AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
MAY 25 , 1994
REGISTRATION NO. 33- 53135
811- 7615
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. 1 / X /
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Post-Effective Amendment No. / /
and ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940 ----
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Amendment No. 1 / X /
(Check appropriate box or boxes) ----
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PUTNAM DIVERSIFIED EQUITY TRUST
(Exact name of registrant as specified in charter)
One Post Office Square, Boston, Massachusetts 02109
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code
(617) 292-1000
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JOHN R. VERANI, Vice President
PUTNAM DIVERSIFIED EQUITY TRUST
One Post Office Square
Boston, Massachusetts 02109
(Name and address of agent for service)
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Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
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Approximate date of commencement of proposed sale to the
public: As soon as practicable after the effective date of this
Registration Statement.
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PUTNAM DIVERSIFIED EQUITY TRUST
CROSS REFERENCE SHEET
(AS REQUIRED BY RULE 481(A))
PART A
N-1A ITEM NO. LOCATION
1. Cover Page....................... Cover Page
2. Synopsis......................... Expenses summary
3. Condensed Financial Information.. How performance is shown
4. General Description of
Registrant........................ Objective; How objective
is pursued; Organization
and history
5. Management of the Fund............ Expenses summary; How
the Fund is managed;
About Putnam
Investments, Inc.
5A. Management's Discussion of
Fund Performance.................. Not applicable
6. Capital Stock and Other
Securities........................ Cover Page; Organization
and history; How
distributions are made;
tax information
7. Purchase of Securities Being
Offered........................... How to buy
shares;
Distribution Plans: How
to sell shares;
How to exchange
shares; How the Fund
values its shares
<PAGE>
8. Redemption or Repurchase.......... How to buy
shares; How to sell
shares; How to
exchange shares;
Organization and history
9. Pending Legal Proceedings......... Not Applicable
PART B
N-1A ITEM NO. LOCATION
10. Cover Page........................ Cover Page
11. Table of Contents................. Cover Page
12. General Information and History... Organization and history
(Part A)
13. Investment Objectives and
Policies.......................... How objective is pursued
(Part A); Investment
Restrictions of the
Fund; Miscellaneous
Investment Practices
14. Management of the Registrant...... Management of the Fund
(Trustees; Officers);
Additional Officers of
the Fund
15. Control Persons and Principal
Holders of Securities............. Management of the Fund
(Trustees; Officers);
Fund Charges and
Expenses (Ownership of
Fund Shares)
16. Investment Advisory and Other
Services.......................... Management of the Fund
(Trustees; Officers; The
Management Contract;
Principal Underwriter);
Fund Charges and
Expenses; Distribution
Plans; Independent
Accountants; Custodian
<PAGE>
17. Brokerage Allocation.............. Management of the Fund
(Portfolio
Transactions); Fund
Charges and Expenses
18. Capital Stock and Other
Securities........................ Organization and history
(Part A); How
distributions are made;
tax information (Part
A); Suspension of
Redemptions
19. Purchase, Redemption and Pricing
of Securities Being Offered....... How to buy
shares (Part A); How to
sell shares
(Part A); How to
exchange shares
(Part A); How to Buy
Shares; Determination of
Net Asset Value;
Suspension of
Redemptions
20. Tax Status........................ How distributions are
made; tax information
(Part A); Taxes
21. Underwriters...................... Management of the Fund
(Principal Underwriter);
Fund Charges and
Expenses
22. Calculation of Performance Data... How performance is shown
(Part A);
Standard Performance
Measures
23. Financial Statements.............. Independent Accountants
and Financial Statements
PART C
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of the
Registration Statement.
<PAGE>
PROSPECTUS
, 1994
PUTNAM DIVERSIFIED EQUITY TRUST
CLASS A AND B SHARES
INVESTMENT STRATEGY: GROWTH
This Prospectus explains concisely what you should know before
investing in Class A or B shares of the Fund. Please read it
carefully and keep it for future reference. You can find more
detailed information about the Fund in the , 1994 Statement
of Additional Information, as amended from time to time. For a
free copy of the Statement, call Putnam Investor Services at
1-800-225-1581. The Statement 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.
BOSTON * LONDON * TOKYO
<PAGE>
PUTNAM DIVERSIFIED EQUITY TRUST (THE "FUND") SEEKS CAPITAL
APPRECIATION THROUGH A DIVERSIFIED PORTFOLIO
CONSISTING
PRIMARILY OF DOMESTIC GROWTH, DOMESTIC VALUE AND
INTERNATIONAL STOCKS.
THE FUND OFFERS TWO CLASSES OF SHARES: CLASS A AND CLASS B. EACH
CLASS IS SOLD PURSUANT TO DIFFERENT SALES ARRANGEMENTS AND BEARS
DIFFERENT EXPENSES. FOR MORE INFORMATION ABOUT THE DIFFERENT
SALES ARRANGEMENTS, SEE "ALTERNATIVE SALES ARRANGEMENTS ."
FOR INFORMATION ABOUT VARIOUS EXPENSES BORNE BY EACH CLASS, SEE
"EXPENSES SUMMARY."
<PAGE>
ABOUT THE FUND
Expenses summary
................ ............ ....................
.....
Objective
. ....................................................
.
How objective is pursued
. .....................................................
Risk factors
..................................................... .
How performance is shown
.....................................................
.
How the Fund is managed
................... ................................... <
/R>
Organization and history
ABOUT YOUR INVESTMENT
Alternative sales arrangements
....................... ................ .............
How to buy shares
................................... ................ .
Distribution Plans
................................... ................ .
How to sell shares
................................... ................
.
How to exchange shares
....................................................
How the Fund values its shares
....................................................
How distributions are made; tax information
ABOUT PUTNAM INVESTMENTS, INC.
<PAGE>
ABOUT THE FUND
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing in
the Fund. The following table summarizes your maximum
transaction costs from investing in the Fund and expenses which
the Fund expects to incur in its first fiscal year. The Examples
show the estimated cumulative expenses attributable to a
hypothetical $1,000 investment in Class A or Class B shares of
the Fund over specified periods.
CLASS A CLASS B
SHARES SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 4.50% NONE*
5.0% in the first
Deferred Sales Charge (as a year, declining
percentage of the lower of to 1.0% in the
original purchase price or sixth year, and
redemption proceeds) NONE** eliminated thereafter
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Management Fees 0.70% 0.70%
12b-1 Fees 0.50% 1.00%
Other Expenses 0.34% 0.34%
Total Fund Operating Expenses 1.54% 2.04%
EXAMPLES
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3
year years
CLASS A $60 $91
CLASS B $71 $94
<PAGE>
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return but no redemption:
1 3
year years
CLASS A $60 $91
CLASS B $21 $64
The table is provided to help you understand the expenses of
investing in the Fund and your share of the operating expenses
which the Fund expects to incur during its first fiscal year.
The 12b-1 fees shown in the table reflect the amount to which the
Trustees currently limit payments under the Class A Distribution
Plan and the maximum amount permitted under the Class B
Distribution Plan. "Other Expenses" are based on estimated
amounts for the Fund's first fiscal year. 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 will vary.
* Class B shares are sold without a front-end sales charge, but
their 12b-1 fees may cause long-term shareholders to pay more
than the economic equivalent of the maximum permitted front-end
sales charge.
** 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 of $1 million or
more. See "How to buy shares."
OBJECTIVE
THE FUND SEEKS CAPITAL APPRECIATION. The Fund is not intended to
be a complete investment program, and there is no assurance that
the Fund will achieve its objective.
HOW OBJECTIVE IS PURSUED
BASIC INVESTMENT STRATEGY
THE FUND INVESTS ITS ASSETS PRIMARILY IN A DIVERSIFIED PORTFOLIO
OF COMMON STOCKS. However, the Fund may purchase preferred
stocks, convertible securities and warrants, as well as debt
securities, money market instruments and cash. Under
normal market conditions, Putnam Investment Management, Inc., the
Fund's investment manager ("Putnam Management"), will invest
at least 65% of the Fund's investments in equity securities,
with a substantial portion of the portfolio in each
of the following sectors of the equity market: domestic "growth"
stocks, domestic "value" stocks and international stocks, each
as described below.
GROWTH SECTOR. Putnam Management will select securities for this
sector of the Fund's portfolio based primarily on investment
considerations suggesting that the issuer's earnings may grow
faster than those of its competitors.
VALUE SECTOR. Putnam Management will select securities for this
sector of the Fund's portfolio based primarily on investment
considerations suggesting that a security is significantly
undervalued in relation to underlying asset values or earnings
potential. In selecting undervalued securities, Putnam Management
may make investment judgments contrary to those of most
investors.
INTERNATIONAL SECTOR. Putnam Management will select securities
for this sector of the Fund's portfolio which are securities
principally traded on securities markets outside the United
States ("International Stocks"). International Stocks chosen for
the Fund's portfolio may include stocks that have characteristics
similar to those of growth and value stocks. The Fund may invest
up to 45% of its investments in International Stocks . The Fund
may also purchase Eurodollar certificates of deposit without
regard to this limit. Foreign investments involve certain risks
not present in domestic securities. See "Investments in foreign
securities" and "Foreign currency exchange transactions".
SELECTION OF INVESTMENTS. Putnam Management will determine the
amount of assets to be allocated to each of the three sectors
relying on both quantitative analytical techniques that measure
relative risks and opportunities of each stock type based on
current and historical market data, as well as on its own
assessment of economic and market conditions. Putnam Management
will regularly review this allocation of assets and make such
adjustments as it deems appropriate, although there are no fixed
limits on allocations, except as described in "International
sector." Putnam Management believes that diversifying the Fund's
portfolio among these three sectors of the equity market may
serve to reduce volatility and associated risk, while at the same
time providing a competitive total investment return. However,
there is no assurance this result will be achieved.
The Fund's portfolio securities may include widely traded common
stocks of larger companies, as well as common stocks of smaller,
less well-known companies. In selecting equity securities for
the Fund, Putnam Management will consider, among other things, an
issuer's financial strength, competitive position and projected
future earnings and dividends. Investing in securities of
smaller, less well-known companies may present greater
opportunities for capital appreciation, but may also involve
greater risks. These companies may have limited product lines,
markets or 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.
PORTFOLIO TURNOVER. The length of time the Fund has held a
particular security is not generally a consideration in
investment decisions. A change in the securities held by the
Fund is known as "portfolio turnover." As a result of the Fund's
investment policies, under certain market conditions, the Fund's
portfolio turnover rate may be higher than that of other mutual
funds. Portfolio turnover generally involves some expense to the
Fund, including brokerage commissions or dealer mark-ups and
other transaction costs on the sale of securities and
reinvestment in other securities. Such transactions may result
in realization of taxable capital gains. While it is impossible
to predict the Fund's portfolio turnover rate, based on its
experience, Putnam Management believes that such rate will not
exceed 150%.
DEFENSIVE STRATEGIES
AT TIMES PUTNAM MANAGEMENT MAY JUDGE THAT CONDITIONS IN THE
SECURITIES MARKETS MAKE PURSUING THE FUND'S BASIC INVESTMENT
STRATEGY INCONSISTENT WITH THE BEST INTERESTS OF ITS
SHAREHOLDERS. At such times Putnam Management may temporarily
use alternative strategies, primarily designed to reduce
fluctuations in the value of the Fund's assets. In implementing
these "defensive" strategies, depending on the circumstances, the
Fund may invest predominantly in only one or two of the market
sectors described above and may invest primarily in debt
securities, preferred stocks, U.S. government and agency
obligations, cash or money market instruments, or in other
securities Putnam Management considers consistent with such
defensive strategies. It is impossible to predict when, or for
how long, the Fund will use such alternative strategies.
RISK FACTORS
INVESTMENTS IN FOREIGN SECURITIES. Since foreign securities
are normally denominated and traded in foreign currencies, the
values of Fund assets invested in foreign securities and any
investment income derived from them may be affected favorably or
unfavorably by currency exchange rates and exchange control
regulations. There may be less information publicly available
about a foreign issuer than about a U.S. issuer, and foreign
issuers are not generally subject to accounting, auditing and
financial reporting standards and practices comparable to those
in the United States. The securities of some foreign issuers are
less liquid and at times more volatile than securities of
comparable U.S. issuers. Foreign brokerage commissions and other
fees are also generally higher than in the United States.
Foreign settlement procedures and trade regulations may involve
certain risks (such as delay in payment or delivery of securities
or in the recovery of the Fund's assets held abroad) and expenses
not present in the settlement of domestic investments.
In addition, with respect to certain foreign countries,
especially in emerging markets, 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 which could affect the value of the Fund's
investments in certain foreign countries. Legal remedies
available to investors in certain foreign countries may
be more limited than those available with respect to
investments in the United States or in other foreign
countries. The laws of some foreign countries may limit the
Fund's ability to invest in securities of certain issuers located
in those foreign countries. Special tax considerations apply to
foreign securities. FOR MORE INFORMATION CONCERNING THE
RISKS ASSOCIATED WITH INVESTING IN FOREIGN SECURITIES,
SEE THE STATEMENT OF ADDITIONAL INFORMATION.
See also "Basic investment strategy," Financial futures and
options" and "Other investment strategies."
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. The Fund may
engage in foreign currency exchange transactions to protect
against uncertainty in the level of future exchange rates.
The Fund may engage in foreign currency exchange
transactions in connection with the purchase and sale of
portfolio securities ("transaction hedging") and to protect the
value of specific portfolio positions ("position hedging").
The Fund may engage in transaction hedging to protect against a
change in the foreign currency exchange rate between the date on
which the Fund contracts to purchase or sell the 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 as part of its transaction hedging
strategies.
If conditions warrant, 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 as part of its transaction hedging strategies. A
foreign currency forward contract is a negotiated agreement to
exchange currency at a future time at a rate or rates that may be<PAGE>
higher or lower than the spot rate. Foreign currency futures
contracts are standardized exchange-traded contracts and have
margin requirements. The Fund may also purchase 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 the
decline in the value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in the value of the foreign currencies for
securities which the Fund intends to buy, when the Fund holds
cash reserves or short-term investments). For position hedging
purposes, the Fund may purchase or sell foreign currency futures
contracts, foreign currency forward contracts, and put and call
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 currencies 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.
Hedging transactions involve costs and may result in losses.
There is no assurance that appropriate foreign currency exchange
transactions will be available with respect to all currencies in
which the Fund's investments may be denominated. The Fund's
ability to engage in hedging transactions may be limited by tax
considerations. The Fund's hedging transactions may affect the
character or amount of the Fund's distributions.
FOR MORE INFORMATION RELATING TO FOREIGN CURRENCY EXCHANGE
TRANSACTIONS, SEE THE STATEMENT OF ADDITIONAL INFORMATION. FOR
MORE INFORMATION ABOUT FUTURES CONTRACTS AND RELATED OPTIONS, SEE
"FINANCIAL FUTURES AND OPTIONS" BELOW.
FINANCIAL FUTURES AND OPTIONS
THE FUND MAY BUY AND SELL FINANCIAL FUTURES CONTRACTS ON STOCK
INDEXES, SECURITIES AND ON FOREIGN CURRENCIES. A futures
contract is a contract to buy or sell units of a particular stock
index (an "Index Future"), or a foreign currency, at an agreed
price on a specified future date. Depending on the change in
value of the index, security or currency between the time when
the Fund enters into and terminates a futures contract, the Fund
realizes a gain or loss. The Fund may purchase and sell futures
contracts for hedging purposes and to adjust the Fund's exposure
to the relevant stock markets. For example, when Putnam
Management wants to increase the Fund's exposure to domestic
equity securities, it may do so by taking long positions on the
Standard & Poor's 500 Stock Index. Similarly, when Putnam
Management wants to increase the Fund's exposure to international
securities, it may do so by taking long positions in futures
contracts relating to international securities. The Fund may buy
and sell call and put options on futures contracts or on stock
indices in addition to or as an alternative to purchasing or
selling futures contracts or, to the extent permitted by
applicable law, to earn additional income.
THE USE OF FUTURES AND OPTIONS INVOLVES CERTAIN SPECIAL RISKS.
FUTURES AND OPTIONS TRANSACTIONS INVOLVE COSTS AND MAY RESULT IN
LOSSES. Certain risks arise because of the possibility of
imperfect correlations between movements in the prices of
financial futures and options and movements in the
prices of the underlying stock index, securities or currencies,
or of the securities or currencies which are the subject of the
hedge. The successful use of futures and options further depends
on Putnam Management's ability to forecast market movements
correctly. Other risks arise from the Fund's potential inability
to close out its futures or related options positions, and there
can be no assurance that a liquid secondary market will exist for
any futures contract or option at a 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. The use of futures or
options on futures for purposes other than hedging is regarded as
speculative.
Because the markets for options and futures on foreign equity
securities and foreign currencies are relatively new and still
developing, the Fund's ability to engage in such transactions may
be limited. Certain provisions of the Internal Revenue Code and
certain regulatory requirements may also limit the Fund's ability
to engage in futures and options transactions.
A MORE DETAILED EXPLANATION OF FUTURES AND OPTIONS TRANSACTIONS,
INCLUDING THE RISKS ASSOCIATED WITH THEM, IS INCLUDED IN THE
STATEMENT OF ADDITIONAL INFORMATION.
<PAGE>
OTHER INVESTMENT PRACTICES
THE FUND MAY ALSO ENGAGE TO A LIMITED EXTENT IN THE FOLLOWING
INVESTMENT PRACTICES, EACH OF WHICH INVOLVES CERTAIN SPECIAL
RISKS. THE STATEMENT OF ADDITIONAL INFORMATION 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 and on foreign currencies. The
Fund receives a premium from writing a call or put option, which
increases the Fund's return if the option expires unexercised or
is closed out at a net profit. When the Fund writes a call
option, it gives up the opportunity to profit from any increase
in the price of a security or currency above the exercise price
of the option; when it writes a put option, the Fund takes the
risk that it will be required to purchase a security or currency
from the option holder at a price above the current market price
of the security or currency. 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 for hedging purposes. The Fund
may also from time to time buy and sell combinations of put and
call options on the same underlying security or currency to earn
additional income. The aggregate value of the securities and
foreign currencies underlying options written by the Fund may not
exceed 25% of the Fund's assets. The Fund's use of options
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 to the Fund if the other party
should default on its obligation and the Fund is delayed or
prevented from recovering the collateral or completing the
transaction.
LIMITING INVESTMENT RISK
SPECIFIC INVESTMENT RESTRICTIONS HELP THE FUND LIMIT INVESTMENT
RISKS FOR ITS SHAREHOLDERS. THESE RESTRICTIONS PROHIBIT THE FUND
FROM: (with respect to 75% of its assets) acquiring more than 10%
of the voting securities of any one issuer* and investing more
than: (a) (with respect to 75% of its assets), 5% of its total
assets (taken at current value) in securities of any one issuer;*
(b) 15% of its net assets 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);* (c) 25% of its total assets in any one
industry (securities of the U.S. government, its agencies or
instrumentalities are not considered to represent
industries);* (d) 5% of its net assets in warrants or more than
2% of its net assets in warrants not listed on the New York or
American Stock Exchanges; or (e) 15% of its net assets in any
combination of securities that are not readily marketable, in
securities restricted as to resale (excluding securities
determined by the Trustees (or the person designated by the
Trustees to make such determinations) to be readily marketable),
and in repurchase agreements maturing in more than seven days.
Restrictions marked with an asterisk (*) above are summaries of
fundamental policies. See the Statement of Additional
Information for the full text of these policies and the Fund's
other fundamental policies. Except for investment policies
designated as fundamental in this Prospectus or the Statement,
the investment policies described in this Prospectus and in the
Statement are not fundamental policies. The Trustees may change
any non-fundamental investment policies without shareholder
approval. As a matter of policy, the Trustees would not
materially change the Fund's investment objective without
shareholder approval.
HOW PERFORMANCE IS SHOWN
TOTAL RETURN DATA MAY FROM TIME TO TIME BE INCLUDED IN
ADVERTISEMENTS ABOUT THE FUND. "Total return" for the life of
the Fund through the most recent calendar quarter represents the
average annual compounded rate of return on an investment of
$1,000 in the Fund at the maximum public offering price (in the
case of Class A 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 total return not reflecting the maximum initial
sales charge or contingent deferred sales charge would be reduced
if such sales charges were used. Quotations of total return 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 various indices. See the
Statement of Additional Information.
ALL DATA IS BASED ON THE FUND'S PAST INVESTMENT RESULTS AND DOES
NOT PREDICT FUTURE PERFORMANCE. Investment performance, which
will vary, is based on many factors, including market conditions,
the composition of the Fund's portfolio, the Fund's operating
expenses and which class of shares you purchase. 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 to
those of other mutual funds and other investment vehicles.
HOW THE FUND IS MANAGED
THE TRUSTEES OF THE FUND ARE RESPONSIBLE FOR GENERALLY OVERSEEING
THE CONDUCT OF THE FUND'S BUSINESS. Subject to such policies as
the Trustees may determine, Putnam Management furnishes a
continuing investment program for the Fund and makes investment
decisions on its behalf. Subject to the control of the Trustees,
Putnam Management also manages the Fund's other affairs and
business. David L. King, John K. Storkerson and Charles
H. Swanberg, each of whom is a Senior Vice President of Putnam
Management and a Vice President of the Fund, are primarily
responsible for the day-to-day management of the Fund's
portfolio. Messrs. King, Storkerson and Swanberg have
been employed by Putnam Management for the past five years.
The Fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
its Distribution Plans (which are in turn allocated to the
relevant class of shares). The Fund also reimburses Putnam
Management for the compensation and related expenses of certain
officers of the Fund and their staff who provide administrative
services to the Fund. The total reimbursement is determined
annually by the Trustees.
Putnam Management places all orders for purchases and sales of
the Fund's securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of shares of the Fund (and, if permitted by law, of the
other Putnam funds) as a factor in the selection of broker-
dealers.
ORGANIZATION AND HISTORY
Putnam Diversified Equity Trust is a Massachusetts business trust
organized on April 13, 1994. 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. As of May 23 , 1994, Putnam Investments,
Inc. owned all of the shares of the Fund and therefore may be
deemed to "control" the Fund.
The Fund is an open-end, diversified management investment
company with an unlimited number of authorized shares of
beneficial interest. Shares of the Fund may, without shareholder
approval, be divided into two or more series of shares
representing separate investment portfolios. Any such series of
shares may be further divided, without shareholder approval, into
two or more classes of shares having such preferences and special
or relative rights and privileges as the Trustees determine. The
Fund's shares are currently divided into two classes. Each share
has one vote, with fractional shares voting proportionally.
Shares of each class will vote together as a single class except
when 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 Declaration of Trust.
If you own fewer shares than a minimum amount set by the Trustees
(presently 20 shares), the Fund may choose to redeem your shares
and pay you for them. 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, M.I.T.; JAMESON ADKINS BAXTER, President, Baxter
Associates, Inc.; HANS H. ESTIN, Vice Chairman, North American
Management; JOHN A. HILL, Principal and Managing Director, First
Reserve Corporation; ELIZABETH T. KENNAN, President, 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, Cabot Partners Limited Partnership; DONALD S. PERKINS,
Director of various corporations, including AT&T, K mart
Corporation and Time Warner Inc.; GEORGE PUTNAM, III,*
President, New Generation Research, Inc.; A.J.C. SMITH,*
Chairman, Chief Executive Officer and Director, Marsh & McLennan
Companies, Inc.; and W. NICHOLAS THORNDIKE, Director of various
corporations and charitable organizations, including Providence
Journal Co. Also, Trustee and President, Massachusetts General
Hospital and Trustee of Eastern Utilities Associates. The Fund's
Trustees are also Trustees of the other Putnam funds. Those
marked with an asterisk (*) are "interested persons" of the Fund,
Putnam Management or Putnam Mutual Funds.
ABOUT YOUR INVESTMENT
ALTERNATIVE SALES ARRANGEMENTS
The Fund offers investors two classes of shares which bear sales
charges in different forms and amounts and which bear different
levels of expenses:
CLASS A SHARES. An investor who purchases Class A shares pays a
sales charge at the time of purchase. As a result, Class A
shares are not subject to any charges when they are redeemed
(except for sales at net asset value in excess of $1 million
which are subject to a contingent deferred sales charge).
Certain purchases of Class A shares qualify for reduced sales
charges. Class A shares currently bear a 12b-1 fee at the annual
rate of 0.50% of the Fund's average net assets attributable to
Class A shares. See "How to buy shares - Class A
shares."
CLASS B SHARES. Class B shares are sold without an initial sales
charge, but are subject to a contingent deferred sales charge of
up to 5% if redeemed within six years. Class B Shares also bear
a higher 12b-1 fee than Class A shares, currently at the annual
rate of 1.00% of the Fund's average net assets attributable to
Class B shares. Class B shares will automatically convert into
Class A Shares, based on relative net asset value, approximately
eight years after purchase. 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, but (until conversion) will have
a higher expense ratio and pay lower dividends than Class A
shares due to the higher 12b-1 fee. See "How to buy
shares -Class B shares."
WHICH ARRANGEMENT IS BETTER 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
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.
Sales personnel may receive different compensation depending on
which class of shares they sell. Shares may only be exchanged
for shares of the same class of another Putnam fund. See "How to
exchange shares."
