PROSPECTUS
OCTOBER 30, 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 October 30, 1996
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 various classes of the
fund's 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
..............................................................
Read this section to make sure the fund's objective is consistent
with your own.
HOW THE FUND PURSUES ITS OBJECTIVE
..............................................................
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 the risks that are associated
with an investment in the fund.
HOW PERFORMANCE IS SHOWN
..............................................................
This section describes and defines the measures used to assess
fund performance. All data are based on 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 its expenses, and how purchases and sales of
securities are made.
ORGANIZATION AND HISTORY
..............................................................
In this section, you will learn when the fund was
introduced, how it is organized, how it may offer shares,
and who its Trustees 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
..............................................................
In this section you can learn how to sell fund shares either
directly to the fund or through an investment dealer.
HOW TO EXCHANGE SHARES
..............................................................
Find out in this section how you may exchange fund shares for
shares of other Putnam funds. The section also explains how
exchanges can be made without sales charges and the conditions
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 fund dividends. It also discusses the tax status
of the payments and counsels you to seek specific advice about
your 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 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% 0.69% 1.74%
Class B 0.80% 1.00% 0.69% 2.49%
Class M 0.80% 0.75% 0.70% 2.25%
The table is provided to help you understand the expenses of
investing and your share of fund operating expenses. The
expenses shown in the table do not reflect the application of
credits that reduce fund expenses.
<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 $74 $109 $146 $251
CLASS B $75 $108 $153 $264***
CLASS B (NO REDEMPTION) $25 $ 78 $133 $264***
CLASS M $57 $103 $151 $284
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 as part of an investment.
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 derived from
the Fund's financial statements, which have been audited and
reported on by the independent accountants. The "Report of
independent accountants" and financial statements included in the
fund's annual report to shareholders for the 1996 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.
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE><CAPTION>
FOR THE PERIOD FOR THE PERIOD
DECEMBER 1, 1994 JUNE 1, 1994
(COMMENCEMENT OF (COMMENCEMNT
YEAR ENDED OPERATIONS) TO YEAR ENDEDOF OPERATIONS) TO
JUNE 30 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 $12.09 $11.87 $12.00 $11.82 $11.78
INVESTMENT OPERATIONS
Net investment income (loss) .08(c) .03(d) .04(c) .01(d) (.01)(c)(d)
Net realized and unrealized
gain (loss) on investments 2.28 .36 2.26 .34 .05
TOTAL FROM INVESTMENTS
OPERATIONS 2.36 .39 2.30 .35 .04
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.22) -- (.19) -- --
From net realized gain
on investment (.01) (.11) (.01) (.11) --
In excess of net realized
gains on investments -- (.06) -- (.06) --
TOTAL DISTRIBUTIONS (.23) (.17) (.20) (.17) --
NET ASSET VALUE,
END OF PERIOD $14.22 $12.09 $14.10 $12.00 $11.82
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(A) 19.71 3.33(E) 19.35 3.00 0.34(E)
NET ASSETS, END OF PERIOD
(in thousands) $14,309 $1,777 $132,013 $25,892 $2,470
Ratio of expenses to
average net assets (%)(b) 2.25 1.61(d)(e) 2.49 2.41(d) .15(c)(d)(e)
Ratio of net investment income(loss)
to average net assets (%) .61 .58(d)(e) .32 .23(d)(.06)(c)(d)(e)
Portfolio turnover (%) 44.14 25.83 44.14 25.83 96.13
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
$12.10 $11.83 $9.58 $8.82 $8.18 $8.63
.13(c) .08(d) (.06)(d) .07(d) .06 .07(d)
2.29 .36 2.53 .69 .71 (.52)
2.42 .44 2.47 .76 .77 (.45)
(.26) -- -- -- (.13) --
(.01) (.11) (.22) -- -- --
- -- (.06) -- -- -- --
(.27) (.17) (.22) -- (.13) --
$14.25 $12.10 $11.83 $9.58 $8.82 $8.18
20.21 3.76 25.81 8.62 9.52 (5.21)(e)
$151,088$32,856 $8,781 $2,859 $2,502 $2,054
1.74 1.61(d) 2.17(d) 1.80(d) 1.98 .78(d)(e)
.99 .97(d) (.17)(d) .81(d) .76 .86(d)(e)
44.14 25.83 96.13 80.92 82.45 14.54(e)
(a) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(b) The ratio of expenses to average net assets for the year endd June 30, 1996 includes
amounts paid through brokerage service and expense offset arrangements. Prior period
ratios exclude these amounts.
(c) Per share net investment income has been determined on the basis of the weighted
average number of shares outstanding for the period.
(d) 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 and 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.
(e) 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
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
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
securities of issuers located in at least three different
countries other than the United States. The fund may also 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 greater 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 securities are, in the opinion of Putnam
Management, undervalued. It may invest in small and relatively
less well-known companies which meet these characteristics.
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.
DEFENSIVE STRATEGIES
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 fund assets.
In implementing these defensive strategies, the fund may invest
without limit in cash and money market instruments, securities
primarily traded in the U.S. markets, or in any other securities
Putnam Management considers consistent with such defensive
strategies.
It is impossible to predict when or for how long, these
alternative strategies would be used.
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.
FOREIGN INVESTMENTS
Since foreign securities are normally denominated and traded in
foreign currencies, the values of fund assets may be affected
favorably or unfavorably by currency exchange rates relative to
the U.S. dollar. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and
foreign issuers may not be subject to accounting standards
comparable to 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.
Legal remedies available to investors in certain foreign
countries may be limited. 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 greater in less developed
nations, sometimes referred to as "emerging markets." For
instance, political and economic structures in these countries
may be in their infancy and developing rapidly, causing
instability. High rates of inflation may adversely affect the
economies and securities markets of such countries. In addition,
the small size, limited trading volume and relative inexperience
of the securities markets in these countries may make investments
in such countries less liquid and more volatile than investments
in more developed countries. Investments in emerging markets are
regarded as speculative.
FOR MORE INFORMATION REGARDING FOREIGN INVESTMENTS, SEE THE SAI.
FUTURES AND OPTIONS
THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS. An
"index future" is a contract to buy or sell units of a particular
stock index at an agreed price on a specified future date.
Depending on the change in value of the index betwen the time the
fund enters into and terminates an index future transaction, the
fund realizes a gain or loss. In addition to or as an alternative
to purchasing or selling index futures, the fund may buy or sell
call and put options on index futures or stock indexes. The fund
may engage in index futures and options transactions for hedging
purposes and for nonhedging purposes, such as to adjust its
exposure to relevant amrkets or as a substitute for direct
investment.
THE USE OF INDEX FUTURES AND RELATED OPTIONS INVOLVES CERTAIN
SPECIAL ARISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS
AND MAY RESULT IN LOSSES.
Certain risks arise from the possibility of imperfect
correlations among movements in the prices of financial futures
and options purchased or sold by the fund, of the underlying
stock index, currencies or securities and, in the case of hedging
transactions, of the securities that are the subject of the
hedge. The successful use of the strategies described above
further depends on Putnam Management's ability to forecast market
movements correctly.
Other risks arise from the potential inabilitiy to close out
index futures or options postions. There can be no assurance that
a liquid secondary market will exist for any index future or
option at any particular time. The fund's ability to terminate
option positions established in the over-the-counter markket may
be more limited than for exchange-traded options and may also
involve the risk that securities dealters participating in such
transactions would fail to meet their obligations to the fund.
Certain provisions of the Internal Revenue Code and certain
regulatory requirements may limit the use of index futures and
options transactions.
A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS
TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, IS
INCLUDED IN THE SAI.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
THE FUND MAY ENGAGE IN FOREIGN CURRENCY EXCHANGE TRANSACTIONS TO
PROTECT AGAINST UNCERTAINTY IN THE LEVEL OF FUTURE EXCHANGE
RATES. Putnam Management may 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, for transaction hedging purposes the fund
may also enter into contracts to purchase or sell foreign
currencies at a future date ("forward contracts") and purchase
and sell foreign currency futures contracts. A foreign currency
forward contract is a negotiated agreement to exchange currency
at a future time at a rate or rates that may be higher or lower
than the spot rate. Foreign currency futures contracts are
standardized exchange-traded contracts and have margin
requirements. In addition, for transaction hedging purposes the
fund may also purchase or sell exchange-listed and over-the-
counter call and put options on foreign currency futures
contracts and on foreign currencies.
