PROSPECTUS
NOVEMBER 1, 1995 ,
as revised AUGUST 12, 1996
Putnam International Growth Fund
Class A, B and M shares
INVESTMENT STRATEGY: GROWTH
This prospectus explains concisely what you should know before
investing in Putnam International Growth Fund (the
"fund"). Please read it carefully and keep it for future
reference. You can find more detailed information in the
November 1, 1995 statement of additional information (the "SAI"),
as amended from time to time. For a free copy of the SAI or
other information, call Putnam Investor Services at 1-800-225-
1581. The SAI has been filed with the Securities and Exchange
Commission and is incorporated into this prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
BOSTON * LONDON * TOKYO
<PAGE>
ABOUT THE FUND
Expenses summary
..............................................................
This section describes the sales charge, management fees, and
annual operating expenses that apply to the fund's various
classes of shares. Use it to help you estimate the impact of
transaction costs on your investment over time.
Financial highlights
..............................................................
Study this table to see, among other things, how the fund
performed each year for the past 10 years or since it began
investment operations if it has been in operation for less than
10 years.
Objective
.............................................................<
/R>.
Read this section to make sure the fund's objective is
consistent with your own.
How the fund pursues its objective
.............................................................<
/R>.
This section explains in detail how the fund seeks its
investment objective. Risk factors. All investments entail some
risk. Read this section to make sure you understand certain
risks that may be involved when investing in the fund.
How performance is shown
............................. .............................
....
This section describes and defines the measures used to assess
the fund's performance. All data are based on the fund's past
investment results and do not predict future
performance.
How the fund is managed
.......................... ................................
....
Consult this section for information about the fund's management,
allocation of the fund's expenses, and how purchases and sales of
securities are made for the fund.
Organization and history
.............................................................<
/R>.
In this section, you will learn when the fund was
introduced, how it is organized, how it may offer shares,
and who its Trustee are.
<PAGE>
ABOUT YOUR INVESTMENT
Alternative sales arrangements
................................ ..........................
....
Read this section for descriptions of the classes of shares
this prospectus offers and for points you should consider
when making your choice.
How to buy shares
.......................... ................................
....
This section describes the ways you may purchase shares and
tells you the minimum amounts required to open various types
of accounts. It explains how sales charges are determined
and how you may become eligible for reduced sales charges on
each class of shares.
Distribution plans
.......................... ................................
....
This section tells you what distribution fees are charged
against each class of shares.
How to sell shares
..............................................................</R
>
In this section you can learn how to sell shares of the
fund, either directly to the fund or through an investment
dealer.
How to exchange shares
.............................................................<
/R>.
Find out in this section how you may exchange shares of the
fund for shares of other Putnam funds. The section also
explains how exchanges can be made without sales charges and
the condition under which sales charges may be required.
How the fund values its shares
.......................... ................................
....
This section explains how the fund determines the value of
its shares.
How the fund makes distributions to shareholders; tax information
..............................................................
This section describes the various options you have in
choosing how to receive dividends from the fund. It also
discusses the federal tax status of the payments and
counsels shareholders to seek specific advice about their
own situation.
ABOUT PUTNAM INVESTMENTS, INC.
Read this section to learn more about the companies that
provide marketing, investment management, and shareholder
account services to Putnam funds and their shareholders.
About the fund
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following table summarizes your maximum transaction costs
from investing in the fund and expenses incurred based on the
most recent fiscal year. The examples show the cumulative
expenses attributable to a hypothetical $1,000 investment over
specified periods.
Class A Class B Class M
shares shares shares
Shareholder transaction
expenses
Maximum sales charge
imposed on purchases
(as a percentage of
offering price) 5.75% NONE* 3.50%*
Deferred sales charge 5.0% in the first
(as a percentage year, declining
of the lower of to 1.0% in the
original purchase sixth year, and
price or redemption eliminated
proceeds) NONE** thereafter NONE
Annual fund operating expenses
(as a percentage of average net assets)
Total fund
Management 12b-1 Other operating
fees fees expenses expenses
- ---------- ----- ------------------
Class A 0.80% 0.25% 0.56% 1.61%
Class B 0.80% 1.00% 0.61% 2.41%
Class M 0.80% 0.75% 0.61% 2.16%
The table is provided to help you understand the expenses of
investing in the fund and your share of the operating expenses
that the fund incurs. The 12b-1 fees for class M shares reflect
amounts currently payable under the class M distribution plan.
For class M shares management fees and "Other expenses" are based
on the corresponding expenses for class B shares.
<PAGE>
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and, except as indicated, redemption at
the end of each period:
1 3 5 10
year years years years
Class A $73 $105 $140 $238
Class B $74 $105 $149 $255***
Class B (no redemption) $24 $ 75
$129 $255***
Class M $56 $100 $147 $276
The examples do not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the examples to assume a 5% annual return,
but actual annual return varies.
* The higher 12b-1 fees borne by class B and class M shares
may cause long-term shareholders to pay more than the
economic equivalent of the maximum permitted front-end
sales charge on class A shares.
** A deferred sales charge of up to 1.00% is assessed on
certain redemptions of class A shares that were purchased
without an initial sales charge . See "How to buy
shares -Class A shares."
*** Reflects conversion of class B shares to class A shares
(which pay lower ongoing expenses) approximately eight
years after purchase. See "Alternative sales
arrangements."
FINANCIAL HIGHLIGHTS
The following table presents per share financial information for
class A, B and M shares. This information has been audited and
reported on by the fund's independent accountants. The "Report of
independent accountants" and financial statements included in the
fund's annual report to shareholders for the 1995 fiscal year are
incorporated by reference into this prospectus. The fund's
annual report, which contains additional unaudited performance
information, is available without charge upon request.
Financial highlights
(For a share outstanding during the period)
<PAGE>
(The table appears on page 5a)
<PAGE>
Financial Highlights
(For a share outstanding throughout the period)
<TABLE><CAPTION>
For the period For the period
December 1, 1994 December 1, 1994
(commencement (commencemnt
of operations) to Year ended of operations) to
June 30 June 30 June 30
1996 1995 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Class M Class B
Net asset value,
beginning of period $11.87 $11.82 $11.78
Investment operations
Net investment income (loss) .03 .01 (.01)(a)(b)
Net realized and unrealized
gain (loss) on investments .36 .34 .05
Total from investments
operations .39 .35 .04
Distributions to
shareholders from:
Net investment income -- -- --
Net realized gain on
investment (.11) (.11) --
In excess of net realized
gains on investments (.06) (.06) --
Total distributions (.17) (.17) --
Net asset value,
end of period $12.09 $12.00 $11.82
Total investment return at
net asset value (%)(c) 3.33(d) 3.00 .34(d)
Net assets, end of period
(in thousands) $1,777 $25,892 $2470
Ratio of expenses to
average net assets (%) 1.61(a)(d) 2.41(a) .15(a)(b)(d)
Ratio of net investment
income (loss) to average
net assets (%) .58(a)(d) .23(a) (.06)(a)(b)(d)
Portfolio turnover (%) 25.83 25.83 96.13
<PAGE>
Financial highlights (continued)
For the period
February 28, 1991
(commencement
of operations) to
Year ended June 30 June 30
1996 1995 1994 1993 1992 1991
<C> <C> <C> <C> <C> <C>
Class A
$11.83 $9.58 $8.82 $8.18 $8.63
.08 (.06)(a) .07(a) .06 .07(a)
.36 2.53 .69 .71 (.52)
.44 2.47 .76 .77 (.45)
-- -- -- (.13) --
(.11) (.22) -- -- --
(.06) -- -- -- --
(.17) (.22) -- (.13) --
$12.10 $11.83 $9.58 $8.82 $8.18
3.76 25.81 8.62 9.52 (5.21)(d)
$32,856 $8,781 $2,859 $2,502 $2,054
1.61(a) 2.17(a) 1.80(a) 1.98 .78(a)(d)
.97(a) (.17)(a) .81(a) .76 .86(a)(d)
25.83 96.13 80.92 82.45 14.54(d)
(a) Reflects an expense limitation applicable during the period. As a
result of such limitation, expenses for class A shares of the
fund for the periods ended June 30, 1994, June 30, 1993 and June
30, 1991 reflect per share reductions of approximately $0.03,
$0.05 and $0.10, respectively. Expenses for class B shares of the
fund for the period ended June 30, 1994 reflect a reduction of
less than $0.01 per share. Expenses for classes A, B, and M
shares of the fund for the period ended June 30, 1995 reflect a
reduction of less than $0.01 per share.
(b) Per share net investment income for class B shares for the period
ended June 30, 1994 has been determined on the basis of the
weighted average number of shares outstanding for the period.
(c) Total investment return assumes dividend reinvestment and does
not reflect the effect of sales charges.
(d) Not annualized.
</TABLE>
<PAGE>
OBJECTIVE
Putnam International Growth Fund seeks capital
appreciation. The fund is designed for investors seeking capital
appreciation primarily through a diversified portfolio of equity
securities of companies located in a country other than the
United States . The fund is not intended to be a complete
investment program, and there is no assurance it will achieve its
objective.
HOW THE FUND PURSUES ITS OBJECTIVE
Basic investment strategy
The Putnam International Growth Fund seeks its objective
by investing primarily in equity securities of companies located
in a country other than the United States . The fund's
investments will normally include common stocks, preferred
stocks, securities convertible into common or preferred stocks,
and warrants to purchase common or preferred stocks. The fund
may also invest to a lesser extent in debt securities and other
types of investments if Putnam Investment Management, Inc., the
fund's investment adviser ("Putnam Management"), believes
purchasing them would help achieve the fund's objective. The
fund will , under normal circumstances , invest at
least 65% of its total assets in issuers located in
at least three different countries other than the United
States . The fund may hold a portion of its assets in cash or
money market instruments.
The fund will consider an issuer of securities to be "located
in a country other than the United States " if it is
organized under the laws of a country other than the United
States and has a principal office outside the United
States , or if it derives 50% or more of its total revenues
from business outside the United States .
The fund may invest in securities of issuers in emerging markets,
as well as more developed markets. Investing in emerging markets
generally involves more risks then in investing in developed
markets. See "Risk factors" below.
The fund will not limit its investments to any particular type of
company. The fund may invest in companies, large or small, whose
earnings are believed to be in a relatively strong growth trend,
or in companies in which significant further growth is not
anticipated but whose market value per share is thought to be
undervalued. It may invest in small and relatively less well-
known companies which meet these characteristics.
At times Putnam Management may judge that conditions in the
international securities markets make pursuing the fund's basic
investment strategy inconsistent with the best interests of its
shareholders. At such times Putnam Management may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the fund's assets. In implementing
these "defensive" strategies, the fund may invest without limit
in securities of any kind, including securities traded primarily
in U.S. markets, and in cash and money market instruments. It is
impossible to predict when, or for how long, the fund will use
these alternative strategies.
Risk factors
Putnam Management believes that the securities markets of many
nations move relatively independently of one another, because
business cycles and other economic or political events that
influence one country's securities markets may have little effect
on securities markets in other countries. By investing in a
diversified portfolio of foreign securities, Putnam Management
attempts to reduce the risks associated with being invested in
the economy of only one country. The countries which Putnam
Management believes offer attractive opportunities for investment
may change from time to time.
The fund may seek investment opportunities among securities of
large, widely traded companies as well as securities of smaller,
less well known companies. Smaller companies may present greater
opportunities for capital appreciation, but may also involve
greater risks. They may have limited product lines, markets for
financial resources, or may depend on a limited management group.
Their securities may trade less frequently and in limited volume.
As a result, the prices of these securities may fluctuate more
than prices of securities of larger, more established companies.
Foreign investments can involve risks that may not be present in
domestic investments. Since foreign securities are normally
denominated and traded in foreign currencies, the values of the
fund's assets may be affected favorably or unfavorably by changes
in currency exchange rates and exchange control regulations.
There may be less information publicly available about a foreign
company than about a U. S. company, and foreign companies are not
generally subject to accounting, auditing and financial reporting
standards and practices comparable with those in the United
States.
The securities of some foreign companies are less liquid and at
times more volatile than securities of comparable U. S.
companies. Foreign brokerage commissions and other fees are also
generally higher than those in the United States. Foreign
settlement procedures and trade regulations may involve certain
risks (such as delay in payment or delivery of securities or in
the recovery of the fund's assets held abroad) and expenses not
present in the settlement of domestic investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial
instability and diplomatic developments that could affect the
value of investments in those countries.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit
investment in securities of certain issuers located in those
countries. Special tax considerations apply to foreign
securities.
The risks described above are typically increased for investments
in securities principally traded in, or issued by issuers located
in underdeveloped and developing nations, which are sometimes
referred to as "emerging markets."
See also "Portfolio turnover," "Risk factors in options and
futures transactions" and "Other investment practices" below.
Portfolio turnover
The length of time the fund has held a particular security is not
generally a consideration in investment decisions. A change in
the securities held by the fund is known as "portfolio turnover."