<PAGE>
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 return it with a check payable to the Fund 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.
<PAGE>
<TABLE>
<CAPTION>
CLASS A SHARES
The public offering price of Class A shares is the net asset value plus a sales charge.
The Fund receives the net asset value. The sales charge varies depending on the size of
your purchase and is allocated between your investment dealer and Putnam Mutual Funds.
The current sales charges are:
SALES CHARGE
AS A PERCENTAGE OF: AMOUNT OF SALES
-------------------- CHARGE REALLOWED
NET TO DEALERS
AMOUNT OF TRANSACTION AMOUNT OFFERING AS A PERCENTAGE OF
AT OFFERING PRICE INVESTED PRICE OFFERING PRICE*
- ------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Less than 100,000 4.71% 4.50 4.00
100,000 but less than 250,000 3.63% 3.50 3.00
250,000 but less than 500,000 2.56% 2.50 2.00
500,000 but less than1,000,000 2.04% 2.00 1.75
- ------------------------------------------------------------------------------
</TABLE>
* At the discretion of Putnam Mutual Funds, however, the entire
sales charge may at times be reallowed to dealers. The Staff of
the Securities and Exchange Commission has indicated that dealers
who receive more than 90% of the sales charge may be considered
underwriters.
There is no initial sales charge on purchases of Class A shares
of $1 million or more. However, a contingent deferred sales
charge ("CDSC") of 1.00% or 0.50%, respectively, is imposed on
redemptions of such shares within the first or second year after
purchase, 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. In addition,
shares purchased by certain investors investing $1 million or
more that have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission described in the
next paragraph are not subject to the CDSC. In determining
whether a CDSC is payable, the Fund will first redeem shares not
subject to any charge. Putnam Mutual Funds receives the entire
amount of any CDSC you pay. See the Statement of Additional
Information 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 and each subsequent one-year period
beginning with the first purchase at net asset value 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 sponsored by an employer with more than 750
employees), Putnam Mutual Funds pays commissions on cumulative
purchases during the life of the account at the rate of 1.00% of
the amount under $3 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%.
<PAGE>
YOU MAY BE ELIGIBLE TO BUY CLASS A SHARES AT REDUCED SALES
CHARGES. Consult your investment dealer or Putnam Mutual Funds
for details about Putnam's Combined Purchase Privilege,
Cumulative Quantity Discount, Statement of Intention, Group Sales
Plan, Employee Benefit Plans and other plans. Descriptions are
also included in the order form and in the Statement of
Additional Information. Shares may be sold at net asset value to
certain categories of investors, and the CDSC may be waived under
certain circumstances. See "How to buy shares -General"
below. In addition, through September 30, 1994, sales charges
will not apply to Class A shares purchased with redemption
proceeds received within the prior ninety days from non-Putnam
mutual funds on which the investor paid a front-end sales charge.
Putnam Mutual Funds will pay the investment dealer of record a
0.50% commission on such sales, subject to reclaim if the Fund
shares are redeemed within six months of purchase.
CLASS B SHARES
Class B shares are sold without an initial sales charge, although
a CDSC will be imposed if you redeem shares within six years of
purchase. 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 below. Subject to the foregoing exclusions, the amount
of the charge is determined as a percentage of the lesser of the
current market value or the cost of the shares being redeemed.
Therefore when a share is redeemed, any increase in its value
above the initial purchase price is not subject to a CDSC. The
amount of the CDSC will depend on the number of years since you
invested and the dollar amount being redeemed, according to the
following table:
CONTINGENT DEFERRED
SALES CHARGE AS A
PERCENTAGE OF
YEARS SINCE PURCHASE DOLLAR AMOUNT
PAYMENT MADE SUBJECT TO CHARGE
- ------------------- -------------------
0-1.................................. 5.0%
1-2.................................. 4.0%
2-3.................................. 3.0%
3-4.................................. 3.0%
4-5.................................. 2.0%
5-6.................................. 1.0%
6 and thereafter..................... NONE
In determining whether a CDSC is payable on any redemption, the
Fund will first redeem shares not subject to any charge, and then
shares held longest during the six-year period. 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.
CONVERSION OF CLASS B SHARES. Class B shares will automatically
convert into Class A shares at the end of the month eight years
after the purchase date, except as noted below. Class B shares
acquired by exchange from Class B shares of another Putnam fund
will convert into Class A shares based on the time of the initial
purchase. Class B shares acquired through reinvestment of
distributions will convert into Class A shares based on the date
of the initial purchase to which such shares relate. For this
purpose, Class B shares acquired through reinvestment of
distributions will be attributed to particular purchases of Class
B shares in accordance with such procedures as the Trustees may
determine from time to time. The conversion of Class B shares to
Class A shares is subject to the continuing availability of a
ruling from the Internal Revenue Service or an opinion of counsel
that such conversions will not constitute taxable events for
federal tax purposes. There can be no assurance that such ruling
or opinion will be available, and the conversion of Class B
shares to Class A shares will not occur if such ruling or opinion
is not available. In such event, Class B shares would continue
to be subject to higher expenses than Class A shares for an
indefinite period.
GENERAL
The Fund may sell Class A shares and Class B shares at net asset
value without an initial sales charge or a CDSC to the Fund's
current and retired Trustees (and their families), current and
retired employees (and their families) of Putnam Management and
affiliates, registered representatives and other employees (and
their families) of broker-dealers having sales agreements with
Putnam Mutual Funds, employees (and their families) of financial
institutions having sales agreements with Putnam Mutual Funds (or
otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of Fund shares), financial
institution trust departments investing an aggregate of $1
million or more in Putnam funds, clients of certain
administrators of tax-qualified plans, employee benefit plans of
companies with more than 750 employees, tax-qualified plans when
proceeds from repayments of loans to participants are invested
(or reinvested) in Putnam funds, "wrap accounts" for the benefit
of clients of broker-dealers, financial institutions or financial
planners adhering to certain standards established by Putnam
Mutual Funds, and investors meeting certain requirements who sold
shares of certain Putnam closed-end funds pursuant to a tender
offer by the closed-end fund. In addition, the Fund may sell
shares at net asset value without an initial sales charge or a
CDSC in connection with the acquisition by the Fund of assets of
an investment company or personal holding company, and the CDSC
will be waived on redemptions of shares arising out of death or
disability or in connection with certain withdrawals from IRA or
other retirement plans. Up to 12% of the value of Class B shares
subject to a Systematic Withdrawal Plan may also be redeemed each
year without a CDSC. See the Statement of Additional
Information.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
shares of the Fund at net asset value.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you
should pay for those shares with a certified check to avoid any
delay in redemption, exchange or transfer. Otherwise the Fund
may delay payment until the purchase price of those shares has
been collected or, if you redeem by telephone, until 15 calendar
days after the purchase date.
To eliminate the need for safekeeping, the Fund will not issue
certificates for your shares unless you request them. Putnam
Mutual Funds may, at its expense, provide additional promotional
incentives or payments to dealers that sell shares of the Putnam
funds. 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 purpose of the Class A Plan is to
permit the Fund to compensate Putnam Mutual Funds for services
provided and expenses incurred by it in promoting the sale of
Class A shares of the Fund, reducing redemptions, or maintaining
or improving services provided to shareholders by Putnam Mutual
Funds or dealers. The Class A Plan provides for payments by the
Fund to Putnam Mutual Funds at the annual rate of up to
0.65% of the Fund's average net assets attributable to
Class A shares, subject to the authority of the Fund's Trustees
to reduce the amount of payments or to suspend the Class A Plan
for such periods as they may determine. Subject to these
limitations, the amount of such payments and the specific
purposes for which they are made shall be determined by the
Trustees of the Fund. At present, the Trustees have approved
payments under the Class A Plan at the annual rate of 0.50% of
the Fund's average net assets attributable to Class A shares for
the purpose of compensating Putnam Mutual Funds for services
provided and expenses incurred by it as principal underwriter of
the Fund's Class A shares, including payments made by it to
dealers under the Service Agreements referred to below. Should
the Trustees decide in the future to approve payments in excess
of this amount, shareholders will be notified and this Prospectus
will be revised. <PAGE>
In order to compensate investment dealers (including, for this
purpose, certain financial institutions) for services provided in
connection with sales of Class A shares and the maintenance of
shareholder accounts, Putnam Mutual Funds makes quarterly
payments to qualifying dealers based on the average net asset
value of Class A shares of the Fund which are 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 and by participant-directed
qualified retirement plans sponsored by employers with more than
750 employees ("NAV Shares"), except for shares owned by certain
investors investing $1 million or more that have made
arrangements with Putnam Mutual Funds and whose dealer of record
waived the sales commission. Except as stated below, Putnam
Mutual Funds makes such payments at the annual rate of
0.50% of such average net asset value (including shares
acquired through reinvestment of distributions). For participant-
directed qualified retirement plans initially investing less than
$20 million in Putnam funds and other investments managed by
Putnam Management or its affiliates, Putnam Mutual Funds'
payments to qualifying dealers on NAV Shares are 100% of the rate
stated above if average plan assets in Putnam funds (excluding
money market funds) during the quarter are less than $20 million,
60% of the stated rate if average plan assets are at least $20
million but less than $30 million, and 40% of the stated rate if
average plan assets are $30 million or more. For all other
participant-directed qualified retirement plans purchasing NAV
Shares, Putnam Mutual Funds makes quarterly payments to
qualifying dealers at the annual rate of 0.10% of the average net
asset value of such shares.
CLASS B DISTRIBUTION PLAN. The Class B Plan provides for
payments by the Fund to Putnam Mutual Funds at the annual rate of
up to 1.00% of the Fund's average net assets attributable to
Class B shares, subject to the authority of the Trustees to
reduce the amount of payments or to suspend the Class B Plan for
such periods as they may determine. Putnam Mutual Funds also
receives the proceeds of any CDSC imposed on redemptions of
shares.
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 and
sales to investors exempt from the CDSC. In addition, in order
to further compensate dealers (including, for this purpose,
certain financial institutions) for services provided in
connection with sales of Class B shares and the maintenance of
shareholder accounts, Putnam Mutual Funds makes quarterly
payments to qualifying dealers based on the average net asset
value of Class B shares which are attributable to shareholders
for whom the dealers are designated as the dealer of record.
Putnam Mutual Funds makes such payments at an annual rate of
0.25% of such average net asset value of such shares.
GENERAL. Putnam Mutual Funds may suspend or modify the payments
made to dealers described above, and such payments are subject to
the continuation of the relevant Plan described above, 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 Class A and Class B 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 repurchase
shares for which it has received payment.
SELLING SHARES DIRECTLY TO THE FUND. Send a signed
letter of instruction or stock power form to Putnam Investor
Services, along with any certificates that represent shares you
want to sell. The price you will receive is the next net asset
value calculated after the Fund receives your request in proper
form less any applicable CDSC. In order to receive that day's
net asset value, Putnam Investor Services must receive your
request before the close of regular trading on the New York Stock
Exchange. If you sell shares having a net asset value of
$100,000 or more, the signatures of registered owners or their
legal representatives must be guaranteed by a bank, broker-dealer
or certain other financial institutions. See the Statement of
Additional Information for more information about where to obtain
a signature guarantee. Stock power forms are available from your
investment dealer, Putnam Investor Services and many commercial
banks. If you want your redemption proceeds sent to an address
other than your address as it appears on Putnam's records, a
signature guarantee is required. Putnam Investor Services
usually requires additional documentation for the sale of shares
by a corporation, partnership, agent or fiduciary, or a surviving
joint owner. Contact Putnam Investor Services for details.
THE FUND GENERALLY SENDS YOU PAYMENT FOR YOUR SHARES THE BUSINESS
DAY AFTER YOUR REQUEST IS RECEIVED. Under unusual circumstances,
the Fund may suspend repurchases, 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 which case 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 your shares which 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 for its services.
HOW TO EXCHANGE SHARES
You can exchange your Class A or Class B 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
more than one class of shares. If the other Putnam fund offers
only one class of shares, only Class A shares may be exchanged
for such class. 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 and 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.
Exchange Authorization Forms are available by calling or writing
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 which 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 the Trustees or Putnam Management
believes 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 Statement of Additional
Information 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 stated at market value.
Short-term investments that will mature in 60 days or less are
stated at amortized cost, which approximates market value. All
other securities and assets are valued at their fair value
following procedures approved by the Trustees.
HOW DISTRIBUTIONS ARE MADE; TAX INFORMATION
The Fund distributes any net investment income and any net
realized capital gains at least annually. Distributions from net
investment income, if any, are expected to be small.
Distributions from capital gains are made after applying any
available capital loss carryovers. Distributions paid by the Fund
with respect to Class A shares will generally be greater than
those paid with respect to Class B shares because expenses
attributable to Class B shares will generally be higher.
YOU CAN CHOOSE FROM THREE DISTRIBUTION OPTIONS: (1) reinvest all
distributions in additional Fund shares without a sales charge;
(2) receive distributions from net investment income in cash
while reinvesting capital gains distributions in additional
shares without a sales charge; or (3) 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 distribution is paid. You
will receive a statement confirming reinvestment of distributions
in additional Fund shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs.
If a check representing a Fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in the Fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in the Fund. Similarly, if
correspondence sent by the Fund or Putnam Investor Services is
returned as "undeliverable," Fund distributions will
automatically be reinvested in the Fund or in another Putnam
fund.
The Fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements that are necessary for it to be relieved of federal
taxes on income and gains it distributes to shareholders. The
Fund will distribute substantially all of its ordinary income and
capital gain net income on a current basis.
All Fund distributions will be taxable to you as ordinary income,
except that any distributions of net long-term capital gains will
be taxed as such, regardless of how long you have held the
shares. Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions.
Early in each year the Fund will notify you of the amount and tax
status of distributions paid to you by the Fund 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).
<PAGE>
ABOUT PUTNAM INVESTMENTS, INC.
PUTNAM MANAGEMENT HAS BEEN MANAGING MUTUAL FUNDS SINCE 1937.
Putnam Mutual Funds is the principal underwriter of the Fund and
of other Putnam funds. Putnam Fiduciary Trust Company is the
Fund's custodian. Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, is the Fund's investor servicing and
transfer agent.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., which is
wholly-owned by Marsh & McLennan Companies, Inc., a publicly
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
<PAGE>
PUTNAM DIVERSIFIED EQUITY TRUST
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
Price Waterhouse
160 Federal Street
Boston, MA 02110
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
<PAGE>
PUTNAM DIVERSIFIED EQUITY TRUST
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION
, 1994
This Statement of Additional Information is not a Prospectus
and is only authorized for distribution when accompanied or
preceded by the Prospectus of the Fund dated , 1994, as revised
from time to time. This Statement 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 Statement
shall include all the Fund's Prospectuses, unless otherwise
noted. The Statement 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 Statement contains specific information about
the Fund. Part II includes information about the Fund and the
other Putnam funds.
TABLE OF CONTENTS
PART I PAGE
INVESTMENT RESTRICTIONS OF THE FUND. . . . . . . . . . . . . . . . . . I-3
FUND CHARGES AND EXPENSES. . . . . . . . . . . . . . . . . . . . . . . I-5
ADDITIONAL OFFICERS OF THE FUND. . . . . . . . . . . . . . . . . . . . I-6
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS . . . . . . . . . . . I-7
<PAGE>
PART II
MISCELLANEOUS INVESTMENT PRACTICES. . . . . . . . . . . . . . II-1
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-23
MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . . .II-28
DETERMINATION OF NET ASSET VALUE. . . . . . . . . . . . . . .II-37
HOW TO BUY SHARES . . . . . . . . . . . . . . . . . . . . . .II-38
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . .II-50
INVESTOR SERVICES . . . . . . . . . . . . . . . . . . . . . .II-51
SIGNATURE GUARANTEES. . . . . . . . . . . . . . . . . . . . .II-57
SUSPENSION OF REDEMPTIONS . . . . . . . . . . . . . . . . . .II-57
SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . .II-57
STANDARD PERFORMANCE MEASURES . . . . . . . . . . . . . . . .II-58
COMPARISON OF PORTFOLIO PERFORMANCE . . . . . . . . . . . . .II-59
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .II-64
<PAGE>
PUTNAM DIVERSIFIED EQUITY TRUST
STATEMENT OF ADDITIONAL INFORMATION
PART I
INVESTMENT RESTRICTIONS OF THE FUND
AS FUNDAMENTAL INVESTMENT RESTRICTIONS, WHICH MAY NOT BE CHANGED
WITHOUT A VOTE OF A MAJORITY OF THE OUTSTANDING VOTING
SECURITIES, THE FUND MAY NOT AND WILL NOT:
(1) Borrow money in excess of 10% of the value (taken at
the lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is made,
and then only from banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are
purchased.
(2) Underwrite securities issued by other persons except to
the extent that, in connection with the disposition of its
portfolio investments, it may be deemed to be an underwriter
under certain federal securities laws.
(3) Purchase or sell real estate, although it may purchase
securities of issuers which deal in real estate, securities which
are secured by interests in real estate, and securities which
represent interests in real estate, and it may acquire and
dispose of real estate or interests in real estate acquired
through the exercise of its rights as a holder of debt
obligations secured by real estate or interests therein.
(4) Purchase or sell commodities or commodity contracts,
except that the Fund may purchase and sell financial futures
contracts and options.
(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 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 (taken at current value).
(6) With respect to 75% of its total assets, invest in
securities of any issuer if, immediately after such investment,
more than 5% of the total assets of the Fund (taken at current
value) would be invested in the securities of such issuer;
provided that this limitation does not apply to obligations
issued or guaranteed as to interest or principal by the U.S.
government or its agencies or instrumentalities or its political
subdivisions.
(7) With respect to 75% of its total assets, acquire more
than 10% of the 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.
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 warrants (other than warrants acquired by a
Fund as 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 5% 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 the
New York or American Stock Exchanges.
(3) 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 or dispose of such leases,
rights, or contracts acquired through the exercise of its rights
as a holder of debt obligations secured thereby.
(4) Invest in 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.
<PAGE>
(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) 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.
Although certain of the Fund's investment restrictions
permit the Fund to borrow money to a limited extent, the Fund
does not currently intend to do so. Although the Fund may
invest in debt securities without regard to credit ratings the
Fund does not currently intend to invest more than 5% of it net
assets in debt securities.
---------------------
All percentage limitations on investments will apply at the
time of the making of an investment and shall not be considered
violated unless an excess or deficiency occurs or exists
immediately after and as a result of such investment.
The Investment Company Act of 1940 provides that a "vote of
a majority of the outstanding voting securities" of a Fund means
the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of that Fund, or (2) 67% or more of the shares
of that Fund present at a meeting if more than 50% of the
outstanding shares are represented at the meeting in person or by
proxy.
FUND CHARGES AND EXPENSES
Under a Management Contract dated May 6 , 1994, 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
0.70% of the first $500 million of the Fund's average net
assets, 0.60% of the next $500 million, 0.55% of the next $500
million, and 0.50% of any amount over $1.5 billion.
TRUSTEE FEES
Each Trustee of the Fund receives an annual fee of
$100 and an additional fee for each Trustees' meeting
attended. Trustees who are not interested persons of Putnam
Management and who serve on committees of the Trustees receive
additional fees for attendance at certain committee meetings.
OWNERSHIP OF FUND SHARES
At May 23 , 1994, Putnam Investments, Inc. owned of
record and beneficially all of the shares of the Fund. Putnam
Investments, Inc. and its parent corporation, Marsh & McLennan
Companies, Inc., are incorporated in Delaware. The address of
Putnam Investments, Inc. is One Post Office Square, Boston, MA
02109.
ADDITIONAL OFFICERS OF THE FUND
In addition to the persons listed as officers of the Fund in
Part II of this Statement, the following persons are also
officers of the Fund. Officers of Putnam Management hold the
same offices in Putnam Management's parent company, Putnam
Investments, Inc.
PETER CARMAN, Vice President. Senior Managing Director of
Putnam Management. Director, Putnam Investments, Inc. Vice
President of certain of the Putnam funds. Prior to August 1,
1993, Mr. Carman was Chief Investment Officer, Chairman of the
U.S. Equity Investment Policy Committee and Director of Sanford
C. Bernstein & Company, Inc.
DAVID L. KING, Vice President. Senior Vice President of
Putnam Management. Vice President of certain of the Putnam Funds.
JOHN K. STORKERSON , Vice President. Senior Vice
President of Putnam Management. Vice President of certain of the
Putnam Funds.
CHARLES H. SWANBERG, Vice President. Senior Vice President
of Putnam Management. Vice President of certain of the Putnam
Funds.
<PAGE>
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse 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 following Report of Independent
Accountants and statement of assets and liabilities have been
included in this Statement of Additional Information in reliance
upon the report of the independent accountants, given on their
authority as experts in auditing and accounting.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
Putnam Diversified Equity Trust
In our opinion, the accompanying statement of assets and
liabilities present fairly, in all material respects, the
financial position of the Fund at May 24 , 1994, in
conformity with generally accepted accounting principles. This
financial statement is the responsibility of the Fund's
management; our responsibility is to express an opinion on this
financial statement based on our audit. We conducted our audit
of the financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statement is free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statement, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the
opinion expressed above.
Price Waterhouse
Boston, Massachusetts
May 24 , 1994
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
PUTNAM DIVERSIFIED EQUITY TRUST
May 24 , 1994
Assets:
Cash. . . . . . . . . . . . . . . . . . . . . . $100,000
Estimated deferred organization expenses 98,304
(Note 1). . . . . . . . . . . . . . . . . . . .
-----------
Total assets. . . . . . . . . . . . . . . . . . . . 198,304
Liabilities:
Estimated organization expenses payable
(Note 1). . . . . . . . . . . . . . . . . . . . . . 98,304
---------
Commitments (Notes 1, 2 and 3)
Net assets applicable to 5,882.353 Class A shares
and 5,882.353 Class B shares outstanding . . . .
. 100,000
========
Computation of net asset value, redemption and
offering price per share:
Net asset value and redemption price per Class A
share ($50,000 divided by 5,882.353 shares) . .
$8.50
=====
Offering price per Class A share (100/95.50
of $8.50), reduced on sales of $100,000 or more
and in certain other circumstances -- see "HOW
TO BUY SHARES" . . . . . . . . . . . . . . . $8.90
=====
Net asset value and offering price per Class B
share ($50,000 divided by 5,882.353 shares)
(redemption price per share is equal to net asset
value less any applicable contingent deferred sales
charge) see "HOW TO BUY SHARES". . . . . . . . . $8.50
====
See Notes to Statement of Assets and Liabilities
<PAGE>
NOTES TO STATEMENT OF ASSETS AND LIABILITIES
NOTE 1. ORGANIZATION
The Fund was organized as a Massachusetts business trust under an
Agreement and Declaration of Trust, dated April 13, 1994, and is
registered under the Investment Company Act of 1940, as amended,
as an open-end, diversified, management investment company.
The Fund offers both Class A and Class B shares. Its Agreement
and Declaration of Trust permits the issuance of an unlimited
number of shares. The Fund has had no operations other than
those relating to organizational matters and the initial capital
contribution of $100,000 to the Fund. The Fund's outstanding
shares are owned by Putnam Investments, Inc.
Upon the sale of its shares to the public, the Fund will become
liable for registration fees payable to the Securities and
Exchange Commission and for not more than $125,000 of expenses in
connection with its organization and the initial public offering
of its shares. Putnam Investment Management, Inc. ("Putnam
Management"), a wholly-owned subsidiary of Putnam Investments,
Inc., will pay any such expenses in excess of that amount and
will pay all such expenses in the event that the initial public
offering is withdrawn. At May 24 , 1994 estimated deferred
organization expenses are $98,304 , based upon estimated
registration, legal and accounting costs. The Fund will
amortize such expenses borne by it on a straight-line basis over
its first five years of operation. Putnam Investments, Inc. has
agreed that if any of the initial shares of the Fund are redeemed
during such amortization period by any holder thereof, the
redemption proceeds will be reduced by the amount of the then
unamortized organization expenses in the same ratio as the number
of shares redeemed bears to the number of initial shares held at
the time of redemption.
NOTE 2. MANAGEMENT CONTRACT
The Fund has entered into a Management Contract with Putnam
Management. As compensation for the services rendered,
facilities furnished, and expenses borne by Putnam Management,
the Fund will pay Putnam Management a fee, computed and paid
quarterly based on the average net assets of the Fund for the
quarter. Such fee is based on the following annual rates:
0.70% of the first $500 million of the Fund's average net
assets, 0.60% of the next $500 million, 0.55% of the next $500
million, and 0.50% of any amount over $1.5 billion.
NOTE 3. DISTRIBUTION PLANS
The Fund has entered into Distribution Plans pursuant to Rule
12b-1 under the Investment Company Act of 1940. The Fund pays
Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments, Inc., a quarterly distribution fee at the annual
rate of up to 0.65% of the average net assets of the Fund
represented by Class A shares and 1.00% of the average net assets
of the Fund represented by Class B shares.