The fund may 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, when the fund holds cash or
short-term investments). 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 on exchanges or in
over-the-counter markets. 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. 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 decision as to whether and to what extent the fund will
engage in foreign currency exchange transactions will depend on a
number of factors, including prevailing market conditions, the
composition of the fund's portfolio and the availability of
suitable transactions. Accordingly, there can be no assurance
that the fund will engage in foreign currency exchange
transactions at any given time or from time to time.
For a further discussion of the risks associated with purchasing
and selling futures contracts and options, see "Futures and
Options." The SAI also contains information concerning the
fund's use of foreign currency exchange transactions.
PORTFOLIO TURNOVER
The length of time the fund has held a particular security is
not generally a consideration in investment decisions. A
change in the securities held by the fund is known as
"portfolio turnover." As a result of the fund's investment
policies, under certain market conditions its portfolio
turnover rate may be higher than that of other mutual funds.
Portfolio turnover generally involves some expense, including
brokerage commissions or dealer markups and other transaction
costs on the sale of securities and reinvestment in other
securities. These transactions may result in realization of
taxable capital gains. Portfolio turnover rates are shown in
the section, "Financial highlights."
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.
OPTIONS. The fund may seek to increase its current return by
writing covered call and put options on securities it owns or
in which it may invest. THe fund receives a premium from
writing a call or put option, which increases the return if hte
option expires unexercised or is closed out at a net profit.
When the fund writes a call option, it gives up the
oppportunity to profit from any increase in the price of a
security above the exercise price of the option; when it writes
a put option, it takes the risk that it will be required to
purchase a security from the option holder at a price above the
current market price of the security. The fund may termainate
an option that it has written prior to its expiration by
entering into a closing purchase transaction in which it
purchases an optioin having the same terms as the option
written.
The fund may also buy and sell put and call option, including
combinations of put and call options on the same underlying
security. The aggregate value of the secuirties underlying the
options may not exceed 25% of fund assets. The use of these
strategies may be limited by applicable law.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD
COMMITMENTS. The fund may lend portfolio securities amounting
to not more than 25% of its assets to broker-dealers and may
enter into repurchase agreements on up to 25% of its assets.
These transactions must be fully collateralized at all times.
The fund may also purchase securities for future delivery,
which may increase its overall investment exposure and involves
a risk of loss if the value of the securities declines prior to
the settlement date. These transactions involve some risk if
the other party should default on its obligation and the fund
is delayed or prevented from recovering the collateral or
completing the transaction.
DIVERSIFICATION
Subject to approval by the shareholders as noted below, the
fund may invest up to 25% of its total assets in the securities
of any one issuer. If the proposed change does not untimately
receive sufficieint votes for approval, this prosepectus will
be revised or supplemented, as appropriate.
The fund is a "diversified" investment company under the
Investment Company act of 1940. THis means that with respect to
75% of its total assets, the fund may not invest more than 5%
of th its total assets in the securities of any one issuer
(except U.S. government securities). The remaining 25% of its
total assets is not subject to this restriction. To the extent
the fund invests a significant portion of its assets in the
securities of a particular issuer, it will be subject to an
increased risk of loss if the market value of such issuer's
securities declines.
DERIVATIVES
Certain of the instruments in which the fund may invest, such
as futures contracts, options and forward contracts, are
considered to be "derivatives." Derivatives are financial
instruments whose value depends upon, or is derived from, the
value of an underlying asset, such as a security or an index.
Further information about these instruments and the risk
involved in their use is included elsewhere in this prospectus
and in the SAI.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP TO LIMIT INVESTMENT RISKS
FOR THE FUND'S 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.
At a shareholder meeting to be held on February 6, 1997, the
shareholders of hte fund will be asked to approve anumber of
changes to the fund's fundamental investment restrictions. If
the proposed changes are approved, rectriction (a) above will
provide that the fund may not and will not: (with respect to
75% of its total assets) invest 5% of its total asssets in
securities of any one issuer other than the U.S. government. In
addition, the restriction which prohibiits the fund from
acquiring more than 10% of the voting securities of any issuer
will be limited to 75% of the fund's total assets.
If some or all of these proposals do not ultimately receive
sufficient votes for approval, this prosepectus will be revised
or supplemented, as appropriate.
Restrictions marked with an asterisk(*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and 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 policy 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
FUND ADVERTISEMENTS MAY, FROM TIME TO TIME, INCLUDE PERFORMANCE
INFORMATION. "Total return" for the one-, five- and ten-year
periods (or for the life of 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,
portfolio composition, fund 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. Fund performance may be
compared to that of various indexes. See the SAI.
HOW THE FUND IS MANAGED
THE TRUSTEES ARE RESPONSIBLE FOR GENERALLY OVERSEEING THE
CONDUCT OF FUND BUSINESS. Subject to such policies as the
Trustees may determine, Putnam Management furnishes a
continuing investment program for the fund and makes investment
decisions on its behalf. Subject to the control of the
Trustees, Putnam Management also manages the fund's other
affairs and business.
The fund pays Putnam Management a quarterly fee for these
services based on 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
fund officers and their staff who provide administrative
services. The total reimbursement is determined annually by
the Trustees.
Putnam Management places all orders for purchases and sales of
fund 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 fund shares (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. The Trustees may, without shareholder
approval, create two or more series of shares representing
separate investment portfolios. Any such series of shares may
be divided without shareholder approval into two or more
classes of shares having such preferences and special or
relative rights and privileges as the Trustees determine. The
fund's shares are not currently divided into series. Only
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 all classes will vote together as a
single class except when otherwise required by law or as
determined by the Trustees. Shares are freely transferable,
are entitled to dividends as declared by the Trustees, and, if
the fund were liquidated, would receive the net assets of the
fund. The fund may suspend the sale of shares at any time and
may refuse any order to purchase shares. Although the fund is
not required to hold annual meetings of its shareholders,
shareholders holding at least 10% of the outstanding shares
entitled to vote have the right to call a meeting to elect or
remove Trustees, or to take other actions as provided in the
Agreement and Declaration of Trust.
If you own fewer shares than the minimum 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., Director of
Safety 1st, 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
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 includes information
about how shares acquired through reinvestment of distributions
are treated for conversion purposes. The discussion also notes
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 appropriate 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 250,000 3.63 3.50 2.75
250,000 but under 500,000 2.56 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 or purchases by participant-directed
qualified retirement plans with at least 200 eligible
employees. However, a CDSC of 1.00% will be imposed upon
redemptionsof shares pruchased at net net asset value after
July 31, 1996 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 redeems 90% or more of hte amount intiially
invested within two years after intial purchase. Similarly, a
CDSC of 1.00% or 0.05%, respectively, will be imposed within
the first or second year after purchase on redemptions by any
investor, other than a participant-directed qualified
retirement plan that purchased fund shares without an initial
sales charge as part of an investment of $1 million or more.
Shares purchased by investors investing $1 million or more in
class A shares whose dealer of record waived its commission
with the approval of Putnam Mutual Funds are not subject to the
CDSC.
In determining whether a CDSC is payable, shares not subject to
any charge will be redeemed first, followed by shares held
longest during the CDSC period. 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. 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%.
A participant-directed qualified retirement plan participating
in a "multi-fund" program approved by Putnam Mutual Funds may
include amounts invested in other mutual funds participating in
such program for purposes of determining whether the plan may
purchase class A shares at net asset value. These investments
will also be included for purposes of the discount privileges
and programs described elsewhere in this prospectus and in the
SAI.
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,
shares not subject to any charge will be redeemed first,
followed by 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.
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 FUND 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,
qualified retirement plans and other plans. Descriptions are
also included in the order form and in the SAI.
Class A, class B and class M shares are available at net asset
value without an initial sales charge or a CDSC to 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, shares are available 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. The CDSC will be waived on redemptions of
shares arising out of the death or post-purchase disability of a
shareholder or settlor of a living trust account, and on
redemptions in connection with certain withdrawals from IRA or
other retirement plans. Up to 12% of the value of shares subject
to a systematic withdrawal plan may also be redeemed each year
without a CDSC. The SAI contains additional information about
purchasing 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, fund shares 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,
payment may be delayed 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, certificates will not be issued 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 by shareholders investing $1
million or more. Also excluded until one year after purchase
are shares purchased at net asset value by participant-directed
qualified retirement plans with at least 200 eligible
employees. These 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 shares
purchased at net asset value 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 shares at net asset value, 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. Payments 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 YOUR 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.
YOUR 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
your 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 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 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. 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.