As a result of the fund's investment policies, under certain
market conditions the fund's portfolio turnover rate may be
higher than that of other mutual funds.
Portfolio turnover generally involves some expense to the fund,
including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and reinvestment in
other securities. These transactions may result in realization
of taxable capital gains. Portfolio turnover rates for the life
of the fund are shown in the section, "Financial highlights."
Options and futures portfolio strategies
The fund may engage in a variety of transactions involving the
use of options and futures contracts and in foreign currency
exchange transactions for purposes of increasing its investment
return or hedging against market changes. The fund may seek to
increase its current return by writing covered call options and
covered put options on its portfolio securities or other
securities in which it may invest. The fund receives a premium
from writing a call or put option, which increases the fund's
return if the option expires unexercised or is closed out at a
net profit. The fund may also buy and sell put and call options
on such securities for hedging purposes. When the fund writes a
call option on a portfolio security, it gives up the opportunity
to profit from any increase in the price of the security above
the exercise price of the option; when it writes a put option,
the fund takes the risk that it will be required to purchase a
security from the option holder at a price above the current
market price of the security. The fund may terminate an option
that it has written prior to its expiration by entering into a
closing purchase transaction in which it purchases an option
having the same terms as the option written. The fund may also
from time to time buy and sell combinations of put and call
options on the same underlying security to earn additional
income.
The fund may buy and sell index futures contracts for hedging
purposes. An "index future" is a contract to buy or sell units
of a particular index at an agreed price on a specified future
date. Depending on the change in value of the index between the
time when the fund enters into and terminates an index future
transaction, the fund realizes a gain or loss. The fund may also
purchase and sell call and put options on index futures or on
indices in addition or as an alternative to purchasing or selling
index futures or, to the extent permitted by applicable law, to
earn additional income. The fund may also purchase warrants,
issued by banks and other financial institutions, whose values
are based on the values from time to time of one or more
securities indices.
Foreign currency exchange transactions. The fund may engage in
foreign currency exchange transactions to protect against
uncertainty in the level of future currency exchange rates.
Putnam Management expects to engage in foreign currency exchange
transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect
against changes in the value of specific portfolio positions
("position hedging").
The fund may engage in transaction hedging to protect against a
change in foreign currency exchange rates between the date on
which the fund contracts to purchase or sell a security and the
settlement date, or to "lock in" the U.S. dollar equivalent of a
dividend or interest payment in a foreign currency. The fund may
purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate in connection with the settlement of
transactions in portfolio securities denominated in that foreign
currency.
If conditions warrant, the fund may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward
contracts") and may purchase and sell foreign currency futures
contracts as a hedge against changes in foreign currency exchange
rates between the trade and settlement dates on particular
transactions and not for speculation. A foreign currency forward
contract is a negotiated agreement to exchange currency at a
future time at a rate or rates that may be higher or lower than
the spot rate. Foreign currency futures contracts are
standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, the fund may also purchase and
sell call and put options on foreign currency futures contracts
and on foreign currencies.
The fund may engage in position hedging to protect against a
decline in value relative to the U.S. dollar of the currencies in
which its portfolio securities are denominated or quoted (or an
increase in value of a currency in which securities the fund
intends to buy are denominated). For position hedging purposes,
the fund may purchase or sell foreign currency futures contacts,
foreign currency forward contracts, and options on foreign
currency futures contracts and on foreign currencies. In
connection with position hedging, the fund may also purchase or
sell foreign currency on a spot basis.
The fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the fund.
The currencies of certain countries are not widely traded, and
the foreign currency exchange transactions described above may
not be available with respect to those currencies.
Risk factors in options and futures transactions
Options and futures transactions involve costs and may result in
losses. Options and futures transactions involve certain special
risks, including the risks that the fund may be unable at times
to close out such positions, that transactions may not accomplish
their purposes because of imperfect market correlations, or that
Putnam Management may not forecast market movements correctly.
The effective use of options and futures strategies depends on
the fund's ability to terminate options and futures positions at
times when Putnam Management deems it desirable to do so.
Although the fund will enter into an option or futures contract
position only if Putnam Management believes that a liquid
secondary market exists for such option or futures contract,
there is no assurance that the fund will be able to effect
closing transactions at any particular time or at an acceptable
price.
The fund generally expects that its options and futures contract
transactions will be conducted on recognized exchanges. In
certain instances, however, the fund may purchase and sell
options in the over-the-counter markets. The fund's ability to
terminate options in over-the-counter markets may be more limited
than for exchange-traded options and may also involve the risk
that securities dealers participating in such transactions would
be unable to meet their obligations to the fund.
The use of options and futures strategies also involves the risk
of imperfect correlation between movements in the prices of
options and futures contracts and movements in the value of the
underlying securities, securities index or foreign currency, or
in the prices of the securities or currency that are the subject
of a hedge. Cross hedging transactions by the fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge. The successful use of these strategies
further depends on the ability of Putnam Management to forecast
market movements correctly.
Because the markets for certain options and futures contracts in
which the fund will invest (including markets located in foreign
countries) are relatively new and still developing and may be
subject to regulatory restraints, the fund's ability to engage in
transactions using such investments may be limited.
The fund's ability to engage in hedging transactions may be
limited by certain regulatory requirements and tax
considerations. The fund's hedging transactions may affect the
character or amount of the fund's distributions.
A more detailed explanation of futures and options transactions,
including the risks associated with them, is included in the SAI.
Other investment practices
The fund may also engage in the following investment practices,
each of which involves certain special risks. The SAI contains
more detailed information about these practices, including
limitations designed to reduce these risks.
Securities loans, repurchase agreements and forward commitments.
The fund may lend portfolio securities amounting to not more than
25% of its assets to broker-dealers and may enter into repurchase
agreements on up to 25% of its assets. These transactions must
be fully collateralized at all times. The fund may also purchase
securities for future delivery, which may increase its overall
investment exposure and involves a risk of loss if the value of
the securities declines prior to the settlement date. These
transactions involve some risk to the fund if the other party
should default on its obligation and the fund is delayed or
prevented from recovering the collateral or completing the
transaction.
Derivatives
Certain of the instruments in which the fund will invest such as
futures contracts, options and forward contracts, are considered
to be "derivatives." Derivatives are financial instruments whose
value depends upon, or is derived from, the value of an
underlying asset, such as a security or an index. Further
information about these instruments and the risk involved in
their use is included elsewhere in this prospectus and in the
SAI.
Limiting investment risk
Specific investment restrictions help the fund limit investment
risks for its shareholders. These restrictions prohibit the fund
from: acquiring more than 10% of the voting securities of any one
issuer.* They also prohibit the fund from investing more than:
(a) 5% of its total assets in securities of any one issuer (other
than U.S. government securities); provided that, with respect to
investments in securities issued by foreign governments, this
limitation shall apply only to 75% of the fund's total assets;*
(b) 5% of its net assets in companies that, together with any
predecessors, have been in operation less than three years (other
than U.S. government securities);*
(c) 25% of its total assets in any one industry (except
securities of the U.S. government or its agencies or
instrumentalities);* or
(d) 15% of its net assets in any combination of securities that
are not readily marketable, in securities restricted as to
resale, (excluding securities determined by the Trustees (or the
person designated the Trustees to make such determinations) to be
readily marketable) and repurchase agreements maturing in more
than seven days.
Restrictions marked with an asterisk(*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and the fund's other fundamental investment
policies. Except for investment policies designated as
fundamental in this prospectus or the SAI, the investment
policies described in this prospectus and in the SAI are not
fundamental investment policies. The Trustees may change any
non-fundamental investment policies without shareholder approval.
As a matter of policy, the Trustees would not materially change
the fund's investment objective without shareholder approval.
HOW PERFORMANCE IS SHOWN
The fund's investment performance may from time to time be
included in advertisements about the fund. "Total return" for
the one-, five- and ten-year periods (or for the life of a class,
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 A and class M shares) or reflecting the
deduction of any applicable contingent deferred sales charge (in
the case of class B 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.
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, the composition of the
fund's portfolio, the fund's operating expenses and which class
of shares the investor purchases. Investment performance also
often reflects the risks associated with the fund's investment
objective and policies. These factors should be considered when
comparing the fund's investment results with those of other
mutual funds and other investment vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the
limitation had not been in effect. The fund's performance may be
compared to that of various indexes. See the SAI.
HOW THE FUND IS MANAGED
The Trustees of the fund are responsible for generally overseeing
the conduct of the fund's business. Subject to such policies as
the Trustees may determine, Putnam Management furnishes a
continuing investment program for the fund and makes investment
decisions on its behalf. Subject to the control of the Trustees,
Putnam Management also manages the fund's other affairs and
business.
The fund pays Putnam Management a quarterly fee for these
services based on the fund's average net assets. See "Expenses
summary" and the SAI.
The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the fund's
portfolio since the year stated below:
Recent experience
Year (at least 5 years)
---- ------------------
Justin Scott 1991 Employed as an investment
Managing Director professionsl by Putnam
Management since 1988.
The fund pays all expenses not assumed by Putnam Management,
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 Putnam
Management for the compensation and related expenses of certain
officers of the fund and their staff who provide administrative
services to the fund. The total reimbursement is determined
annually by the Trustees.
Putnam Management places all orders for purchases and sales of
the fund's securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of the fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers.
ORGANIZATION AND HISTORY
Putnam International Growth Fund is a Massachusetts
business trust organized on October 5, 1990. 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. Prior to August 12, 1996, the
fund was known as Putnam Overseas Growth Fund.
The fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. Shares of the fund may be divided without
shareholder approval into 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. The fund's shares are currently divided into three
classes. Only the fund's class A, B and M shares are offered by
this prospectus. The fund may also offer other classes of shares
with different sales charges and expenses. Because of these
different sales charges and expenses, the investment performance
of the classes will vary. For more information, including your
eligibility to purchase any other class of shares, contact your
investment dealer or Putnam Mutual Funds (at 1-800-225-1581).
Each share has one vote, with fractional shares voting
proportionally. Shares of each class 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 you own fewer shares than a minimum amount set by the Trustees
(presently 20 shares), the fund may choose to redeem your shares.
You will receive at least 30 days' written notice before the fund
redeems your shares, and you may purchase additional shares at
any time to avoid a redemption. The fund may also redeem shares
if you own shares above a maximum amount set by the Trustees.
There is presently no maximum, but the Trustees may establish one
at any time, which could apply to both present and future
shareholders.
The fund's Trustees: George Putnam,* Chairman . President
of the Putnam funds. Chairman and Director of Putnam Management
and Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; William F. Pounds, Vice
Chairman . Professor of Management, Alfred P. Sloan School
of Management, Massachusetts Institute of Technology ;
Jameson Adkins Baxter, President, Baxter Associates, Inc.; Hans
H. Estin, Vice Chairman, North American Management Corp.; John A.
Hill, Chairman and Managing Director, First Reserve
Corporation; Ronald J. Jackson, Former Chairman, President and
Chief Executive Officer of Fisher-Price, Inc., Trustee of Salem
Hospital and Overseer of the Peabody Essex Museum; Elizabeth
T. Kennan, President Emeritus and Professor, Mount Holyoke
College; Lawrence J. Lasser,* Vice President of the Putnam funds.
President, Chief Executive Officer and Director of Putnam
Investments, Inc. and Putnam Management. Director, Marsh &
McLennan Companies, Inc.; Robert E. Patterson, Executive Vice
President and Director of Acquisitions , Cabot Partners
Limited Partnership; Donald S. Perkins,* Director of
various corporations, including Cummins Engine Company, Lucent
Technologies, Inc., Springs Industries, Inc. and Time Warner
Inc.; George Putnam, III,* President, New Generation Research,
Inc.; Eli Shapiro, Alfred P. Sloan Professor of Management,
Emeritus, Alfred P. Sloan School of Management, Massachusetts
Institute of Technology; A.J.C. Smith,* Chairman and Chief
Executive Officer , Marsh & McLennan Companies, Inc.; and
W. Nicholas Thorndike, Director of various corporations and
charitable organizations, including Data General Corporation,
Bradley Real Estate, Inc. and Providence Journal Co. Also,
Trustee of Massachusetts General Hospital and Eastern Utilities
Associates. The Trustees are also Trustees of the other
Putnam funds. Those marked with an asterisk (*) are or may be
deemed to be "interested persons" of the fund, Putnam Management
or Putnam Mutual Funds.
About Your Investment
ALTERNATIVE SALES ARRANGEMENTS
This prospectus offers investors three classes of shares that
bear sales charges in different forms and amounts and that bear
different levels of expenses:
Class A shares. An investor who purchases class A shares pays a
sales charge at the time of purchase. As a result, class A
shares are not subject to any charges when they are redeemed,
except for sales at net asset value that are subject to a
contingent deferred sales charge ("CDSC"). Certain purchases of
class A shares qualify for reduced sales charges. Class A shares
bear a lower 12b-1 fee than class B and class M shares. See "How
to buy shares -- Class A shares" and "Distribution plans."