<PAGE>
<PAGE>
TABLE OF CONTENTS
MISCELLANEOUS INVESTMENT PRACTICES. . . . . . . . . . . . . . . . II-1
TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-23
MANAGEMENT OF THE FUND. . . . . . . . . . . . . . . . . . . . . .II-28
DETERMINATION OF NET ASSET VALUE. . . . . . . . . . . . . . . . .II-37
HOW TO BUY SHARES . . . . . . . . . . . . . . . . . . . . . . . .II-38
DISTRIBUTION PLAN . . . . . . . . . . . . . . . . . . . . . . . .II-50
INVESTOR SERVICES . . . . . . . . . . . . . . . . . . . . . . . .II-51
SIGNATURE GUARANTEES. . . . . . . . . . . . . . . . . . . . . . .II-57
SUSPENSION OF REDEMPTIONS . . . . . . . . . . . . . . . . . . . .II-57
SHAREHOLDER LIABILITY . . . . . . . . . . . . . . . . . . . . . .II-57
STANDARD PERFORMANCE MEASURES . . . . . . . . . . . . . . . . . .II-58
COMPARISON OF PORTFOLIO PERFORMANCE . . . . . . . . . . . . . . .II-59
DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .II-64
<PAGE>
THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION
PART II
The following information applies generally to your Fund
and to the other Putnam funds. In certain cases the discussion
applies to some but not all of the funds or their shareholders,
and you should refer to your Prospectus to determine whether the
matter is applicable to you or your Fund. You will also be
referred to Part I for certain information applicable to your
particular Fund. Shareholders who purchase shares at net asset
value through employer-sponsored defined contribution plans
should also consult their employer for information about the
extent to which the matters described below apply to them.
MISCELLANEOUS INVESTMENT PRACTICES
YOUR FUND'S PROSPECTUS STATES WHICH OF THE FOLLOWING
INVESTMENT PRACTICES ARE AVAILABLE TO YOUR FUND. THE FACT THAT
YOUR FUND IS AUTHORIZED TO ENGAGE IN A PARTICULAR PRACTICE DOES
NOT NECESSARILY MEAN THAT IT WILL ACTUALLY DO SO. YOU SHOULD
DISREGARD ANY PRACTICE DESCRIBED BELOW WHICH IS NOT MENTIONED IN
THE PROSPECTUS.
SHORT-TERM TRADING
In seeking the Fund's objective, Putnam Management will
buy or sell portfolio securities whenever Putnam Management
believes it appropriate to do so. In deciding whether to sell a
portfolio security, Putnam Management does not consider how long
the Fund has owned the security. From time to time the Fund will
buy securities intending to seek short-term trading profits. A
change in the securities held by the Fund is known as "portfolio
turnover" and generally involves some expense to the Fund. These
expenses may include brokerage commissions or dealer mark-ups and
other transaction costs on both the sale of securities and the
reinvestment of the proceeds in other securities. If sales of
portfolio securities cause the Fund to realize net short-term
capital gains, such gains will be taxable as ordinary income. As
a result of the Fund's investment policies, under certain market
conditions the Fund's portfolio turnover rate may be higher than
that of other mutual funds. Portfolio turnover rate for a fiscal
year is the ratio of the lesser of purchases or sales of
portfolio securities to the monthly average of the value of
portfolio securities -- excluding securities whose maturities at
acquisition were one year or less. The Fund's portfolio turnover
rate is not a limiting factor when Putnam Management considers a
change in the Fund's portfolio.
<PAGE>
LOWER-RATED SECURITIES
The Fund may invest in lower-rated fixed-income securities
(commonly known as "junk bonds"), to the extent described in the
Prospectus. The lower ratings of certain securities held by the
Fund reflect a greater possibility that adverse changes in the
financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates,
may impair the ability of the issuer to make payments of interest
and principal. The inability (or perceived inability) of issuers
to make timely payment of interest and principal would likely
make the values of securities held by the Fund more volatile and
could limit the Fund's ability to sell its securities at prices
approximating the values the Fund had placed on such securities.
In the absence of a liquid trading market for securities held by
it, the Fund may be unable at times to establish the fair value
of such securities. The rating assigned to a security by Moody's
Investors Service, Inc. or Standard & Poor's Corporation (or by
any other nationally recognized securities rating organization)
does not reflect an assessment of the volatility of the
security's market value or the liquidity of an investment in the
security. See the Prospectus or Part I of this Statement for a
description of security ratings.
Like those of other fixed-income securities, the values of
lower-rated securities fluctuate in response to changes in
interest rates. Thus, a decrease in interest rates will
generally result in an increase in the value of the Fund's
assets. Conversely, during periods of rising interest rates, the
value of the Fund's assets will generally decline. In addition,
the values of such securities are also affected by changes in
general economic conditions and business conditions affecting the
specific industries of their issuers. Changes by recognized
rating services in their ratings of any fixed-income security and
in the ability of an issuer to make payments of interest and
principal may also affect the value of these investments.
Changes in the value of portfolio securities generally will not
affect cash income derived from such securities, but will affect
the Fund's net asset value. The Fund will not necessarily
dispose of a security when its rating is reduced below its rating
at the time of purchase, although Putnam Management will monitor
the investment to determine whether its retention will assist in
meeting the Fund's investment objective.
At times, a substantial portion of the Fund's assets may
be invested in securities as to which the Fund, by itself or
together with other funds and accounts managed by Putnam
Management and its affiliates, holds a major portion or all of
such securities. Although Putnam Management generally considers
such securities to be liquid because of the availability of an
institutional market for such securities, it is possible that,
under adverse market or economic conditions or in the event of
adverse changes in the financial condition of the issuer, the
Fund could find it more difficult to sell such securities when
Putnam Management believes it advisable to do so or may be able
to sell such securities only at prices lower than if such
securities were more widely held. Under such circumstances, it
may also be more difficult to determine the fair value of such
securities for purposes of computing the Fund's net asset value.
In order to enforce its rights in the event of a default under
such securities, the Fund may be required to take possession of
and manage assets securing the issuer's obligations on such
securities, which may increase the Fund's operating expenses and
adversely affect the Fund's net asset value. In the case of
tax-exempt funds, any income derived from the Fund's ownership or
operation of such assets would not be tax-exempt. In addition,
the Fund's intention to qualify as a "regulated investment
company" under the Internal Revenue Code may limit the extent to
which the Fund may exercise its rights by taking possession of
such assets.
Certain securities held by the Fund may permit the issuer
at its option to "call", or redeem, its securities. If an issuer
were to redeem securities held by the Fund during a time of
declining interest rates, the Fund may not be able to reinvest
the proceeds in securities providing the same investment return
as the securities redeemed.
If the Fund's Prospectus describes so-called "zero-coupon"
bonds and "payment-in-kind" bonds as possible investments, the
Fund may invest without limit in such bonds unless otherwise
specified in the Prospectus. Zero-coupon bonds are issued at a
significant discount from their principal amount in lieu of
paying interest periodically. Payment-in-kind bonds allow the
issuer, at its option, to make current interest payments on the
bonds either in cash or in additional bonds. Because zero-coupon
bonds do not pay current interest, their value is subject to
greater fluctuation in response to changes in market interest
rates than bonds which pay interest currently. Both zero-coupon
and payment-in-kind bonds allow an issuer to avoid the need to
generate cash to meet current interest payments. Accordingly,
such bonds may involve greater credit risks than bonds paying
interest currently. Even though such bonds do not pay current
interest in cash, the Fund is nonetheless required to accrue
interest income on such investments and to distribute such
amounts at least annually to shareholders. Thus, the Fund could
be required at times to liquidate investments in order to satisfy
its dividend requirements.
<PAGE>
The amount of information about the financial condition of
an issuer of tax exempt securities may not be as extensive as
that which is made available by corporations whose securities are
publicly traded. Therefore, to the extent the Fund invests in
tax exempt securities in the lower rating categories, the
achievement of the Fund's goals is more dependent on Putnam
Management's investment analysis than would be the case if the
Fund were investing in securities in the higher rating
categories.
INVESTMENTS IN MISCELLANEOUS FIXED INCOME SECURITIES
Unless otherwise specified in the Prospectus or elsewhere
in this Statement of Additional Information, if the Fund may
invest in inverse floating obligations and premium securities, it
may do so without limit. The Fund, however, currently does not
intend to invest more than 15% of its assets in inverse floating
obligations under normal market conditions.
SECURITIES LOANS
The Fund may make secured loans of its portfolio
securities, on either a short-term or long-term basis, amounting
to not more than 25% of its total assets, thereby realizing
additional income. The risks in lending portfolio securities, as
with other extensions of credit, consist of possible delay in
recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially. As a matter of
policy, securities loans are made to broker-dealers pursuant to
agreements requiring that loans be continuously secured by
collateral consisting of cash or short-term debt obligations at
least equal at all times to the value of the securities on loan,
"marked-to-market" daily. The borrower pays to the Fund an
amount equal to any dividends or interest received on securities
lent. The Fund retains all or a portion of the interest received
on investment of the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to consent, with
respect to the loaned securities pass to the borrower, the Fund
retains the right to call the loans at any time on reasonable
notice, and it will do so to enable the Fund to exercise voting
rights on any matters materially affecting the investment. The
Fund may also call such loans in order to sell the securities.
FORWARD COMMITMENTS
The Fund may enter into contracts to purchase securities
for a fixed price at a future date beyond customary settlement
time ("forward commitments") if the Fund holds, and maintains
until the settlement date in a segregated account, cash or
high-grade debt obligations in an amount sufficient to meet the
purchase price, or if the Fund enters into offsetting contracts
for the forward sale of other securities it owns. In the case of
to-be-announced ("TBA") purchase commitments, the unit price and
the estimated principal amount are established when the Fund
enters into a contract, with the actual principal amount being
within a specified range of the estimate. Forward commitments
may be considered securities in themselves, and involve a risk of
loss if the value of the security to be purchased declines prior
to the settlement date, which risk is in addition to the risk of
decline in the value of the Fund's other assets. Where such
purchases are made through dealers, the Fund relies on the dealer
to consummate the sale. The dealer's failure to do so may result
in the loss to the Fund of an advantageous yield or price.
Although the Fund will generally enter into forward commitments
with the intention of acquiring securities for its portfolio or
for delivery pursuant to options contracts it has entered into,
the Fund may dispose of a commitment prior to settlement if
Putnam Management deems it appropriate to do so. The Fund may
realize short-term profits or losses upon the sale of forward
commitments.
The Fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell mortgage-backed securities it owns
under delayed delivery arrangements. Proceeds of TBA sale
commitments are not received until the contractual settlement
date. During the time a TBA sale commitment is outstanding,
equivalent deliverable securities, or an offsetting TBA purchase
commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction. Unsettled TBA sale
commitments are valued at current market value of the underlying
securities. If the TBA sale commitment is closed through the
acquisition of an offsetting purchase commitment, the Fund
realizes a gain or loss on the commitment without regard to any
unrealized gain or loss on the underlying security. If the Fund
delivers securities under the commitment, the Fund realizes a
gain or loss from the sale of the securities based upon the unit
price established at the date the commitment was entered into.
REPURCHASE AGREEMENTS
The Fund may enter into repurchase agreements up to the
limit specified in the Prospectus. A repurchase agreement is a
contract under which the Fund acquires a security for a
relatively short period (usually not more than one week) subject
to the obligation of the seller to repurchase and the Fund to
resell such security at a fixed time and price (representing the
Fund's cost plus interest). It is the Fund's present intention
to enter into repurchase agreements only with commercial banks
and registered broker-dealers and only with respect to
obligations of the U.S. government or its agencies or
instrumentalities. Repurchase agreements may also be viewed as
loans made by the Fund which are collateralized by the securities
subject to repurchase. Putnam Management will monitor such
transactions to ensure that the value of the underlying
securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest
factor. If the seller defaults, the Fund could realize a loss on
the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less than the
resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or
insolvency proceedings, the Fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal
and interest if the Fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's
estate.
Pursuant to an exemptive order issued by the Securities
and Exchange Commission, the Fund may transfer uninvested cash
balances into a joint account, along with cash of other Putnam
funds and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money
market instruments.
OPTIONS ON SECURITIES
WRITING COVERED OPTIONS. The Fund may write covered call
options and covered put options on optionable securities held in
its portfolio, when in the opinion of Putnam Management such
transactions are consistent with the Fund's investment objectives
and policies. Call options written by the Fund give the
purchaser the right to buy the underlying securities from the
Fund at a stated exercise price; put options give the purchaser
the right to sell the underlying securities to the Fund at a
stated price.
The Fund may write only covered options, which means that,
so long as the Fund is obligated as the writer of a call option,
it will own the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of
securities exchanges). In the case of put options, the Fund will
hold cash and/or high-grade short-term debt obligations equal to
the price to be paid if the option is exercised. In addition,
the Fund will be considered to have covered a put or call option
if and to the extent that it holds an option that offsets some or
all of the risk of the option it has written. The Fund may write
combinations of covered puts and calls on the same underlying
security.
The Fund will receive a premium from writing a put or call
option, which increases the Fund's return on the underlying
security in the event the option expires unexercised or is closed
out at a profit. The amount of the premium reflects, among other
things, the relationship between the exercise price and the
current market value of the underlying security, the volatility
of the underlying security, the amount of time remaining until
expiration, current interest rates, and the effect of supply and
demand in the options market and in the market for the underlying
security. By writing a call option, the Fund limits its
opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option
but continues to bear the risk of a decline in the value of the
underlying security. By writing a put option, the Fund assumes
the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current
market value, resulting in a potential capital loss unless the
security subsequently appreciates in value.
The Fund may terminate an option that it has written prior
to its expiration by entering into a closing purchase
transaction, in which it purchases an offsetting option. The
Fund realizes a profit or loss from a closing transaction if the
cost of the transaction (option premium plus transaction costs)
is less or more than the premium received from writing the
option. Because increases in the market price of a call option
generally reflect increases in the market price of the security
underlying the option, any loss resulting from a closing purchase
transaction may be offset in whole or in part by unrealized
appreciation of the underlying security owned by the Fund.
If the Fund writes a call option but does not own the
underlying security, and when it writes a put option, the Fund
may be required to deposit cash or securities with its broker as
"margin", or collateral, for its obligation to buy or sell the
underlying security. As the value of the underlying security
varies, the Fund may have to deposit additional margin with the
broker. Margin requirements are complex and are fixed by
individual brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock exchanges and
other self-regulatory organizations.
PURCHASING PUT OPTIONS. The Fund may purchase put options
to protect its portfolio holdings in an underlying security
against a decline in market value. Such protection is provided
during the life of the put option since the Fund, as holder of
the option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying
security's market price. In order for a put option to be
profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the
premium and transaction costs. By using put options in this
manner, the Fund will reduce any profit it might otherwise have
realized from appreciation of the underlying security by the
premium paid for the put option and by transaction costs.
PURCHASING CALL OPTIONS. The Fund may purchase call
options to hedge against an increase in the price of securities
that the Fund wants ultimately to buy. Such hedge protection is
provided during the life of the call option since the Fund, as
holder of the call option, is able to buy the underlying security
at the exercise price regardless of any increase in the
underlying security's market price. In order for a call option
to be profitable, the market price of the underlying security
must rise sufficiently above the exercise price to cover the
premium and transaction costs.
RISK FACTORS IN OPTIONS TRANSACTIONS
The successful use of the Fund's options strategies
depends on the ability of Putnam Management to forecast correctly
interest rate and market movements. For example, if the Fund
were to write a call option based on Putnam Management's
expectation that the price of the underlying security would fall,
but the price were to rise instead, the Fund could be required to
sell the security upon exercise at a price below the current
market price. Similarly, if the Fund were to write a put option
based on Putnam Management's expectation that the price of the
underlying security would rise, but the price were to fall
instead, the Fund could be required to purchase the security upon
exercise at a price higher than the current market price.
When the Fund purchases an option, it runs the risk that
it will lose its entire investment in the option in a relatively
short period of time, unless the Fund exercises the option or
enters into a closing sale transaction before the option's
expiration. If the price of the underlying security does not
rise (in the case of a call) or fall (in the case of a put) to an
extent sufficient to cover the option premium and transaction
costs, the Fund will lose part or all of its investment in the
option. This contrasts with an investment by the Fund in the
underlying security, since the Fund will not realize a loss if
the security's price does not change.
The effective use of options also depends on the Fund's
ability to terminate option positions at times when Putnam
Management deems it desirable to do so. There is no assurance
that the Fund will be able to effect closing transactions at any
particular time or at an acceptable price.
If a secondary market in options were to become
unavailable, the Fund could no longer engage in closing
transactions. Lack of investor interest might adversely affect
the liquidity of the market for particular options or series of
options. A market may discontinue trading of a particular option
or options generally. In addition, a market could become
temporarily unavailable if unusual events -- such as volume in
excess of trading or clearing capability -- were to interrupt its
normal operations.
A market may at times find it necessary to impose
restrictions on particular types of options transactions, such as
opening transactions. For example, if an underlying security
ceases to meet qualifications imposed by the market or the
Options Clearing Corporation, new series of options on that
security will no longer be opened to replace expiring series, and
opening transactions in existing series may be prohibited. If an
options market were to become unavailable, the Fund as a holder
of an option would be able to realize profits or limit losses
only by exercising the option, and the Fund, as option writer,
would remain obligated under the option until expiration or
exercise.
Disruptions in the markets for the securities underlying
options purchased or sold by the Fund could result in losses on
the options. If trading is interrupted in an underlying
security, the trading of options on that security is normally
halted as well. As a result, the Fund as purchaser or writer of
an option will be unable to close out its positions until options
trading resumes, and it may be faced with considerable losses if
trading in the security reopens at a substantially different
price. In addition, the Options Clearing Corporation or other
options markets may impose exercise restrictions. If a
prohibition on exercise is imposed at the time when trading in
the option has also been halted, the Fund as purchaser or writer
of an option will be locked into its position until one of the
two restrictions has been lifted. If the Options Clearing
Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by
the writers of all outstanding calls in the event of exercise, it
may prohibit indefinitely the exercise of put options. The Fund,
as holder of such a put option, could lose its entire investment
if the prohibition remained in effect until the put option's
expiration.
Special risks are presented by internationally-traded
options. Because of time differences between the United States
and various foreign countries, and because different holidays are
observed in different countries, foreign options markets may be
open for trading during hours or on days when U.S. markets are
closed. As a result, option premiums may not reflect the current
prices of the underlying interest in the United States.
OVER-THE-COUNTER OPTIONS
The Staff of the Division of Investment Management of the
Securities and Exchange Commission has taken the position that
over-the-counter ("OTC") options purchased by the Fund and assets
held to cover OTC options written by the Fund are illiquid
securities. Although the Staff has indicated that it is
continuing to evaluate this issue, pending further developments,
the Fund intends to enter into OTC options transactions only with
primary dealers in U.S. Government Securities and, in the case of
OTC options written by the Fund, only pursuant to agreements that
will assure that the Fund will at all times have the right to
repurchase the option written by it from the dealer at a
specified formula price. The Fund will treat the amount by which
such formula price exceeds the amount, if any, by which the
option may be "in-the-money" as an illiquid investment. It is
the present policy of the Fund not to enter into any OTC option
transaction if, as a result, more than 15% of the Fund's net
assets would be invested in (i) illiquid investments (determined
under the foregoing formula) relating to OTC options written by
the Fund, (ii) OTC options purchased by the Fund, (iii)
securities which are not readily marketable, and (iv) repurchase
agreements maturing in more than seven days.
FUTURES CONTRACTS AND RELATED OPTIONS
Subject to applicable law, and unless otherwise specified
in the Prospectus, the Fund may invest without limit in the types
of futures contracts and related options identified in the
Prospectus. A financial futures contract sale creates an
obligation by the seller to deliver the type of financial
instrument called for in the contract in a specified delivery
month for a stated price. A financial futures contract purchase
creates an obligation by the purchaser to take delivery of the
type of financial instrument called for in the contract in a
specified delivery month at a stated price. The specific
instruments delivered or taken, respectively, at settlement date
are not determined until on or near that date. The determination
is made in accordance with the rules of the exchange on which the
futures contract sale or purchase was made. Futures contracts
are traded in the United States only on commodity exchanges or
boards of trade -- known as "contract markets" -- approved for
such trading by the Commodity Futures Trading Commission (the
"CFTC"), and must be executed through a futures commission
merchant or brokerage firm which is a member of the relevant
contract market.
Although futures contracts by their terms call for actual
delivery or acceptance of commodities or securities, in most
cases the contracts are closed out before the settlement date
without the making or taking of delivery. Closing out a futures
contract sale is effected by purchasing a futures contract for
the same aggregate amount of the specific type of financial
instrument or commodity with the same delivery date. If the
price of the initial sale of the futures contract exceeds the
price of the offsetting purchase, the seller is paid the
difference and realizes a gain. Conversely, if the price of the
offsetting purchase exceeds the price of the initial sale, the
seller realizes a loss. Similarly, the closing out of a futures
contract purchase is effected by the purchaser's entering into a
futures contract sale. If the offsetting sale price exceeds the
purchase price, the purchaser realizes a gain, and if the
purchase price exceeds the offsetting sale price, he realizes a
loss. In general 40% of the gain or loss arising from the
closing out of a futures contract traded on an exchange approved
by the CFTC is treated as short-term gain or loss, and 60% is
treated as long-term gain or loss.
Unlike when the Fund purchases or sells a security, no
price is paid or received by the Fund upon the purchase or sale
of a futures contract. Upon entering into a contract, the Fund
is required to deposit with its custodian in a segregated account
in the name of the futures broker an amount of cash and/or U.S.
Government Securities. This amount is known as "initial margin."
The nature of initial margin in futures transactions is different
from that of margin in security transactions in that futures
contract margin does not involve the borrowing of funds to
finance the transactions. Rather, initial margin is similar to a
performance bond or good faith deposit which is returned to the
Fund upon termination of the futures contract, assuming all
contractual obligations have been satisfied. Futures contracts
also involve brokerage costs.
Subsequent payments, called "variation margin" or
"maintenance margin", to and from the broker (or the custodian)
are made on a daily basis as the price of the underlying security
or commodity fluctuates, making the long and short positions in
the futures contract more or less valuable, a process known as
"marking to the market." For example, when the Fund has
purchased a futures contract on a security and the price of the
underlying security has risen, that position will have increased
in value and the Fund will receive from the broker a variation
margin payment based on that increase in value. Conversely, when
the Fund has purchased a security futures contract and the price
of the underlying security has declined, the position would be
less valuable and the Fund would be required to make a variation
margin payment to the broker.
The Fund may elect to close some or all of its futures
positions at any time prior to their expiration in order to
reduce or eliminate a hedge position then currently held by the
Fund. The Fund may close its positions by taking opposite
positions which will operate to terminate the Fund's position in
the futures contracts. Final determinations of variation margin
are then made, additional cash is required to be paid by or
released to the Fund, and the Fund realizes a loss or a gain.
Such closing transactions involve additional commission costs.
OPTIONS ON FUTURES CONTRACTS. The Fund may purchase and
write call and put options on futures contracts it may buy or
sell and enter into closing transactions with respect to such
options to terminate existing positions. Options on future
contracts give the purchaser the right in return for the premium
paid to assume a position in a futures contract at the specified
option exercise price at any time during the period of the
option. The Fund may use options on futures contracts in lieu of
writing or buying options directly on the underlying securities
or purchasing and selling the underlying futures contracts. For
example, to hedge against a possible decrease in the value of its
portfolio securities, the Fund may purchase put options or write
call options on futures contracts rather than selling futures
contracts. Similarly, the Fund may purchase call options or
write put options on futures contracts as a substitute for the
purchase of futures contracts to hedge against a possible
increase in the price of securities which the Fund expects to
purchase. Such options generally operate in the same manner as
options purchased or written directly on the underlying
investments.
As with options on securities, the holder or writer of an
option may terminate his position by selling or purchasing an
offsetting option. There is no guarantee that such closing
transactions can be effected.
The Fund will be required to deposit initial margin and
maintenance margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements
similar to those described above in connection with the
discussion of futures contracts.
RISKS OF TRANSACTIONS IN FUTURES CONTRACTS AND RELATED
OPTIONS. Successful use of futures contracts by the Fund is
subject to Putnam Management's ability to predict movements in
the direction of interest rates and other factors affecting
securities markets. For example, if the Fund has hedged against
the possibility of decline in the values of its investments and
the values of its investments increase instead, the Fund will
lose part or all of the benefit of the increase through payments
of daily maintenance margin. The Fund may have to sell
investments at a time when it may be disadvantageous to do so in
order to meet margin requirements.
Compared to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts involves
less potential risk to the Fund because the maximum amount at
risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of
a call or put option on a futures contract would result in a loss
to the Fund when the purchase or sale of a futures contract would
not, such as when there is no movement in the prices of the
hedged investments. The writing of an option on a futures
contract involves risks similar to those risks relating to the
sale of futures contracts.
There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render
certain market clearing facilities inadequate, and thereby result
in the institution by exchanges of special procedures which may
interfere with the timely execution of customer orders.
To reduce or eliminate a hedge position held by the Fund,
the Fund may seek to close out a position. The ability to
establish and close out positions will be subject to the
development and maintenance of a liquid secondary market. It is
not certain that this market will develop or continue to exist
for a particular futures contract or option. Reasons for the
absence of a liquid secondary market on an exchange include the
following: (i) there may be insufficient trading interest in
certain contracts or options; (ii) restrictions may be imposed by
an exchange on opening transactions or closing transactions or
both; (iii) trading halts, suspensions or other restrictions may
be imposed with respect to particular classes or series of
contracts or options, or underlying securities; (iv) unusual or
unforeseen circumstances may interrupt normal operations on an
exchange; (v) the facilities of an exchange or a clearing
corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic
or other reasons, decide or be compelled at some future date to
discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the
secondary market on that exchange for such contracts or options
(or in the class or series of contracts or options) would cease
to exist, although outstanding contracts or options on the
exchange that had been issued by a clearing corporation as a
result of trades on that exchange would continue to be
exercisable in accordance with their terms.