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.
Fund investments in foreign securities may be subject to
withholding taxes at the source on dividend or interest
payments. In that case, the fund's yield on those securities
would be decreased.
If at the end of the fund's fiscal year more than 50% of the
value of its 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 paid by it
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.
Fund transactions in foreign currencies and hedging activities
may give rise to ordinary income or loss to the extent such
income or loss results from fluctuations in value of the
foreign currency concerned. In addition, such 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.
Investment in an entity that qualifies as a "passive foreign
investment company" under the Code could subject the fund to a
U.S. federal income tax or other charge on certain "excess
distributions" with respect to the investment, and on the
proceeds from disposition of the investment.
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.
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 custodian of the fund. Putnam Investor Services, a
division of Putnam Fiduciary Trust Company, is the fund's
investor servicing and transfer agent for the fund.
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 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-OCTOBER 30, 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 participant-directed qualified
retirement plans. Please read it carefully and keep it for
future reference. You can find more detailed information about
the fund in the October 30, 1996 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.
The following table summarizes expenses attributable to class A
shares based on the fund's most recent fiscal year. The example
shows the cumulative expenses attributable to a hypothetical
$1,000 investment in class A shares 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 0.69%
Total fund operating expenses 1.74%
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 expenses shown in the table do not
reflect the application of credits that reduce fund expenses.
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
$18 $55 $94 $205
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 independent accountants. The "Report of
independent accountants" and financial statements included in
the fund's annual report to shareholders for the 1996 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.
<PAGE>
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE><CAPTION>
FOR THE PERIOD
FEBRUARY 28, 1991
(COMMENCEMENT
OF OPERATIONS) TO
YEAR ENDED JUNE 30 JUNE 30
1996 1995 1994 1993 1992 1991
CLASS A
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD $12.10 $11.83 $9.58 $8.82 $8.18 $8.63
INVESTMENT OPERATIONS
Net investment income (loss) .13(c) .08(d) (.06)(d) .07(d) .06 .07(d)
Net realized and unrealized
gain (loss) on investments 2.29 .36 2.53 .69 .71 (.52)
TOTAL FROM INVESTMENT
OPERATIONS 2.42 .44 2.47 .76 .77 (.45)
DISTRIBUTIONS TO
SHAREHOLDERS:
From net investment income (.26) -- -- -- (.13) --
From net realized gain on
investments (.01) (.11) (.22) -- -- --
In excess of net realized
gain on investments -- (.06) -- -- -- --
TOTAL DISTRIBUTIONS (.27) (.17) (.22) -- (.13) --
NET ASSET VALUE,
END OF PERIOD $14.25 $12.10 $11.83 $9.58 $8.82 $8.18
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%)(A) 20.21 3.76 25.81 8.62 9.52 (5.21)(E)
NET ASSETS, END OF PERIOD
(in thousands) $151,088 $32,856 $8,781 $2,859 $2,502 $2,054
Ratio of expenses to
average net assets (%)(b) 1.74 1.61(d) 2.17(d) 1.80(d) 1.98 .78(d)(e)
Ratio of net investment
income (loss) to average
net assets (%) (.99) .97(d) (.17)(d) .81(d) .76 .86(d)(e)
Portfolio turnover (%) 44.14 25.83 96.13 80.92 82.45 14.54(e)
(a) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charge.
(b) The ratio of expenses to average net assets for the year ended June 30, 1996
includes amounts paid through brokerage service and expense offset arrangements.
(c) Per share net investment income (loss) has been determined on the basis of the
weighted average number of shares outstanding for the period.
(d) 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, 1994 and June 30, 1995 reflect a reduction of less than $0.01 per share.
(e) 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 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 securities of issuers located in at least
three different countries other than the United States. The
fund may also 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 greater 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 securities are, in the opinion of
Putnam Management, undervalued. It may invest in small and
relatively less well-known companies which meet these
characteristics. 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.
DEFENSIVE STRATEGIES
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 fund assets.
In implementing these defensive strategies, the fund may invest
without limit in cash and money market instruments, securities
primarily traded in the U.S. markets, or in any other
securities Putnam Management considers consistent with such
defensive strategies.
It is impossible to predict when or for how long, these
alternative strategies would be used.
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.
FOREIGN INVESTMENTS
Since foreign securities are normally denominated and traded in
foreign currencies, the values of fund assets may be affected
favorably or unfavorably by currency exchange rates relative to
the U.S. dollar. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and
foreign issuers may not be subject to accounting standards
comparable to 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.
Legal remedies available to investors in certain foreign
countries may be limited. 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 greater in less
developed nations, sometimes referred to as "emerging markets."
For instance, political and economic structures in these
countries may be in their infancy and developing rapidly,
causing instability. High rates of inflation may adversely
affect the economies and securities markets of such countries.
In addition, the small size, limited trading volume and
relative inexperience of the securities markets in these
countries may make investments in such countries less liquid
and more volatile than investments in more developed countries.
Investments in emerging markets are regarded as speculative.
FOR MORE INFORMATION REGARDING FOREIGN INVESTMENTS, SEE THE
SAI.
FUTURES AND OPTIONS
THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS. An
"index future" is a contract to buy or sell units of a
particular stock index at an agreed price on a specified future
date. Depending on the change in value of the index between
the time the fund enters into and terminates an index future
transaction, the fund realizes a gain or loss. In addition to
or as an alternative to purchasing or selling index futures,
the fund may buy and sell call and put options on index futures
or stock indexes. The fund may engage in index futures and
options transactions for hedging purposes and for nonhedging
purposes, such as to adjust its exposure to relevant markets or
as a substitute for direct investment.
THE USE OF INDEX FUTURES AND RELATED OPTIONS INVOLVES CERTAIN
SPECIAL RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS
AND MAY RESULT IN LOSSES.
Certain risks arise from the possibility of imperfect
correlations among movements in the prices of financial futures
and options purchased or sold by the fund, of the underlying
stock index, currencies or securities and, in the case of
hedging transactions, of the securities that are the subject of
the hedge. The successful use of the strategies described
above further depends on Putnam Management's ability to
forecast market movements correctly.
Other risks arise from the potential inability to close out
index futures or options positions. There can be no assurance
that a liquid secondary market will exist for any index future
or option at any particular time. The fund's ability to
terminate option positions established in the over-the-counter
market may be more limited than for exchange-traded options and
may also involve the risk that securities dealers participating
in such transactions would fail to meet their obligations to
the fund. Certain provisions of the Internal Revenue Code and
certain regulatory requirements may limit the use of index
futures and options transactions.
A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS
TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, IS
INCLUDED IN THE SAI.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
THE FUND MAY ENGAGE IN FOREIGN CURRENCY EXCHANGE TRANSACTIONS
TO PROTECT AGAINST UNCERTAINTY IN THE LEVEL OF FUTURE EXCHANGE
RATES. Putnam Management may 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, for transaction hedging purposes the
fund may also enter into contracts to purchase or sell foreign
currencies at a future date ("forward contracts") and purchase
and sell foreign currency futures contracts. A foreign
currency forward contract is a negotiated agreement to exchange
currency at a future time at a rate or rates that may be higher
or lower than the spot rate. Foreign currency futures
contracts are standardized exchange-traded contracts and have
margin requirements. In addition, for transaction hedging
purposes the fund may also purchase or sell exchange-listed and
over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies.
The fund may 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, when the fund holds cash on
short-term investments). 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 on
exchanges or in over-the-counter markets. 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. 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 decision as to whether and to what extent the fund will
engage in foreign currency exchange transactions will depend on
a number of factors, including prevailing market conditions,
the composition of the fund's portfolio and the availability of
suitable transactions. Accordingly, there can be no assurance
that the fund will engage in foreign currency exchange
transactions at any given time or from time to time. For a
further discussion of the risks associated with purchasing and
selling futures contracts and options, see "Futures and
options." The SAI also contains information concerning the
fund's use of currency exchange transactions.
PORTFOLIO TURNOVER
The length of time the fund has held a particular security is
not generally a consideration in investment decisions. A
change in the securities held by the fund is known as
"portfolio turnover." As a result of the fund's investment
policies, under certain market conditions its portfolio
turnover rate may be higher than that of other mutual funds.
Portfolio turnover generally involves some expense, including
brokerage commissions or dealer markups and other transaction
costs on the sale of securities and reinvestment in other
securities. These transactions may result in realization of
taxable capital gains. Portfolio turnover rates are shown in
the section "Financial highlights."