Class B shares. Class B shares are sold without an initial sales
charge, but are subject to a CDSC if redeemed within a specified
period after purchase. Class B shares also bear a higher 12b-1
fee than class A and class M shares. Class B shares
automatically convert into class A shares, based on relative net
asset value, approximately eight years after purchase. For more
information about the conversion of class B shares, see the SAI.
This discussion will include information about how shares
acquired through reinvestment of distributions are treated for
conversion purposes. The discussion will also note certain
circumstances under which a conversion may not occur. Class B
shares provide an investor the benefit of putting all of the
investor's dollars to work from the time the investment is made.
Until conversion, class B shares will have a higher expense ratio
and pay lower dividends than class A and class M shares because
of the higher 12b-1 fee. See "How to buy shares -- Class B
shares" and "Distribution plans."
Class M shares. An investor who purchases class M shares pays a
sales charge at the time of purchase that is lower than the sales
charge applicable to class A shares. Certain purchases of class
M shares qualify for reduced sales charges. Class M shares bear
a 12b-1 fee that is lower than class B shares but higher than
class A shares. Class M shares are not subject to any CDSC and
do not convert into any other class of shares. See "How to buy
shares -- Class M shares" and "Distribution plans."
Which arrangement is best for you? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount and
intended length of the investment. Investors making investments
that qualify for reduced sales charges might consider class A or
class M shares. Investors who prefer not to pay an initial sales
charge might consider class B shares. Orders for class B shares
for $250,000 or more will be treated as orders for class A shares
or declined. For more information about these sales
arrangements, consult your investment dealer or Putnam Investor
Services. Shares may only be exchanged for shares of the same
class of another Putnam fund. See "How to exchange shares."
HOW TO BUY SHARES
You can open a fund account with as little as $500 and make
additional investments at any time with as little as $50. You
can buy fund shares three ways - through most investment dealers,
through Putnam Mutual Funds (at 1-800-225-1581), or through a
systematic investment plan. If you do not have a dealer, Putnam
Mutual Funds can refer you to one.
Buying shares through Putnam Mutual Funds. Complete an order
form and write a check for the amount you wish to invest, payable
to the fund. Return the completed form and check to Putnam
Mutual Funds, which will act as your agent in purchasing shares
through your designated investment dealer.
Buying shares through systematic investing. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking account. Application forms are available
from your investment dealer or through Putnam Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.
Class A shares
The public offering price of class A shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, in its discretion, allocates the entire amount to
your investment dealer:
Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- ----------------------------------------------------------------
Under 50,000 6.10% 5.75% 5.00%
50,000 but under 100,000 4.71
4.50 3.75
100,000 but under 250,0003.63 3.50 2.75
250,000 but under 500,0002.56 2.50 2.00
500,000 but under 1,000,000 2.04
2.00 1.75
- ----------------------------------------------------------------
There is no initial sales charge on purchases of class A shares of
$1 million or more. However, a CDSC of 1.00% or 0.50%,
respectively, will be imposed on redemptions (other than
redemptions by certain participant-directed qualified retirement
plans, which are subject to a two-year CDSC of 1.00%, as described
below) within the first or second year after purchase .
There are also no initial sales charges on Class A shares
purchased by participant-directed qualified retirement plans with
at least 200 eligible employees. A CDSC of 1.00% will, however,
be imposed upon the redemption of shares purchased after July 31,
1996 at net asset value by a participant-directed qualified
retirement plan (including a plan with at least 200 eligible
employees) that initially invested less than $20 million in Putnam
funds and other investments managed by Putnam Management or its
affiliates and that sells 90% or more of the amount initially
invested within two years after its initial purchase.
Any CDSC will be based on the lower of the shares' cost and
current net asset value. Any shares acquired by reinvestment of
distributions will be redeemed without a CDSC.
Shares purchased by certain investors investing $1 million or more
who have made arrangements with Putnam Mutual Funds and whose
dealer of record waived the commission as described below are not
subject to the CDSC.
In determining whether a CDSC is payable, shares not
subject to any charge will be redeemed first . Putnam
Mutual Funds receives the entire amount of any CDSC you pay. See
the SAI for more information about the CDSC.
Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of class A shares of $1
million or more based on an investor's cumulative purchases during
the one-year period beginning with the date of the initial
purchase at net asset value. Each subsequent one-year measuring
period for these purposes will begin with the first net asset
value purchase following the end of the prior period. Such
commissions are paid at the rate of 1.00% of the amount under $3
million, 0.50% of the next $47 million and 0.25% thereafter.
On sales at net asset value to a participant-directed qualified
retirement plan initially investing less than $20 million in
Putnam funds and other investments managed by Putnam Management or
its affiliates (including a plan with at least 200 eligible
employees), Putnam Mutual Funds pays commissions during
each one-year measuring period, determined as described
above , at the rate of 1.00% of the first $2 million, 0.80%
of the next $1 million and 0.50% thereafter. On sales at
net asset value to all other participant-directed qualified
retirement plans, Putnam Mutual Funds pays commissions on the
initial investment and on subsequent net quarterly sales at the
rate of 0.15%.
Class B shares
Class B shares are sold without an initial sales charge, although
a CDSC will be imposed if you redeem shares within a specified
period after purchase, as shown in the table below. The following
types of shares may be redeemed without charge at any time: (i)
shares acquired by reinvestment of distributions and (ii) shares
otherwise exempt from the CDSC, as described in "How to buy shares
- -- General" below. For other shares, the amount of the charge is
determined as a percentage of the lesser of the current market
value or the cost of shares being redeemed.
Year 1 2 3 4 5 6 7+
- --------------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%
In determining whether a CDSC is payable on any redemption, the
fund will first redeem shares not subject to any charge, and then
shares held longest during the CDSC period. For this purpose, the
amount of any increase in a share's value above its initial
purchase price is not regarded as a share exempt from the CDSC.
Thus, when a share that has appreciated in value is redeemed
during the CDSC period, a CDSC is assessed only on its initial
purchase price. For information on how sales charges are
calculated if you exchange your shares, see "How to exchange
shares." Putnam Mutual Funds receives the entire amount of any
CDSC you pay.
<PAGE>
Class M shares
The public offering price of class M shares is the net asset value
plus a sales charge that varies depending on the size of your
purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, at its discretion, allocates the entire amount to
your investment dealer.
Sales charge Amount of
as a percentage of: sales charge
--------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering
price
- ---------------------------------------------------------------
Under 50,000 3.63% 3.50% 3.00%
50,000 but under 100,000 2.56
2.50 2.00
100,000 but under 250,000 1.52
1.50 1.00
250,000 but under 500,000 1.01
1.00 1.00
500,000 and above NONE NONE NONE
- ---------------------------------------------------------------
General
You may be eligible to buy class A shares and class M shares at
reduced sales charges.
Consult your investment dealer or Putnam Mutual Funds for details
about Putnam's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, employee
benefit plans, and other plans.
Sales charges will not apply to class M shares purchased with
redemption proceeds received within the prior 90 days from non-
Putnam mutual funds on which the investor paid a front-end or a
contingent deferred sales charge and to class M shares purchased
beginning December 1, 1995 by participant-directed
qualified retirement plans with at least 50 eligible employees.
The fund may also sell class M shares at net asset value to
members of qualified groups.
The fund may sell class A, class B and class M shares at net asset
value without an initial sales charge or a CDSC to the fund's
current and retired Trustees (and their families), current and
retired employees (and their families) of Putnam Management and
affiliates, registered representatives and other employees (and
their families) of broker-dealers having sales agreements with
Putnam Mutual Funds, employees (and their families) of financial
institutions having sales agreements with Putnam Mutual Funds (or
otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of fund shares), financial
institution trust departments investing an aggregate of $1 million
or more in Putnam funds, clients of certain administrators of tax-
qualified plans, tax-qualified plans when proceeds from repayments
of loans to participants are invested (or reinvested) in Putnam
funds, "wrap accounts" for the benefit of clients of broker-
dealers, financial institutions or financial planners adhering to
certain standards established by Putnam Mutual Funds, and
investors meeting certain requirements who sold shares of certain
Putnam closed-end funds pursuant to a tender offer by the closed-
end fund.
In addition, the fund may sell shares at net asset value without
an initial sales charge or a CDSC in connection with the
acquisition by the fund of assets of an investment company or
personal holding company, and the CDSC will be waived on
redemptions of shares arising out of death or disability or in
connection with certain withdrawals from IRA or other retirement
plans. Up to 12% of the value of class B shares subject to a
systematic withdrawal plan may also be redeemed each year without
a CDSC. See the SAI. The SAI contains additional information
about purchasing the fund's shares at reduced sales charges.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of the fund at net asset value.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you
should pay for those shares with a certified check to avoid any
delay in redemption, exchange or transfer. Otherwise the fund may
delay payment until the purchase price of those shares has been
collected or, if you redeem by telephone, until 15 calendar days
after the purchase date. To eliminate the need for safekeeping,
the fund will not issue certificates for your shares unless you
request them.
Putnam Mutual Funds will from time to time, at its expense,
provide additional promotional incentives or payments to dealers
that sell shares of the Putnam funds. These incentives or
payments may include payments for travel expenses, including
lodging, incurred in connection with trips taken by invited
registered representatives and their guests to locations within
and outside the United States for meetings or seminars of a
business nature. In some instances, these incentives or payments
may be offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares.
DISTRIBUTION PLANS
Class A distribution plan. The class A plan provides for payments
by the fund to Putnam Mutual Funds at the annual rate of up to
0.35% of average net assets attributable to class A shares. The
Trustees currently limit payments under the class A plan to the
annual rate of 0.25% of such assets.
Putnam Mutual Funds makes quarterly payments to qualifying dealers
(including, for this purpose, certain financial institutions) to
compensate them for services provided in connection with sales of
class A shares and the maintenance of shareholder accounts. The
payments are based on the average net asset value of class A
shares attributable to shareholders for whom the dealers are
designated as the dealer of record.
This calculation excludes until one year after purchase shares
purchased at net asset value, known as "NAV shares," by
shareholders investing $1 million. Also excluded until one year
after purchase are NAV shares purchased by participant-directed
qualified retirement plans with at least 200 eligible employees,
or prior to December 1, 1995, plans sponsored by employers with
than 750 employees. NAV shares are not subject to the one-year
exclusion provision in cases where certain shareholders who
invested $1 million or more have made arrangements with Putnam
Mutual Funds and the dealer of record waived the sales commission.
Except as stated below, Putnam Mutual Funds makes the quarterly
payments at the annual rate of 0.25% of such average net asset
value for class A shares.
For participant-directed qualified retirement plans initially
investing less than $20 million in Putnam funds and other
investments managed by Putnam Management or its affiliates,
Putnam Mutual Funds' payments to qualifying dealers on NAV shares
are 100% of the rate stated above if average plan assets in
Putnam funds (excluding money market funds) during the quarter
are less than $20 million, 60% of the stated rate if average plan
assets are at least $20 million but under $30 million, and 40% of
the stated rate if average plan assets are $30 million or more.
For all other participant-directed qualified retirement plans
purchasing NAV shares, Putnam Mutual Funds makes quarterly
payments to qualifying dealers at the annual rate of 0.10% of the
average net asset value of such shares.
Class B and class M distribution plans. The class B and class M
plans provide for payments by the fund to Putnam Mutual Funds at
the annual rate of up to 1.00% of average net assets attributable
to class B shares and class M shares, as the case may be. The
Trustees currently limit payments under the class M plan to the
annual rate of 0.75% of such assets.
Although class B shares are sold without an initial sales charge,
Putnam Mutual Funds pays a sales commission equal to 4.00% of the
amount invested to dealers who sell class B shares. These
commissions are not paid on exchanges from other Putnam funds or
on sales to investors exempt from the CDSC.
The amount paid to dealers at the time of the sale of class M
shares is set forth above under "How to buy shares -- Class M
shares." In addition, to further compensate dealers (including
qualifying financial institutions) for services provided in
connection with sales of class B shares and class M shares and
the maintenance of shareholder accounts, Putnam Mutual Funds
makes quarterly payments to qualifying dealers.
The payments are based on the average net asset value of class B
shares and class M shares attributable to shareholders for whom
the dealers are designated as the dealer of record. Putnam
Mutual Funds makes the payments at an annual rate of 0.25% of
such average net asset value of class B shares and class M
shares, as the case may be.
Putnam Mutual Funds also pays to 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. For class M
shares, the total annual payment to dealers equals 0.65% of such
average net asset value.
General. Payment under the plans are intended to compensate
Putnam Mutual Funds for services provided and expenses incurred
by it as principal underwriter of fund shares, including the
payments to dealers mentioned above. Putnam Mutual Funds may
suspend or modify such payments to dealers.
The payments are also subject to the continuation of the relevant
distribution plan, the terms of service agreements between
dealers and Putnam Mutual Funds, and any applicable limits
imposed by the National Association of Securities Dealers, Inc.