U.S. TREASURY SECURITY FUTURES CONTRACTS AND OPTIONS. If
the Fund invests in tax-exempt securities issued by a
governmental entity, the Fund may purchase and sell futures
contracts and related options on U.S. Treasury securities when,
in the opinion of Putnam Management, price movements in Treasury
security futures and related options will correlate closely with
price movements in the tax-exempt securities which are the
subject of the hedge. U.S. Treasury security futures contracts
require the seller to deliver, or the purchaser to take delivery
of, the type of U.S. Treasury security called for in the contract
at a specified date and price. Options on U.S. Treasury security
futures contracts give the purchaser the right in return for the
premium paid to assume a position in a U.S. Treasury security
futures contract at the specified option exercise price at any
time during the period of the option.
Successful use of U.S. Treasury security futures contracts
by the Fund is subject to Putnam Management's ability to predict
movements in the direction of interest rates and other factors
affecting markets for debt securities. For example, if the Fund
has sold U.S. Treasury security futures contracts in order to
hedge against the possibility of an increase in interest rates
which would adversely affect tax-exempt securities held in its
portfolio, and the prices of the Fund's tax-exempt securities
increase instead as a result of a decline in interest rates, the
Fund will lose part or all of the benefit of the increased value
of its securities which it has hedged because it will have
offsetting losses in its futures positions. In addition, in such
situations, if the Fund has insufficient cash, it may have to
sell securities to meet daily maintenance margin requirements at
a time when it may be disadvantageous to do so.
There is also a risk that price movements in U.S. Treasury
security futures contracts and related options will not correlate
closely with price movements in markets for tax-exempt
securities. For example, if the Fund has hedged against a
decline in the values of tax-exempt securities held by it by
selling Treasury security futures and the values of Treasury
securities subsequently increase while the values of its
tax-exempt securities decrease, the Fund would incur losses on
both the Treasury security futures contracts written by it and
the tax-exempt securities held in its portfolio. Putnam
Management will seek to reduce this risk by monitoring movements
in markets for U.S. Treasury security futures and options and for
tax-exempt securities closely. The Fund will only purchase or
sell Treasury security futures or related options when, in the
opinion of Putnam Management, price movements in Treasury
security futures and related options will correlate closely with
price movements in tax-exempt securities in which the Fund
invests.
INDEX FUTURES CONTRACTS. An index futures contract is a
contract to buy or sell units of an index at a specified future
date at a price agreed upon when the contract is made. Entering
into a contract to buy units of an index is commonly referred to
as buying or purchasing a contract or holding a long position in
the index. Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a short
position. A unit is the current value of the index. The Fund
may enter into stock index futures contracts, debt index futures
contracts, or other index futures contracts appropriate to its
objective. The Fund may also purchase and sell options on index
futures contracts.
For example, the Standard & Poor's Composite 500 Stock
Price Index ("S&P 500") is composed of 500 selected common
stocks, most of which are listed on the New York Stock Exchange.
The S&P 500 assigns relative weightings to the common stocks
included in the Index, and the value fluctuates with changes in
the market values of those common stocks. In the case of the S&P
500, contracts are to buy or sell 500 units. Thus, if the value
of the S&P 500 were $150, one contract would be worth $75,000
(500 units x $150). The stock index futures contract specifies
that no delivery of the actual stocks making up the index will
take place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the
difference between the contract price and the actual level of the
stock index at the expiration of the contract. For example, if
the Fund enters into a futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price of $150
and the S&P 500 is at $154 on that future date, the Fund will
gain $2,000 (500 units x gain of $4). If the Fund enters into a
futures contract to sell 500 units of the stock index at a
specified future date at a contract price of $150 and the S&P 500
is at $152 on that future date, the Fund will lose $1,000 (500
units x loss of $2).
There are several risks in connection with the use by the
Fund of index futures as a hedging device. One risk arises
because of the imperfect correlation between movements in the
prices of the index futures and movements in the prices of
securities which are the subject of the hedge. Putnam Management
will, however, attempt to reduce this risk by buying or selling,
to the extent possible, futures on indices the movements of which
will, in its judgment, have a significant correlation with
movements in the prices of the securities sought to be hedged.
Successful use of index futures by the Fund for hedging
purposes is also subject to Putnam Management's ability to
predict movements in the direction of the market. It is possible
that, where the Fund has sold futures to hedge its portfolio
against a decline in the market, the index on which the futures
are written may advance and the value of securities held in the
Fund's portfolio may decline. If this occurred, the Fund would
lose money on the futures and also experience a decline in value
in its portfolio securities. It is also possible that, if the
Fund has hedged against the possibility of a decline in the
market adversely affecting securities held in its portfolio and
securities prices increase instead, the Fund will lose part or
all of the benefit of the increased value of those securities it
has hedged because it will have offsetting losses in its futures
positions. In addition, in such situations, if the Fund has
insufficient cash, it may have to sell securities to meet daily
variation margin requirements at a time when it is
disadvantageous to do so.
In addition to the possibility that there may be an
imperfect correlation, or no correlation at all, between
movements in the index futures and the portion of the portfolio
being hedged, the prices of index futures may not correlate
perfectly with movements in the underlying index due to certain
market distortions. First, all participants in the futures
market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit
requirements, investors may close futures contracts through
offsetting transactions which could distort the normal
relationship between the index and futures markets. Second,
margin requirements in the futures market are less onerous than
margin requirements in the securities market, and as a result the
futures market may attract more speculators than the securities
market does. Increased participation by speculators in the
futures market may also cause temporary price distortions. Due
to the possibility of price distortions in the futures market and
also because of the imperfect correlation between movements in
the index and movements in the prices of index futures, even a
correct forecast of general market trends by Putnam Management
may still not result in a successful hedging transaction over a
short time period.
OPTIONS ON STOCK INDEX FUTURES. Options on index futures
are similar to options on securities except that options on index
futures give the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the index
futures contract, at exercise, exceeds (in the case of a call) or
is less than (in the case of a put) the exercise price of the
option on the index future. If an option is exercised on the
last trading day prior to its expiration date, the settlement
will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the index
on which the future is based on the expiration date. Purchasers
of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid.
OPTIONS ON INDICES
As an alternative to purchasing call and put options on
index futures, the Fund may purchase and sell call and put
options on the underlying indices themselves. Such options would
be used in a manner identical to the use of options on index
futures.
INDEX WARRANTS
The Fund may purchase put warrants and call warrants whose
values vary depending on the change in the value of one or more
specified securities indices ("index warrants"). Index warrants
are generally issued by banks or other financial institutions and
give the holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a cash payment
from the issuer based on the value of the underlying index at the
time of exercise. In general, if the value of the underlying
index rises above the exercise price of the index warrant, the
holder of a call warrant will be entitled to receive a cash
payment from the issuer upon exercise based on the difference
between the value of the index and the exercise price of the
warrant; if the value of the underlying index falls, the holder
of a put warrant will be entitled to receive a cash payment from
the issuer upon exercise based on the difference between the
exercise price of the warrant and the value of the index. The
holder of a warrant would not be entitled to any payments from
the issuer at any time when, in the case of a call warrant, the
exercise price is greater than the value of the underlying index,
or, in the case of a put warrant, the exercise price is less than
the value of the underlying index. If the Fund were not to
exercise an index warrant prior to its expiration, then the Fund
would lose the amount of the purchase price paid by it for the
warrant.
The Fund will normally use index warrants in a manner
similar to its use of options on securities indices. The risks
of the Fund's use of index warrants are generally similar to
those relating to its use of index options. Unlike most index
options, however, index warrants are issued in limited amounts
and are not obligations of a regulated clearing agency, but are
backed only by the credit of the bank or other institution which
issues the warrant. Also, index warrants generally have longer
terms than index options. Although the Fund will normally invest
only in exchange-listed warrants, index warrants are not likely
to be as liquid as certain index options backed by a recognized
clearing agency. In addition, the terms of index warrants may
limit the Fund's ability to exercise the warrants at such time,
or in such quantities, as the Fund would otherwise wish to do.
FOREIGN SECURITIES
Under its current policy, which may be changed without
shareholder approval, the Fund may invest up to the limit of its
total assets specified in its Prospectus in securities
principally traded in markets outside the United States.
Eurodollar certificates of deposit are excluded for purposes of
this limitation. Foreign investments can be affected favorably
or unfavorably by changes in currency exchange rates and in
exchange control regulations. There may be less publicly
available information about a foreign company than about a U.S.
company, and foreign companies may not be subject to accounting,
auditing and financial reporting standards and requirements
comparable to those applicable to U.S. companies. Securities of
some foreign companies are less liquid or more volatile than
securities of U.S. companies, and foreign brokerage commissions
and custodian fees are generally higher than in the United
States. Investments in foreign securities can involve other
risks different from those affecting U.S. investments, including
local political or economic developments, expropriation or
nationalization of assets and imposition of withholding taxes on
dividend or interest payments. To hedge against possible
variations in foreign exchange rates, the Fund may purchase and
sell forward foreign currency contracts. These represent
agreements to purchase or sell specified currencies at specified
dates and prices. The Fund will only purchase and sell forward
foreign currency contracts in amounts Putnam Management deems
appropriate to hedge existing or anticipated portfolio positions
and will not use such forward contracts for speculative purposes.
Foreign securities, like other assets of the Fund, will be held
by the Fund's custodian or by a subcustodian.
FOREIGN CURRENCY TRANSACTIONS
Unless otherwise specified in the Prospectus, the Fund may
engage without limit in currency exchange transactions, as well
as foreign currency forward and futures contracts, to protect
against uncertainty in the level of future currency exchange
rates. In addition, the Fund may write covered call and put
options on foreign currencies for the purpose of increasing its
current return.
Generally, the Fund may engage in both "transaction
hedging" and "position hedging". When it engages in transaction
hedging, the Fund enters into foreign currency transactions with
respect to specific receivables or payables, generally arising in
connection with the purchase or sale of portfolio securities.
The Fund will engage in transaction hedging when it desires to
"lock in" the U.S. dollar price of a security it has agreed to
purchase or sell, or the U.S. dollar equivalent of a dividend or
interest payment in a foreign currency. By transaction hedging
the Fund will attempt to protect itself against a possible loss
resulting from an adverse change in the relationship between the
U.S. dollar and the applicable foreign currency during the period
between the date on which the security is purchased or sold, or
on which the dividend or interest payment is earned, and the date
on which such payments are made or received.
The Fund may purchase or sell a foreign currency on a spot
(or cash) basis at the prevailing spot rate in connection with
the settlement of transactions in portfolio securities
denominated in that foreign currency. The Fund may also enter
into contracts to purchase or sell foreign currencies at a future
date ("forward contracts") and purchase and sell foreign currency
futures contracts.
For transaction hedging purposes the Fund may also
purchase exchange-listed and over-the-counter call and put
options on foreign currency futures contracts and on foreign
currencies. A put option on a futures contract gives the Fund
the right to assume a short position in the futures contract
until the expiration of the option. A put option on a currency
gives the Fund the right to sell the currency at an exercise
price until the expiration of the option. A call option on a
futures contract gives the Fund the right to assume a long
position in the futures contract until the expiration of the
option. A call option on a currency gives the Fund the right to
purchase the currency at the exercise price until the expiration
of the option.
When it engages in position hedging, the Fund enters into
foreign currency exchange transactions to protect against a
decline in the values of the foreign currencies in which its
portfolio securities are denominated (or an increase in the value
of currency for securities which the Fund expects to purchase,
when the Fund holds cash or short-term investments). In
connection with position hedging, the Fund may purchase put or
call options on foreign currency and on foreign currency futures
contracts and buy or sell forward contracts and foreign currency
futures contracts. The Fund may also purchase or sell foreign
currency on a spot basis.
The precise matching of the amounts of foreign currency
exchange transactions and the value of the portfolio securities
involved will not generally be possible since the future value of
such securities in foreign currencies will change as a
consequence of market movements in the value of those securities
between the dates the currency exchange transactions are entered
into and the dates they mature.
It is impossible to forecast with precision the market
value of portfolio securities at the expiration or maturity of a
forward or futures contract. Accordingly, it may be necessary
for the Fund to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market
value of the security or securities being hedged is less than the
amount of foreign currency the Fund is obligated to deliver and a
decision is made to sell the security or securities and make
delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security or securities if
the market value of such security or securities exceeds the
amount of foreign currency the Fund is obligated to deliver.
Transaction and position hedging do not eliminate
fluctuations in the underlying prices of the securities which the
Fund owns or intends to purchase or sell. They simply establish
a rate of exchange which one can achieve at some future point in
time. Additionally, although these techniques tend to minimize
the risk of loss due to a decline in the value of the hedged
currency, they tend to limit any potential gain which might
result from the increase in value of such currency.
<PAGE>
The Fund may seek to increase its current return or to
offset some of the costs of hedging against fluctuations in
current exchange rates by writing covered call options and
covered put options on foreign currencies. The Fund receives a
premium from writing a call or put option, which increases the
Fund's current return if the option expires unexercised or is
closed out at a net profit. The Fund may terminate an option
that it has written prior to its expiration by entering into a
closing purchase transaction in which it purchases an option
having the same terms as the option written.
The Fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the Fund. Cross hedging transactions by the Fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge.
CURRENCY FORWARD AND FUTURES CONTRACTS. A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number
of days from the date of the contract as agreed by the parties,
at a price set at the time of the contract. In the case of a
cancelable forward contract, the holder has the unilateral right
to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage
for trades. A foreign currency futures contract is a
standardized contract for the future delivery of a specified
amount of a foreign currency at a future date at a price set at
the time of the contract. Foreign currency futures contracts
traded in the United States are designed by and traded on
exchanges regulated by the CFTC, such as the New York Mercantile
Exchange.
Forward foreign currency exchange contracts differ from
foreign currency futures contracts in certain respects. For
example, the maturity date of a forward contract may be any fixed
number of days from the date of the contract agreed upon by the
parties, rather than a predetermined date in a given month.
Forward contracts may be in any amounts agreed upon by the
parties rather than predetermined amounts. Also, forward foreign
exchange contracts are traded directly between currency traders
so that no intermediary is required. A forward contract
generally requires no margin or other deposit.
At the maturity of a forward or futures contract, the Fund
either may accept or make delivery of the currency specified in
the contract, or at or prior to maturity enter into a closing
transaction involving the purchase or sale of an offsetting
contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to
the original forward contract. Closing transactions with respect
to futures contracts are effected on a commodities exchange; a
clearing corporation associated with the exchange assumes
responsibility for closing out such contracts.
Positions in the foreign currency futures contracts may be
closed out only on an exchange or board of trade which provides a
secondary market in such contracts. Although the Fund intends to
purchase or sell foreign currency futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a secondary market
on an exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be
possible to close a futures position and, in the event of adverse
price movements, the Fund would continue to be required to make
daily cash payments of variation margin.
FOREIGN CURRENCY OPTIONS. In general, options on foreign
currencies operate similarly to options on securities and are
subject to many similar risks. Foreign currency options are
traded primarily in the over-the-counter market, although options
on foreign currencies have recently been listed on several
exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of
currencies, and is the official medium of exchange of the
European Community's European Monetary System.
The Fund will only purchase or write foreign currency
options when Putnam Management believes that a liquid secondary
market exists for such options. There can be no assurance that a
liquid secondary market will exist for a particular option at any
specific time. Options on foreign currencies are affected by all
of those factors which influence foreign exchange rates and
investments generally.
The value of any currency, including U.S. dollars and
foreign currencies, may be affected by complex political and
economic factors applicable to the issuing country. In addition,
the exchange rates of foreign currencies (and therefore the
values of foreign currency options) may be affected
significantly, fixed, or supported directly or indirectly by U.S.
and foreign government actions. Government intervention may
increase risks involved in purchasing or selling foreign currency
options, since exchange rates may not be free to fluctuate in
response to other market forces.
The value of a foreign currency option reflects the value
of an exchange rate, which in turn reflects relative values of
two currencies, the U.S. dollar and the foreign currency in
question. Because foreign currency transactions occurring in the
interbank market involve substantially larger amounts than those
that may be involved in the exercise of foreign currency options,
investors may be disadvantaged by having to deal in an odd lot
market for the underlying foreign currencies in connection with
options at prices that are less favorable than for round lots.
Foreign governmental restrictions or taxes could result in
adverse changes in the cost of acquiring or disposing of foreign
currencies.
There is no systematic reporting of last sale information
for foreign currencies and there is no regulatory requirement
that quotations available through dealers or other market sources
be firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot
transactions in the interbank market and thus may not reflect
exchange rates for smaller odd-lot transactions (less than $1
million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To
the extent that options markets are closed while the markets for
the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets.
SETTLEMENT PROCEDURES. Settlement procedures relating to
the Fund's investments in foreign securities and to the Fund's
foreign currency exchange transactions may be more complex than
settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not
present in the Fund's domestic investments. For example,
settlement of transactions involving foreign securities or
foreign currency may occur within a foreign country, and the Fund
may be required to accept or make delivery of the underlying
securities or currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be required to pay
any fees, taxes or charges associated with such delivery. Such
investments may also involve the risk that an entity involved in
the settlement may not meet its obligations.
FOREIGN CURRENCY CONVERSION. Although foreign exchange
dealers do not charge a fee for currency conversion, they do
realize a profit based on the difference (the "spread") between
prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a foreign currency to the Fund
at one rate, while offering a lesser rate of exchange should the
Fund desire to resell that currency to the dealer.
RESTRICTED SECURITIES
The SEC Staff currently takes the view that any
designation by the Trustees of the authority to determine that a
restricted security is readily marketable (as described in the
investment restrictions of the Funds) must be pursuant to written
procedures established by the Trustees. It is the present
intention of the Funds' Trustees that, if the Trustees decide to
delegate such determinations to Putnam Management or another
person, they would do so pursuant to written procedures,
consistent with the Staff's position. Should the Staff modify
its position in the future, the Trustees would consider what
action would be appropriate in light of the Staff's position at
that time.
TAXES
TAXATION OF THE FUND. The Fund intends to qualify each
year as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). In order
so to qualify and to qualify for the special tax treatment
accorded regulated investment companies and their shareholders,
the Fund must, among other things:
(a) Derive at least 90% of its gross income from
dividends, interest, payments with respect to certain securities
loans, and gains from the sale of stock, securities and foreign
currencies, or other income (including but not limited to gains
from options, futures, or forward contracts) derived with respect
to its business of investing in such stock, securities, or
currencies;
(b) derive less than 30% of its gross income from the
sale or other disposition of certain assets (including stock or
securities and certain options, futures contracts and forward
contracts) held for less than three months;
(c) distribute with respect to each taxable year at least
90% of the sum of its taxable net investment income, its net
tax-exempt income, and the excess, if any, of net short-term
capital gains over net long-term capital losses for such year;
and
(d) diversify its holdings so that, at the end of each
fiscal quarter, (i) at least 50% of the market value of the
Fund's assets is represented by cash and cash items, U.S.
Government securities, securities of other regulated investment
companies, and other securities limited in respect of any one
issuer to a value not greater than 5% of the value of the Fund's
total assets and 10% of the outstanding voting securities of such
issuer, and (ii) not more than 25% of the value of its assets is
invested in the securities (other than those of the U.S.
Government or other regulated investment companies) of any one
issuer or of two or more issuers which the Fund controls and
which are engaged in the same, similar, or related trades or
businesses.
If the Fund qualifies as a regulated investment company
that is accorded special tax treatment, the Fund will not be
subject to federal income tax on income paid to its shareholders
in the form of dividends (including capital gain dividends).
If the Fund failed to qualify as a regulated investment
company accorded special tax treatment in any taxable year, the
Fund would be subject to tax on its taxable income at corporate
rates, and all distributions from earnings and profits, including
any distributions of net tax-exempt income and net long-term
capital gains, would be taxable to shareholders as ordinary
income. In addition, the Fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make
substantial distributions before requalifying as a regulated
investment company that is accorded special tax treatment.
If the Fund fails to distribute in a calendar year
substantially all of its ordinary income for such year and
substantially all of its capital gain net income for the one-year
period ending October 31 (or later if the Fund is permitted so to
elect and so elects), plus any retained amount from the prior
year, the Fund will be subject to a 4% excise tax on the
undistributed amounts. A dividend paid to shareholders by the
Fund in January of a year generally is deemed to have been paid
by the Fund on December 31 of the preceding year, if the dividend
was declared and payable to shareholders of record on a date in
October, November or December of that preceding year. The Fund
intends generally to make distributions sufficient to avoid
imposition of the 4% excise tax.
EXEMPT-INTEREST DIVIDENDS. The Fund will be qualified to
pay exempt-interest dividends to its shareholders only if, at the
close of each quarter of the Fund's taxable year, at least 50% of
the total value of the Fund's assets consists of obligations the
interest on which is exempt from federal income tax.
Distributions that the Fund properly designates as exempt-
interest dividends are treated by shareholders as interest
excludable from their gross income for federal income tax
purposes but may be taxable for federal alternative minimum tax
purposes. If the Fund intends to be qualified to pay
exempt-interest dividends, the Fund may be limited in its ability
to engage in such taxable transactions as forward commitments,
repurchase agreements, financial futures, and options contracts
on financial futures, tax-exempt bond indices, and other assets.
Part or all of the interest on indebtedness, if any, incurred or
continued by a shareholder to purchase or carry shares of a Fund
paying exempt-interest dividends is not deductible. The portion
of interest that is not deductible is equal to the total interest
paid or accrued on the indebtedness, multiplied by the percentage
of the Fund's total distributions (not including distributions
from net long-term capital gains) paid to the shareholder that
are exempt-interest dividends. Under rules used by the Internal
Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying
particular assets, the purchase of shares may be considered to
have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.
In general, exempt-interest dividends, if any,
attributable to interest received on certain private activity
obligations and certain industrial development bonds will not be
tax-exempt to any shareholders who are "substantial users" of the
facilities financed by such obligations or bonds or who are
"related persons" of such substantial users.
A Fund which is qualified to pay exempt-interest dividends
will inform investors within 60 days of the Fund's fiscal
year-end of the percentage of its income distributions designated
as tax-exempt. The percentage is applied uniformly to all
distributions made during the year. The percentage of income
designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the Fund's income
that was tax-exempt during the period covered by the
distribution.
HEDGING TRANSACTIONS. If the Fund engages in
transactions, including hedging transactions in options, futures
contracts, and straddles, or other similar transactions, it will
be subject to special tax rules (including mark-to-market,
straddle, wash sale, and short sale rules), the effect of which
may be to accelerate income to the Fund, defer losses to the
Fund, cause adjustments in the holding periods of the Fund's
securities, or convert short-term capital losses into long-term
capital losses. These rules could therefore affect the amount,
timing and character of distributions to shareholders. The Fund
will endeavor to make any available elections pertaining to such
transactions in a manner believed to be in the best interests of
the Fund.
Under the 30% of gross income test described above (see
"Taxation of the Fund"), the Fund will be restricted in selling
assets held or considered under Code rules to have been held for
less than three months, and in engaging in certain hedging
transactions (including hedging transactions in options and
futures) that in some circumstances could cause certain Fund
assets to be treated as held for less than three months.
Certain of the Fund's hedging activities (including its
transactions, if any, in foreign currencies or foreign
currency-denominated instruments) are likely to produce a
difference between its book income and its taxable income. If
the Fund's book income exceeds its taxable income, the
distribution (if any) of such excess will be treated as a
dividend to the extent of the Fund's remaining earnings and
profits, and thereafter as a return of capital or as gain from
the sale or exchange of a capital asset, as the case may be. If
the Fund's book income is less than its taxable income, the Fund
could be required to make distributions exceeding book income to
qualify as a regulated investment company that is accorded
special tax treatment.
RETURN OF CAPITAL DISTRIBUTIONS. If the Fund makes a
distribution to you in excess of its current and accumulated
"earnings and profits" in any taxable year, the excess
distribution will be treated as a return of capital to the extent
of your tax basis in your shares, and thereafter as capital gain.
A return of capital is not taxable, but it reduces your tax basis
in your shares.
SECURITIES ISSUED OR PURCHASED AT A DISCOUNT. The Fund's
investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a
discount may) require the Fund to accrue and distribute income
not yet received. In order to generate sufficient cash to make
the requisite distributions, the Fund may be required to sell
securities in its portfolio that it otherwise would have
continued to hold.
CAPITAL LOSS CARRYOVER. The amounts and expiration dates
of any capital loss carryovers available to the Fund are shown in
Note 1 (Federal income taxes) to the financial statements
included in Part I of this Statement or incorporated by reference
into this Statement.
FOREIGN CURRENCY-DENOMINATED SECURITIES AND RELATED
HEDGING TRANSACTIONS. The Fund's transactions in foreign
currency-denominated debt securities, certain foreign currency
options, futures contracts, and forward contracts may give rise
to ordinary income or loss to the extent such income or loss
results from fluctuations in the value of the foreign currency
concerned.