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.
OPTIONS. The fund may seek to increase its current return by
writing covered call and put options on securities it owns or
in which it may invest. The fund receives a premium from
writing a call or put option, which increases the return if the
option expires unexercised or is closed out at a net profit.
When the fund writes a call option, it gives up the opportunity
to profit from any increase in the price of a security above
the exercise price of the option; when it writes a put option,
it takes the risk that it will be required to purchase a
security 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 buy and sell put and call options, including
combinations of put and call options on the same underlying
security. The aggregate value of the securities underlying the
options may not exceed 25% of fund assets. The use of these
strategies may be limited by applicable law.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD
COMMITMENTS. The fund may lend portfolio securities amounting
to not more than 25% of its assets to broker-dealers and may
enter into repurchase agreements on up to 25% of its assets.
These transactions must be fully collateralized at all times.
The fund may also purchase securities for future delivery,
which may increase its overall investment exposure and involves
a risk of loss if the value of the securities declines prior to
the settlement date. These transactions involve some risk if
the other party should default on its obligation and the fund
is delayed or prevented from recovering the collateral or
completing the transaction.
<PAGE>
DERIVATIVES
Certain of the instruments in which the fund may invest, such
as futures contracts, options and forward contracts, are
considered to be "derivatives." Derivatives are financial
instruments whose value depends upon, or is derived from, the
value of an underlying asset, such as a security or an index.
Further information about these instruments and the risk
involved in their use is included elsewhere in this prospectus
and in the SAI.
DIVERSIFICATION
Subject to approval by the shareholders as noted below, the
fund may invest up to 25% of its total assets in the securities
of any one issuer. If the proposed change does not ultimately
receive sufficient votes for approval, this prospectus will be
revised or supplemented, as appropriate.
The fund is a "diversified" investment company under the
Investment Company Act of 1940. This means that with respect
to 75% of its total assets, the fund may not invest more than
5% of its total assets in the securities of any one issuer
(except U.S. government securities). The remaining 25% of its
total assets is not subject to this restriction. To the
extent the fund invests a significant portion of its assets in
the securities of a particular issuer, it will be subject to an
increased risk of loss if the market value of such issuer's
securities declines.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP TO LIMIT INVESTMENT RISKS
FOR THE FUND'S 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 repurchase
agreements maturing in more than seven days.
At a shareholder meeting to be held on
February 6, 1997,
the
shareholders of
the fund
will be asked to approve a number of
changes to the fund's fundamental investment restrictions. If
the proposed changes are approved, restriction (a) above will
provide that the fund may not and will not: (with respect to
75% of its total assets) invest 5% of its total assets in
securities of any one issuer other than the U.S. government.
In addition, the restriction which prohibits the fund from
acquiring more than 10% of the voting securities of any issuer
will be limited to 75% of the fund's total assets.
If some or all of these proposals do not ultimately receive
sufficient votes for approval, this prospectus will be revised
or supplemented, as appropriate.
Restrictions marked with an asterisk(*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and 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
policy 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
FUND ADVERTISEMENTS MAY, FROM TIME TO TIME, INCLUDE PERFORMANCE
INFORMATION. "Total return" for the one-, five- and ten-year
periods (or for the life of the 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, portfolio composition,
fund 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 of shares
purchased through such plans.
HOW THE FUND IS MANAGED
THE TRUSTEES ARE RESPONSIBLE FOR GENERALLY OVERSEEING THE
CONDUCT OF FUND BUSINESS. Subject to such policies as the
Trustees may determine, Putnam Management furnishes a
continuing investment program for the fund and makes investment
decisions on its behalf. Subject to the control of the
Trustees, Putnam Management also manages the fund's other
affairs and business.
The fund pays Putnam Management a quarterly fee for these
services based on 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
fund officers and their staff who provide administrative
services. The total reimbursement is determined annually by
the Trustees.
Putnam Management places all orders for purchases and sales of
fund 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
fund shares (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. The Trustees may, without shareholder
approval , create two or more series of shares representing
separate investment portfolios. Any such series of shares may
be divided without shareholder approval into two or more classes
of shares having such preferences and special or relative rights
and privileges as the Trustees determine. The fund's shares are
not currently divided into series. Only the fund's class 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 all classes will vote together as a
single class except when otherwise required by law or as
determined by the Trustees. Shares are freely transferable, are
entitled to dividends as declared by the Trustees, and, if the
fund were liquidated, would receive the net assets of the fund.
The fund may suspend the sale of shares at any time and may
refuse any order to purchase shares. Although the fund is not
required to hold annual meetings of its shareholders,
shareholders holding at least 10% of the outstanding shares
entitled to vote have the right to call a meeting to elect or
remove Trustees, or to take other actions as provided in the
Agreement and Declaration of Trust.
If you own fewer shares than the minimum 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., Director of Safety 1st,
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 PARTICIPANT-DIRECTED QUALIFIED RETIREMENT 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 participant-directed qualified retirement 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. A participant-directed qualified retirement plan is
eligible to purchase fund shares at net asset value if it
invests at least $20 million in Putnam funds and other
investments managed by Putnam Management and its affiliates and
(i) has at least 200 eligible employees or (ii) invests at least
$1 million in class A shares. A participant directed qualified
retirement plan is also eligible to purchase fund shares at net
asset value if its investment in class A shares is at least $1
million and the dealer of record waives its commission with the
consent of Putnam Mutual Funds. Participant-directed qualified
retirement plans participating in a "multi-fund" program
approved by Putnam Mutual Funds may include amounts invested in
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 at net asset value to participant-directed qualified
retirement plans initially investing at least $20 million in
Putnam funds and other investments managed by Putnam Management
or its affiliates, Putnam Mutual Funds pays commissions on the
initial investment 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 by shareholders investing $1
million or more. Also excluded until one year after purchase
are shares purchased at net asset value by participant-directed
qualified retirement plans with at least 200 eligible employees.
These 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 shares
purchased at net asset value 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 shares at net asset value, 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.
Payments under the plan 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
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 the
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 for more information
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 at least annually
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 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. Generally, fund
distributions are taxable as ordinary income, except that any
distributions of net long-term capital gains will be taxed as
such regardless of how long you have held your shares. 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.
<PAGE>
Fund investments in foreign securities may be subject to
withholding taxes at the source on dividend or interest
payments. In that case, the fund yield on those securities
would be decreased.
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.
Investment in an entity that qualifies as a "passive foreign
investment company" under the Code could subject the fund to a
U.S. federal income tax or other charge on certain "excess
distributions" with respect to the investment, and on the
proceeds from disposition of the investment.
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-OCTOBER 30, 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 October 30, 1996 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.
The following table summarizes expenses attributable to class Y
shares based on the fund's most recent fiscal year. The
example shows the cumulative expenses attributable to a
hypothetical $1,000 investment in class Y shares over specified
periods.
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management fees 0.80%
Other expenses 0.69%
Total fund operating expenses 1.49%
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 expects to incur with respect to class Y shares
in the current fiscal year. The expenses shown in the table do
not reflect the application of credits that reduce fund
expenses. Estimated management fees and "Other expenses" are
based on the operating expenses for the fund's class A 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
$15 $47 $81 $178
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.
HOW THE FUND PURSUES ITS OBJECTIVE
BASIC INVESTMENT STRATEGY
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 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 securities of issuers located in at least
three different countries other than the United States. The
fund may also 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 greater 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 securities are, in the opinion of
Putnam Management, undervalued. It may invest in small and
relatively less well-known companies which meet these
characteristics. 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.
DEFENSIVE STRATEGIES
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 fund assets.
In implementing these defensive strategies, the fund may invest
without limit in cash and money market instruments, securities
primarily traded in the U.S. markets, or in any other
securities Putnam Management considers consistent with such
defensive strategies.
It is impossible to predict when or for how long, these
alternative strategies would be used.
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.
FOREIGN INVESTMENTS
Since foreign securities are normally denominated and traded in
foreign currencies, the values of fund assets may be affected
favorably or unfavorably by currency exchange rates relative to
the U.S. dollar. There may be less information publicly
available about a foreign issuer than about a U.S. issuer, and
foreign issuers may not be subject to accounting standards
comparable to 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.
Legal remedies available to investors in certain foreign
countries may be limited. 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 greater in less
developed nations, sometimes referred to as "emerging markets."
For instance, political and economic structures in these
countries may be in their infancy and developing rapidly,
causing instability. High rates of inflation may adversely
affect the economies and securities markets of such countries.