HOW TO SELL SHARES
You can sell your shares to the fund any day the New York Stock
Exchange is open, either directly to the fund or through your
investment dealer. The fund will only redeem shares for which it
has received payment.
Selling shares directly to the fund. Send a signed letter of
instruction or stock power form to Putnam Investor Services,
along with any certificates that represent shares you want to
sell. The price you will receive is the next net asset value
calculated after the fund receives your request in proper form
less any applicable CDSC. In order to receive that day's net
asset value, Putnam Investor Services must receive your request
before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more,
the signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer or
certain other financial institutions. See the SAI for more
information about where to obtain a signature guarantee. Stock
power forms are available from your investment dealer, Putnam
Investor Services and many commercial banks.
If you want your redemption proceeds sent to an address other
than your address as it appears on Putnam's records, a signature
guarantee is required. Putnam Investor Services usually requires
additional documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
The fund generally sends you payment for your shares the business
day after your request is received. Under unusual circumstances,
the fund may suspend redemptions, or postpone payment for more
than seven days, as permitted by federal securities law.
You may use Putnam's Telephone Redemption Privilege to redeem
shares valued up to $100,000 from your account unless you have
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 act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide Putnam Investor
Services with his or her account registration and address as it
appears on Putnam Investor Services' records.
Putnam Investor Services will employ these and other reasonable
procedures to confirm that instructions communicated by telephone
are genuine; if it fails to employ reasonable procedures, Putnam
Investor Services may be liable for any losses due to
unauthorized or fraudulent instructions. For information,
consult Putnam Investor Services.
During periods of unusual market changes and shareholder
activity, you may experience delays in contacting Putnam Investor
Services by telephone. In this event, you may wish to submit a
written redemption request, as described above, or contact your
investment dealer, as described below. The Telephone Redemption
Privilege is not available if you were issued certificates for
shares that remain outstanding. The Telephone Redemption
Privilege may be modified or terminated without notice.
Selling shares through your investment dealer. Your dealer must
receive your request before the close of regular trading on the
New York Stock Exchange to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary
documentation to Putnam Investor Services, and may charge you for
its services.
HOW TO EXCHANGE SHARES
You can exchange your shares for shares of the same class of
certain other Putnam funds at net asset value beginning 15 days
after purchase. Not all Putnam funds offer all classes of
shares. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you
redeem the shares acquired through the exchange, the redemption
may be subject to the CDSC, depending upon when you originally
purchased the shares. The CDSC will be computed using the
schedule of any fund into or from which you have exchanged your
shares that would result in your paying the highest CDSC
applicable to your class of shares. For purposes of computing
the CDSC, the length of time you have owned your shares will be
measured from the date of original purchase and will not be
affected by any exchange.
To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services. The
form is available from Putnam Investor Services. For federal
income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss. A Telephone
Exchange Privilege is currently available for amounts up to
$500,000. Putnam Investor Services' procedures for telephonic
transactions are described above under "How to sell shares." The
Telephone Exchange Privilege is not available if you were issued
certificates for shares that remain outstanding. Ask your
investment dealer or Putnam Investor Services for prospectuses of
other Putnam funds. Shares of certain Putnam funds are not
available to residents of all states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where Putnam Management or the Trustees
believe doing so would be in the best interests of the fund, the
fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to
the extent required by law. Consult Putnam Investor Services
before requesting an exchange. See the SAI to find out more
about the exchange privilege.
<PAGE>
HOW THE FUND VALUES ITS SHARES
The fund calculates the net asset value of a share of each class
by dividing the total value of its assets, less liabilities, by
the number of its shares outstanding. Shares are valued as of
the close of regular trading on the New York Stock Exchange each
day the exchange is open.
Portfolio securities for which market quotations are readily
available are valued at market value. Short-term investments
that will mature in 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.
Securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rates or at such other rates as
the Trustees may determine in computing net asset value. As a
result, fluctuations in the value of such currencies in relation
to the U.S. dollar will affect the net asset value of fund shares
even though there has not been any change in the values of such
securities as quoted in such foreign currencies.
HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION
The fund distributes any net investment income at least annually
and any net realized capital gains at least anually.
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. Distributions
paid on class A shares will generally be greater than those paid
on class B and class M shares because expenses attributable to
class B and class M shares will generally be higher.
You can choose from three distribution options:
- - 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.
You can change your distribution option by notifying Putnam
Investor Services in writing. If you do not select an option
when you open your account, all distributions will be reinvested.
All distributions not paid in cash will be reinvested in shares
of the class on which the distributions are paid. You will
receive a statement confirming reinvestment of distributions in
additional shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs.
If a check representing a fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in the fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in the fund. Similarly, if
correspondence sent by the fund or Putnam Investor Services is
returned as "undeliverable," fund distributions will
automatically be reinvested in the fund or in another Putnam
fund.
The fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal
taxes on income and gains it distributes to shareholders. The
fund will distribute substantially all of its ordinary income and
capital gain net income on a current basis.
All fund distributions will be taxable to you as ordinary income,
except that any distributions of net long-term capital gains will
be taxable as such, regardless of how long you have held the
shares. Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions.
Early in each year Putnam Investor Services will notify you of
the amount and tax status of distributions paid to you for the
preceding year.
Fund transactions in foreign currencies and hedging activities
will likely produce a difference between book income and taxable
income. This difference may cause a portion of the fund's income
distributions to constitute a return of capital for tax purposes
or require the fund to make distributions exceeding book income
to qualify as a regulated investment company for tax purposes.
Shareholders who are U.S. citizens or residents may be able to
claim a foreign tax credit or deduction on their U.S. income tax
returns with respect to foreign taxes paid by the fund.
If at the end of the fund's fiscal year more than 50% of the
value of the fund's total assets represents securities of foreign
corporations, the fund intends to make an election permitted by
the Internal Revenue Code to treat any foreign taxes it paid as
paid by its shareholders. In this case, shareholders who are
U.S. citizens, U.S. corporations and, in some cases, U.S.
residents generally will be required to include in U.S. taxable
income their pro rata share of such taxes, but may then generally
be entitled to claim a foreign tax credit or deduction (but not
both) for their share of such taxes.
The foregoing is a summary of certain federal income tax
consequences of investing in the fund. You should consult your
tax adviser to determine the precise effect of an investment in
the fund on your particular tax situation (including possible
liability for state and local taxes).
About Putnam Investments, Inc.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the principal underwriter of the fund and
of other Putnam funds. Putnam Fiduciary Trust Company is the
fund's custodian. Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, is the fund's investor servicing and
transfer agent.
Putnam Management, Putnam Mutual Funds, and Putnam Fiduciary
Trust Company are subsidiaries of Putnam Investments, Inc., which
is wholly owned by Marsh & McLennan Companies, Inc., a publicly-
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
Make the most of your Putnam privileges
The following services are available to you as a Putnam mutual
fund shareholder.
SYSTEMATIC INVESTMENT PLAN Invest as much as you wish ($25 or
more) on any business day of the month except for the 29th, 30th,
or 31st. The amount will be automatically transferred from your
checking or savings account.
SYSTEMATIC WITHDRAWAL Make regular withdrawals of $50 or more
monthly, quarterly, or semiannually from an account valued at
$10,000 or more. Your automatic withdrawal may be made on any
business day of the month except for the 29th, 30th, or 31st.
SYSTEMATIC EXCHANGE Transfer assets automatically from one
Putnam account to another on a regular, prearranged basis. There
is no additional charge for this service.
FREE EXCHANGE PRIVILEGE Exchange money between Putnam funds in
the same class of shares without charge. The exchange privilege
allows you to adjust your investments as your objectives change.
A signature guarantee is required for exchanges of more than
$500,000 and shares of all Putnam funds may not be available to
all investors.
Investors may not maintain, within the same fund, simultaneous
plans for systematic investment or exchange and systematic
withdrawal or exchange. These privileges are subject to change
or termination.
For more information about any of these services and privileges,
call your investment advisor or a Putnam customer service
representative toll-free at 1-800-225-1581.
<PAGE>
Putnam Family of Funds
PUTNAM GROWTH FUNDS
Putnam Asia Pacific Growth Fund
Putnam Capital Appreciation Fund
Putnam Diversified Equity Trust
Putnam Europe Growth Fund
Putnam Global Growth Fund
Putnam Health Sciences Trust
Putnam International New Opportunities Fund
Putnam Investors Fund
Putnam Natural Resources Fund
Putnam New Opportunities Fund
Putnam OTC Emerging Growth Fund
Putnam Overseas Growth Fund
Putnam Vista Fund
Putnam Voyager Fund
Putnam Voyager Fund II
PUTNAM GROWTH AND INCOME FUNDS
Putnam Balanced Retirement Fund
Putnam Convertible Income-Growth Trust
Putnam Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Putnam Growth and Income Fund II
Putnam New Value Fund
Putnam Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Putnam American Government Income Fund
Putnam Diversified Income Trust
Putnam Diversified Income Trust II
Putnam Federal Income Trust
Putnam Global Governmental Income Trust
Putnam High Yield Advantage Fund
Putnam High Yield Trust
Putnam Income Fund
Putnam Intermediate U.S. Government Income Fund
Putnam Preferred Income Fund
Putnam U.S. Government Income Trust
PUTNAM TAX-FREE INCOME FUNDS
Putnam Municipal Income Fund
Putnam Tax Exempt Income Fund
Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund
Putnam State tax-free income funds+
Arizona, California, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, New York,
Ohio, and Pennsylvania
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that
spread your money across a variety of stocks, bonds, and money
market investments seeking to help maximize your return and
reduce your risk.
The three portfolios:
Balanced Portfolio
Conservative Portfolio
Growth Portfolio
PUTNAM MONEY MARKET FUNDS
Putnam Money Market Fund
Putnam California Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Tax Exempt Money Market Fund
+Not available in all states.
Please call your financial advisor or Putnam to obtain a
prospectus for any Putnam fund. It contains more complete
information, including charges and expenses. Read it carefully
before you invest or send money.
<PAGE>
PUTNAM INTERNATIONAL GROWTH FUND
One Post Office Square
Boston, MA 02109
FUND INFORMATION:
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>
PUTNAM INTERNATIONAL GROWTH FUND
One Post Office Square, Boston, MA 02109
Class A shares
INVESTMENT STRATEGY: GROWTH
PROSPECTUS-NOVEMBER 1, 1995 as revised AUGUST 12, 1996
This prospectus explains concisely what you should know before
investing in class A shares of Putnam International Growth
Fund (the "fund") which are offered without a sales charge
through eligible employer-sponsored defined contribution plans
("defined contribution plans"). Please read it carefully and
keep it for future reference. You can find more detailed
information about the fund in the November 1, 1995 statement of
additional information (the "SAI"), as amended from time to time.
For a free copy of the SAI or for other information, including a
prospectus regarding class A shares for other investors, call
Putnam Investor Services at 1-800-752-9894. The SAI has been
filed with the Securities and Exchange Commission and is
incorporated into this prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PUTNAMINVESTMENTS
Putnam Defined
Contribution Plans
<PAGE>
ABOUT THE FUND
Expenses
summary. .........................................
Financial
highlights. .....................................
Objective. ................................................
How the fund pursues its
objective. .......................
Risk factors....
.......................................
How performance is
shown. .................................
How the fund is
managed. ..................................
Organization and
history. .................................
ABOUT YOUR INVESTMENT
How to buy
shares. ........................................
Distribution
plan. ........................................
How to sell
shares. .......................................
How to exchange
shares. ...................................
How the fund values its
shares. ...........................
How the fund makes distributions to shareholders;
tax
information. ........................................
ABOUT PUTNAM INVESTMENTS,
INC. ............................
<PAGE>
About the Fund
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing in
the fund. The following table summarizes expenses attributable
to class A shares based. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment in
class A shares of the fund over specified periods.
Annual fund operating expenses
(as a percentage of average net assets)
Management fees 0.80%
12b-1 fees 0.25%
Other expenses 0.56%
Total fund operating expenses 1.61%
The table is provided to help you understand the expenses of
investing in the fund and your share of the operating expenses
that the fund incurs.
Example
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years
$16 $51 $88 $191
The example does not represent past or future expense levels, and
actual expenses may be greater or less than those shown. Federal
regulations require the example to assume a 5% annual return, but
actual annual return varies. The example does not reflect any
charges or expenses related to your employer's plan.
FINANCIAL HIGHLIGHTS
The following table presents per share financial information for
class A shares. This information has been derived from the
fund's financial statements, which have been audited and reported
on by the fund's independent accountants. The "Report of
independent accountants" and financial statements included in the
fund's annual report to shareholders for the 1995 fiscal year are
incorporated by reference into this prospectus. The fund's annual
report, which contains additional unaudited performance
information, is available without charge upon request.
