the declaration of trust or as otherwise provided by
applicable law.
VI. U.S. Tax Matters
The Fund intends to qualify each year as a regulated
investment company under Subchapter M of the United States
Internal Revenue Code of 1986, as amended (the "Code").
As a regulated investment company qualifying to have its
tax liability determined under Subchapter M, the Fund will not
be subject to U.S. federal income tax on any of its net
investment income or net realized capital gains that are
distributed to its shareholders. In addition, as a
Massachusetts business trust, the Fund under present
Massachusetts law is not subject to any excise or income taxes
in Massachusetts.
In order to qualify as a "regulated investment company" and
to receive the favorable tax treatment accorded regulated
investment companies and their shareholders, the Fund must,
among other things, (a) derive at least 90% of its gross income
from dividends, interest, payments with respect to certain
securities loans, and gains from the sale of stock, securities
and foreign currencies, or other income (including but not
limited to gains from options, futures, or forward contracts)
derived with respect to its business of investing in such stock,
securities, or currencies; (b) distribute with respect to each
taxable year at least 90% of the sum of its taxable net
investment income, its net tax-exempt income, and the excess, if
any, of its net short-term capital gains over net long-term
capital losses for such year; (c) diversify its holdings so
that, at the close of each quarter of its taxable year, (i) at
least 50% of the value of its total assets consists of cash,
cash items, U.S. Government Securities, securities of other
regulated investment companies and other securities limited
generally with respect to any one issuer to not more than 5% of
the total assets of the Fund and not more than 10% of the
outstanding voting securities of such issuer, and (ii) not more
than 25 % of the value of its assets is invested in the
securities (other than those of the U.S. Government or other
regulated investment companies) of any one issuer or of two or
more issuers which the Fund controls and which are engaged in
the same, similar or related trades or businesses.
If the Fund 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
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 generally will be taxable to
shareholders as ordinary income, except that any distributions
designated by the Fund as deriving from net gains on securities
held by the Fund for more than one year will be taxable as such,
regardless of how long a shareholder has held shares in the
Fund. Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions. Shareholders who are not subject to U.S. federal
income tax on their income generally will not have to pay such
tax on amounts distributed to them.
Distributions from capital gains are made after applying
any available capital loss carryovers.
The Fund's transactions in non-U.S. currencies, non-U.S.
currency-denominated debt securities and certain non-U.S.
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 non-U.S. currency concerned.
Investment by the Fund in "passive non-U.S. 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 non-U.S. investment company as a "qualified electing
fund".
A "passive non-U.S. investment company" is any non-U.S.
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 held by corporation (generally
determined 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 non-U.S. currency gains. Passive income for
this purpose does not include rents and royalties received by
the non-U.S. corporation from active business and certain income
received from related persons.
The Fund's investment in securities issued at a discount
and certain other obligations will (and investments in
securities purchased at a discount may) require the Fund to
accrue and distribute income not yet received. In order to
generate sufficient cash to make the requisite distributions,
the Fund may be required to sell securities in its portfolio
that it otherwise would have continued to hold.
The Fund generally is required to withhold and remit to the
U.S. Treasury 31% of the taxable dividends and other
distributions paid to any individual shareholder who fails to
furnish the Fund with a correct taxpayer identification number
(TIN), who has under-reported dividends or interest income, or
who fails to certify to the fund that he or she is not subject
to such withholding. Shareholders who fail to furnish their
correct TIN are subject to a penalty of $50 for each such
failure unless the failure is due to reasonable cause and not
wilful neglect. An individual's taxpayer identification number
is his or her social security number.
New regulations relating to withholding tax on income paid
to foreign persons (the "New Withholding Regulations") will
generally be effective for payments made after December 31,
2000. The New Withholding Regulations modify and, in general,
unify the way in which non-U.S. investors establish their status
as non-U.S. States "beneficial owners" eligible for withholding
exemptions including a reduced treaty rate or an exemption from
backup withholding. For example, the new regulations will
require new forms, which non-U.S. investors will generally have
to provide earlier than they would have had to provide
replacements for expiring existing forms.
The New Withholding Regulations clarify withholding agents'
reliance standards. They also require additional certifications
for claiming treaty benefits. For example, a non-U.S. investor
may be required to provide a TIN, and may have to certify that
he/she "derives" the income with respect to which the treaty
benefit is claimed within the meaning of applicable regulations.
The New Withholding Regulations also provide somewhat different
procedures for foreign intermediaries and flow-through entities,
such as foreign partnerships, to claim the benefit of applicable
exemptions on behalf of non-U.S. investors for which or for whom
they receive payments. The New Withholding Regulations also
amend the foreign broker office deinition as it applies to
partnerships.
The New Withholding Regulations are complex and this
summary does not completely describe them. Non-U.S. investors
should consult with their tax advisors to determine how the New
Withholding Regulationswill affect their particular
circumstances.
Non-U.S. investors should consult their tax advisers
concerning the tax consequences of ownership of shares of the
Fund, including the possibility that distributions may be
subject to a 30% United States withholding tax (or a reduced
rate of withholding provided by treaty), the possibility that a
non-U.S. investor may be subject to U.S. tax on capital gain
distributions and gains realized upon the sale of fund shares if
the investor is present in the United States for at least 31
days during the calendar year (and certain other conditions
apply), or the possibility that a non-U.S. investor may be
subject to U.S. tax on income from the fund that is "effectively
connected" with a U.S. trade or business carried on by such an
investor. Shareholders residing in Japan should consult "Tax
Treatment of Shareholders in Japan", above.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Code and related regulations
currently in effect. For the complete provisions, reference
should be made to the pertinent Code sections and regulations.
The Code and regulations are subject to change by legislative or
administrative actions. Dividends and distributions also may be
subject to state, local or foreign taxes. Shareholders are
urged to consult their tax advisers regarding specific questions
as to U.S. federal, state or local taxes. The foregoing
discussion relates solely to U.S. federal income tax law.
VII. Important Participants in Offering of Mutual Fund Shares
A. Investment Company
Certain pooled investment vehicles qualify as
investment companies under the 1940 Act. There are open-
end investment companies (those which offer redeemable
securities) and closed-end investment companies (any
others).
B. Investment Adviser/Administrator
The investment adviser is typically responsible for
the implementation of an investment company's investment
program. It, or another affiliated or unaffiliated entity,
may also perform certain record keeping and administrative
functions.
C. Underwriter
An investment company may appoint one or more
principal underwriters for its shares. The activities of
such a principal underwriter are generally governed by a
number of legal regimes, including, for example, the 1940
Act, the 1933 Act, the 1934 Act, and state laws.
D. Transfer Agent
A transfer agent performs certain bookkeeping, data
processing, and administrative services pertaining to the
maintenance of shareholder accounts. A transfer agent may
also handle the payment of any dividends declared by the
trustees of a fund.
E. Custodian
A custodian's responsibilities may include, among
other things, safeguarding and controlling a fund's cash
and securities, handling the receipt and delivery of
securities, and collecting interest and dividends on a
fund's investments.
II. FINANCIAL CONDITION OF THE INVESTMENT MANAGEMENT COMPANY
Japanese translation of the statements for the fiscal years
ended December 31, 1998 and 1997 .
III. FORM OF FOREIGN INVESTMENT FUND SECURITIES
Main items to be set forth on the share certificate of the
Fund (if issued) are as follows:-
(1) Front
a. Name of the Fund
b. Number of shares represented
c. Signatures of the Chairman and Transfer Agent
d. Description stating that the Declaration of Trust
applies to shareholders and assignees therefrom
(2) Back
a. Space for endorsement
b. Description concerning delegation of transfer agency