In addition, the small size, limited trading volume and
relative inexperience of the securities markets in these
countries may make investments in such countries less liquid
and more volatile than investments in more developed countries.
Investments in emerging markets are regarded as speculative.
FOR MORE INFORMATION REGARDING FOREIGN INVESTMENTS, SEE THE
SAI.
FUTURES AND OPTIONS
THE FUND MAY BUY AND SELL STOCK INDEX FUTURES CONTRACTS. An
"index future" is a contract to buy or sell units of a
particular stock index at an agreed price on a specified future
date. Depending on the change in value of the index between
the time the fund enters into and terminates an index future
transaction, the fund realizes a gain or loss. In addition to
or as an alternative to purchasing or selling index futures,
the fund may buy and sell call and put options on index futures
or stock indexes. The fund may engage in index futures and
options transactions for hedging purposes and for nonhedging
purposes, such as to adjust its exposure to relevant markets or
as a substitute for direct investment.
THE USE OF INDEX FUTURES AND RELATED OPTIONS INVOLVES CERTAIN
SPECIAL RISKS. FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS
AND MAY RESULT IN LOSSES.
Certain risks arise from the possibility of imperfect
correlations among movements in the prices of financial futures
and options purchased or sold by the fund, of the underlying
stock index, currencies or securities and, in the case of
hedging transactions, of the securities that are the subject of
the hedge. The successful use of the strategies described
above further depends on Putnam Management's ability to
forecast market movements correctly.
Other risks arise from the potential inability to close out
index futures or options positions. There can be no assurance
that a liquid secondary market will exist for any index future
or option at any particular time. The fund's ability to
terminate option positions established in the over-the-counter
market may be more limited than for exchange-traded options and
may also involve the risk that securities dealers participating
in such transactions would fail to meet their obligations to
the fund. Certain provisions of the Internal Revenue Code and
certain regulatory requirements may limit the use of index
futures and options transactions.
A MORE DETAILED EXPLANATION OF INDEX FUTURES AND OPTIONS
TRANSACTIONS, INCLUDING THE RISKS ASSOCIATED WITH THEM, IS
INCLUDED IN THE SAI.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
THE FUND MAY ENGAGE IN FOREIGN CURRENCY EXCHANGE TRANSACTIONS
TO PROTECT AGAINST UNCERTAINTY IN THE LEVEL OF FUTURE EXCHANGE
RATES. Putnam Management may 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, for transaction hedging purposes the
fund may also enter into contracts to purchase or sell foreign
currencies at a future date ("forward contracts") and purchase
and sell foreign currency futures contracts. A foreign
currency forward contract is a negotiated agreement to exchange
currency at a future time at a rate or rates that may be higher
or lower than the spot rate. Foreign currency futures
contracts are standardized exchange-traded contracts and have
margin requirements. In addition, for transaction hedging
purposes the fund may also purchase or sell exchange-listed and
over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies.
The fund may 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, when the fund holds cash or
short-term investments). 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 on
exchanges or in over-the counter markets. 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. 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 decision as to whether and to what extent the fund will
engage in foreign currency exchange transactions will depend on
a number of factors, including prevailing market conditions,
the composition of the fund's portfolio and the availability of
suitable transactions. Accordingly, there can be no assurance
that the fund will engage in foreign currency exchange
transactions at any given time or from time to time. For a
further discussion of the risks associated with purchasing and
selling futures contracts and options, see "Futures and
options." The SAI also contains information concerning the
fund's use of foreign currency exchange transactions.
PORTFOLIO TURNOVER
The length of time the fund has held a particular security is
not generally a consideration in investment decisions. A change
in the securities held by the fund is known as "portfolio
turnover." As a result of the fund's investment policies, under
certain market conditions its portfolio turnover rate may be
higher than that of other mutual funds.
Portfolio turnover generally involves some expense, including
brokerage commissions or dealer markups and other transaction
costs on the sale of securities and reinvestment in other
securities. These transactions may result in realization of
taxable capital gains. Portfolio turnover rates for fiscal 1996
and 1995 were 44.14% and 25.83%, respectively.
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.
<PAGE>
OPTIONS. The fund may seek to increase its current return by
writing covered call and put options on securities it owns or in
which it may invest. The fund receives a premium from writing a
call or put option, which increases the return if the option
expires unexercised or is closed out at a net profit.
When the fund writes a call option, it gives up the opportunity
to profit from any increase in the price of a security above the
exercise price of the option; when it writes a put option, it
takes the risk that it will be required to purchase a security
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 buy and sell put and call options, including
combinations of put and call options on the same underlying
security. The aggregate value of the securities underlying the
options may not exceed 25% of fund assets. The use of these
strategies may be limited by applicable law.
SECURITIES LOANS, REPURCHASE AGREEMENTS AND FORWARD COMMITMENTS.
The fund may lend portfolio securities amounting to not more
than 25% of its assets to broker-dealers and may enter into
repurchase agreements on up to 25% of its assets. These
transactions must be fully collateralized at all times. The
fund may also purchase securities for future delivery, which may
increase its overall investment exposure and involves a risk of
loss if the value of the securities declines prior to the
settlement date. These transactions involve some risk if the
other party should default on its obligation and the fund is
delayed or prevented from recovering the collateral or
completing the transaction.
DERIVATIVES
Certain of the instruments in which the fund may invest, such as
futures contracts, options and forward contracts, are considered
to be "derivatives." Derivatives are financial instruments
whose value depends upon, or is derived from, the value of an
underlying asset, such as a security or an index. Further
information about these instruments and the risk involved in
their use is included elsewhere in this prospectus and in the
SAI.
<PAGE>
DIVERSIFICATION
Subject to approval by the shareholders as noted below, the fund
may invest up to 25% of its total assets in the securities of
any one issuer. If the proposed change does not ultimately
receive sufficient votes for approval, this prospectus will be
revised or supplemented, as appropriate.
The fund is a "diversified" investment company under the
Investment Company Act of 1940. This means that with respect to
75% of its total assets, the fund may not invest more than 5% of
its total assets in the securities of any one issuer (except
U.S. government securities). The remaining 25% of its total
assets is not subject to this restriction. To the extent the
fund invests a significant portion of its assets in the
securities of a particular issuer, it will be subject to an
increased risk of loss if the market value of such issuer's
securities declines.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP TO LIMIT INVESTMENT RISKS
FOR THE FUND'S 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 repurchase agreements maturing in
more than seven days.
At a shareholder meeting to be held on
February 6, 1997,
the
shareholders of
the fund
will be asked to approve a number of
changes to the fund's fundamental investment restrictions. If
the proposed changes are approved, restriction (a) above will
provide that the fund may not and will not: (with respect to 75%
of its total assets) invest 5% of its of its total assets in
securities of any one issuer other than the U.S. government. In
addition, the restriction which prohibits the fund from
acquiring more than 10% of the voting securities of any issuer
will be limited to 75% of the fund's total assets.
If some or all of these proposals do not ultimately receive
sufficient votes for approval, this prospectus will be revised
or supplemented, as appropriate.
Restrictions marked with an asterisk(*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and 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 policy 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
FUND ADVERTISEMENTS MAY, FROM TIME TO TIME, INCLUDE PERFORMANCE
INFORMATION. "Total return" for the one-, five- and ten-year
periods (or for the life of the class Y 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. Total return may also be presented for
other periods.
ALL DATA ARE BASED ON PAST INVESTMENT RESULTS AND DO NOT PREDICT
FUTURE PERFORMANCE.
Investment performance, which will vary, is based on many
factors, including market conditions, portfolio composition,
fund operating expenses and 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. Fund performance may be
compared to that of various indexes. See the SAI.
<PAGE>
HOW THE FUND IS MANAGED
THE TRUSTEES ARE RESPONSIBLE FOR GENERALLY OVERSEEING THE
CONDUCT OF FUND BUSINESS. Subject to such policies as the
Trustees may determine, Putnam Management furnishes a continuing
investment program for the fund and makes investment decisions
on its behalf. Subject to the control of the Trustees, Putnam
Management also manages the fund's other affairs and business.
The fund pays Putnam Management a quarterly fee for these
services based on 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
fund officers and their staff who provide administrative
services. The total reimbursement is determined annually by the
Trustees.