Financial highlights
(for a share outstanding throughout the period)
<PAGE>
(The table appears on pages 3a)
Financial highlights
(For a share outstanding throughout the period)
For the period
February 28, 1991
(commencement
of operations) to
Year ended June 30 June 30
1995 1994 1993 1992 1991
Class A
Net asset value,
Beginning of period$11.83 $9.58 $8.82 $8.18 $8.63
Investment operations
Net investment income (loss) .08 (.06)(a) .07(a)
.06 .07(a)
Net realized and unrealized
gain (loss) on investments .36 2.53 .69
.71 (.52)
Total from investment
operations .44 2.47 .76 .77 (.45)
Distributions to
shareholders from:
Net investment income -- -- -- (.13) --
Net realized gain on
investments (.11) (.22) -- -- --
In excess of net realized
gain on investments (.06) -- -- -- --
Total distributions (.17) (.22) -- (.13) --
Net asset value,
end of period $12.10 $11.83 $9.58 $8.82 $8.18
Total investment return at
net asset value (%)(c) 3.76 25.81 8.62 9.52 (5.21)(c)
Net assets, end of period
(in thousands) $32,856 $8,781 $2,859 $2,502 $2,054
Ratio of expenses to
average net assets (%) 1.61(a) 2.17(a) 1.80(a) 1.98 .78(a)(c)
Ratio of net investment
income (loss) to average
net assets (%) .97(a) (.17)(a) .81(a) .76 .86(a)(c)
Portfolio turnover (%) 25.83 96.13 80.92 82.45 14.54(c)
(a) Reflects an expense limitation applicable during the period.
As a
result of such limitation, expenses for class A shares of
the
fund for the periods ended June 30, 1994, June 30, 1993 and
June
30, 1991 reflect per share reductions of approximately
$0.03,
$0.05 and $0.10, respectively. Expenses for class A shares
of the
fund for the period ended June 30, 1995 reflect a
reduction of
less than $0.01 per share.
(b)Total investment return assumes dividend reinvestment and does
not reflect the effect of sales charge.
(c) Not annualized.
OBJECTIVE
Putnam International Growth Fund seeks capital
appreciation. The fund is designed for investors seeking capital
appreciation primarily through a diversified portfolio of equity
securities of companies located in a country other than the
United States . The fund is not intended to be a complete
investment program, and there is no assurance that it will
achieve its objective.
HOW THE FUND PURSUES ITS OBJECTIVE
Basic investment strategy
The fund seeks its objective by investing primarily in equity
securities of companies located in a country other than the
United States . The fund's investments will normally include
common stocks, preferred stocks, securities convertible into
common or preferred stocks, and warrants to purchase common or
preferred stocks. The fund may also invest to a lesser extent in
debt securities and other types of investments if Putnam
Investment Management, Inc., the fund's investment manager
("Putnam Management"), believes purchasing them would help
achieve the fund's objective. The fund will, under normal
circumstances, invest at least 65% of its total assets
in issuers located in at least three different countries
other than the United States . The fund may hold a portion
of its assets in cash or money market instruments.
The fund will consider an issuer of securities to be "located
in a country other than the United States " if it is
organized under the laws of a country other than the United
States and has a principal office outside the United
States , or if it derives 50% or more of its total revenues
from business outside the United States .
The fund may invest in securities of issuers in emerging markets,
as well as more developed markets. Investing in emerging markets
generally involves more risks than in investing in developed
markets. See "Risk factors" below.
The fund will not limit its investments to any particular type of
company. The fund may invest in companies, large or small, whose
earnings are believed to be in a relatively strong growth trend,
or in companies in which significant further growth is not
anticipated but whose market value per share is thought to be
undervalued. It may invest in small and relatively less well-
known companies which meet these characteristics.
At times Putnam Management may judge that conditions in the
international securities markets make pursuing the fund's basic
investment strategy inconsistent with the best interests of its
shareholders. At such times Putnam Management may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the fund's assets. In implementing
these "defensive" strategies, the fund may invest without limit
in securities of any kind, including securities traded primarily
in U.S. markets and in cash and money market instruments. It is
impossible to predict when, or for how long, the fund will use
these alternative strategies.
Risk factors
Putnam Management believes that the securities markets of many
nations move relatively independently of one another, because
business cycles and other economic or political events that
influence one country's securities markets may have little effect
on securities markets in other countries. By investing in a
diversified portfolio of foreign securities, Putnam Management
attempts to reduce the risks associated with being invested in
the economy of only one country. The countries which Putnam
Management believes offer attractive opportunities for investment
may change from time to time.
The fund may seek investment opportunities among securities of
large, widely traded companies as well as securities of smaller,
less well known companies. Smaller companies may present greater
opportunities for capital appreciation, but may also involve
greater risks. They may have limited product lines, markets for
financial resources, or may depend on a limited management group.
Their securities may trade less frequently and in limited volume.
As a result, the prices of these securities may fluctuate more
than prices of securities of larger, more established companies.
Foreign investments can involve risks that may not be present in
domestic investments. Since foreign securities are normally
denominated and traded in foreign currencies, the values of the
fund's assets may be affected favorably or unfavorably by changes
in currency exchange rates and exchange control regulations.
There may be less information publicly available about a foreign
company than about a U. S. company, and foreign companies are not
generally subject to accounting, auditing and financial reporting
standards and practices comparable with those in the United
States.
The securities of some foreign companies are less liquid and at
times more volatile than securities of comparable U. S.
companies. Foreign brokerage commissions and other fees are also
generally higher than those in the United States. Foreign
settlement procedures and trade regulations may involve certain
risks (such as delay in payment or delivery of securities or in
the recovery of the fund assets held abroad) and expenses not
present in the settlement of domestic investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial
instability and diplomatic developments that could affect the
value of the investments in certain foreign countries.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit
investments in securities of certain issuers located in those
foreign countries. Special tax considerations apply to foreign
securities.
The risks described above are typically increased for investments
in securities principally traded in, or issued by issuers located
in, under-developed and developing nations, which are sometimes
referred to as "emerging markets."
See also "Portfolio turnover." "Risk factors in options and
futures transactions" and "Other investment practices" below.
Portfolio turnover
The length of time the fund has held a particular security is not
generally a consideration in investment decisions. A change in
the securities held by the fund is known as "portfolio turnover."
As a result of the fund's investment policies, under certain
market conditions the fund's portfolio turnover rate may be
higher than that of other mutual funds.
Portfolio turnover generally involves some expense to the fund,
including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and reinvestment in
other securities. These transactions may result in realization
of taxable capital gains. Portfolio turnover rates for the life
of the fund are shown in the section, "Financial highlights."
Options and futures portfolio strategies
The fund may engage in a variety of transactions involving the
use of options and futures contracts and in foreign currency
exchange transactions for purposes of increasing its investment
return or hedging against market changes. The fund may seek to
increase its current return by writing covered call options and
covered put options on its portfolio securities or other
securities in which it may invest. The fund receives a premium
from writing a call or put option, which increases the fund's
return if the option expires unexercised or is closed out at a
net profit. The fund may also buy and sell put and call options
on such securities for hedging purposes. When the fund writes a
call option on a portfolio security, it gives up the opportunity
to profit from any increase in the price of the security above
the exercise price of the option; when it writes a put option,
the fund takes the risk that it will be required to purchase a
security from the option holder at a price above the current
market price of the security. The fund may terminate an option
that it has written prior to its expiration by entering into a
closing purchase transaction in which it purchases an option
having the same terms as the option written. The fund may also
from time to time buy and sell combinations of put and call
options on the same underlying security to earn additional
income.
The fund may buy and sell index futures contracts for hedging
purposes. An "index future" is a contract to buy or sell units
of a particular index at an agreed price on a specified future
date. Depending on the change in value of the index between the
time when the fund enters into and terminates an index future
transaction, the fund realizes a gain or loss. The fund may also
purchase and sell call and put options on index futures or on
indices in addition or as an alternative to purchasing or selling
index futures or, to the extent permitted by applicable law, to
earn additional income. The fund may also purchase warrants,
issued by banks and other financial institutions, whose values
are based on the values from time to time of one or more
securities indices.
Foreign currency exchange transactions. The fund may engage in
foreign currency exchange transactions to protect against
uncertainty in the level of future currency exchange rates.
Putnam Management expects to engage in foreign currency exchange
transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect
against changes in the value of specific portfolio positions
("position hedging").
The fund may engage in transaction hedging to protect against a
change in foreign currency exchange rates between the date on
which the fund contracts to purchase or sell a security and the
settlement date, or to "lock in" the U.S. dollar equivalent of a
dividend or interest payment in a foreign currency. The fund may
purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate in connection with the settlement of
transactions in portfolio securities denominated in that foreign
currency.
If conditions warrant, the fund may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward
contracts") and may purchase and sell foreign currency futures
contracts as a hedge against changes in foreign currency exchange
rates between the trade and settlement dates on particular
transactions and not for speculation. A foreign currency forward
contract is a negotiated agreement to exchange currency at a
future time at a rate or rates that may be higher or lower than
the spot rate. Foreign currency futures contracts are
standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, the fund may also purchase and
sell call and put options on foreign currency futures contracts
and on foreign currencies.
The fund may engage in position hedging to protect against a
decline in value relative to the U.S. dollar of the currencies in
which its portfolio securities are denominated or quoted (or an
increase in value of a currency in which securities the fund
intends to buy are denominated). For position hedging purposes,
the fund may purchase or sell foreign currency futures contacts,
foreign currency forward contracts, and options on foreign
currency futures contracts and on foreign currencies. In
connection with position hedging, the fund may also purchase or
sell foreign currency on a spot basis.
The fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the fund.
The currencies of certain countries are not widely traded, and
the foreign currency exchange transactions described above may
not be available with respect to those currencies.
Risk factors in options and futures transactions
Options and futures transactions involve costs and may result in
losses. Options and futures transactions involve certain special
risks, including the risks that the fund may be unable at times
to close out its positions, that transactions may not accomplish
their purpose because of imperfect market correlations, or that
Putnam Management may not forecast market movements correctly.
The effective use of options and futures strategies depends on
the fund's ability to terminate options and futures positions at
times when Putnam Management deems it desirable to do so.
Although the fund will enter into an option or futures contract
position only if Putnam Management believes that a liquid
secondary market exists for such option or futures contract,
there is no assurance that the fund will be able to effect
closing transactions at any particular time or at an acceptable
price.
The fund generally expects that its options and futures contract
transactions will be conducted on recognized exchanges. In
certain instances, however, the fund may purchase and sell
options in the over-the-counter markets. The fund's ability to
terminate options in over-the-counter markets may be more limited
than for exchange-traded options and may also involve the risk
that securities dealers participating in such transactions would
be unable to meet their obligations to the fund.
The use of options and futures strategies also involves the risk
of imperfect correlation between movements in the prices of
options and futures contracts and movements in the value of the
underlying securities, securities index or foreign currency, or
in the prices of the securities or currency that are the subject
of a hedge. Cross hedging transactions by the fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge. The successful use of these strategies
further depends on the ability of Putnam Management to forecast
market movements correctly.
Because the markets for certain options and futures contracts in
which the fund will invest (including markets located in foreign
countries) are relatively new and still developing and may be
subject to regulatory restraints, the fund's ability to engage in
transactions using such investments may be limited.
The fund's ability to engage in hedging transactions may be
limited by certain regulatory requirements and tax
considerations. The fund's hedging transactions may affect the
character or amount of the fund's distributions.
A more detailed explanation of futures and options transactions,
including the risks associated with them, is included in the SAI.
Other investment practices
The fund may also engage in the following investment practices,
each of which involve certain special risks. The SAI contains
more detailed information about these practices, including
limitations designed to reduce these risks.
Securities loans, repurchase agreements and forward commitments.
The fund may lend portfolio securities amounting to not more than
25% of its assets to broker-dealers and may enter into repurchase
agreements on up to 25% of its assets. These transactions must
be fully collateralized at all times. The fund may also purchase
securities for future delivery, which may increase its overall
investment exposure and involves a risk of loss if the value of
the securities declines prior to the settlement date. These
transactions involve some risk to the fund if the other party
should default on its obligation and the fund is delayed or
prevented from recovering the collateral or completing the
transaction.
Derivatives
Certain of the instruments in which the fund will invest such as
futures contracts, options and forward contracts, are considered
to be "derivatives." Derivatives are financial instruments whose
value depends upon, or is derived from, the value of an
underlying asset, such as a security or an index. Further
information about these instruments and the risk involved in
their use is included elsewhere in this prospectus and in the
SAI.
Limiting investment risk
Specific investment restrictions help the fund limit investment
risks for its shareholders. These restrictions prohibit the fund
from acquiring more than 10% of the voting securities of any one
issuer.* They also prohibit the fund from investing more than:
(a) 5% of its total assets in securities of any one issuer (other
than U.S. government securities); provided that, with respect to
investments in securities issued by foreign governments, this
limitation shall apply only to 75% of the fund's total assets;*
(b) 5% of its net assets in companies that, together with any
predecessors, have been in operation less than three years (other
than U.S. government securities);*
(c) 25% of its total assets in any one industry (except
securities of the U.S. government or its agencies or
instrumentalities);* or
(d) 15% of its net assets in any combination of securities that
are not readily marketable, in securities restricted as to
resale, (excluding securities that have been determined by the
Trustees (or the person designated by the Trustees to make such
determinations) to be readily marketable), and repurchase
agreements maturing in more than seven days.