If more than 50% of the Fund's assets at year end consists
of the debt and equity securities of foreign corporations, the
Fund may elect to permit shareholders to claim a credit or
deduction on their income tax returns for their pro rata portion
of qualified taxes paid by the Fund to foreign countries. In
such a case, shareholders will include in gross income from
foreign sources their pro rata shares of such taxes. A
shareholder's ability to claim a foreign tax credit or deduction
in respect of foreign taxes paid by the Fund may be subject to
certain limitations imposed by the Code, as a result of which a
shareholder may not get a full credit or deduction for the amount
of such taxes. Shareholders who do not itemize on their federal
income tax returns may claim a credit (but no deduction) for such
foreign taxes.
Investment by the Fund in certain "passive foreign
investment companies" could subject the Fund to a U.S. federal
income tax or other charge on the proceeds from the sale of its
investment in such a company; however, this tax can be avoided by
making an election to mark such investments to market annually or
to treat the passive foreign investment company as a "qualified
electing fund."
SALE OR REDEMPTION OF SHARES. The sale, exchange or
redemption of Fund shares may give rise to a gain or loss. In
general, any gain or loss realized upon a taxable disposition of
shares will be treated as long-term capital gain or loss if the
shares have been held for more than 12 months, and otherwise as
short-term capital gain or loss. However, if a shareholder sells
shares at a loss within six months of purchase, any loss will be
disallowed for Federal income tax purposes to the extent of any
exempt-interest dividends received on such shares. In addition,
any loss (not already disallowed as provided in the preceding
sentence) realized upon a taxable disposition of shares held for
six months or less will be treated as long-term, rather than
short-term, to the extent of any long-term capital gain
distributions received by the shareholder with respect to the
shares. All or a portion of any loss realized upon a taxable
disposition of Fund shares will be disallowed if other Fund
shares are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly purchased
shares will be adjusted to reflect the disallowed loss.
SHARES PURCHASED THROUGH TAX-QUALIFIED PLANS. Special tax
rules apply to investments though defined contribution plans and
other tax-qualified plans. Shareholders should consult their tax
adviser to determine the suitability of shares of a fund as an
investment through such plans and the precise effect of an
investment on their particular tax situation.
BACKUP WITHHOLDING. The Fund generally is required to
withhold and remit to the U.S. Treasury 31% of the taxable
dividends and other distributions paid to any individual
shareholder who fails to furnish the Fund with a correct taxpayer
identification number, who has underreported dividends or
interest income, or who fails to certify to the Fund that he or
she is not subject to such withholding. An individual's taxpayer
identification number is his or her social security number.
MANAGEMENT OF THE FUND
TRUSTEES
*+GEORGE PUTNAM, Chairman and President. Chairman and
Director of Putnam Investment Management, Inc. and Putnam Mutual
Funds. Director, The Boston Company, Inc., Boston Safe Deposit
and Trust Company, Freeport-McMoRan, Inc., General Mills, Inc.,
Houghton Mifflin Company, Marsh & McLennan Companies, Inc. and
Rockefeller Group, Inc.
+WILLIAM F. POUNDS, Vice Chairman. Professor of
Management, Alfred P. Sloan School of Management, Massachusetts
Institute of Technology. Director of Fisher Price, Inc., IDEXX,
M/A-COM, Inc., EG&G, Inc. and Sun Company, Inc.
JAMESON A. BAXTER, Trustee. President, Baxter Associates,
Inc. (consultants to management). Director of Banta Corporation,
Avondale Federal Savings Bank and ASHTA Chemicals, Inc. Chairman
of the Board of Trustees, Mount Holyoke College.
+HANS H. ESTIN, Trustee. Vice Chairman, North American
Management Corp. (a registered investment adviser). Director of
The Boston Company, Inc. and Boston Safe Deposit and Trust
Company.
ELIZABETH T. KENNAN, Trustee. President of Mount Holyoke
College. Director, NYNEX Corporation, Northeast Utilities and
the Kentucky Home Life Insurance Companies and Trustee of the
University of Notre Dame.
*LAWRENCE J. LASSER, Trustee and Vice President.
President, Chief Executive Officer and Director of Putnam
Investments, Inc. and Putnam Investment Management, Inc.
Director of Marsh & McLennan Companies, Inc. Vice President of
the Putnam funds.
JOHN A. HILL, Trustee. Chairman and Managing Director,
First Reserve Corporation (a registered investment adviser).
Director, Lantana Corporation, Maverick Tube Corporation, Snyder
Oil Corporation and various First Reserve Funds.
+ROBERT E. PATTERSON, Trustee. Executive Vice President,
Cabot Partners Limited Partnership (a registered investment
adviser).
DONALD S. PERKINS, Trustee. Director of various
corporations, including American Telephone & Telegraph Company,
AON Corp., Cummins Engine Company, Inc., Illinois Power Company,
Inland Steel Industries, Inc., K mart Corporation, LaSalle Street
Fund, Inc., Springs Industries, Inc., TBG, Inc. and Time Warner
Inc.
*#GEORGE PUTNAM, III, Trustee. President, New Generation
Research, Inc. (publisher of bankruptcy information). Director,
World Environment Center.
*A.J.C. SMITH, Trustee. Chairman, Chief Executive Officer
and Director, Marsh & McLennan Companies, Inc.
W. NICHOLAS THORNDIKE, Trustee. Director of various
corporations and charitable organizations, including Providence
Journal Co. and Courier Corporation. Also, Trustee and President
of Massachusetts General Hospital and Trustee of Bradley Real
Estate Trust and Eastern Utilities Associates.
OFFICERS
CHARLES E. PORTER, Executive Vice President. Managing
Director of Putnam Investments, Inc. and Putnam Investment
Management, Inc. Executive Vice President of the Putnam funds.
PATRICIA C. FLAHERTY, Senior Vice President. Senior Vice
President of Putnam Investments, Inc. and Putnam Investment
Management, Inc.
WILLIAM N. SHIEBLER, Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. President, Chief
Operating Officer and Director of Putnam Mutual Funds. Vice
President of the Putnam funds.
GORDON H. SILVER, Vice President. Senior Managing
Director of Putnam Investments, Inc. and Putnam Investment
Management, Inc. Director, Putnam Investments, Inc. and Putnam
Investment Management, Inc. Vice President of the Putnam funds.
JOHN R. VERANI, Vice President. Senior Vice President of
Putnam Investments, Inc. and Putnam Investment Management, Inc.
Vice President of the Putnam funds.
PAUL M. O'NEIL, Vice President. Vice President of Putnam
Investments, Inc. and Putnam Investment Management, Inc. Vice
President of the Putnam funds.
JOHN D. HUGHES, Vice President and Treasurer. Vice
President and Treasurer of the Putnam funds.
BEVERLY MARCUS, Clerk and Assistant Treasurer. Clerk and
Assistant Treasurer of the Putnam funds.
*Trustees who are "interested persons" (as defined in the
Investment Company Act of 1940) of the Fund, Putnam Management or
Putnam Mutual Funds.
+Members of the Executive Committee of the Trustees. The
Executive Committee meets between regular meetings of the
Trustees as may be required to review investment matters and
other affairs of the Fund and may exercise all of the powers of
the Trustees.
#George Putnam, III is the son of George Putnam.
-----------------
Certain other officers of Putnam Management are officers
of your Fund. SEE "ADDITIONAL OFFICERS OF THE FUND" IN PART I OF
THIS STATEMENT. The mailing address of each of the officers and
Trustees is One Post Office Square, Boston, Massachusetts 02109.
Except as stated below, the principal occupations of the
officers and Trustees for the last five years have been with the
employers as shown above, although in some cases they have held
different positions with such employers. Also, prior to January,
1992, Ms. Baxter was Vice President and Principal, Regency Group,
Inc. and Consultant, The First Boston Corporation. Prior to May,
1991, Mr. Pounds was Senior Advisor to the Rockefeller Family and
Associates, Chairman of Rockefeller Trust Company and Director of
Rockefeller Group, Inc. Prior to November, 1990, Mr. Shiebler
was President and Chief Operating Officer of the Intercapital
Division of Dean Witter Reynolds, Inc., Vice President of the
Dean Witter Funds and Director of Dean Witter Trust Company.
Each Trustee of the Fund receives an annual fee and an
additional fee for each Trustees' meeting attended. Trustees who
are not interested persons of Putnam Management and who serve on
committees of the Trustees receive additional fees for attendance
at certain committee meetings and for special services rendered
in that connection. All of the Trustees are Trustees of all the
Putnam funds and each receives fees for his or her services. FOR
DETAILS OF TRUSTEES' FEES PAID BY THE FUND, SEE "FUND CHARGES AND
EXPENSES" IN PART I OF THIS STATEMENT.
The Agreement and Declaration of Trust of the Fund
provides that the Fund will indemnify its Trustees and officers
against liabilities and expenses incurred in connection with
litigation in which they may be involved because of their offices
with the Fund, except if it is determined in the manner specified
in the Agreement and Declaration of Trust that they have not
acted in good faith in the reasonable belief that their actions
were in the best interests of the Fund or that such
indemnification would relieve any officer or Trustee of any
liability to the Fund or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
his or her duties. The Fund, at its expense, provides liability
insurance for the benefit of its Trustees and officers.
Putnam Management, Putnam Mutual Funds and Putnam
Fiduciary Trust Company are subsidiaries of Putnam Investments,
Inc., a holding company which is in turn wholly owned by Marsh &
McLennan Companies, Inc., a publicly owned holding company whose
principal operating subsidiaries are international insurance and
reinsurance brokers, investment managers and management
consultants.
Trustees and officers of the Fund who are also officers of
Putnam Management or its affiliates or who are stockholders of
Marsh & McLennan Companies, Inc. will benefit from the advisory
fees, sales commissions, distribution fees (if any), custodian
fees and transfer agency fees paid or allowed by the Fund.
PUTNAM MANAGEMENT
Putnam Management is one of America's oldest and largest
money management firms. Putnam Management's staff of experienced
portfolio managers and research analysts selects securities and
constantly supervises the Fund's portfolio. By pooling an
investor's money with that of other investors, a greater variety
of securities can be purchased than would be the case
individually; the resulting diversification helps reduce
investment risk. Putnam Management has been managing mutual funds
since 1937. Today, the firm serves as the investment manager for
the funds in the Putnam Family, with over $64 billion in assets
in nearly 3.5 million shareholder accounts at December 31, 1993.
An affiliate, The Putnam Advisory Company, Inc., manages domestic
and foreign institutional accounts and mutual funds, including
the accounts of many Fortune 500 companies. Another affiliate,
Putnam Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary powers. At
December 31, 1993, Putnam Management and its affiliates managed
nearly $91 billion in assets, including over $17 billion in tax
exempt securities and nearly $31 billion in retirement plan
assets.
THE MANAGEMENT CONTRACT
Under a Management Contract between the Fund and Putnam
Management, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes
continuously an investment program for the Fund and makes
investment decisions on behalf of the Fund. Subject to the
control of the Trustees, Putnam Management also manages,
supervises and conducts the other affairs and business of the
Fund, furnishes office space and equipment, provides bookkeeping
and clerical services (including determination of the Fund's net
asset value, but excluding shareholder accounting services) and
places all orders for the purchase and sale of the Fund's
portfolio securities. Putnam Management may place Fund portfolio
transactions with broker-dealers which furnish Putnam Management,
without cost to it, certain research, statistical and quotation
services of value to Putnam Management and its affiliates in
advising the Fund and other clients. In so doing, Putnam
Management may cause the Fund to pay greater brokerage
commissions than it might otherwise pay.
FOR DETAILS OF PUTNAM MANAGEMENT'S COMPENSATION UNDER THE
MANAGEMENT CONTRACT, SEE "FUND CHARGES AND EXPENSES" IN PART I OF
THIS STATEMENT. Putnam Management's compensation under the
Management Contract may be reduced in any year if the Fund's
expenses exceed the limits on investment company expenses imposed
by any statute or regulatory authority of any jurisdiction in
which shares of the Fund are qualified for offer or sale. The
term "expenses" is defined in the statutes or regulations of such
jurisdictions, and generally, excludes brokerage commissions,
taxes, interest, extraordinary expenses and, if the Fund has a
Distribution Plan, payments made under such Plan. The only such
limitation as of the date of this Statement (applicable to any
Fund registered for sale in California) was 2.5% of the first $30
million of average net assets, 2% of the next $70 million and
1.5% of any excess over $100 million.
Under the Management Contract, Putnam Management may
reduce its compensation to the extent that the Fund's expenses
exceed such lower expense limitation as Putnam Management may, by
notice to the Fund, declare to be effective. The expenses
subject to this limitation are exclusive of brokerage
commissions, interest, taxes, deferred organizational and
extraordinary expenses and, if the Fund has a Distribution Plan,
payments required under such Plan. THE TERMS OF ANY EXPENSE
LIMITATION FROM TIME TO TIME IN EFFECT ARE DESCRIBED IN EITHER
THE PROSPECTUS OR PART I OF THIS STATEMENT.
In addition to the fee paid to Putnam Management, the Fund
reimburses Putnam Management for the compensation and related
expenses of certain officers of the Fund and their assistants who
provide certain administrative services for the Fund and the
other funds in the Putnam Family, each of which bears an
allocated share of the foregoing costs. The aggregate amount of
all such payments and reimbursements is determined annually by
the Trustees. THE AMOUNT OF THIS REIMBURSEMENT FOR THE FUND'S
MOST RECENT FISCAL YEAR IS INCLUDED IN "FUND CHARGES AND
EXPENSES" IN PART I OF THIS STATEMENT. Putnam Management pays
all other salaries of officers of the Fund. The Fund pays all
expenses not assumed by Putnam Management including, without
limitation, auditing, legal, custodial, investor servicing and
shareholder reporting expenses. The Fund pays the cost of
typesetting for its Prospectuses and the cost of printing and
mailing any Prospectuses sent to its shareholders. Putnam Mutual
Funds pays the cost of printing and distributing all other
Prospectuses.
<PAGE>
The Management Contract provides that Putnam Management
shall not be subject to any liability to the Fund or to any
shareholder of the Fund for any act or omission in the course of
or connected with rendering services to the Fund in the absence
of willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties on the part of Putnam Management.
The Management Contract may be terminated without penalty
by vote of the Trustees or the shareholders of the Fund, or by
Putnam Management, on 30 days' written notice. It may be amended
only by a vote of the shareholders of the Fund. The Management
Contract also terminates without payment of any penalty in the
event of its assignment. The Management Contract provides that
it will continue in effect only so long as such continuance is
approved at least annually by vote of either the Trustees or the
shareholders, and, in either case, by a majority of the Trustees
who are not "interested persons" of Putnam Management or the
Fund. In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of the
outstanding voting securities" as defined in the Investment
Company Act of 1940.
PORTFOLIO TRANSACTIONS
INVESTMENT DECISIONS. Investment decisions for the Fund
and for the other investment advisory clients of Putnam
Management and its affiliates are made with a view to achieving
their respective investment objectives. Investment decisions are
the product of many factors in addition to basic suitability for
the particular client involved. Thus, a particular security may
be bought or sold for certain clients even though it could have
been bought or sold for other clients at the same time.
Likewise, a particular security may be bought for one or more
clients when one or more other clients are selling the security.
In some instances, one client may sell a particular security to
another client. It also sometimes happens that two or more
clients simultaneously purchase or sell the same security, in
which event each day's transactions in such security are, insofar
as possible, averaged as to price and allocated between such
clients in a manner which in Putnam Management's opinion is
equitable to each and in accordance with the amount being
purchased or sold by each. There may be circumstances when
purchases or sales of portfolio securities for one or more
clients will have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES. Transactions on U.S.
stock exchanges, commodities markets and futures markets and
other agency transactions involve the payment by the Fund of
negotiated brokerage commissions. Such commissions vary among
different brokers. A particular broker may charge different
commissions according to such factors as the difficulty and size
of the transaction. Transactions in foreign investments often
involve the payment of fixed brokerage commissions, which may be
higher than those in the United States. There is generally no
stated commission in the case of securities traded in the
over-the-counter markets, but the price paid by the Fund usually
includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the Fund includes a
disclosed, fixed commission or discount retained by the
underwriter or dealer. It is anticipated that most purchases and
sales of securities by funds investing primarily in tax-exempt
securities and certain other fixed-income securities will be with
the issuer or with underwriters of or dealers in those
securities, acting as principal. Accordingly, those funds would
not ordinarily pay significant brokerage commissions with respect
to securities transactions. SEE "FUND CHARGES AND EXPENSES" IN
PART I OF THIS STATEMENT FOR INFORMATION CONCERNING COMMISSIONS
PAID BY THE FUND.
It has for many years been a common practice in the
investment advisory business for advisers of investment companies
and other institutional investors to receive brokerage and
research services (as defined in the Securities Exchange Act of
1934, as amended (the "1934 Act")) from broker-dealers that
execute portfolio transactions for the clients of such advisers
and from third parties with which such broker-dealers have
arrangements. Consistent with this practice, Putnam Management
receives brokerage and research services and other similar
services from many broker-dealers with which Putnam Management
places the Fund's portfolio transactions and from third parties
with which these broker-dealers have arrangements. These
services include such matters as general economic and market
reviews, industry and company reviews, evaluations of
investments, recommendations as to the purchase and sale of
investments, newspapers, magazines, pricing services, quotation
services, news services and personal computers utilized by Putnam
Management's managers and analysts. Where the services referred
to above are not used exclusively by Putnam Management for
research purposes, Putnam Management, based upon its own
allocations of expected use, bears that portion of the cost of
these services which directly relates to their non-research use.
Some of these services are of value to Putnam Management and its
affiliates in advising various of their clients (including the
Fund), although not all of these services are necessarily useful
and of value in managing the Fund. The management fee paid by
the Fund is not reduced because Putnam Management and its
affiliates receive these services even though Putnam Management
might otherwise be required to purchase some of these services
for cash.
<PAGE>
Putnam Management places all orders for the purchase and
sale of portfolio investments for the Fund and buys and sells
investments for the Fund through a substantial number of brokers
and dealers. In so doing, Putnam Management uses its best
efforts to obtain for the Fund the most favorable price and
execution available, except to the extent it may be permitted to
pay higher brokerage commissions as described below. In seeking
the most favorable price and execution, Putnam Management, having
in mind the Fund's best interests, considers all factors it deems
relevant, including, by way of illustration, price, the size of
the transaction, the nature of the market for the security or
other investment, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the
broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by the
Management Contract, Putnam Management may cause the Fund to pay
a broker-dealer which provides "brokerage and research services"
(as defined in the 1934 Act) to Putnam Management an amount of
disclosed commission for effecting securities transactions on
stock exchanges and other transactions for the Fund on an agency
basis in excess of the commission which another broker-dealer
would have charged for effecting that transaction. Putnam
Management's authority to cause the Fund to pay any such greater
commissions is also subject to such policies as the Trustees may
adopt from time to time. Putnam Management does not currently
intend to cause the Fund to make such payments. It is the
position of the staff of the Securities and Exchange Commission
that Section 28(e) does not apply to the payment of such greater
commissions in "principal" transactions. Accordingly Putnam
Management will use its best effort to obtain the most favorable
price and execution available with respect to such transactions,
as described above.
The Management Contract provides that commissions, fees,
brokerage or similar payments received by Putnam Management or an
affiliate in connection with the purchase and sale of portfolio
investments of the Fund, less any direct expenses approved by the
Trustees, shall be recaptured by the Fund through a reduction of
the fee payable by the Fund under the Management Contract.
Putnam Management seeks to recapture for the Fund soliciting
dealer fees on the tender of the Fund's portfolio securities in
tender or exchange offers. Any such fees which may be recaptured
are likely to be minor in amount.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking
the most favorable price and execution available and such other
policies as the Trustees may determine, Putnam Management may
consider sales of shares of the Fund (and, if permitted by law,
of the other Putnam funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund.
PRINCIPAL UNDERWRITER
Putnam Mutual Funds is the principal underwriter of shares
of the Fund and the other continuously offered Putnam funds.
Putnam Mutual Funds is not obligated to sell any specific amount
of shares of the Fund and will purchase shares for resale only
against orders for shares. SEE "FUND CHARGES AND EXPENSES" IN
PART I OF THIS STATEMENT FOR INFORMATION ON SALES CHARGES AND
OTHER PAYMENTS RECEIVED BY PUTNAM MUTUAL FUNDS.
INVESTOR SERVICING AGENT AND CUSTODIAN
Putnam Investor Services, a division of Putnam Fiduciary
Trust Company ("PFTC"), is the Fund's investor servicing agent
(transfer, plan and dividend disbursing agent), for which it
receives fees which are paid monthly by the Fund as an expense of
all its shareholders. The fee paid to Putnam Investor Services
is determined by the Trustees taking into account the number of
shareholder accounts and transactions. Putnam Investor Services
earned the DALBAR Quality Tested Service Seal in 1990, 1991 and
1992. Over 10,000 tests of 38 separate shareholders service
components demonstrated that Putnam Investor Services exceeded
the industry standard in all categories.
PFTC is the custodian of the Fund's assets. In carrying
out its duties under its custodian contract, PFTC may employ one
or more subcustodians whose responsibilities will include
safeguarding and controlling the Fund's cash and securities,
handling the receipt and delivery of securities and collecting
interest and dividends on the Fund's investments. PFTC and any
subcustodians employed by it have a lien on the securities of the
Fund (to the extent permitted by the Fund's investment
restrictions) to secure charges and any advances made by such
subcustodians at the end of any day for the purpose of paying for
securities purchased by the Fund. The Fund expects that such
advances will exist only in unusual circumstances. Neither PFTC
nor any subcustodian determines the investment policies of the
Fund or decides which securities the Fund will buy or sell. PFTC
pays the fees and other charges of any subcustodians employed by
it. The Fund may from time to time pay custodial expenses in
full or in part through the placement by Putnam Management of the
Fund's portfolio transactions with the subcustodians or with a
third-party broker having an agreement with the subcustodians.
The Fund pays PFTC an annual fee based on the Fund's assets,
securities transactions and securities holdings and reimburses
PFTC for certain out-of-pocket expenses incurred by it or any
subcustodian employed by it in performing custodial services.
SEE "FUND CHARGES AND EXPENSES" IN PART I OF THIS
STATEMENT FOR INFORMATION ON FEES AND REIMBURSEMENTS FOR INVESTOR
SERVICING AND CUSTODY RECEIVED BY PFTC. THE FEES MAY BE REDUCED
BY CREDITS ALLOWED BY PFTC.
DETERMINATION OF NET ASSET VALUE
The Fund determines net asset value per share of each
class of shares once each day the New York Stock Exchange (the
"Exchange") is open. Currently, the Exchange is closed
Saturdays, Sundays and the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, the Fourth of July,
Labor Day, Thanksgiving and Christmas. The Fund determines net
asset value as of the close of regular trading on the Exchange.
However, equity options held by the Fund are priced as of the
close of trading at 4:10 p.m., and futures contracts on U.S.
Government securities and index options held by the Fund are
priced as of their close of trading at 4:15 p.m.
Securities for which market quotations are readily
available are valued at prices which, in the opinion of the
Trustees or Putnam Management, most nearly represent the market
values of such securities. Currently, such prices are determined
using the last reported sale price or, if no sales are reported
(as in the case of some securities traded over-the-counter), the
last reported bid price, except that certain U.S. Government
securities are stated at the mean between the last reported bid
and asked prices. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which
approximates market value. All other securities and assets are
valued at their fair value following procedures approved by the
Trustees. Liabilities are deducted from the total, and the
resulting amount is divided by the number of shares of the class
outstanding.
Reliable market quotations are not considered to be
readily available for long-term corporate bonds and notes,
certain preferred stocks, tax-exempt securities, or certain
foreign securities. These investments are stated at fair value
on the basis of valuations furnished by pricing services approved
by the Trustees, which determine valuations for normal,
institutional-size trading units of such securities using methods
based on market transactions for comparable securities and
various relationships between securities which are generally
recognized by institutional traders.
If any securities held by a Fund are restricted as to
resale, Putnam Management determines their fair value following
procedures approved by the Trustees. The fair value of such
securities is generally determined as the amount which the Fund
could reasonably expect to realize from an orderly disposition of
such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary
from case to case. However, consideration is generally given to
the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of
the restrictions on disposition of the securities (including any
registration expenses that might be borne by the Fund in
connection with such disposition). In addition, specific factors
are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of
the same class (both at the time of purchase and at the time of
valuation), the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any
available analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various times
prior to the close of the Exchange. The values of these
securities used in determining the net asset value of the Fund's
shares are computed as of such times. Also, because of the
amount of time required to collect and process trading
information as to large numbers of securities issues, the values
of certain securities (such as convertible bonds, U.S. Government
securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will
not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such
securities occur during such period, then these securities will
be valued at their fair value following procedures approved by
the Trustees.
Money market funds generally value their portfolio
securities at amortized cost according to Rule 2a-7 under the
Investment Company Act of 1940.
HOW TO BUY SHARES
General
The Prospectus contains a general description of how
investors may buy shares of the Fund and states whether the Fund
offers more than one class of shares. This Statement contains
additional information which may be of interest to investors.