Putnam Management places all orders for purchases and sales of
fund 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
fund shares (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. The Trustees may, without shareholder
approval, create two or more series of shares representing
separate investment portfolios. Any such series of shares may
be divided without shareholder approval into two or more classes
of shares having such preferences and special or relative rights
and privileges as the Trustees determine. The fund's shares are
not currently divided into series. Only the fund's class 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 all classes will vote together as a
single class except when otherwise required by law or as
determined by the Trustees. Shares are freely transferable, are
entitled to dividends as declared by the Trustees, and, if the
fund were liquidated, would receive the net assets of the fund.
The fund may suspend the sale of shares at any time and may
refuse any order to purchase shares. Although the fund is not
required to hold annual meetings of its shareholders,
shareholders holding at least 10% of the outstanding shares
entitled to vote have the right to call a meeting to elect or
remove Trustees, or to take other actions as provided in the
Agreement and Declaration of Trust.
If you own fewer shares than the minimum 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., Director of Safety 1st,
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 EMPLOYEE-DIRECTED QUALIFIED RETIREMENT 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 participant-directed qualified retirement
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
participant-directed qualified retirement 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. Participant-directed
qualified retirement 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 participant-directed qualified retirement 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 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.
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 the 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 for more information
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 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 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 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.
Fund investments in foreign securities may be subject to
withholding taxes at the source on dividend or interest
payments. In that case, the fund yield on those securities
would be decreased.
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.
Investment in an entity that qualifies as a "passive foreign
investment company" under the Code could subject the fund to a
U.S. federal income tax or other charge on certain "excess
distributions" with respect to the investment, and on the
proceeds from disposition of the investment.
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
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
OCTOBER 30, 1996
This SAI is not a prospectus and is only authorized for
distribution when accompanied or preceded by the prospectus of
the fund dated October 30, 1996, as revised from time to time.
This SAI contains information which may be useful to investors
but which is not included in the prospectus. If the fund has
more than one form of current prospectus, each reference to the
prospectus in this SAI shall include all of the fund's
prospectuses, unless otherwise noted. The SAI should be read
together with the applicable prospectus. Investors may obtain
a free copy of the applicable prospectus from Putnam Investor
Services, Mailing address: P.O. Box 41203, Providence, RI
02940-1203.
Part I of this SAI contains specific information about the
fund. Part II includes information about the fund and the other
Putnam funds.
<PAGE>
TABLE OF CONTENTS
PART I PAGE
INVESTMENT RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . .I-3
PROPOSED RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . .I-3
CHARGES AND EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . .I-9
INVESTMENT PERFORMANCE . . . . . . . . . . . . . . . . . . . . .I-
14
ADDITIONAL OFFICERS. . . . . . . . . . . . . . . . . . . . . . .I- 14
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . .I- 15
PART II
MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-29
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-35
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-44
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-46
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .II-59
INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-60
SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-66
SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-66
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-66
STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-67
COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-68
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-73
<PAGE>
SAI
PART I
INVESTMENT RESTRICTIONS
AS FUNDAMENTAL INVESTMENT RESTRICTIONS, WHICH MAY NOT BE
CHANGED WITHOUT A VOTE OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES, THE FUND MAY NOT AND WILL NOT:
(1) Borrow money in excess of 10% of the value (taken at the
lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is
made, and then only from banks as a temporary measure to
facilitate the meeting of redemption requests (not for
leverage) which might otherwise require the untimely
disposition of portfolio investments or for extraordinary or
emergency purposes. Such borrowings will be repaid before any
additional investments are purchased.
(2) Pledge, hypothecate, mortgage or otherwise encumber its
assets in excess of 15% of its total assets (taken at current
value) and then only to secure borrowings permitted by
restriction 1 above. (The deposit of underlying securities and
other assets in escrow and collateral arrangements with respect
to margin for futures contracts and options are not deemed to
be pledges or other encumbrances.)
(3) Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases and
sales of securities, and except that it may make margin
payments in connection with futures contracts and options.
(4) Make short sales of securities or maintain a short sale
position for the account of the fund unless at all times when a
short position is open it owns an equal amount of such
securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for
securities of the same issue as, and at least equal in amount
to, the securities sold short.
(5) Underwrite securities issued by other persons except to
the extent that, in connection with the disposition of its
portfolio investments, it may be deemed to be an underwriter
under certain federal securities laws.
(6) Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities
which are secured by interests in real estate, and securities
representing interests in real estate, and it may acquire and
dispose of real estate or interests in real estate acquired
through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.
<PAGE>
(7) Purchase or sell commodities or commodity contracts,
except that the fund may purchase and sell financial futures
contracts and related options.
(8) Make loans, except by purchase of debt obligations in
which the fund may invest consistent with its investment
policies, by entering into repurchase agreements with respect
to not more than 25% of its total assets (taken at current
value) or through the lending of its portfolio securities with
respect to not more than 25% of its total assets.
(9) Invest in securities of any issuer if, to the knowledge of
the fund, officers and Trustees of the fund and officers and
directors of Putnam Management who beneficially own more than
0.5% of the shares or securities of that issuer together own
more than 5%.
(10) Invest in securities of any issuer if, immediately after
such investment, more than 5% of the total assets of the fund
(taken at current value) would be invested in the securities of
such issuer; provided that this limitation does not apply to
obligations issued or guaranteed as to interest or principal by
the U.S. government or its agencies or instrumentalities, and
this limitation shall apply only to 75% of the fund's total
assets with respect to investments in securities issued by, or
backed by the credit of, any foreign government or its agencies
and instrumentalities.
(11) Acquire more than 10% of the voting securities of any
issuer.
(12) Purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if as a result
of such purchase more than 25% of the fund's total assets would
be invested in any one industry.
(13) Invest in the securities of other registered investment
companies, except by purchase in the open market including only
customary brokers' commissions, and except as they may be
acquired as part of a merger, consolidation or acquisition of
assets.
(14) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, although it may purchase securities of
issuers which deal in, represent interests in, or are secured
by interests in such leases, rights, or contracts, and it may
acquire or dispose of such leases, rights, or contracts
acquired through the exercise of its rights as a holder of debt
obligations secured thereby.
(15) Make investments for the purpose of gaining control of a
company's management.
(16) Issue any class of securities which is senior to the fund's
shares of beneficial interest.
Although certain of the fund's fundamental investment
restrictions permit it to borrow money to a limited extent, the
fund does not currently intend to do so and did not do so last
year.
The Investment Company Act of 1940 provides that a "vote of a
majority of the outstanding voting securities" of the fund means
the affirmative vote of the lesser of (1) more than 50% of the
outstanding fund shares, or (2) 67% or more of the shares
present at a meeting if more than 50% of the outstanding fund
shares are represented at the meeting in person or by proxy.
IT IS CONTRARY TO THE FUND'S PRESENT POLICY, WHICH MAY BE
CHANGED WITHOUT SHAREHOLDER APPROVAL, TO:
(1) Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities restricted
as to resale, excluding securities determined by the Trustees of
the fund (or the person designated by the Trustees of the fund
to make such determinations) to be readily marketable, and (c)
repurchase agreements maturing in more than seven days, if, as a
result, more than 15% of the fund's net assets (taken at current
value) would be invested in securities described in (a), (b) and
(c) above.
(2) Invest in securities of any issuer if the party responsible
for payment, together with any predecessors, has been in
operation for less than three consecutive years and, as a result
of the investment, the aggregate of such investments would
exceed 5% of the value of the fund's net assets; provided,
however, that this restriction shall not apply to any obligation
of the United States or its agencies or instrumentalities.
In addition, the fund has agreed with certain state securities
commissions to the following investment restrictions, which may
only be amended with the consent of the relevant commission and
unless so amended will continue to apply to the fund for so long
as shares of the fund are qualified for sale in the relevant
state.
The fund will not:
(1) Invest in warrants (other than warrants acquired by the fund
as a part of a unit or attached to securities at the time of
purchase) if, as a result, such investments (valued at the lower
of cost or market) would exceed 10% of the value of the fund's
net assets; provided that not more than 2% of the fund's net
assets may be invested in warrants not listed on any principal
foreign or domestic exchange.
(2) Purchase or sell real property (including limited
partnership interests), except that the fund may (a) purchase or
sell readily marketable interests in real estate investment
trusts or readily marketable securities of companies which
invest in real estate (b) purchase or sell securities that are
secured by interests in real estate or interests therein, or (c)
acquire real estate through exercise of its rights as a holder
of obligations secured by real estate or interests therein or
sell real estate so acquired.