Restrictions marked with an asterisk(*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and the fund's other fundamental investment
policies. Except for investment policies designated as
fundamental in this prospectus or the SAI, the investment
policies described in this prospectus and in the SAI are not
fundamental investment policies. The Trustees may change any
non-fundamental investment policies without shareholder approval.
As a matter of policy, the Trustees would not materially change
the fund's investment objective without shareholder approval.
HOW PERFORMANCE IS SHOWN
The fund's investment performance may from time to time be
included in advertisements about the fund. "Total return" for
the one-, five- and ten-year periods (or for the life of the
class A shares of the fund, if shorter) through the most recent
calendar quarter represents the average annual compounded rate of
return on an investment of $1,000 in the fund invested at the
maximum public offering price. Total return may also be
presented for other periods or based on investment at reduced
sales charge levels. Any quotation of investment performance not
reflecting the maximum initial sales charge would be reduced if
the sales charge were used.
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, the composition of the
fund's portfolio, the fund's operating expenses and which class
of shares the investor purchases. Investment performance also
often reflects the risks associated with the fund's investment
objective and policies. These factors should be considered when
comparing the fund's investment results with those of other
mutual funds and other investment vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the
limitation had not been in effect. The fund's performance may be
compared to that of various indexes. See the SAI. Because
shares sold through eligible defined contribution plans are sold
without a sales charge, quotations of investment performance
reflecting the deduction of a sales charge will be lower than the
actual investment performance on shares purchased through such
plans.
HOW THE FUND IS MANAGED
The Trustees of the fund are responsible for generally overseeing
the conduct of the fund's business. Subject to such policies as
the Trustees may determine, Putnam Management furnishes a
continuing investment program for the fund and makes investment
decisions on its behalf. Subject to the control of the Trustees,
Putnam Management also manages the fund's other affairs and
business.
The fund pays Putnam Management a quarterly fee for these
services based on the fund's average net assets. See "Expenses
summary" and the SAI.
<PAGE>
The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the fund's
portfolio since the year stated below:
Business experience
Year (at least 5 years)
---- -------------------- --
Justin Scott 1991 Employed as an investment
Managing Director professional by Putnam
Management since 1988.
The fund pays all expenses not assumed by Putnam Management,
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 Putnam
Management for the compensation and related expenses of certain
officers of the fund and their staff who provide administrative
services to the fund. The total reimbursement is determined
annually by the Trustees.
Putnam Management places all orders for purchases and sales of
the fund's securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of the fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers.
ORGANIZATION AND HISTORY
Putnam International Growth Fund is a Massachusetts
business trust organized on October 5, 1990. 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. Prior to August 12, 1996, the
fund was known as Putnam Overseas Growth Fund.
The fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. Shares of the fund may be divided without
shareholders approval into 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. The fund's shares are currently divided into three
classes. Only the fund's class A shares are offered by this
prospectus. The fund also offers other classes of shares with
different sales charges and expenses. Because of these different
sales charges and expenses, the investment performance of the
classes will vary. For more information, including your
eligibility to purchase any other class of shares, contact your
investment dealer or Putnam Mutual Funds (at 1-800-225-1581).
Each share has one vote, with fractional shares voting
proportionally. Shares of each class 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 you own fewer shares than a minimum amount set by the Trustees
(presently 20 shares), the fund may choose to redeem your shares.
You will receive at least 30 days' written notice before the fund
redeems your shares, and you may purchase additional shares at
any time to avoid a redemption. The fund may also redeem shares
if you own shares above a maximum amount set by the Trustees.
There is presently no maximum, but the Trustees may establish one
at any time, which could apply to both present and future
shareholders.
The fund's Trustees: George Putnam,* Chairman. President of the
Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; William F. Pounds, Vice
Chairman. Professor of Management, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology; Jameson Adkins
Baxter, President, Baxter Associates, Inc.; Hans H. Estin, Vice
Chairman, North American Management Corp.; John A. Hill,
Chairman and Managing Director, First Reserve
Corporation; Ronald J. Jackson, Former Chairman, President and
Chief Executive Officer of Fisher-Price, Inc., Trustee of Salem
Hospital and Overseer of the Peabody Essex Museum; Elizabeth
T. Kennan, President Emeritus and Professor, Mount Holyoke
College; Lawrence J. Lasser,* Vice President of the Putnam funds.
President, Chief Executive Officer and Director of Putnam
Investments, Inc. and Putnam Management. Director, Marsh &
McLennan Companies, Inc.; Robert E. Patterson, Executive Vice
President and Director of Acquisitions , Cabot Partners
Limited Partnership; Donald S. Perkins,* Director of various
corporations, including Cummins Engine Company, Lucent
Technologies, Inc., Springs Industries, Inc. and Time Warner
Inc.; George Putnam, III,* President, New Generation Research,
Inc.; Eli Shapiro, Alfred P. Sloan Professor of Management,
Emeritus, Alfred P. Sloan School of Management, Massachusetts
Institute of Technology; A.J.C. Smith,* Chairman and Chief
Executive Officer , Marsh & McLennan Companies, Inc.; and
W. Nicholas Thorndike, Director of various corporations and
charitable organizations, including Data General Corporation,
Bradley Real Estate, Inc. and Providence Journal Co. Also,
Trustee of Massachusetts General Hospital and Eastern Utilities
Associates. The Trustees are also Trustees of the other
Putnam funds. Those marked with an asterisk (*) are or may be
deemed to be "interested persons" of the fund, Putnam Management
or Putnam Mutual Funds.
About Your Investment
HOW TO BUY SHARES
All orders to purchase shares must be made through your
employer's defined contribution plan. For more information about
how to purchase shares of the fund through your employer's plan
or limitations on the amount that may be purchased, please
consult your employer. Shares are sold to eligible defined
contribution plans at the net asset value per share next
determined after receipt of an order by Putnam Mutual Funds.
Orders must be received by Putnam Mutual Funds before the close
of regular trading on the New York Stock Exchange in order to
receive that day's net asset value. In order to be eligible to
purchase shares at net asset value, defined contribution plans
must initially invest at least $20 million in Putnam
funds and other investments managed by Putnam Management or its
affiliates . Defined contribution plans participating in a
"multi-fund" program approved by Putnam Mutual Funds may include
amounts invested in the other mutual funds participating in such
program for purposes of determining whether the plan may purchase
class A shares at net asset value. Eligible plans may make
additional investments of any amount at any time. To eliminate
the need for safekeeping, the fund will not issue certificates
for your shares.
On sales
of shares at
net asset value to defined
contribution plans initially investing at least $20
million in Putnam funds and other investments managed by Putnam
Management , Putnam Mutual Funds pays commissions on
the shares
initially purchased
and on subsequent net
quarterly sales at the rate of 0.15%. Putnam Mutual Funds will
from time to time, at its expense, provide additional promotional
incentives or payments to dealers that sell shares of the Putnam
funds. These incentives or payments may include payments for
travel expenses, including lodging, incurred in connection with
trips taken by invited registered representatives and their
guests to locations within and outside the United States for
meetings or seminars of a business nature. In some instances,
these incentives or payments may be offered only to certain
dealers who have sold or may sell significant amounts of shares.
Certain dealers may not sell all classes of shares.
DISTRIBUTION PLAN
Class A distribution plan. The class A plan provides for
payments by the fund to Putnam Mutual Funds at the annual rate of
up to 0.35% of average net assets attributable to class A shares.
The Trustees currently limit payments under the class A plan to
the annual rate of 0.25% of such assets.
Putnam Mutual Funds makes quarterly payments to qualifying
dealers (including, for this purpose, certain financial
institutions) to compensate them for services provided in
connection with sales of class A shares and the maintenance of
shareholder accounts. The payments are based on the average net
asset value of class A shares attributable to shareholders for
whom the dealers are designated as the dealer of record.
This calculation excludes until one year after purchase shares
purchased at net asset value, known as "NAV shares", by
shareholders investing $1 million or more. NAV shares
are not subject to the one-year exclusion provision in cases
where certain shareholders who invested $1 million or more have
made arrangements with Putnam Mutual Funds and the dealer of
record waived the sales commission.
For all defined contribution plans initially investing
at least $20 million in Putnam funds and other investments
managed by Putnam Management , Putnam Mutual Funds makes
quarterly payments to qualifying dealers at the annual rate of
0.10% of the average net asset value of such shares.
Payment under the plan is intended to compensate Putnam Mutual
Funds for services provided and expenses incurred by it as
principal underwriter of fund shares, including the payments to
dealers mentioned above. Putnam Mutual Funds may suspend or
modify such payments to dealers.
The payments are also subject to the continuation of the
distribution plan, the terms of service agreements between
dealers and Putnam Mutual Funds, and any applicable limits
imposed by the National Association of Securities Dealers, Inc.
HOW TO SELL SHARES
Subject to any restrictions imposed by your employer's plan, you
can sell your shares through the plan to the fund any day the New
York Stock Exchange is open. For more information about how to
sell shares of the fund through your employer's plan, including
any charges that may be imposed by the plan, please consult with
your employer.
Your plan administrator must send a signed letter of instruction
to Putnam Investor Services. The price you will receive is the
next net asset value calculated after the fund receives your
request in proper form. All requests must be received by the
fund prior to the close of regular trading on the New York Stock
Exchange in order to receive that day's net asset value. If your
plan sells shares having a net asset value of $100,000 or more,
the signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer or
certain other financial institutions. See the SAI for more
information about where to obtain a signature guarantee.
The fund generally provides payment for redeemed shares the
business day after the request is received. Under unusual
circumstances, the fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal
securities law. The fund will only redeem shares for which it
has received payment.
HOW TO EXCHANGE SHARES
Subject to any restrictions contained in your plan, you can
exchange your shares for shares of other Putnam funds available
through your plan at net asset value. Contact your plan
administrator or Putnam Investor Services on how to exchange your
shares or how to obtain prospectuses of other Putnam funds in
which you may invest.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where Putnam Management or the Trustees
believe doing so would be in the best interests of the fund, the
fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to
the extent required by law. Consult Putnam Investor Services
before requesting an exchange. See the SAI to find out more about
the exchange privilege.
HOW THE FUND VALUES ITS SHARES
The fund calculates the net asset value of a share of each class
by dividing the total value of its assets, less liabilities, by
the number of its shares outstanding. Shares are valued as of
the close of regular trading on the New York Stock Exchange each
day the Exchange is open.
Portfolio securities for which market quotations are readily
available are valued at market value. Short-term investments
that will mature in 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.
Securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rates or at such other rates as
the Trustees may determine in computing net asset value. As a
result, fluctuations in the value of such currencies in relation
to the U.S. dollar will affect the net asset value of fund shares
even though there has not been any change in the values of such
securities as quoted in such foreign currencies.
HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION
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 terms of your plan will govern how your plan may receive
distributions from the fund. Generally, periodic distributions
from the fund to your plan are reinvested in additional fund
shares, although your plan may permit you to receive fund
distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares or
to receive all fund distributions in cash. If another option is
not selected, all distributions will be reinvested in additional
fund shares.
The fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal
taxes on income and gains it distributes. The fund will
distribute substantially all of its ordinary income and capital
gain net income on a current basis. Generally, fund
distributions are taxable as ordinary income, except that any
distributions of net long-term capital gains will be taxed as
such. However, distributions by the fund to employer-sponsored
defined contribution plans that qualify for tax-exempt treatment
under federal income tax laws will not be taxable. Special tax
rules apply to investments through such plans. You should
consult your tax adviser to determine the suitability of the fund
as an investment through such a plan and the tax treatment of
distributions (including distributions of amounts attributable to
an investment in the fund) from such a plan.
The foregoing is a summary of certain federal income tax
consequences of investing in the fund. You should consult your
tax adviser to determine the precise effect of an investment in
the fund on your particular tax situation (including possible
liability for state and local taxes).
ABOUT PUTNAM INVESTMENTS, INC.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the principal underwriter of the fund and
of other Putnam funds. Putnam Defined Contribution Plans is a
division of Putnam Mutual Funds. Putnam Fiduciary Trust Company
is the fund's custodian. Putnam Investor Services, a division of
Putnam Fiduciary Trust Company, is the fund's investor servicing
and transfer agent.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are located at One Post Office Square, Boston,
Massachusetts 02109 and are subsidiaries of Putnam Investments,
Inc., which is wholly owned by Marsh & McLennan Companies, Inc.,
a publicly-owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
PUTNAM INTERNATIONAL GROWTH FUND
One Post Office Square, Boston, MA 02109
Class Y shares
INVESTMENT STRATEGY: GROWTH
PROSPECTUS- NOVEMBER 1, 1995, as revised AUGUST 12,
1996
This prospectus explains concisely what you should know before
investing in class Y shares of Putnam International Growth
Fund (the "fund"). Please read it carefully and keep it for
future reference. You can find more detailed information about
the fund in the November 1, 1995 statement of additional
information (the "SAI"), as amended from time to time. For a
free copy of the SAI or other information, call Putnam Investor
Services at 1-800-752-9894. The SAI has been filed with the
Securities and Exchange Commission and is incorporated into this
prospectus by reference.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
PUTNAMINVESTMENTS
Putnam Defined
Contribution Plans
<PAGE>
ABOUT THE FUND
Expenses summary . . . . . . . . . . . . . . .