Class A shares are sold with a sales charge payable at the
time of purchase (except for Class A shares of money market
funds). As used in this Statement and unless the context
requires otherwise, the term "Class A shares" includes shares of
Funds that offer only one class of shares. The Prospectus
contains a table of applicable sales charges. For information
about how to purchase Class A shares of a Putnam fund at net
asset value through an employer's defined contribution plan,
please consult your employer. Certain purchases of Class A
shares may be exempt from a sales charge or may be subject to a
contingent deferred sales charge. See "General--Sales without
sales charges or contingent deferred sales charges", "Additional
Information About Class A Shares", and "Contingent Deferred Sales
Charges--Class A shares".
Class B shares are sold subject to a contingent deferred
sales charge payable upon redemption within a specified period
after purchase. The Prospectus contains a table of applicable
contingent deferred sales charges.
Class Y shares, which are available only to employer-
sponsored defined contribution plans initially investing at least
$250 million in a combination of Putnam funds and other
investments managed by Putnam Management or its affiliates, are
not subject to sales charges or contingent deferred sales
charges.
Certain purchase programs described below are not
available to defined contribution plans. Consult your employer
for information on how to purchase shares through your plan.
The Fund is currently making a continuous offering of its
shares. The Fund receives the entire net asset value of shares
sold. The Fund will accept unconditional orders for shares to be
executed at the public offering price based on the net asset
value per share next determined after the order is placed. In
the case of Class A shares, the public offering price is the net
asset value plus the applicable sales charge, if any. No sales
charge is included in the public offering price of other classes
of shares. In the case of orders for purchase of shares placed
through dealers, the public offering price will be based on the
net asset value determined on the day the order is placed, but
only if the dealer receives the order before the close of regular
trading on the Exchange. If the dealer receives the order after
the close of the Exchange, the price will be based on the net
asset value next determined. If funds for the purchase of shares
are sent directly to Putnam Investor Services, they will be
invested at the public offering price based on the net asset
value next determined after receipt. Payment for shares of the
Fund must be in U.S. dollars; if made by check, the check must be
drawn on a U.S. bank.
Initial and subsequent purchases must satisfy the minimums
stated in the Prospectus, except that (i) individual investments
under certain employee benefit plans or Tax Qualified Retirement
Plans may be lower, (ii) persons who are already shareholders may
make additional purchases of $50 or more by sending funds
directly to Putnam Investor Services (see "Your Investing
Account" below), and (iii) for investors participating in
systematic investment plans and military allotment plans, the
initial and subsequent purchases must be $25 or more.
Information about these plans is available from investment
dealers or from Putnam Mutual Funds.
As a convenience to investors, shares may be purchased
through a systematic investment plan. Preauthorized monthly bank
drafts for a fixed amount (at least $25) are used to purchase
Fund shares at the applicable public offering price next
determined after Putnam Mutual Funds receives the proceeds from
the draft (normally the 20th of each month, or the next business
day thereafter). Further information and application forms are
available from investment dealers or from Putnam Mutual Funds.
Except as described below, distributions to be reinvested
are reinvested without a sales charge in shares of the same class
as of the ex-dividend date using the net asset value determined
on that date, and are credited to a shareholder's account on the
payment date. Distributions for Putnam Tax Exempt Income Fund,
Putnam Arizona Tax Exempt Income Fund, Putnam California Tax
Exempt Income Fund, Putnam Municipal Income Fund, Putnam Florida
Tax Exempt Income Fund, Putnam Massachusetts Tax Exempt Income
Fund II, Putnam Michigan Tax Exempt Income Fund II, Putnam
Minnesota Tax Exempt Income Fund II, Putnam New Jersey Tax Exempt
Income Fund, Putnam New York Tax Exempt Income Fund, Putnam New
York Tax Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income
Fund II, Putnam Pennsylvania Tax Exempt Income Fund and Putnam
Texas Tax Exempt Income Fund are reinvested without a sales
charge as of the next day following the period for which
distributions are paid using the net asset value determined on
that date, and are credited to a shareholder's account on the
payment date. Distributions for Putnam Tax-Free Income Trust and
Putnam Corporate Asset Trust are reinvested without a sales
charge as of the last day of the period for which distributions
are paid using the net asset value determined on that date, and
are credited to a shareholder's account on the payment date.
Dividends for Putnam money market funds are credited to a
shareholder's account on the payment date.
PAYMENT IN SECURITIES. In addition to cash, the Fund may
accept securities as payment for Fund shares at the applicable
net asset value. Generally, the Fund will only consider
accepting securities to increase its holdings in a portfolio
security, or if Putnam Management determines that the offered
securities are a suitable investment for the Fund and in a
sufficient amount for efficient management.
While no minimum has been established, it is expected that
the Fund would not accept securities with a value of less than
$100,000 per issue as payment for shares. The Fund may reject in
whole or in part any or all offers to pay for purchases of Fund
shares with securities, may require partial payment in cash for
such purchases to provide funds for applicable sales charges, and
may discontinue accepting securities as payment for Fund shares
at any time without notice. The Fund will value accepted
securities in the manner described in the section "Determination
of Net Asset Value" for valuing shares of the Fund. The Fund
will only accept securities which are delivered in proper form.
The Fund will not accept options or restricted securities as
payment for shares. The acceptance of securities by certain
Funds in exchange for Fund shares are subject to additional
requirements. In the case of Putnam Europe Growth Fund, Putnam
Overseas Growth Fund, Putnam Intermediate Tax Exempt Fund and
Putnam Diversified Equity Trust, transactions involving the
issuance of Fund shares for securities or assets other than cash
will be limited to a bona-fide re-organization or statutory
merger and to other acquisitions of portfolio securities that
meet all the following conditions: (a) such securities meet the
investment objectives and policies of the Fund; (b) such
securities are acquired for investment and not for resale; (c)
such securities are liquid securities which are not restricted as
to transfer either by law or liquidity of market; and (d) such
securities have a value which is readily ascertainable, as
evidenced by a listing on the American Stock Exchange, the New
York Stock Exchange or NASDAQ. In addition, Putnam Global
Governmental Income Trust may accept only investment grade bonds
with prices regularly stated in publications generally accepted
by investors, such as the London Financial Times and the
Association of International Bond Dealers manual, or securities
listed on the New York or American Stock Exchanges or with
NASDAQ, and Putnam Diversified Income Trust may accept only bonds
with prices regularly stated in publications generally accepted
by investors. For federal income tax purposes, a purchase of
Fund shares with securities will be treated as a sale or exchange
of such securities on which the investor will realize a taxable
gain or loss. The processing of a purchase of Fund shares with
securities involves certain delays while the Fund considers the
suitability of such securities and while other requirements are
satisfied. For information regarding procedures for payment in
securities, contact Putnam Mutual Funds. Investors should not
send securities to the Fund except when authorized to do so and
in accordance with specific instructions received from Putnam
Mutual Funds.
SALES WITHOUT SALES CHARGES OR CONTINGENT DEFERRED SALES
CHARGES. The Fund may sell shares without a sales charge or
contingent deferred sales charge to:
(i) current and retired Trustees of the Fund; officers of
the Fund; directors and current and retired U.S. full-time
employees of Putnam Management, Putnam Mutual Funds, their
parent corporations and certain corporate affiliates;
family members of and employee benefit plans for the
foregoing; and partnerships, trusts or other entities in
which any of the foregoing has a substantial interest;
(ii) employee benefit plans, for the repurchase of shares
in connection with repayment of plan loans made to plan
participants (if the sum loaned was obtained by redeeming
shares of a Putnam fund sold with a sales charge) (not
offered by tax-exempt funds);
(iii) clients of administrators of tax-qualified employee
benefit plans which have entered into agreements with
Putnam Mutual Funds (not offered by tax-exempt funds);
(iv) registered representatives and other employees of
broker-dealers having sales agreements with Putnam Mutual
Funds; employees of financial institutions having sales
agreements with Putnam Mutual Funds or otherwise having an
arrangement with any such broker-dealer or financial
institution with respect to sales of Fund shares; and
their spouses and children under age 21 (Putnam Mutual
Funds is regarded as the dealer of record for all such
accounts);
(v) investors meeting certain requirements who sold shares
of certain Putnam closed-end funds pursuant to a tender
offer by such closed-end fund;
(vi) a trust department of any financial institution
purchasing shares of the Fund in its capacity as trustee
of any trust, if the value of the shares of the Fund and
other Putnam funds purchased or held by all such trusts
exceeds $1 million in the aggregate; and
(vii) "wrap accounts" maintained for clients of broker-
dealers, financial institutions or financial planners who
have entered into agreements with Putnam Mutual Funds with
respect to such accounts.
In addition, the Fund may issue its shares at net asset
value or more in connection with the acquisition of substantially
all of the securities owned by other investment companies or
personal holding companies.
PAYMENTS TO DEALERS. Putnam Mutual Funds may, at its
expense, pay concessions in addition to the payments disclosed in
the Prospectus to dealers which satisfy certain criteria
established from time to time by Putnam Mutual Funds relating to
increasing net sales of shares of the Putnam funds over prior
periods, and certain other factors.
<PAGE>
ADDITIONAL INFORMATION ABOUT CLASS A SHARES
The underwriter's commission is the sales charge shown in
the Prospectus less any applicable dealer discount. The dealer
discount is the same for all dealers, except that Putnam Mutual
Funds retains the entire sales charge on any retail sales made by
it. Putnam Mutual Funds will give dealers ten days' notice of
any changes in the dealer discount.
Putnam Mutual Funds offers several plans by which an
investor may obtain reduced sales charges on purchases of Class A
shares. The variations in sales charges reflect the varying
efforts required to sell shares to separate categories of
purchasers. These plans may be altered or discontinued at any
time.
COMBINED PURCHASE PRIVILEGE. The following persons may
qualify for the sales charge reductions or eliminations shown in
the Prospectus by combining into a single transaction the
purchase of Class A shares with other purchases of any class of
shares:
(i) an individual, or a "company" as defined in Section
2(a)(8) of the Investment Company Act of 1940 (which
includes corporations which are corporate affiliates of
each other);
(ii) an individual, his or her spouse and their children
under twenty-one, purchasing for his, her or their own
account;
(iii) a trustee or other fiduciary purchasing for a single
trust estate or single fiduciary account (including a
pension, profit-sharing, or other employee benefit trust
created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code);
(iv) tax-exempt organizations qualifying under Section
501(c)(3) of the Internal Revenue Code (not including
403(b) plans); and
(v) employee benefit plans of a single employer or of
affiliated employers, other than 403(b) plans.
A combined purchase currently may also include shares of
any class of other continuously offered Putnam funds (other than
money market funds) purchased at the same time through a single
investment dealer, if the dealer places the order for such shares
directly with Putnam Mutual Funds.
CUMULATIVE QUANTITY DISCOUNT (RIGHT OF ACCUMULATION). A
purchaser of Class A shares may qualify for a cumulative quantity
discount by combining a current purchase (or combined purchases
as described above) with certain other shares of any class of
Putnam funds already owned. The applicable sales charge is based
on the total of:
(i) the investor's current purchase; and
(ii) the maximum public offering price (at the close of
business on the previous day) of:
(a) all shares held by the investor in all of the
Putnam funds (except money market funds); and
(b) any shares of money market funds acquired by
exchange from other Putnam funds; and
(iii) the maximum public offering price of all shares
described in paragraph (ii) owned by another shareholder
eligible to participate with the investor in a "combined
purchase" (see above).
To qualify for the combined purchase privilege or to
obtain the cumulative quantity discount on a purchase through an
investment dealer, when each purchase is made the investor or
dealer must provide Putnam Mutual Funds with sufficient
information to verify that the purchase qualifies for the
privilege or discount. The shareholder must furnish this
information to Putnam Investor Services when making direct cash
investments.
STATEMENT OF INTENTION. Investors may also obtain the
reduced sales charges for Class A shares shown in the Prospectus
for investments of a particular amount by means of a written
Statement of Intention, which expresses the investor's intention
to invest that amount (including certain "credits," as described
below) within a period of 13 months in shares of any class of the
Fund or any other continuously offered Putnam fund (excluding
money market funds). Each purchase of Class A shares under a
Statement of Intention will be made at the public offering price
applicable at the time of such purchase to a single transaction
of the total dollar amount indicated in the Statement. A
Statement of Intention may include purchases of shares made not
more than 90 days prior to the date that an investor signs a
Statement; however, the 13-month period during which the
Statement is in effect will begin on the date of the earliest
purchase to be included.
An investor may receive a credit toward the amount
indicated in the Statement equal to the maximum public offering
price as of the close of business on the previous day of all
shares he or she owns on the date of the Statement which are
eligible for purchase under a Statement (plus any shares of money
market funds acquired by exchange of such eligible shares).
Investors do not receive credit for shares purchased by the
reinvestment of distributions. Investors qualifying for the
"combined purchase privilege" (see above) may purchase shares
under a single Statement of Intention.
The Statement of Intention is not a binding obligation
upon the investor to purchase the full amount indicated. The
minimum initial investment under a Statement of Intention is 5%
of such amount, and must be invested immediately. Class A shares
purchased with the first 5% of such amount will be held in escrow
to secure payment of the higher sales charge applicable to the
shares actually purchased if the full amount indicated is not
purchased. When the full amount indicated has been purchased,
the escrow will be released. If an investor desires to redeem
escrowed shares before the full amount has been purchased, the
shares will be released from escrow only if the investor pays the
sales charge that, without regard to the Statement of Intention,
would apply to the total investment made to date.
To the extent that an investor purchases more than the
dollar amount indicated on the Statement of Intention and
qualifies for a further reduced sales charge, the sales charge
will be adjusted for the entire amount purchased at the end of
the 13-month period, upon recovery from the investor's dealer of
its portion of the sales charge adjustment. Once received from
the dealer, which may take a period of time or may never occur,
the sales charge adjustment will be used to purchase additional
shares at the then current offering price applicable to the
actual amount of the aggregate purchases. These additional
shares will not be considered as part of the total investment for
the purpose of determining the applicable sales charge pursuant
to the Statement of Intention. No sales charge adjustment will
be made unless and until the investor's dealer returns any excess
commissions previously received.
To the extent that an investor purchases less than the
dollar amount indicated on the Statement of Intention within the
13-month period, the sales charge will be adjusted upward for the
entire amount purchased at the end of the 13-month period. This
adjustment will be made by redeeming shares from the account to
cover the additional sales charge, the proceeds of which will be
paid to the investor's dealer and Putnam Mutual Funds in
accordance with the Prospectus. If the account exceeds an amount
that would otherwise qualify for a reduced sales charge, that
reduced sales charge will be applied.
Statements of Intention are not available for certain
employee benefit plans.
Statement of Intention forms may be obtained from Putnam
Mutual Funds or from investment dealers. Interested investors
should read the Statement of Intention carefully.
REDUCED SALES CHARGE FOR GROUP PURCHASES. Members of
qualified groups may purchase Class A shares of the Fund at a
group sales charge rate of 4.5% of the public offering price
(4.71% of the net amount invested). The dealer discount on such
sales is 3.75% of the offering price.
To receive the group rate, group members must purchase
Class A shares through a single investment dealer designated by
the group. The designated dealer must transmit each member's
initial purchase to Putnam Mutual Funds, together with payment
and completed application forms. After the initial purchase, a
member may send funds for the purchase of Class A shares directly
to Putnam Investor Services. Purchases of Class A shares are
made at the public offering price based on the net asset value
next determined after Putnam Mutual Funds or Putnam Investor
Services receives payment for the shares. The minimum investment
requirements described above apply to purchases by any group
member. Only Class A shares are included in calculating the
purchased amount.
Qualified groups include the employees of a corporation or
a sole proprietorship, members and employees of a partnership or
association, or other organized groups of persons (the members of
which may include other qualified groups) provided that: (i) the
group has at least 25 members of which at least 10 members
participate in the initial purchase; (ii) the group has been in
existence for at least six months; (iii) the group has some
purpose in addition to the purchase of investment company shares
at a reduced sales charge; (iv) the group's sole organizational
nexus or connection is not that the members are credit card
holders of a company, policy holders of an insurance company,
customers of a bank or broker-dealer, clients of an investment
adviser or security holders of a company; (v) the group agrees to
provide its designated investment dealer access to the group's
membership by means of written communication or direct
presentation to the membership at a meeting on not less
frequently than an annual basis; (vi) the group or its investment
dealer will provide annual certification in form satisfactory to
Putnam Investor Services that the group then has at least 25
members and that at least ten members participated in group
purchases during the immediately preceding 12 calendar months;
and (vii) the group or its investment dealer will provide
periodic certification in form satisfactory to Putnam Investor
Services as to the eligibility of the purchasing members of the
group.
Members of a qualified group include: (i) any group which
meets the requirements stated above and which is a constituent
member of a qualified group; (ii) any individual purchasing for
his or her own account who is carried on the records of the group
or on the records of any constituent member of the group as being
a good standing employee, partner, member or person of like
status of the group or constituent member; or (iii) any fiduciary
purchasing shares for the account of a member of a qualified
group or a member's beneficiary. For example, a qualified group
could consist of a trade association which would have as its
members individuals, sole proprietors, partnerships and
corporations. The members of the group would then consist of the
individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, and the
corporations and their employees, as well as the trustees of
employee benefit trusts acquiring Class A shares for the benefit
of any of the foregoing.
A member of a qualified group may, depending upon the
value of Class A shares of the Fund owned or proposed to be
purchased by the member, be entitled to purchase Class A shares
of the Fund at non-group sales charge rates shown in the
Prospectus which may be lower than the group sales charge rate,
if the member qualifies as a person entitled to reduced non-group
sales charges. Such a group member will be entitled to purchase
at the lower rate if, at the time of purchase, the member or his
or her investment dealer furnishes sufficient information for
Putnam Mutual Funds or Putnam Investor Services to verify that
the purchase qualifies for the lower rate.
Interested groups should contact their investment dealer
or Putnam Mutual Funds. The Fund reserves the right to revise
the terms of or to suspend or discontinue group sales at any
time.
EMPLOYEE BENEFIT PLANS; INDIVIDUAL ACCOUNT PLANS. The
term "employee benefit plan" means any plan or arrangement,
whether or not tax-qualified, which provides for the purchase of
Class A shares. The term "affiliated employer" means employers
who are affiliated with each other within the meaning of Section
2(a)(3)(C) of the Investment Company Act of 1940. The term
"individual account plan" means any employee benefit plan whereby
(i) Class A shares are purchased through payroll deductions or
otherwise by a fiduciary or other person for the account of
participants who are employees (or their spouses) of an employer,
or of affiliated employers, and (ii) a separate Investing Account
is maintained in the name of such fiduciary or other person for
the account of each participant in the plan.
The table of sales charges in the Prospectus applies to
sales to employee benefit plans, except that the Fund may sell
Class A shares at net asset value to employee benefit plans,
including individual account plans, of employers or of affiliated
employers which have at least 750 employees to whom such plan is
made available, in connection with a payroll deduction system of
plan funding (or other system acceptable to Putnam Investor
Services) by which contributions or account information for plan
participation are transmitted to Putnam Investor Services by
methods acceptable to Putnam Investor Services. The Fund may
also sell Class A shares at net asset value to employee benefit
plans of employers or of affiliated employers which have at least
750 employees, if such plans are qualified under Section 401 of
the Internal Revenue Code.
Additional information about employee benefit plans and
individual account plans is available from investment dealers or
from Putnam Mutual Funds.
CONTINGENT DEFERRED SALES CHARGES
CLASS A SHARES. Class A shares purchased at net asset
value by shareholders investing $1 million or more, including
purchases pursuant to any Combined Purchase Privilege, Right of
Accumulation or Statement of Intention, are subject to a
contingent deferred sales charge ("CDSC") of 1.00% or 0.50%,
respectively, if redeemed within the first or second year after
purchase. The Class A CDSC is imposed on the lower of the cost
and the current net asset value of the shares redeemed. The CDSC
does not apply to shares sold without a sales charge through
participant-directed qualified retirement plans and shares
purchased by certain investors investing $1 million or more that
have made arrangements with Putnam Mutual Funds and whose dealer
of record waived the commission described in the next paragraph.
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 of such shares, including purchases pursuant to any
Combined Purchase Privilege, Right of Accumulation or Statement
of Intention, during the one-year period beginning with the date
of the initial purchase at net asset value and each subsequent
one-year period beginning with the first purchase at net asset
value 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 sponsored by an employer with more
than 750 employees), Putnam Mutual Funds pays commissions on
cumulative purchases during the life of the account at the rate
of 1.00% of the amount under $3 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
(gross sales minus gross redemptions during the quarter) at the
rate of 0.15%. Money market fund shares are excluded from all
commission calculations, except for determining the amount
initially invested by a participant-directed qualified retirement
plan. Commissions on sales at net asset value to such plans are
subject to Putnam Mutual Funds' right to reclaim such commissions
if the shares are redeemed within two years.
Different CDSC and commission rates may apply to shares
purchased before April 1, 1994.
CLASS B SHARES. Investors who set up a Systematic
Withdrawal Plan (SWP) for a Class B share account (see "Plans
Available To Shareholders -- Automatic Cash Withdrawal Plan") may
withdraw through the SWP up to 12% of the net asset value of the
account (calculated as set forth below) each year without
incurring any CDSC. Shares not subject to a CDSC (such as shares
representing reinvestment of distributions) will be redeemed
first and will count toward the 12% limitation. If there are
insufficient shares not subject to a CDSC, shares subject to the
lowest CDSC liability will be redeemed next until the 12% limit
is reached. The 12% figure is calculated on a pro rata basis at
the time of the first payment made pursuant to a SWP and
recalculated thereafter on a pro rata basis at the time of each
SWP payment. Therefore, shareholders who have chosen a SWP based
on a percentage of the net asset value of their account of up to
12% will be able to receive SWP payments without incurring a
CDSC. However, shareholders who have chosen a specific dollar
amount (for example, $100 per month from a fund that pays income
distributions monthly) for their periodic SWP payment should be
aware that the amount of that payment not subject to a CDSC may
vary over time depending on the net asset value of their account.
For example, if the net asset value of the account is $10,000 at
the time of payment, the shareholder will receive $100 free of
the CDSC (12% of $10,000 divided by 12 monthly payments).
However, if at the time of the next payment the net asset value
of the account has fallen to $9,400, the shareholder will receive
$94 free of any CDSC (12% of $9,400 divided by 12 monthly
payments) and $6 subject to the lowest applicable CDSC. This SWP
privilege may be revised or terminated at any time.
ALL SHARES. No CDSC is imposed on shares of any class
subject to a CDSC ("CDSC Shares") to the extent that the CDSC
Shares redeemed (i) are no longer subject to the holding period
therefor, (ii) resulted from reinvestment of distributions on
CDSC Shares, or (iii) were exchanged for shares of another Putnam
fund, provided that the shares acquired in such exchange or
subsequent exchanges (including shares of a Putnam money market
fund) will continue to remain subject to the CDSC, if applicable,
until the applicable holding period expires. In determining
whether the CDSC applies to each redemption of CDSC Shares, CDSC
Shares no longer subject to a CDSC and CDSC Shares representing
reinvestment of distributions are redeemed first.
The Fund will waive any CDSC on redemptions, in the case
of individual or Uniform Transfers to Minors Act accounts, in
case of death or disability or for the purpose of paying benefits
pursuant to tax-qualified retirement plans. Such payments
currently include, without limitation, (1) distributions from an
IRA due to death or disability, (2) a return of excess
contributions to an IRA or 401(k) plan, and (3) distributions
from retirement plans qualified under section 401(a) or section
403(b)(7) (a "403(b) plan") of the Internal Revenue Code of 1986,
as amended (the "Code"), due to death, disability, retirement or
separation from service. The Fund will also waive any CDSC in
the case of the death of one joint tenant. These waivers may be
changed at any time. Additional waivers may apply to IRA
accounts opened prior to February 1, 1994.
DISTRIBUTION PLAN
If the Fund or a class of shares of the Fund has adopted a
Distribution Plan, the Prospectus describes the principal
features of the Plan. This Statement contains additional
information which may be of interest to investors.
Continuance of a Plan is subject to annual approval by a
vote of the Trustees, including a majority of the Trustees who
are not interested persons of the Fund and who have no direct or
indirect interest in the Plan or related arrangements (the
"Qualified Trustees"), cast in person at a meeting called for
that purpose. All material amendments to a Plan must be likewise
approved by the Trustees and the Qualified Trustees. No Plan may
be amended in order to increase materially the costs which the
Fund may bear for distribution pursuant to such Plan without also
being approved by a majority of the outstanding voting securities
of the Fund or the relevant class of the Fund, as the case may
be. A Plan terminates automatically in the event of its
assignment and may be terminated without penalty, at any time, by
a vote of a majority of the Qualified Trustees or by a vote of a
majority of the outstanding voting securities of the Fund or the
relevant class of the Fund, as the case may be.
If Plan payments are made to reimburse Putnam Mutual Funds
for payments to dealers based on the average net asset value of
Fund shares attributable to shareholders for whom the dealers are
designated as the dealer of record, "average net asset value"
attributable to a shareholder account means the product of (i)
the Fund's average daily share balance of the account and (ii)
the Fund's average daily net asset value per share (or the
average daily net asset value per share of the class, if
applicable). For administrative reasons, Putnam Mutual Funds may
enter into agreements with certain dealers providing for the
calculation of "average net asset value" on the basis of assets
of the accounts of the dealer's customers on an established day
in each quarter.