PROPOSED RESTRICTIONS
At a meeting to be held on February 6, 1997, shareholders of the
fund are being asked to approve a number of changes to the
fund's fundamental investment restrictions, including the
elimination of certain of these restrictions. If these
proposals are approved at that meeting, the fund's fundamental
and non-fundamental investment restrictions will be as follows
after that date:
FUNDAMENTAL RESTRICTIONS
(1) Borrow money in excess of 10% of the value (taken at the
lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is
made, and then only from banks as a temporary measure to
facilitate the meeting of redemption requests (not for leverage)
which might otherwise require the untimely disposition of
portfolio investments or for extraordinary or emergency
purposes. Such borrowings will be repaid before any additional
investments are purchased.
(2) Underwrite securities issued by other persons except to the
extent that, in connection with the disposition of its portfolio
investments, it may be deemed to be an underwriter under certain
federal securities laws.
(3) Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities
which are secured by interests in real estate, and securities
representing interests in real estate, and it may acquire and
dispose of real estate or interests in real estate acquired
through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.
(4) Purchase or sell commodities or commodity contracts, except
that the fund may purchase and sell financial futures contracts
and options and may enter into foreign exchange contracts and
other financial transactions not involving physical commodities.
<PAGE>
(5) Make loans, except by purchase of debt obligations in which
the fund may invest consistent with its investment policies, by
entering into repurchase agreements, or by lending its portfolio
securities.
(6) With respect to 75% of its total assets, invest in the
securities of any issuer if, immediately after such investment,
more than 5% of the total assets of the fund (taken at current
value) would be invested in the securities of such issuer;
provided that this limitation does not apply to obligations
issued or guaranteed as to interest or principal by the U.S.
government or its agencies or instrumentalities.
(7) With respect to 75% of its total assets, acquire more than
10% of the outstanding voting securities of any issuer.
(8) Purchase securities (other than securities of the U.S.
government, its agencies or instrumentalities) if as a result of
such purchase more than 25% of the fund's total assets would be
invested in any one industry.
(9) Issue any class of securities which is senior to the fund's
shares of beneficial interest, except for permitted borrowings.
NON-FUNDAMENTAL RESTRICTIONS
(1) Invest in (a) securities which at the time of such
investment are not readily marketable, (b) securities restricted
as to resale, excluding securities determined by the Trustees of
the fund (or the person designated by the Trustees of the fund
to make such determinations) to be readily marketable, and (c)
repurchase agreements maturing in more than seven days, if, as a
result, more than 15% of the fund's net assets (taken at current
value) would be invested in securities described in (a), (b) and
(c) above.
(2) Invest in securities of any issuer if the party responsible
for payment, together with any predecessors, has been in
operation for less than three consecutive years and, as a result
of the investment, the aggregate of such investments would
exceed 5% of the value of the fund's net assets; provided,
however, that this restriction shall not apply to any obligation
of the United States or its agencies or instrumentalities.
(3) Invest in the securities of any issuer, if, to the
knowledge of the fund, officers and Trustees of the fund and
officers and directors of Putnam Management who beneficially own
more than 0.5% of the securities of that issuer together own
more than 5% of such securities.
(4) Purchase securities on margin, except such short-term
credits as may be necessary for the clearance of purchases and
sales of securities, and except that it may make margin payments
in connection with financial futures contracts or options.
(5) Make short sales of securities or maintain a short position
for the account of the fund unless at all times when a short
position is open it owns an equal amount of such securities or
owns securities which, without payment of any further
consideration, are convertible into or exchangeable for
securities of the same issue as, and in equal amount to, the
securities sold short.
(6) Pledge, hypothecate, mortgage or otherwise encumber its
assets in excess of 33 1/3% of its total assets (taken at cost)
in connection with permitted borrowings.
(7) Buy or sell oil, gas or other mineral leases, rights or
royalty contracts, although it may purchase securities which
represent interests in, are secured by interests in, or which
are issued by issuers which deal in, such leases, rights or
contracts, and it may acquire and dispose of such leases, rights
or contracts acquired through the exercise of its rights as a
holder of debt obligations secured thereby.
(8) Invest in the securities of registered open-end investment
companies, except as they may be acquired as part of a merger or
consolidation or acquisition of assets or by purchases in the
open market involving only customary brokers' commissions.
If shareholders do not ultimately approve some or all of the
proposed changes, this SAI will be revised accordingly.
-------------------------
All percentage limitations on investments (other than pursuant
to non-fundamental restriction (1)) will apply at the time of
the making of an investment and shall not be considered violated
unless an excess or deficiency occurs or exists immediately
after and as a result of such investment.
-------------------------
<PAGE>
CHARGES AND EXPENSES
MANAGEMENT FEES
Under a Management Contract dated October 21, 1996 the fund
pays a quarterly fee to Putnam Management based on the average
net assets of the fund, as determined at the close of each
business day during the quarter, at an annual rate of 0.80% of
the first $500 million of the fund's average net assets; 0.70%
of the next $500 million; 0.65% of the next $500 million; 0.60%
of the next $5 billion; 0.575% of the next $5 billion; 0.555%
of the next $5 billion; 0.54% of the next $5 billion; and 0.53%
of any amount over $21.5 billion. For the past three fiscal
years, pursuant to the Management Contract (and a management
contract in effect prior to October 21, 1996, under which the
management fee payable to Putnam Management was paid at the
annual rate of 0.80% of the first $500 million of average net
assets, 0.70% of the next $500 million, 0.65% of the next $500
million, and 0.60% of any amount over $1.5 billion), the fund
incurred the following fees:
REFLECTING A
REDUCTION IN THE
FOLLOWING AMOUNTS
FISCAL MANAGEMENT PURSUANT TO AN
YEAR FEE PAID EXPENSE LIMITATION
1996 $1,088,976 0
1995 $ 295,925 $ 1,767
1994 $ 10,001 $22,860
BROKERAGE COMMISSIONS
The following table shows brokerage commissions paid during the
fiscal periods indicated:
FISCAL BROKERAGE
YEAR COMMISSIONS
1996 $855,903
1995 $206,547
1994 $ 49,103
<PAGE>
The following table shows transactions placed with brokers and
dealers during the most recent fiscal year to recognize
research, statistical and quotation services Putnam Management
considered to be particularly useful to it and its affiliates:
DOLLAR
VALUE PERCENT OF
OF THESE TOTAL AMOUNT OF
TRANSACTIONS TRANSACTIONS COMMISSIONS
$234,359,499 86.37% $765,190
ADMINISTRATIVE EXPENSE REIMBURSEMENT
The fund reimbursed Putnam Management in the following amounts
for administrative services during fiscal 1996, including the
following amounts for compensation of certain officers of the
fund and contributions to the Putnam Investments, Inc. Profit
Sharing Retirement Plan for their benefit:
PORTION OF TOTAL
REIMBURSEMENT FOR
TOTAL COMPENSATION AND
REIMBURSEMENT CONTRIBUTIONS
$7,734 $6,769
TRUSTEE FEES
Each Trustee receives a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of other
Putnam funds. The Trustees periodically review their fees to
assure that such fees continue to be appropriate in light of
their responsibilities as well as in relation to fees paid to
trustees of other mutual fund complexes. The Trustees meet
monthly over a two-day period, except in August. The
Compensation Committee, which consists solely of Trustees not
affiliated with Putnam Management and is responsible for
recommending Trustee compensation, estimates that Committee and
Trustee meeting time together with the appropriate preparation
requires the equivalent of at least three business days per
Trustee meeting. The following table shows the year each
Trustee was first elected a Trustee of the Putnam funds, the
estimated fees to be paid to each Trustee by the
fund for the current fiscal year and the fees
paid to each Trustee by all of the Putnam funds during calendar
year 1995:
<PAGE>
COMPENSATION TABLE
<TABLE><CAPTION>
Pension on Estimated(3) Total
Aggregate retirement annual benefits compensation
compensation benefits accrued from all from all
from the as part of Putnam funds Putnam
Trustees fund(1) fund expenses(2) upon retirement funds(4)
<S> <C> <C> <C> <C>
Jameson A. Baxter/1994 $647 $0 $71,676 $150,854
Hans H. Estin/1972 641 0 70,043 150,854
John A. Hill/1985 (5) 636 0 70,043 149,854
Ronald J. Jackson/1996(6) 71 n/a n/a n/a
Elizabeth T. Kennan/1992 641 0 69,709 148,854
Lawrence J. Lasser/1992 632 0 70,043 150,854
Robert E. Patterson/1984 700 0 71,043 152,854
Donald S. Perkins/1982 635 0 69,376 150,854
William F. Pounds/1971 674(7) 0 70,543 149,854
George Putnam/1957 641 0 70,043 150,854
George Putnam, III/1984 641 0 70,043 150,854
Eli Shapiro/1995(8) 707 0 47,686 95,372
A.J.C. Smith/1986 632 0 68,252 149,854
W. Nicholas Thorndike/1992 696 0 71,043 152,854
(1) Reflects estimated amounts to be paid for the current fiscal year. Includes an
annual retainer and an attendance fee for each meeting attended.