Objective. . . . . . . . . . . . . . . . . . .
How the fund pursues its objective . . . . . .
Risk factors . . . . . . . . . . . . . . .
How performance is shown . . . . . . . . . . .
How the fund is managed. . . . . . . . . . . .
Organization and history . . . . . . . . . . .
ABOUT YOUR INVESTMENT
How to buy shares. . . . . . . . . . . . . . .
How to sell shares . . . . . . . . . . . . . .
How to exchange shares . . . . . . . . . . . .
How the fund values its shares . . . . . . . .
How the fund makes distributions to shareholders;
tax information. . . . . . . . . . . . . .
ABOUT PUTNAM INVESTMENTS, INC. . . . . . . . . . . . .<PAGE>
About the Fund
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing in
the fund. The following table summarizes estimated expenses
attributable to class Y shares. The example shows the cumulative
expenses attributable to a hypothetical $1,000 investment in
class Y shares of the fund over specified periods.
Annual fund operating expenses
(as a percentage of average net assets)
Management fees 0.80%
Other expenses 0.61%
Total fund operating expenses 1.41%
The table is provided to help you understand the expenses of
investing in the fund and your share of the operating expenses
that the fund incurs. Management fees and "Other expenses" are
based on the operating expenses for the fund's class B shares.
Example
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years
$14 $45 $77 $169
The example does not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the example to assume a 5% annual return, but
actual annual return varies. The example does not reflect any
changes or expenses related to your employer's plan.
OBJECTIVE
Putnam International Growth Fund seeks capital
appreciation. The fund is designed for investors seeking capital
appreciation primarily through a diversified portfolio of equity
securities of companies located in a country other than the
United States . The fund is not intended to be a complete
investment program, and there is no assurance that it will
achieve its objective.
<PAGE>
HOW THE FUND PURSUES ITS OBJECTIVE
Basic investment strategy
The fund seeks its objective by investing primarily in equity
securities of companies located in a country other than the
United States . The fund's investments will normally include
common stocks, preferred stocks, securities convertible into
common or preferred stocks, and warrants to purchase common or
preferred stocks. The fund may also invest to a lesser extent in
debt securities and other types of investments if Putnam
Investment Management, Inc., the fund's investment manager
("Putnam Management"), believes purchasing them would help
achieve the fund's objective. The fund will, under normal
circumstances, invest at least 65% of its total assets
in issuers located in at least three different countries
other than the United States . The fund may hold a portion
of its assets in cash or money market instruments.
The fund will consider an issuer of securities to be "located
in a country other than the United States " if it is
organized under the laws of a country other than the United
States and has a principal office outside the United
States , or if it derives 50% or more of its total revenues
from business outside the United States .
The fund may invest in securities of issuers in emerging markets,
as well as more developed markets. Investing in emerging markets
generally involves more risks than investing in developed
markets. See "Risk factors" below.
The fund will not limit its investments to any particular type of
company. The fund may invest in companies, large or small, whose
earnings are believed to be in a relatively strong growth trend,
or in companies in which significant further growth is not
anticipated but whose market value per share is thought to be
undervalued. It may invest in small and relatively less well-
known companies which meet these characteristics.
At times Putnam Management may judge that conditions in the
international securities markets make pursuing the fund's basic
investment strategy inconsistent with the best interests of its
shareholders. At such times Putnam Management may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the fund's assets. In implementing
these "defensive" strategies, the fund may invest without limit
in securities of any kind, including securities traded primarily
in U.S. markets, and in cash and money market instruments. It is
impossible to predict when, or for how long, the fund will use
these alternative strategies.
<PAGE>
Risk factors
Putnam Management believes that the securities markets of many
nations move relatively independently of one another, because
business cycles and other economic or political events that
influence one country's securities markets may have little effect
on securities markets in other countries. By investing in a
diversified portfolio of foreign securities, Putnam Management
attempts to reduce the risks associated with being invested in
the economy of only one country. The countries which Putnam
Management believes offer attractive opportunities for investment
may change from time to time.
The fund may seek investment opportunities among securities of
large, widely traded companies as well as securities of smaller,
less well-known companies. Smaller companies may present greater
opportunities for capital appreciation, but may also involve
greater risks. They may have limited product lines, markets for
financial resources, or may depend on a limited management group.
Their securities may trade less frequently and in limited volume.
As a result, the prices of these securities may fluctuate more
than prices of securities of larger, more established companies.
Foreign investments can involve risks that may not be present in
domestic investments. Since foreign securities are normally
denominated and traded in foreign currencies, the values of the
fund's assets may be affected favorably or unfavorably by changes
in currency exchange rates and exchange control regulations.
There may be less information publicly available about a foreign
company than about a U. S. company, and foreign companies are not
generally subject to accounting, auditing and financial reporting
standards and practices comparable with those in the United
States.
The securities of some foreign companies are less liquid and at
times more volatile than securities of comparable U. S.
companies. Foreign brokerage commissions and other fees are also
generally higher than those in the United States. Foreign
settlement procedures and trade regulations may involve certain
risks (such as delay in payment or delivery of securities or in
the recovery of fund assets held abroad) and expenses not present
in the settlement of domestic investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial
instability and diplomatic developments that could affect the
value of investments in certain foreign countries.
<PAGE>
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit
investments in securities of certain issuers located in those
foreign countries. Special tax considerations apply to foreign
securities.
The risks described above are typically increased for investments
in securities principally traded in, or issued by issuers located
in, underdeveloped and developing nations, which are sometimes
referred to as "emerging markets."
See also "Portfolio turnover,"Risk factors in options and futures
transactions" and "Other investment practices" below.
Portfolio turnover
The length of time the fund has held a particular security is not
generally a consideration in investment decisions. A change in
the securities held by the fund is known as "portfolio turnover."
As a result of the fund's investment policies, under certain
market conditions the fund's portfolio turnover rate may be
higher than that of other mutual funds.
Portfolio turnover generally involves some expense to the fund,
including brokerage commissions or dealer mark-ups and other
transaction costs on the sale of securities and reinvestment in
other securities. These transactions may result in realization
of taxable capital gains. Portfolio turnover rates for fiscal
1995 and 1994 were 25.83% and 96.13%, respectively.
Options and futures portfolio strategies
The fund may engage in a variety of transactions involving the
use of options and futures contracts and in foreign currency
exchange transactions for purposes of increasing its investment
return or hedging against market changes. The fund may seek to
increase its current return by writing covered call options and
covered put options on its portfolio securities or other
securities in which it may invest. The fund receives a premium
from writing a call or put option, which increases the fund's
return if the option expires unexercised or is closed out at a
net profit. The fund may also buy and sell put and call options
on such securities for hedging purposes. When the fund writes a
call option on a portfolio security, it gives up the opportunity
to profit from any increase in the price of the security above
the exercise price of the option; when it writes a put option,
the fund takes the risk that it will be required to purchase a
security from the option holder at a price above the current
market price of the security. The fund may terminate an option
that it has written prior to its expiration by entering into a
closing purchase transaction in which it purchases an option
having the same terms as the option written. The fund may also
from time to time buy and sell combinations of put and call
options on the same underlying security to earn additional
income.
The fund may buy and sell index futures contracts for hedging
purposes. An "index future" is a contract to buy or sell units
of a particular index at an agreed price on a specified future
date. Depending on the change in value of the index between the
time when the fund enters into and terminates an index future
transaction, the fund realizes a gain or loss. The fund may also
purchase and sell call and put options on index futures or on
indices in addition or as an alternative to purchasing or selling
index futures or, to the extent permitted by applicable law, to
earn additional income. The fund may also purchase warrants,
issued by banks and other financial institutions, whose values
are based on the values from time to time of one or more
securities indices.
Foreign currency exchange transactions. The fund may engage in
foreign currency exchange transactions to protect against
uncertainty in the level of future currency exchange rates.
Putnam Management expects to engage in foreign currency exchange
transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect
against changes in the value of specific portfolio positions
("position hedging").
The fund may engage in transaction hedging to protect against a
change in foreign currency exchange rates between the date on
which the fund contracts to purchase or sell a security and the
settlement date, or to "lock in" the U.S. dollar equivalent of a
dividend or interest payment in a foreign currency. The fund may
purchase or sell a foreign currency on a spot (or cash) basis at
the prevailing spot rate in connection with the settlement of
transactions in portfolio securities denominated in that foreign
currency.
If conditions warrant, the fund may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward
contracts") and may purchase and sell foreign currency futures
contracts as a hedge against changes in foreign currency exchange
rates between the trade and settlement dates on particular
transactions and not for speculation. A foreign currency forward
contract is a negotiated agreement to exchange currency at a
future time at a rate or rates that may be higher or lower than
the spot rate. Foreign currency futures contracts are
standardized exchange-traded contracts and have margin
requirements.
For transaction hedging purposes, the fund may also purchase and
sell call and put options on foreign currency futures contracts
and on foreign currencies.
The fund may engage in position hedging to protect against a
decline in value relative to the U.S. dollar of the currencies in
which its portfolio securities are denominated or quoted (or an
increase in value of a currency in which securities the fund
intends to buy are denominated). For position hedging purposes,
the fund may purchase or sell foreign currency futures contracts,
foreign currency forward contracts, and options on foreign
currency futures contracts and on foreign currencies. In
connection with position hedging, the fund may also purchase or
sell foreign currency on a spot basis.
The fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the fund.
The currencies of certain countries are not widely traded, and
the foreign currency exchange transactions described above may
not be available with respect to those currencies.
Risk factors in options and futures transactions
Options and futures transactions involve costs and may result in
losses. Options and futures transactions involve certain special
risks, including the risks that the fund may be unable at times
to close out such positions, that transactions may not
accomplish their purposes because of imperfect market
correlations, or that Putnam Management may not forecast market
movements correctly.
The effective use of options and futures strategies depends on
the fund's ability to terminate options and futures positions at
times when Putnam Management deems it desirable to do so.
Although the fund will enter into an option or futures contract
position only if Putnam Management believes that a liquid
secondary market exists for such option or futures contract,
there is no assurance that the fund will be able to effect
closing transactions at any particular time or at an acceptable
price.
The fund generally expects that its options and futures contract
transactions will be conducted on recognized exchanges. In
certain instances, however, the fund may purchase and sell
options in the over-the-counter markets. The fund's ability to
terminate options in over-the-counter markets may be more limited
than for exchange-traded options and may also involve the risk
that securities dealers participating in such transactions would
be unable to meet their obligations to the fund.
The use of options and futures strategies also involves the risk
of imperfect correlation between movements in the prices of
options and futures contracts and movements in the value of the
underlying securities, securities index or foreign currency, or
in the prices of the securities or currency that are the subject
of a hedge. Cross hedging transactions by the fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge. The successful use of these strategies
further depends on the ability of Putnam Management to forecast
market movements correctly.
Because the markets for certain options and futures contracts in
which the fund will invest (including markets located in foreign
countries) are relatively new and still developing and may be
subject to regulatory restraints, the fund's ability to engage in
transactions using such investments may be limited.
The fund's ability to engage in hedging transactions may be
limited by certain regulatory requirements and tax
considerations. The fund's hedging transactions may affect the
character or amount of the fund's distributions.
A more detailed explanation of futures and options transactions,
including the risks associated with them, is included in the SAI.
Other investment practices
The fund may also engage in the following investment practices,
each of which involves certain special risks. The SAI contains
more detailed information about these practices, including
limitations designed to reduce these risks.
Securities loans, repurchase agreements and forward commitments.
The fund may lend portfolio securities amounting to not more than
25% of its assets to broker-dealers and may enter into repurchase
agreements on up to 25% of its assets. These transactions must
be fully collateralized at all times. The fund may also purchase
securities for future delivery, which may increase its overall
investment exposure and involves a risk of loss if the value of
the securities declines prior to the settlement date. These
transactions involve some risk to the fund if the other party
should default on its obligation and the fund is delayed or
prevented from recovering the collateral or completing the
transaction.
Derivatives
Certain of the instruments in which the fund will invest, such as
futures contracts, options and forward contracts, are considered
to be "derivatives." Derivatives are financial instruments whose
value depends upon, or is derived from, the value of an
underlying asset, such as a security or an index. Further
information about these instruments and the risks involved in
their use is included elsewhere in this prospectus and in the
SAI.