Financial institutions receiving payments from Putnam
Mutual Funds as described above may be required to comply with
various state and federal regulatory requirements, including
among others those regulating the activities of securities
brokers or dealers.
INVESTOR SERVICES
SHAREHOLDER INFORMATION
Each time shareholders buy or sell shares, they will
receive a statement confirming the transaction and listing their
current share balance. (Under certain investment plans, a
statement may only be sent quarterly.) Shareholders will receive
a statement confirming reinvestment of distributions in
additional Fund shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs. To help shareholders take full
advantage of their Putnam investment, they will receive a Welcome
Kit and a periodic publication covering many topics of interest
to investors. The Fund also sends annual and semiannual reports
that keep shareholders informed about its portfolio and
performance, and year-end tax information to simplify their
recordkeeping. Easy-to-read, free booklets on special subjects
such as the Exchange Privilege and IRAs are available from Putnam
Investor Services. Shareholders may call Putnam Investor
Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m.
and 7:00 p.m. Boston time for more information, including account
balances.
YOUR INVESTING ACCOUNT
The following information provides more detail concerning
the operation of a Putnam Investing Account. For further
information or assistance, investors should consult Putnam
Investor Services. Shareholders who purchase shares through a
defined contribution plan should note that not all of the
services or features described below may be available to them,
and they should contact their employer for details.
A shareholder may reinvest a recent cash distribution
without a front-end sales charge or without the reinvested shares
being subject to a CDSC, as the case may be, by delivering to
Putnam Investor Services the uncashed distribution check,
endorsed to the order of the Fund. Putnam Investor Services must
receive the properly endorsed check within 30 days after the date
of the check. Upon written notice to shareholders, the Fund may
permit shareholders who receive cash distributions to reinvest
amounts representing returns of capital without a sales charge or
without being subject to the CDSC.
The Investing Account also provides a way to accumulate
shares of the Fund. In most cases, after an initial investment
of $500, a shareholder may send checks to Putnam Investor
Services for $50 or more, made payable to the Fund, to purchase
additional shares at the applicable public offering price next
determined after Putnam Investor Services receives the check.
For Putnam Corporate Asset Trust, the minimum initial investment
is $25,000 and the minimum subsequent investment is $5,000.
Checks must be drawn on a U.S. bank and must be payable in U.S.
dollars.
Putnam Investor Services acts as the shareholder's agent
whenever it receives instructions to carry out a transaction on
the shareholder's account. Upon receipt of instructions that
shares are to be purchased for a shareholder's account, shares
will be purchased through the investment dealer designated by the
shareholder. Shareholders may change investment dealers at any
time by written notice to Putnam Investor Services, provided the
new dealer has a sales agreement with Putnam Mutual Funds.
Shares credited to an account are transferable upon
written instructions in good order to Putnam Investor Services
and may be sold to the Fund as described under "How to buy
shares, sell shares and exchange shares" in the Prospectus.
Money market funds and certain other funds will not issue share
certificates. A shareholder may send any certificates which have
been previously issued to Putnam Investor Services for
safekeeping at no charge to the shareholder.
Putnam Mutual Funds, at its expense, may provide certain
additional reports and administrative material to qualifying
institutional investors with fiduciary responsibilities to assist
these investors in discharging their responsibilities.
Institutions seeking further information about this service
should contact Putnam Mutual Funds, which may modify or terminate
this service at any time.
Putnam Investor Services may make special services
available to shareholders with investments exceeding $1,000,000.
Contact Putnam Investor Services for details.
The Fund pays Putnam Investor Services' fees for
maintaining Investing Accounts.
REINSTATEMENT PRIVILEGE
CLASS A SHARES
An investor who has sold shares to the Fund may reinvest
(within 90 days) the proceeds of such sale in shares of the Fund,
or may be able to reinvest (within 90 days) the proceeds in
shares of the other continuously offered Putnam funds (through
the Exchange Privilege described in the Prospectus and below).
Any such reinvestment would be at the net asset value of the
shares of the fund(s) the investor selects, next determined after
Putnam Mutual Funds receives a Reinstatement Authorization and
will not be subject to any sales charge, including a contingent
deferred sales charge.
CLASS B SHARES
An investor who has sold Class B shares to the Fund may
reinvest (within 90 days) the proceeds of such sale in Class B
shares of the Fund, or may be able to reinvest (within 90 days)
the proceeds in Class B shares of other Putnam funds (through the
Exchange Privilege described in the Prospectus and below). Upon
such reinvestment, the investor would receive Class B shares at
the net asset value next determined after Putnam Mutual Funds
receives a Reinstatement Authorization subject to the applicable
contingent deferred sales charge calculated for this purpose
using the date of the original purchase.
ALL SHARES
Exercise of the Reinstatement Privilege does not alter the
federal income tax treatment of any capital gains realized on a
sale of Fund shares, but to the extent that any shares are sold
at a loss and the proceeds are reinvested in shares of the Fund,
some or all of the loss may be disallowed as a deduction.
Consult your tax adviser.
Investors who desire to exercise this Privilege should
contact their investment dealer or Putnam Investor Services.
EXCHANGE PRIVILEGE
Except as otherwise set forth in this section, by calling
Putnam Investor Services, investors may exchange shares valued up
to $500,000 between accounts with identical registrations,
provided that no certificates are outstanding for such shares and
no address change has been made within the preceding 15 days.
During periods of unusual market changes and shareholder
activity, shareholders may experience delays in contacting Putnam
Investor Services by telephone to exercise the Telephone Exchange
Privilege.
Putnam Investor Services also makes exchanges promptly
after receiving a properly completed Exchange Authorization Form
and, if issued, share certificates. If the shareholder is a
corporation, partnership, agent, or surviving joint owner, Putnam
Investor Services will require additional documentation of a
customary nature. Because an exchange of shares involves the
redemption of Fund shares and reinvestment of the proceeds in
shares of another Putnam fund, completion of an exchange may be
delayed under unusual circumstances if the Fund were to suspend
redemptions or postpone payment for the Fund shares being
exchanged, in accordance with federal securities laws. Exchange
Authorization Forms and prospectuses of the other Putnam funds
are available from Putnam Mutual Funds or investment dealers
having sales contracts with Putnam Mutual Funds. The prospectus
of each fund describes its investment objective(s) and policies,
and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
Shares of certain Putnam funds are not available to residents of
all states. The Fund reserves the right to change or suspend the
Exchange Privilege at any time. Shareholders would be notified
of any change or suspension. Additional information is available
from Putnam Investor Services.
Shares of the Fund must be held at least 15 days by the
shareholder desiring an exchange. There is no holding period if
the shareholder acquired the shares to be exchanged through
reinvestment of distributions, transfer from another shareholder,
prior exchange or certain employer-sponsored defined contribution
plans. In all cases, the shares to be exchanged must be
registered on the records of the Fund in the name of the
shareholder desiring the exchange.
Shareholders of other Putnam funds may also exchange their
shares at net asset value for shares of the Fund, as set forth in
the current prospectus of each fund.
For federal income tax purposes, an exchange is a sale on
which the investor generally will realize a capital gain or loss
depending on whether the net asset value at the time of the
exchange is more or less than the investor's cost. The Exchange
Privilege may be revised or terminated at any time. Shareholders
would be notified of any such change or suspension.
DIVIDENDS PLUS
Shareholders may invest the Fund's distributions of net
investment income or distributions combining net investment
income and short-term capital gains in shares of the same class
of another continuously offered Putnam fund (the "receiving
fund") using the net asset value per share of the receiving fund
determined on the date the Fund's distribution is payable. No
sales charge or contingent deferred sales charge will apply to
the purchased shares unless the Fund is a money market fund. The
prospectus of each fund describes its investment objective(s) and
policies, and shareholders should obtain a prospectus and
consider these objective(s) and policies carefully before
investing their distributions in the receiving fund. Shares of
certain Putnam funds are not available to residents of all
states.
The minimum account size requirement for the receiving
fund will not apply if the current value of your account in this
Fund is more than $5,000.
Shareholders of other Putnam funds (except for money
market funds, whose shareholders must pay a sales charge or
become subject to a contingent deferred sales charge) may also
use their distributions to purchase shares of the Fund at net
asset value.
For federal tax purposes, distributions from the Fund
which are reinvested in another fund are treated as paid by the
Fund to the shareholder and invested by the shareholder in the
receiving fund and thus, to the extent comprised of taxable
income and deemed paid to a taxable shareholder, are taxable.
The Dividends PLUS program may be revised or terminated at
any time.
PLANS AVAILABLE TO SHAREHOLDERS
The Plans described below are fully voluntary and may be
terminated at any time without the imposition by the Fund or
Putnam Investor Services of any penalty. All Plans provide for
automatic reinvestment of all distributions in additional shares
of the Fund at net asset value. The Fund, Putnam Mutual Funds or
Putnam Investor Services may modify or cease offering these Plans
at any time.
AUTOMATIC CASH WITHDRAWAL PLAN. An investor who owns or
buys shares of the Fund valued at $10,000 or more at the current
public offering price may open a Withdrawal Plan and have a
designated sum of money ($50 or more) paid monthly, quarterly,
semi-annually or annually to the investor or another person.
(Payments from the Fund can be combined with payments from other
Putnam funds into a single check through a Designated Payment
Plan.) Shares are deposited in a Plan account, and all
distributions are reinvested in additional shares of the Fund at
net asset value (except where the Plan is utilized in connection
with a charitable remainder trust). Shares in a Plan account are
then redeemed at net asset value to make each withdrawal payment.
Payment will be made to any person the investor designates;
however, if shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary,
except in the case of a profit-sharing or pension plan where
payment will be made to a designee. As withdrawal payments may
include a return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor.
The redemption of shares in connection with a Withdrawal Plan
generally will result in a gain or loss for tax purposes. Some
or all of the losses realized upon redemption may be disallowed
pursuant to the so-called wash sale rules if shares of the same
fund from which shares were redeemed are purchased (including
through the reinvestment of fund distributions) within a period
beginning 30 days before, and ending 30 days after, such
redemption. In such a case, the basis of the replacement shares
will be increased to reflect the disallowed loss. Continued
withdrawals in excess of income will reduce and possibly exhaust
invested principal, especially in the event of a market decline.
The maintenance of a Withdrawal Plan concurrently with purchases
of additional shares of the Fund would be disadvantageous to the
investor because of the sales charge payable on such purchases.
For this reason, the minimum investment accepted while a
Withdrawal Plan is in effect is $1,000, and an investor may not
maintain a Plan for the accumulation of shares of the Fund (other
than through reinvestment of distributions) and a Withdrawal Plan
at the same time. The cost of administering these Plans for the
benefit of those shareholders participating in them is borne by
the Fund as an expense of all shareholders. The Fund, Putnam
Mutual Funds or Putnam Investor Services may terminate or change
the terms of the Withdrawal Plan at any time. A Withdrawal Plan
will be terminated if communications mailed to the shareholder
are returned as undeliverable.
Investors should consider carefully with their own
financial advisers whether the Plan and the specified amounts to
be withdrawn are appropriate in their circumstances. The Fund
and Putnam Investor Services make no recommendations or
representations in this regard.
TAX QUALIFIED RETIREMENT PLANS; 403(B) AND SEP PLANS.
(NOT OFFERED BY FUNDS INVESTING PRIMARILY IN TAX-EXEMPT
SECURITIES.) Investors may purchase shares of the Fund through
the following Tax Qualified Retirement Plans, available to
qualified individuals or organizations:
Standard and variable profit-sharing (including 401(k))
and money purchase pension plans; and
Individual Retirement Account Plans (IRAs).
Each of these Plans has been qualified as a prototype plan
by the Internal Revenue Service. Putnam Investor Services will
furnish services under each plan at a specified annual cost.
Putnam Fiduciary Trust Company serves as trustee under each of
these Plans.
Forms and further information on these Plans are available
from investment dealers or from Putnam Mutual Funds. In
addition, specialized professional plan administration services
are available on an optional basis; contact Putnam Defined
Contribution Plan Services at 1-800-225-2465, extension 8600.
A 403(b) Retirement Plan is available for employees of
public school systems and organizations which meet the
requirements of Section 501(c)(3) of the Internal Revenue Code.
Forms and further information on the 403(b) Plan are also
available from investment dealers or from Putnam Mutual Funds.
Shares of the Fund may also be used in simplified employee
pension (SEP) plans. For further information on the Putnam
prototype SEP plan, contact an investment dealer or Putnam Mutual
Funds.
Consultation with a competent financial and tax adviser
regarding these Plans and consideration of the suitability of
Fund shares as an investment under the Employee Retirement Income
Security Act of 1974 or otherwise is recommended.
SIGNATURE GUARANTEES
Redemption requests for shares having a net asset value of
$100,000 or more must be signed by the registered owners or their
legal representatives and must be guaranteed by a bank,
broker/dealer, municipal securities dealer or broker, government
securities dealer or broker, credit union, national securities
exchange, registered securities association, clearing agency,
savings association or trust company, provided such institution
is acceptable under and conforms with Putnam Fiduciary Trust
Company's signature guarantee procedures. A copy of such
procedures is available upon request. If you want your
redemption proceeds sent to an address other than your address as
it appears on Putnam's records, you must provide a signature
guarantee. Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
SUSPENSION OF REDEMPTIONS
The Fund may not suspend shareholders' right of
redemption, or postpone payment for more than seven days, unless
the New York Stock Exchange is closed for other than customary
weekends or holidays, or if permitted by the rules of the
Securities and Exchange Commission during periods when trading on
the Exchange is restricted or during any emergency which makes it
impracticable for the Fund to dispose of its securities or to
determine fairly the value of its net assets, or during any other
period permitted by order of the Commission for protection of
investors.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Fund. However, the Agreement and Declaration of Trust
disclaims shareholder liability for acts or obligations of the
Fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the Fund or the Trustees. The Agreement and Declaration of Trust
provides for indemnification out of Fund property for all loss
and expense of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund would be unable to
meet its obligations. The likelihood of such circumstances is
remote.
STANDARD PERFORMANCE MEASURES
Yield and total return data for the Fund may from time to
time be presented in Part I of this Statement and in
advertisements. In the case of funds with more than one class of
shares, all performance information is calculated separately for
each class. The data is calculated as follows.
Total return for one-, five- and ten-year periods (or for
such shorter periods as the Fund has been in operation or shares
of the relevant class have been outstanding) is determined by
calculating the actual dollar amount of investment return on a
$1,000 investment in the Fund made at the beginning of the
period, at the maximum public offering price for Class A shares
and net asset value for other classes of shares, and then
calculating the annual compounded rate of return which would
produce that amount. Total return for a period of one year is
equal to the actual return of the Fund during that period. Total
return calculations assume deduction of the Fund's maximum sales
charge or contingent deferred sales charge, if applicable, and
reinvestment of all Fund distributions at net asset value on
their respective reinvestment dates.
The Fund's yield is presented for a specified thirty-day
period (the "base period"). Yield is based on the amount
determined by (i) calculating the aggregate amount of dividends
and interest earned by the Fund during the base period less
expenses accrued for that period, and (ii) dividing that amount
by the product of (A) the average daily number of shares of the
Fund outstanding during the base period and entitled to receive
dividends and (B) the per share maximum public offering price for
Class A shares and net asset value for other classes of shares on
the last day of the base period. The result is annualized on a
compounding basis to determine the yield. For this calculation,
interest earned on debt obligations held by the Fund is generally
calculated using the yield to maturity (or first expected call
date) of such obligations based on their market values (or, in
the case of receivables-backed securities such as GNMA's, based
on cost). Dividends on equity securities are accrued daily at
their stated dividend rates.
If the Fund is a money market fund, yield is computed by
determining the percentage net change, excluding capital changes,
in the value of an investment in one share over the seven-day
period for which yield is presented (the "base period"), and
multiplying the net change by 365/7 (or approximately 52 weeks).
Effective yield represents a compounding of the yield by adding 1
to the number representing the percentage change in value of the
investment during the base period, raising that sum to a power
equal to 365/7, and subtracting 1 from the result.
If the Fund is a tax-exempt fund, the tax-equivalent yield
during the base period may be presented for shareholders in one
or more stated tax brackets. Tax-equivalent yield is calculated
by adjusting the tax-exempt yield by a factor designed to show
the approximate yield that a taxable investment would have to
earn to produce an after-tax yield equal, for that shareholder,
to the tax-exempt yield. The tax-equivalent yield will differ
for shareholders in other tax brackets.
At times, Putnam Management may reduce its compensation or
assume expenses of the Fund in order to reduce the Fund's
expenses. The per share amount of any such fee reduction or
assumption of expenses during the Fund's past ten fiscal years
(or for the life of the Fund, if shorter) is reflected in the
table in the section entitled "Financial history" in the
Prospectus. Any such fee reduction or assumption of expenses
would increase the Fund's yield and total return during the
period of the fee reduction or assumption of expenses.
All data are based on past performance and do not predict
future results.
COMPARISON OF PORTFOLIO PERFORMANCE
Independent statistical agencies measure the Fund's
investment performance and publish comparative information
showing how the Fund, and other investment companies, performed
in specified time periods. Three agencies whose reports are
commonly used for such comparisons are set forth below. From
time to time, the Fund may distribute these comparisons to its
shareholders or to potential investors. THE AGENCIES LISTED
BELOW MEASURE PERFORMANCE BASED ON THEIR OWN CRITERIA RATHER THAN
ON THE STANDARDIZED PERFORMANCE MEASURES DESCRIBED IN THE
PRECEDING SECTION.
LIPPER ANALYTICAL SERVICES, INC. distributes mutual fund
rankings monthly. The rankings are based on total return
performance calculated by Lipper, reflecting generally
changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a
variety of performance periods, for example year-to-date,
1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset
category.
MORNINGSTAR, INC. distributes mutual fund ratings twice a
month. The ratings are divided into five groups:
highest, above average, neutral, below average and lowest.
They represent a fund's historical risk/reward ratio
relative to other funds with similar objectives. The
performance factor is a weighted-average assessment of the
Fund's 3-year, 5-year, and 10-year total return
performance (if available) reflecting deduction of
expenses and sales charges. Performance is adjusted using
quantitative techniques to reflect the risk profile of the
fund. The ratings are derived from a purely quantitative
system that does not utilize the subjective criteria
customarily employed by rating agencies such as Standard &
Poor's Corporation and Moody's Investor Service, Inc.
CDA/WIESENBERGER'S MANAGEMENT RESULTS publishes mutual
fund rankings and is distributed monthly. The rankings
are based entirely on total return calculated by
Weisenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year. Mutual funds are ranked in
general categories (e.g., international bond,
international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of
sales charges or fees.
Independent publications may also evaluate the Fund's
performance. Certain of those publications are listed below, at
the request of Putnam Mutual Funds, which bears full
responsibility for their use and the descriptions appearing
below. From time to time the Fund may distribute evaluations by
or excerpts from these publications to its shareholders or to
potential investors. The following illustrates the types of
information provided by these publications.
BUSINESS WEEK publishes mutual fund rankings in its
Investment Figures of the Week column. The rankings are
based on 4-week and 52-week total return reflecting
changes in net asset value and the reinvestment of all
distributions. They do not reflect deduction of any sales
charges. Funds are not categorized; they compete in a
large universe of over 2000 funds. The source for
rankings is data generated by Morningstar, Inc.
INVESTOR'S BUSINESS DAILY publishes mutual fund rankings
on a daily basis. The rankings are depicted as the top 25
funds in a given category. The categories are based
loosely on the type of fund, e.g., growth funds, balanced
funds, U.S. government funds, GNMA funds, growth and
income funds, corporate bond funds, etc. Performance
periods for sector equity funds can vary from 4 weeks to
39 weeks; performance periods for other fund groups vary
from 1 year to 3 years. Total return performance reflects
changes in net asset value and reinvestment of dividends
and capital gains. The rankings are based strictly on
total return. They do not reflect deduction of any sales
charges. Performance grades are conferred from A+ to E.
An A+ rating means that the fund has performed within the
top 5% of a general universe of over 2000 funds; an A
rating denotes the top 10%; an A- is given to the top 15%,
etc.
BARRON'S periodically publishes mutual fund rankings. The
rankings are based on total return performance provided by
Lipper Analytical Services. The Lipper total return data
reflects changes in net asset value and reinvestment of
distributions, but does not reflect deduction of any sales
charges. The performance periods vary from short-term
intervals (current quarter or year-to-date, for example)
to long-term periods (five-year or ten-year performance,
for example). Barron's classifies the funds using the
Lipper mutual fund categories, such as Capital
Appreciation Funds, Growth Funds, U.S. Government Funds,
Equity Income Funds, Global Funds, etc. Occasionally,
Barron's modifies the Lipper information by ranking the
funds in asset classes. "Large funds" may be those with
assets in excess of $25 million; "small funds" may be
those with less than $25 million in assets.
THE WALL STREET JOURNAL publishes its Mutual Fund
Scorecard on a daily basis. Each Scorecard is a ranking
of the top-15 funds in a given Lipper Analytical Services
category. Lipper provides the rankings based on its total
return data reflecting changes in net asset value and
reinvestment of distributions and not reflecting any sales
charges. The Scorecard portrays 4-week, year-to-date,
one-year and 5-year performance; however, the ranking is
based on the one-year results. The rankings for any given
category appear approximately once per month.
FORTUNE magazine periodically publishes mutual fund
rankings that have been compiled for the magazine by
Morningstar, Inc. Funds are placed in stock or bond fund
categories (for example, aggressive growth stock funds,
growth stock funds, small company stock funds, junk bond
funds, Treasury bond funds, etc.), with the top-10 stock
funds and the top-5 bond funds appearing in the rankings.
The rankings are based on 3-year annualized total return
reflecting changes in net asset value and reinvestment of
distributions and not reflecting sales charges.
Performance is adjusted using quantitative techniques to
reflect the risk profile of the fund.
MONEY magazine periodically publishes mutual fund rankings
on a database of funds tracked for performance by Lipper
Analytical Services. The funds are placed in 23 stock or
bond fund categories and analyzed for five-year risk
adjusted return. Total return reflects changes in net
asset value and reinvestment of all dividends and capital
gains distributions and does not reflect deduction of any
sales charges. Grades are conferred (from A to E): the
top 20% in each category receive an A, the next 20% a B,
etc. To be ranked, a fund must be at least one year old,
accept a minimum investment of $25,000 or less and have
had assets of at least $25 million as of a given date.
FINANCIAL WORLD publishes its monthly Independent
Appraisals of Mutual Funds, a survey of approximately 1000
mutual funds. Funds are categorized as to type, e.g.,
balanced funds, corporate bond funds, global bond funds,
growth and income funds, U.S. government bond funds, etc.
To compete, funds must be over one year old, have over $1
million in assets, require a maximum of $10,000 initial
investment, and should be available in at least 10 states
in the United States. The funds receive a composite past
performance rating, which weighs the intermediate- and
long-term past performance of each fund versus its
category, as well as taking into account its risk, reward
to risk, and fees. An A+ rated fund is one of the best,
while a D-rated fund is one of the worst. The source for
Financial World rating is Schabacker investment management
in Rockville, MD.
FORBES magazine periodically publishes mutual fund ratings
based on performance over at least two bull and bear
market cycles. The funds are categorized by type,
including stock and balanced funds, taxable bond funds,
municipal bond funds, etc. Data sources include Lipper
Analytical Services and CDA Investment Technologies. The
ratings are based strictly on performance at net asset
value over the given cycles. Funds performing in the top
5% receive an A+ rating; the top 15% receive an A rating;
and so on until the bottom 5% receive an F rating. Each
fund exhibits two ratings, one for performance in "up"
markets and another for performance in "down" markets.
KIPLINGER'S PERSONAL FINANCE MAGAZINE (formerly Changing
Times), periodically publishes rankings of mutual funds
based on one-, three- and five-year total return
performance reflecting changes in net asset value and
reinvestment of dividends and capital gains and not
reflecting deduction of any sales charges. Funds are
ranked by tenths: a rank of 1 means that a fund was among
the highest 10% in total return for the period; a rank of
10 denotes the bottom 10%. Funds compete in categories of
similar funds--aggressive growth funds, growth and income
funds, sector funds, corporate bond funds, global
governmental bond funds, mortgage-backed securities funds,
etc. Kiplinger's also provides a risk-adjusted grade in
both rising and falling markets. Funds are graded against
others with the same objective. The average weekly total
return over two years is calculated. Performance is
adjusted using quantitative techniques to reflect the risk
profile of the fund.
U.S. NEWS AND WORLD REPORT periodically publishes mutual
fund rankings based on an overall performance index (OPI)
devised by Kanon Bloch Carre & Co., a Boston research
firm. Over 2000 funds are tracked and divided into 10
equity, taxable bond and tax-free bond categories. Funds
compete within the 10 groups and three broad categories.
The OPI is a number from 0-100 that measures the relative
performance of funds at least three years old over the
last 1, 3, 5 and 10 years and the last six bear markets.
Total return reflects changes in net asset value and the
reinvestment of any dividends and capital gains
distributions and does not reflect deduction of any sales
charges. Results for the longer periods receive the most
weight.