(2
) The Trustees approved a Retirement Plan for Trustees of the Putnam funds on October 1,
1996. Prior to that date, voluntary retirement benefits were paid to certain retired
Trustees, and no such benefits were accrued as part of fund expenses.
(3) Assumes that each Trustee retires after at least five years of service. Estimated
benefits for each are based on amounts paid to such Trustee for the three most recent
calendar years (or, for Trustees who have not served as Trustees for the three most
recent calendar years, the average amount paid to each Trustee for such years).
(4)
As of December 31, 1995, there were 99 funds in the Putnam family.
(5)
Includes compensation deferred pursuant to a Trustee Compensation Deferral Plan.
The total amount of deferred compensation payable by the Putnam funds to
Mr. Hill as of December 31, 1995 was $51,141. Information on deferred
compensation includes income earned on such amounts.
(6)
Elected as a Trustee in May 1996.
(7)
Includes additional compensation for service as Vice Chairman of the Putnam funds.
(8)
Elected as a Trustee in April 1995.
</TABLE>
Under a Retirement Plan for Trustees of the Putnam
funds (the "Plan"), each Trustee who retires with at
least five years of service as a Trustee of
the funds is entitled to receive an annual retirement
benefit equal to one-half of the average annual
compensation paid to such Trustee for the last three years of
service prior to retirement. This retirement benefit is
payable during a Trustee's lifetime, beginning the year following
retirement, for a number of years equal to such Trustee's years of
service. A death benefit is also available under the Plan which
assures that the Trustee and his or her beneficiaries will
receive benefit payments for the lesser of an aggregate period of
(i) ten years or (ii) such Trustee's total years of service . A
Trustee who retired at December 31, 1995 would have received
an annual benefit of $70,043 under the Plan (assuming attendance
at all Trustee meetings during the preceding three years).
The Plan Administrator (a committee comprised of Trustees
that are not "interested persons" of the fund, as defined in the
Investment Company Act of 1940) may terminate or amend the
Plan at any time, but no termination or amendment will result
in a reduction in the amount of benefits (i) currently being paid to
a Trustee at the time of such termination or amendment, or (ii) to
which a current Trustee would have been entitled to receive had he
or she retired immediately prior to such termination or
amendment.
For additional information concerning the Trustees, see "Management"
in Part II of this SAI.
SHARE OWNERSHIP
At September 30, 1996, the officers and Trustees of the fund as a
group owned less than 1% of the outstanding shares of each class of
the fund, and, except as noted below, to the knowledge of the fund
no person owned of record or beneficially 5% or more of the shares
of any class of shares of the fund.
SHAREHOLDER NAME PERCENTAGE
CLASS AND ADDRESS OWNED
B Merrill Lynch Pierce Fenner 10.00%
4800 Deer Lake Drive East
Jacksonville, FL 32246-6484
M F.M. Co. 6.10%
1 Financial Plaza
Holland, MI 49423-9154
Y California State Automobile 100.00%
Association and California State
Automobile Association
Inter-Insurance Bureau Autosave Plan
c/o Putnam Fiduciary Trust
Company, as trustee or agent,
859 Willard Street, Quincy, MA 02269
DISTRIBUTION FEES
During fiscal 1996, the fund paid the following 12b-1 fees to Putnam
Mutual Funds:
CLASS A CLASS B CLASS M
$179,564 $594,107 $40,125
CLASS A SALES CHARGES AND CONTINGENT DEFERRED SALES CHARGES
Putnam Mutual Funds received sales charges with respect to class A
shares in the following amounts during the periods indicated:
SALES CHARGES
RETAINED BY PUTNAM CONTINGENT
TOTAL MUTUAL FUNDS DEFERRED
FRONT-END AFTER SALES
FISCAL YEAR SALES CHARGES DEALER CONCESSIONS CHARGES
1996 $1,934,550 $296,443 $ 1,039
1995 $360,087 $48,353 $16,856
1994 $ 65,752 $ 6,203 $0
CLASS B CONTINGENT DEFERRED SALES CHARGES
Putnam Mutual Funds received contingent deferred sales charges upon
redemptions of class B shares in the following amounts during the
periods indicated:
CONTINGENT DEFERRED
FISCAL YEAR SALES CHARGES
1996 $56,441
1995 $13,612
1994 $0
CLASS M SALES CHARGES
Putnam Mutual Funds received sales charges with respect to class M
shares in the following amount during the 1996 fiscal year:
SALES CHARGES
RETAINED BY PUTNAM
MUTUAL FUNDS
TOTAL AFTER
FISCAL YEAR SALES CHARGES DEALER CONCESSIONS
1996 $123,135 $18,112
1995 $ 25,486 $ 3,908
INVESTOR SERVICING AND CUSTODY FEES AND EXPENSES
During the 1996 fiscal year, the fund incurred $701,824 in fees and
out-of-pocket expenses for investor servicing and custody services
provided by Putnam Fiduciary Trust Company.
INVESTMENT PERFORMANCE
STANDARD PERFORMANCE MEASURES
(for periods ended June 30, 1996)
Class A Class B Class M
Inception date: 02/28/91 06/01/94 12/01/94
ANNUALIZED
TOTAL RETURN NAV* POP** NAV CDSC POP NAV
- -----------------------------------------------------------------
1 year 20.21% 13.28% 19.35% 14.35% 19.71% 15.51%
5 years 13.30 11.96
Life of class 11.28 10.04 10.61 9.31 14.41 11.86
* net asset value
** public offering price
Data represent past performance and are not indicative of future
results. Total return for class A and class M shares reflect the
deduction of the maximum sales charge of 5.75% and 3.50%,
respectively. Total return for class B shares reflects the
deduction of the applicable contingent deferred sales charge
("CDSC"). The maximum class B CDSC is 5.0%. See "Standard
performance measures" in Part II of this SAI for information on how
performance is calculated. Past performance is no guarantee of
future results.
ADDITIONAL OFFICERS
In addition to the persons listed as fund officers in Part II of
this SAI, each of the following persons is also a Vice President of
the fund and certain of the other Putnam funds, the total number of
which is noted parenthetically. Officers of Putnam Management hold
the same offices in Putnam Management's parent company, Putnam
Investments, Inc.
OFFICER NAME (AGE) (NUMBER OF FUNDS)
ANTHONY W. REGAN (Age 57) (10 funds). Senior Managing Director of
Putnam Management. Director of Putnam Investments, Inc. Vice
President and Trust Officer of Putnam Fiduciary Trust Company.
IAN C. FERGUSON (Age 39) (22 funds). Senior Managing Director of
Putnam Management. Prior to April, 1996, Mr. Ferguson was Chief
Executive Officer at Hong Kong Shanghai Banking Corporation.
BRETT C. BROWCHUK (Age 33) (38 funds). Managing Director of Putnam
Management. Prior to April, 1994, Mr. Browchuk was managing
Director at Fidelity Investments.
PETER CARMAN (Age 55) (30 funds). Senior Managing Director of
Putnam Management. Prior to August 1, 1993, Mr. Carman was Chief
Investment Officer, Chairman of the U.S. Equity Investment Policy
Committee and a Director of Sanford C. Bernstein & Company, Inc.
JUSTIN M. SCOTT (Age 39) (7 funds). Managing Director of Putnam
Management.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, MA 02109,
are the fund's independent accountants, providing audit services,
tax return review and other tax consulting services and assistance
and consultation in connection with the review of various Securities
and Exchange Commission filings. The Report of Independent
Accountants, financial highlights and financial statements included
in the fund's Annual Report for the fiscal year ended June 30, 1996,
filed electronically on August 29, 1996 (File No. 811-06190), are
incorporated by reference into this SAI. The financial highlights
in the prospectus and incorporated by reference into this SAI and
the financial statements incorporated by reference into the
prospectus and this SAI have been so included and incorporated in
reliance upon the report of the independent accountants, given on
their authority as experts in auditing and accounting.