Limiting investment risk
Specific investment restrictions help the fund limit investment
risks for its shareholders. These restrictions prohibit the fund
from acquiring more than 10% of the voting securities of any one
issuer.* They also prohibit the fund from investing more than:
(a) 5% of its total assets in securities of any one issuer (other
than U.S. government securities); provided that, with respect to
investments in securities issued by foreign governments, this
limitation shall apply only to 75% of the fund's total assets;*
(b) 5% of its net assets in companies that, together with any
predecessors, have been in operation less than three years (other
than U.S. government securities);*
(c) 25% of its total assets in any one industry (except
securities of the U.S. government or its agencies or
instrumentalities);* or
(d) 15% of its net assets in any combination of securities that
are not readily marketable, in securities restricted as to resale
(excluding securities determined by the Trustees (or the person
designated by the Trustees to make such determinations) to be
readily marketable), and in repurchase agreements maturing in
more than seven days.
Restrictions marked with an asterisk (*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and the fund's other fundamental investment
policies. Except for investment policies designated as
fundamental in this prospectus or the SAI, the investment
policies described in this prospectus and in the SAI are not
fundamental policies. The Trustees may change any non-
fundamental investment policies without shareholder approval. As
a matter of policy, the Trustees would not materially change the
fund's investment objective without shareholder approval.
<PAGE>
HOW PERFORMANCE IS SHOWN
Investment performance may from time to time be included in
advertisements about class Y shares. "Total return" for the
one-, five- and ten-year periods (or for the life of the class Y
shares, 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. Total return may also be
presented for other periods.
All data are based on past investment results and does not
predict future performance.
Investment performance, which will vary, is based on many
factors, including market conditions, the composition of the
fund's portfolio, the fund's operating expenses and which class
of shares the investor purchases. Investment performance also
often reflects the risks associated with the fund's investment
objective and policies. These factors should be considered when
comparing the fund's investment results with those of other
mutual funds and other investment vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the
limitation had not been in effect. The fund's performance may be
compared to that of various indexes. See the SAI.
HOW THE FUND IS MANAGED
The Trustees of the fund are responsible for generally overseeing
the conduct of the fund's business. Subject to such policies as
the Trustees may determine, Putnam Management furnishes a
continuing investment program for the fund and makes investment
decisions on its behalf. Subject to the control of the Trustees,
Putnam Management also manages the fund's other affairs and
business.
The fund pays Putnam Management a quarterly fee for these
services based on the fund's average net assets. See "Expenses
summary" and the SAI.
The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the fund's
portfolio since the year stated below:
Business experience
Year (at least 5 years)
---- -------------------
Justin Scott 1991 Employed as an investment
Managing Director professional by Putnam
Management since 1988.
The fund pays all expenses not assumed by Putnam Management,
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 Putnam
Management for the compensation and related expenses of certain
officers of the fund and their staff who provide administrative
services to the fund. The total reimbursement is determined
annually by the Trustees.
Putnam Management places all orders for purchases and sales of
the fund's securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of the fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers.
ORGANIZATION AND HISTORY
Putnam International Growth Fund is a Massachusetts
business trust organized on October 5, 1990. 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. Prior to August 12, 1996, the
fund was known as Putnam Overseas Growth Fund.
The fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. Shares of the fund may be divided without
shareholder approval into 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. The fund's shares are currently divided into four
classes. Only the fund's class Y shares are offered by this
prospectus. The fund also offers other classes of shares with
different sales charges and expenses. Because of these different
sales charges and expenses, the investment performance of the
classes will vary. For more information, including your
eligibility to purchase any other class of shares, contact your
investment dealer or Putnam Mutual Funds (at 1-800-225-1581).
Each share has one vote, with fractional shares voting
proportionally. Shares of each class 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 you own fewer shares than a minimum amount set by the Trustees
(presently 20 shares), the fund may choose to redeem your shares.
You will receive at least 30 days' written notice before the fund
redeems your shares, and you may purchase additional shares at
any time to avoid a redemption. The fund may also redeem shares
if you own shares above a maximum amount set by the Trustees.
There is presently no maximum, but the Trustees may establish one
at any time, which could apply to both present and future
shareholders.
The fund's Trustees: George Putnam,* Chairman. President of the
Putnam funds. Chairman and Director of Putnam Management and
Putnam Mutual Funds Corp. ("Putnam Mutual Funds"). Director,
Marsh & McLennan Companies, Inc.; William F. Pounds, Vice
Chairman. Professor of Management, Alfred P. Sloan School of
Management, Massachusetts Institute of Technology ; Jameson
Adkins Baxter, President, Baxter Associates, Inc.; Hans H. Estin,
Vice Chairman, North American Management Corp.; John A. Hill,
Chairman and Managing Director, First Reserve
Corporation; Ronald J. Jackson, Former Chairman, President and
Chief Executive Officer of Fisher-Price, Inc., Trustee of Salem
Hospital and Overseer of the Peabody Essex Museum; Elizabeth
T. Kennan, President Emeritus and Professor, Mount Holyoke
College; Lawrence J. Lasser,* Vice President of the Putnam funds.
President, Chief Executive Officer and Director of Putnam
Investments, Inc. and Putnam Management. Director, Marsh &
McLennan Companies, Inc.; Robert E. Patterson, Executive Vice
President and Director of Acquisitions , Cabot Partners
Limited Partnership; Donald S. Perkins,* Director of
various corporations, including Cummins Engine Company, Lucent
Technologies, Inc., Springs Industries, Inc. and Time Warner
Inc.; George Putnam, III,* President, New Generation Research,
Inc.; Eli Shapiro, Alfred P. Sloan Professor of Management,
Emeritus, Alfred P. Sloan School of Management, Massachusetts
Institute of Technology; A.J.C. Smith,* Chairman and Chief
Executive Officer , Marsh & McLennan Companies, Inc.; and
W. Nicholas Thorndike, Director of various corporations and
charitable organizations, including Data General Corporation,
Bradley Real Estate, Inc. and Providence Journal Co. Also,
Trustee of Massachusetts General Hospital and Eastern Utilities
Associates. The Trustees are also Trustees of the other
Putnam funds. Those marked with an asterisk (*) are or may be
deemed to be "interested persons" of the fund, Putnam Management
or Putnam Mutual Funds.
About Your Investment
HOW TO BUY SHARES
All orders to purchase shares must be made through your
employer's defined contribution plan. For more information about
how to purchase shares of the fund through your employer's plan
or limitations on the amount that may be purchased, please
consult your employer. Shares are sold to eligible defined
contribution plans at the net asset value per share next
determined after receipt of an order by Putnam Mutual Funds.
Orders must be received by Putnam Mutual Funds before the close
of regular trading on the New York Stock Exchange in order to
receive that day's net asset value. Class Y shares are available
to defined contribution plans whose investment in Putnam funds
and other assets managed by Putnam Management or its affiliates,
combined with such investments by the plan's sponsor and the
sponsor's other employee benefit plans, equals at least $250
million. Defined contribution plans that elect to buy class Y
shares upon attaining eligibility will receive class Y shares in
place of any class A shares then owned. Class Y shares are also
available to defined contribution plans whose sponsor confirms a
good faith expectation that investments in Putnam-managed assets
by the sponsor and its employee benefit plans will attain $250
million (using the higher of purchase price or current market
value) within one year of the initial purchase of class Y shares,
and agrees that class Y shares may be redeemed and class A shares
purchased if that level is not attained. To eliminate the need
for safekeeping, the fund will not issue certificates for your
shares. Putnam Mutual Funds will from time to time, at its
expense, provide additional promotional incentives or payments to
dealers that sell shares of the Putnam funds. These incentives
or payments may include payments for travel expenses, including
lodging, incurred in connection with trips taken by invited
registered representatives and their guests to locations within
and outside the United States for meetings or seminars of a
business nature. In some instances, these incentives or payments
may be offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares.
HOW TO SELL SHARES
Subject to any restrictions imposed by your employer's plan, you
can sell your shares through the plan to the fund any day the New
York Stock Exchange is open. For more information about how to
sell shares of the fund through your employer's plan, including
any charges that may be imposed by the plan, please consult with
your employer.
<PAGE>
Your plan administrator must send a signed letter of instruction
to Putnam Investor Services. The price you will receive is the
next net asset value calculated after the fund receives your
request in proper form. All requests must be received by the
fund prior to the close of regular trading on the New York Stock
Exchange in order to receive that day's net asset value. If you
sell shares having a net asset value of $100,000 or more, the
signatures of registered owners or their legal representatives
must be guaranteed by a bank, broker-dealer or certain other
financial institutions. See the SAI for more information about
where to obtain a signature guarantee.
The fund generally provides payment for redeemed shares the
business day after the request is received. Under unusual
circumstances, the fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal
securities law. The fund will only redeem shares for which it
has received payment.
HOW TO EXCHANGE SHARES
Subject to any restrictions contained in your plan, you can
exchange your shares for shares of other Putnam funds available
through your plan at net asset value. Contact your plan
administrator or Putnam Investor Services on how to exchange your
shares or how to obtain prospectuses of other Putnam funds in
which you may invest.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where Putnam Management or the Trustees
believe doing so would be in the best interests of the fund, the
fund reserves the right to revise or terminate the exchange
privilege, limit the amount or number of exchanges or reject any
exchange. Shareholders would be notified of any such action to
the extent required by law. Consult Putnam Investor Services
before requesting an exchange. See the SAI to find out more
about the exchange privilege.
HOW THE FUND VALUES ITS SHARES
The fund calculates the net asset value of a share of each class
by dividing the total value of its assets, less liabilities, by
the number of its shares outstanding. Shares are valued as of
the close of regular trading on the New York Stock Exchange each
day the Exchange is open.
Portfolio securities for which market quotations are readily
available are valued at market value. Short-term investments
that will mature in 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.
Securities quoted in foreign currencies are translated into U.S.
dollars at the current exchange rates or at such other rates as
the Trustees may determine in computing net asset value. As a
result, fluctuations in the value of such currencies in relation
to the U.S. dollar will affect the net asset value of fund shares
even though there has not been any change in the values of such
securities as quoted in such foreign currencies.
HOW THE FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX INFORMATION
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 terms of your plan will govern how your plan may receive
distributions from the fund. Generally, periodic distributions
from the fund to your plan are reinvested in additional fund
shares, although your plan may permit you to receive fund
distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares or
to receive all fund distributions in cash. If another option is
not selected, all distributions will be reinvested in additional
fund shares.
The fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal
taxes on income and gains it distributes. The fund will
distribute substantially all of its ordinary income and capital
gain net income on a current basis. Generally, fund
distributions are taxable as ordinary income, except that any
distributions of net long-term capital gains will be taxed as
such. However, distributions by the fund to employer-sponsored
defined contribution plans that qualify for tax-exempt treatment
under federal income tax laws will not be taxable. Special tax
rules apply to investments through such plans. You should
consult your tax adviser to determine the suitability of the fund
as an investment through such a plan and the tax treatment of
distributions (including distributions of amounts attributable to
an investment in the fund) from such a plan.
The foregoing is a summary of certain federal income tax
consequences of investing in the fund. You should consult your
tax adviser to determine the precise effect of an investment in
the fund on your particular tax situation (including possible
liability for state and local taxes).
<PAGE>
ABOUT PUTNAM INVESTMENTS, INC.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the principal underwriter of the fund and
of other Putnam funds. Putnam Defined Contribution Plans is a
division of Putnam Mutual Funds. Putnam Fiduciary Trust Company
is the fund's custodian. Putnam Investor Services, a division of
Putnam Fiduciary Trust Company, is the fund's investor servicing
and transfer agent.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are located at One Post Office Square, Boston,
Massachusetts 02109 and are subsidiaries of Putnam Investments,
Inc., which is wholly owned by Marsh & McLennan Companies, Inc.,
a publicly-owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
Differences between the typeset (printed) Class A, Class B and
Class M prospectus and the EDGAR filing version.
1. Pagination is different in printed prospectus.
2. Table of Contents is on Page 1 of printed prospectus.
3. Section headings and subheadings in the printed prospectus are
printed in boldface type with colored ink
4. The first page of the printed prospectus contains an
illustration of the balance scales, the Putnam logo.
5. Each page of printed text between Page 1 and the back cover
has a header identifying the major section of the Prospectus
(i.e. "About the Fund" or "About your investment") discussed
on that page.
<PAGE>
Differences between the typeset Defined Contribution and Class Y
(printed)
prospectus and the EDGAR filing version.
1. Pagination is different in printed prospectus
2. Section headings and subheadings in the printed prospectus
are printed in boldface type
3. The first few descriptive lines of certain paragraphs, and
certain other emphasized phrases, are printed in boldface
type
4. In the printed prospectus, the dashes at the beginning of
certain sentences are replaced by a solid box
5. The first page of the printed prospectus contains a box
with an illustration of the balance scales, the Putnam logo