THE 100 BEST MUTUAL FUNDS YOU CAN BUY (1992), authored by
Gordon K. Williamson. The author's list of funds is
divided into 12 equity and bond fund categories, and the
100 funds are determined by applying four criteria.
First, equity funds whose current management teams have
been in place for less than five years are eliminated.
(The standard for bond funds is three years.) Second, the
author excludes any fund that ranks in the bottom 20
percent of its category's risk level. Risk is determined
by analyzing how many months over the past three years the
fund has underperformed a bank CD or a U.S. Treasury bill.
Third, a fund must have demonstrated strong results for
current three-year and five-year performance. Fourth, the
fund must either possess, in Mr. Williamson's judgment,
"excellent" risk-adjusted return or "superior" return with
low levels of risk. Each of the 100 funds is ranked in
five categories: total return, risk/volatility,
management, current income and expenses. The rankings
follow a five-point system: zero designates "poor"; one
point means "fair"; two points denote "good"; three points
qualify as a "very good"; four points rank as "superior";
and five points mean "excellent."
In addition, Putnam Mutual Funds may distribute to
shareholders or prospective investors illustrations of the
benefits of reinvesting tax-exempt or tax-deferred distributions
over specified time periods, which may include comparisons to
fully taxable distributions. These illustrations use
hypothetical rates of tax-advantaged and taxable returns and are
not intended to indicate the past or future performance of any
fund.
DEFINITIONS
"Putnam Management" -- Putnam Investment Management,
Inc., the Fund's investment
manager.
"Putnam Mutual Funds" -- Putnam Mutual Funds Corp., the
Fund's principal underwriter.
"Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company,
Company" the Fund's custodian.
"Putnam Investor Services" -- Putnam Investor Services, a
division of Putnam Fiduciary
Trust Company, the Fund's
investor servicing agent.
<PAGE>
PUTNAM DIVERSIFIED EQUITY TRUST
FORM N-1A
PART C
OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) Index to Financial Statements and Supporting
Schedules:
(1) Financial Statements:
Statements of assets and liabilities --
May 24 , 1994
Notes to financial statements(a).
(2) Supporting Schedules:
Schedules I through IX omitted because the
required matter is not present.
(a) Included in Part B.
- --------------------------
(B) EXHIBITS:
1. Agreement and Declaration of Trust dated
April 13, 1994 -- Incorporated by
reference to the Registrant's Initial
Registration Statement.
2. By-Laws -- Incorporated by reference to
the Registrant's Initial Registration
Statement.
3. Not applicable.
4a. Class A Specimen share certificate --
Exhibit 1 .
4b. Class B Specimen share certificate --
Exhibit 2 .
4c. Portions of Agreement and Declaration of
Trust Relating to Shareholders' Rights --
Incorporated by reference to the
Registrant's Initial Registration
Statement.
4d. Portions of By-Laws Relating to Shareholders'
Rights -- Incorporated by reference to the
Registrant's Initial Registration
Statement.
5. Copy of Management Contract dated May
6 , 1994 -- Exhibit 3 .
6a. Copy of Distributor's Contract dated
May 6 , 1994 -- Exhibit 4 .
6b. Copy of Specimen Dealer Sales Contract --
Exhibit 5 .
6c. Copy of Specimen Financial Institution Sales
Contract -- Exhibit 6 .
7. Not applicable.
8. Copy of Custodian Agreement with Putnam
Fiduciary Trust Company dated May 3, 1991 as
amended July 13, 1992 -- Exhibit 7 .
9. Copy of Investor Servicing Agreement dated
June 3, 1991 with Putnam Fiduciary Trust
Company -- Exhibit 8 .
10. Opinion of Ropes & Gray, including consent --
Exhibit 9 .
11. Not applicable.
12. Not applicable.
13. Investment Letter from Putnam Investments,
Inc. to the Registrant -- Exhibit 10 .
14a. Copy of Prototype Individual Retirement
Account Plan -- Exhibit 11 .
14b. Copy of Prototype Basic Plan Document and
related Plan Agreements -- Exhibit 12 .
15a. Copy of Class A Distribution Plan and
Agreement dated May 6 , 1994 --
Exhibit 13 .
15b. Copy of Class B Distribution Plan and
Agreement dated May 6 , 1994 -- Exhibit
14 .
15c. Copy of Specimen Dealer Service Agreement --
Exhibit 15 .
15d. Copy of Specimen Financial Institution
Service Agreement -- Exhibit 16 .
16. Not applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH
REGISTRANT
As of May 23 , 1994, Putnam Investments, Inc.
owned all of the outstanding shares of the Registrant. Also, as
of April 30 , 1994, Putnam Investments, Inc. owned
98.7% of the outstanding shares of Putnam Capital Growth &
Income Fund, 83.2% of the outstanding shares of Putnam
Capital Appreciation Fund, 91.9% of the outstanding shares
of Putnam Growth Fund, 72.0% of the outstanding shares of
Putnam Overseas Growth Fund and 77.6% of the outstanding
shares of Putnam Research Analyst Fund and may be deemed
to control such Funds.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The information required by this item is included in
Part B (Fund Charges and Expenses).
ITEM 27. INDEMNIFICATION
Article VIII of the Registrant's Agreement and
Declaration of Trust provides as follows.
Section 1. The Trust shall indemnify each of its
Trustees and officers (including persons who serve at the Trust's
request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to as a
"Covered Person") against all liabilities and expenses, including
but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and counsel fees reasonably
incurred by any Covered Person in connection with the defense or
disposition of any action, suit or other proceeding, whether
civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have
been involved as a party or otherwise or with which such Covered
Person may be or may have been threatened, while in office or
thereafter, by reason of being or having been such a Covered
Person except with respect to any matter as to which such Covered
Person shall have been finally adjudicated in any such action,
suit or other proceeding (a) not to have acted in good faith in
the reasonable belief that such Covered Person's action was in
the best interests of the Trust or (b) to be liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of such Covered Person's office. Expenses, including
counsel fees so incurred by any such Covered Person (but
excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), shall be paid from time to
time by the Trust in advance of the final disposition of any such
action, suit or proceeding upon receipt of an undertaking by or
on behalf of such Covered Person to repay amounts so paid to the
Trust if it is ultimately determined that indemnification of such
expenses is not authorized under this Article, provided, however,
that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust shall be
insured against losses arising from any such advance payments or
(c) either a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees
then in office act on the matter), or independent legal counsel
in a written opinion, shall have determined, based upon a review
of readily available facts (as opposed to a full trial type
inquiry) that there is reason to believe that such Covered Person
will be found entitled to indemnification under this Article.
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise)
without an adjudication by a court, or by any other body before
which the proceeding was brought, that such Covered Person either
(a) did not act in good faith in the reasonable belief that his
action was in the best interests of the Trust or (b) is liable to
the Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his or her office, indemnification
shall be provided if (a) approved as in the best interests of the
Trust, after notice that it involves such indemnification, by at
least a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees
then in office act on the matter) upon a determination, based
upon a review of readily available facts (as opposed to a full
trial type inquiry) that such Covered Person acted in good faith
in the reasonable belief that his action was in the best
interests of the Trust and is not liable to the Trust or its
Shareholders by reasons of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office, or (b) there has been obtained an
opinion in writing of independent legal counsel, based upon a
review of readily available facts (as opposed to a full trial
type inquiry) to the effect that such Covered Person appears to
have acted in good faith in the reasonable belief that his action
was in the best interests of the Trust and that such
indemnification would not protect such Covered Person against any
liability to the Trust to which he would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his
office. Any approval pursuant to this Section shall not prevent
the recovery from any Covered Person of any amount paid to such
Covered Person in accordance with this Section as indemnification
if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in the
best interests of the Trust or to have been liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of such Covered Person's office.
Section 3. The right of indemnification hereby
provided shall not be exclusive of or affect any other rights to
which such Covered Person may be entitled. As used in this
Article VIII, the term "Covered Person" shall include such
person's heirs, executors and administrators and a "disinterested
Trustee" is a Trustee who is not an "interested person" of the
Trust as defined in Section 2(a)(19) of the Investment Company
Act of 1940, as amended, (or who has been exempted from being an
"interested person" by any rule, regulation or order of the
Commission) and against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the
same or similar grounds is then or has been pending. Nothing
contained in this Article shall affect any rights to
indemnification to which personnel of the Trust, other than
Trustees or officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such
person.
----------------------
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to Trustees,
officers and controlling persons of the Trust pursuant to the
foregoing provisions or otherwise, the Trust has been advised
that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the
Securities Act of 1933, and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Trust of expenses incurred or paid
by a Trustee, officer or controlling person of the Trust in the
successful defense of any action, suit or proceeding) is asserted
against the Trust by such Trustee, officer or controlling person
in connection with the securities being registered, the Trust
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
<PAGE>
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Except as set forth below, the directors and officers
of the Registrant's investment adviser have been engaged during
the past two fiscal years in no business, vocation or employment
of a substantial nature other than as directors or officers of
the investment adviser or certain of its corporate affiliates.
Certain officers of the investment adviser serve as officers of
some or all of the Putnam funds. The address of the investment
adviser, its corporate affiliates and the Putnam Funds is One
Post Office Square, Boston, Massachusetts 02109.
NAME NON-PUTNAM BUSINESS AND OTHER
CONNECTIONS
Christopher J. Ainley Prior to March, 1992, Vice President,
J.P. Morgan Investment Management,
522 Fifth Avenue, New York, NY 10021
Gail S. Attridge Prior to November, 1993, International
Vice President Analyst, Keystone Custodian Funds,
200 Berkley Street, Boston, MA 02116
Dolores Snyder Bamford Prior to June, 1992, Research
Assistant Vice President Associate, Fidelity Investments, 82
Devonshire St., Boston, MA 02109
Charles L. Beach Prior to May, 1992, Senior Analyst,
Assistant Vice President Dean Witter Investment Banking,
One Financial Center,
Boston, MA 02110
Edward P. Bousa Prior to October, 1992, Vice President
Senior Vice President and Portfolio Manager, Fidelity
Investments, 82 Devonshire St.,
Boston, MA 02109
Kathleen M. Brant Prior to June, 1992, Global Bond
Vice President Trader, Fidelity Investments,
82 Devonshire St., Boston, MA 02109
Leslie J. Burke Prior to February, 1992, Research
Associate, Fidelity Investments, 82
Devonshire St., Boston, NA 02109
<PAGE>
Peter Carman Prior to August, 1993, Chief
Senior Managing Director Investment Officer, Chairman, U.S.
Equity Investment Policy Committee,
Member of Board of Directors,
Sanford C. Bernstein & Co., Inc.,
767 Fifth Avenue, New York, NY 10153
Anna Coppola Prior to May, 1993, Associate,
Assistant Vice President Heidrick & Struggles, One Post
Office Square, Boston, MA 02109
Kathleen Crews Prior to February, 1993, Assistant
Assistant Vice President Vice President, Alliance Capital
Management, L.P., 1345 Avenue of
the Americas, New York, NY 10105
York, NY
Kenneth L. Daly Prior to September, 1993, Vice
Senior Vice President President, Fidelity Investments,
82 Devonshire St., Boston, MA 02109
Richard B. England Prior to December, 1992, Investment
Vice President Officer, Aetna Equity Investors,
151 Farmington Avenue, Hartford,
CT, 06156
Joseph F. Feeney, Jr. Prior to June, 1992, Assistant
Assistant Vice President Vice President, Bank of Boston,
100 Federal St., Boston, MA 02110
Jonathan H. Francis Prior to March, 1993, President,
Senior Vice President J.H. Francis & Co., N. Pheasant
Lane, Westport, CT 06880
Judy P. Frodigh Prior to June, 1992, Manager, Human
Vice President Resources, Massachusetts Financial
Services, Inc., 500 Boylston St.,
Boston, MA 02110
James F. Giblin Prior to April, 1993, Managing
Senior Vice President Director, CIGNA Corp. Investments,
Inc., 900 Cottage Grove Rd.
Bloomfield, CT 06152
<PAGE>
Thomas C. Goggins Prior to June, 1993, Portfolio
Vice President Manager, Transamerica Investment
Services, 1150 South Olive Street,
Los Angeles, CA 90015
Corey A. Griffin Prior to June, 1992, Vice President,
Assistant Vice President Coldwell Banker Commercial Real
Estate
Services, 70-80 Lincoln St.,
Boston,
MA 02111
Daniel J. Grim Prior to May 1993, Consultant,
Vice President Connie
Lee, 2445 M Street N.W.,
Washington, D.C. 20037;
Chief Operating Officer, Boardwalk,
Inc., Minocqua, WI 54548
Billy P. Han Prior to December, 1992, Vice
Assistant Vice President President, Scudder, Stevens & Clark,
Inc., 160 Federal Street, Boston, MA
02110
Stephon A. Jackson Prior to December, 1992, nalyst,
Assistant Vice President Arco Investment Management Co.,
515 South Flower Street,
Los Angeles, CA 91030
Jeffrey L. Knight Prior to March, 1993, Teacher,
Vice President Greater Newburyport Educational
Collaborative, Newburyport, MA 01950
Jeffrey J. Kobylarz Prior to May, 1993, Credit Analyst,
Vice President Dean Witter Reynolds, Inc.,
Two World Trade Center,
New York, NY 10048
Ami T. Kuan Prior to June, 1992, Equity Analyst,
Assistant Vice President Fidelity Investments, 82 Devonshire
St., Boston, MA 02109
Lawrence J. Lasser Director, Marsh & McLennan Companies,
President, Director Inc., 1221 Avenue of the Americas,
and Chief Executive New York, NY 10020
Officer Director, INROADS/Central New England,
Inc., 99 Bedford St., Boston,
MA 02111
Ian A. Lue Prior to August, 1993,
Assistant Vice President
Robert A. Madore Prior to October, 1992, Senior Vice
Vice President President and Portfolio Manager,
Fiduciary Captial Management, Inc.
51 Sherman Hill Rd., Woodbury,
CT 06798
Frederick S. Marius Prior to September, 1992, Associate
Assistant Vice President Attorney at Skadden Arps, One
Associate Counsel Beacon St., Boston, MA 02109
Andrew S. Matteis Prior to March, 1993, Vice President,
Vice President Fitch Investors Service, One
State Street Plaza, New York
NY 10004
Michael J. Mufson Prior to June, 1993, Senior Equity
Vice President Analyst, Stein Roe & Farnham,
One South Wacker Drive, Chicago, Il
60606
Warren Naphtal Prior to January, 1994, Managing
Senior Vice President Director, Continental Bank, 231
So. Lasalle St., Chicago, IL 60697
Jeffrey W. Netols Prior to February, 1993, Portfolio
Senior Vice President Analyst, Associated Bank,
200 N. Adams, Greenbay, WI 54307
Brian O'Keefe Prior to December, 1993, Vice
Vice President President - Foreign Exchange
Trader, Bank of Boston, 100 Federal
Street, Boston, MA 02109
Pat G. Patel Prior to April, 1993, Regional
Assistant Vice President Manager, Zacks Investment Research,
155 N. Wacker Drive, Chicago,
IL 60606
George Putnam Chairman and Director, Putnam Mutual
Chairman and Director Funds Corp.
Director, The Boston Company, Inc.,
One Boston Place, Boston, MA 02108
Director, Boston Safe Deposit and
Trust Company, One Boston Place,
Boston, MA 02108
Director, Freeport-McMoRan, Inc., 200
Park Avenue, New York, NY 10166
Director, General Mills, Inc., 9200
Wayzata Boulevard, Minneapolis,
MN 55440
Director, Houghton Mifflin Company,
One Beacon Street, Boston, MA 02108
Director, Marsh & McLennan Companies,
Inc., 1221 Avenue of the Americas,
New York, NY 10020
Director, Rockefeller Group, Inc.,
1230 Avenue of the Americas,
New York, NY 10020
Christopher A. Ray Prior to December, 1992, Vice
Vice President President and Portfolio Manager at
Scudder, Stevens & Clark, Inc., 160
Federal Street, Boston, MA 02110
Charles A. Ruys de Perez Prior to August, 1992, Associate,
Vice President and Debevoise and Plimpton,
Senior Counsel 875 Third Ave., New York, NY 19022
Joseph W. Scott Prior to October, 1992,
Assistant Vice President
Mark J. Siegel Prior to June, 1993, Vice President,
Vice President Salomon Brothers International,
Ltd., Victoria Plaza, 111 Buckingham
Palace Road, London SW1W 0SB,
England
Joanne Soja Prior to June, 1993, Managing
Senior Vice President Director/Portfolio Manager,
Chancellor Capital Management,
153 East 53rd Street, New York, NY
10002
Bonnie L. Troped Prior to May, 1993, Assistant Vice
Vice President President/Director of Corporate
Events, The Boston Company, One
Boston Place, Boston, MA 02108
F. Mark Turner Prior to November, 1992, Managing
Managing Director Director, Scudder, Stevens & Clark,
160 Federal St., Boston, MA 02110
John D. Weber Prior to June, 1992, Associate,
Assistant Vice President Citicorp Venture Capital, Ltd.
399 Park Avenue, New York, NY 10043
ITEM 29. PRINCIPAL UNDERWRITER
(a) Putnam Mutual Funds Corp. is the principal
underwriter for each of the following investment companies,
including the Registrant:
Putnam Adjustable Rate U.S. Government Fund, Putnam American
Government Income Fund, Putnam Arizona Tax Exempt Income Fund,
Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds,
Putnam Balanced Government Fund, Putnam California Tax Exempt
Income Fund, Putnam California Tax Exempt Money Market Fund,
Putnam Capital Appreciation Fund, Putnam Capital Growth and
Income Fund, Putnam Capital Manager Trust, Putnam Convertible
Income-Growth Trust, Putnam Corporate Asset Trust, Putnam Daily
Dividend Trust, Putnam Diversified Equity Trust, Putnam
Diversified Income Trust, Putnam Dividend Growth Fund, Putnam
Energy-Resources Trust, Putnam Equity Income Fund, Putnam Europe
Growth Fund, Putnam Federal Income Trust, Putnam Florida Tax
Exempt Income Fund, The George Putnam Fund of Boston, Putnam
Global Governmental Income Trust, Putnam Global Growth Fund,
Putnam Growth Fund, The Putnam Fund for Growth and Income, Putnam
Health Sciences Trust, Putnam High Yield Trust, Putnam High Yield
Advantage Fund, Putnam Income Fund, Putnam Intermediate Tax
Exempt Fund, Putnam Investors Fund, Putnam Managed Income Trust,
Putnam Massachusetts Tax Exempt Income Fund II, Putnam Michigan
Tax Exempt Income Fund II, Putnam Minnesota Tax Exempt Income
Fund II, Putnam Municipal Income Fund, Putnam New Jersey Tax
Exempt Income Fund, Putnam New Opportunities Fund, Putnam New
York Tax Exempt Income Fund, Putnam New York Tax Exempt Money
Market Fund, Putnam New York Tax Exempt Opportunities Fund,
Putnam Ohio Tax Exempt Income Fund II, Putnam OTC Emerging Growth
Fund, Putnam Overseas Growth Fund, Putnam Pennsylvania Tax Exempt
Income Fund, Putnam Research Analyst Fund, Putnam Tax-Free Income
Trust, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money
Market Fund, ^ Putnam U.S. Government Income Trust, Putnam
Utilities Growth and Income Fund, Putnam Vista Fund, Putnam
Voyager Fund
(b) The directors and officers of the Registrant's
principal underwriter are:<PAGE>
<TABLE>
<CAPTION>
POSITIONS AND OFFICES POSITIONS AND OFFICES
NAME WITH UNDERWRITER WITH REGISTRANT
<C> <C> <C>
John V. Adduci Assistant Vice President None
Paulette C. Amisano Vice President None
Ronald J. Anwar Vice President None
Karen M. Apatow Assistant Vice President None
Steven E. Asher Senior Vice President None
Georgette M. Bacca Vice President None
Ira G. Baron Senior Vice President None
John L. Bartlett Senior Vice President None
Matthew F. Beaudry Vice President None
Robert A. Benish Vice President None
John J. Bent Vice President None
Sharon A. Berka Vice President None
James R. Besher Vice President None
Maureen L. Boisvert Vice President None
Keith R. Bouchard Vice President None
Leslee R. Bresnahan Vice President None
James D. Brockelman Senior Vice President None
Kathleen T. Brogan Vice President None
Scott P. Brogan Vice President None
Gail Buckner Senior Vice President None
Jon D. Burke Senior Vice President None
Robert W. Burke Senior Managing Director None
Richard P. Busher Vice President None
Ellen S. Callahan Assistant Vice President None
William A. Campagna Senior Vice President None
Charles A. Carey Assistant Vice President None
Patricia A. Cartwright Assistant Vice President None
Christopher D. Caton Assistant Vice President None
Stephen J. Chaput Assisant Vice President None
Daniel J. Church Vice President None
Dana F. Clark Vice President None
James E. Clinton Assistant Vice President None
Kathleen M. Collman Managing Director None
Mark L. Coneeny Vice President None
Donald A. Connelly Senior Vice President None
Anna Coppola Assistant Vice President None
F. Nicholas Corvinus Senior Vice President None
Kenneth L. Daly Senior Vice President None
Edward H. Dane Assistant Vice President None
Nancy M. Days Assistant Vice President None
Daniel J. Delianedis Vice President None
Janice D. Delory Vice President None
J. Thomas Depres Senior Vice President None
Michael G. Dolan Assistant Vice President None
Scott M. Donaldson Vice President None
Emily J. Durbin Assistant Vice President None
David B. Edlin Senior Vice President None
James M. English Senior Vice President None
Vincent Esposito Senior Vice President None
Mary K. Farrell Assistant Vice President None
Susan H. Feldman Vice President None
Michael J. Fetcher Assistant Vice President None
Paul F. Fichera Senior Vice President None
C. Nancy Fisher Senior Vice President None
Mitchell B. Fishman Vice President None
Joseph C. Fiumara Vice President None
Patricia C. Flaherty Senior Vice President None
Judy P. Frodigh Vice President None
Samuel F. Gagliardi Vice President None
Judy S. Gates Vice President None
Richard W. Gauger Assistant Vice President None
Joseph P. Gennaco Vice President None
Steven E. Gibson Managing Director None
Robert Goodman Managing Director None
Robert G. Greenly Vice President None
Keith E. Gregg Vice President None
Thomas W. Halloran Vice President None
Marilyn M. Hausammann Senior Vice President None
Howard W. Hawkins, III Vice President None
Jill M. Hayes Vice President None
Deanna R. Hayes-Castro Assistant Vice President None
Paul P. Heffernan Vice President None
Susan M. Heimanson Vice President None
Katherine L. Hickney Vice President None
Bradley J. Hilsabeck Vice President None
Bess J.M. Hochstein Vice President None
Sherrie V. Holder-Watts Vice President None
Maureen A. Holmes Assistant Vice President None
William J. Hurley Senior Vice President None
Gregory E. Hyde Vice President None
Dwight D. Jacobsen Senior Vice President None
Douglas B. Jamieson Treasurer & Director None
Kevin M. Joyce Senior Vice President None
James J. Kilbane Vice President None
Deborah H. Kirk Senior Vice President None
Jill A. Koontz Assistant Vice President None
Howard H. Kreutzberg Senior Vice President None
Bruce M. Landers Assistant Vice President None
Edward V. Lewandowski Senior Vice President None
Edward V. Lewandowski, Jr. Vice President None
John A. Libertine, Jr. Assistant Vice President None
Rufino R. Lomba Vice President None
Maura A. Lockwood Assistant Vice President None
Philip J. Lussier Managing Director None
Ann Malatos Assistant Vice President None
Renee L. Maloof Assistant Vice President None
Frederick S. Marius Assistant Vice President None
Karen E. Marotta Vice President None
Kathleen M. McAnulty Assistant Vice President None
Anne B. McCarthy Assistant Vice President None
Marla J. McDougall Assistant Vice President None
Walter S. McFarland Vice President None
Greg J. McMillan Assistant Vice President None
Robert E. McMurtrie Vice President None
Claye A. Metelmann Assistant Vice President None
J. Chris Meyer Senior Vice President None
Ronald K. Mills Vice President None
Mitchell L. Moret Vice President None
Donald E. Mullen Vice President None
Brendan R. Murray Vice President None
Robert Nadherny Vice President None
Alexander L. Nelson Managing Director None
Jane M. Nickodemus Vice President None
John P. Nickodemus Vice President None
Michael C. Noonis Assistant Vice President None
Peter A. Nyhus Vice President None
Kristen P. O'Brien Vice President None
Donald O'Fee Vice President None
Lorie C. O'Malley Senior Vice President None
Kevin L. O'Shea Vice President None
Philip G. Padgett, Jr. Vice President None
Richard N. Pallan Senior Managing Director None
Scott A. Papes Vice President None
Cynthia O. Parr Vice President None
John D. Pataccoli Vice President None
Joseph Phoenix Vice President None
Jeffrey E. Place Vice President None
Keith Plapinger Vice President None
Douglas H. Powell Vice President None
George Putnam Director Chairman & President
Psomas, Susannah Vice President None
Douglas F. Rowe Vice President None
Robert B. Rowe Vice President None
Kevin A. Rowell Vice President None
Thomas C. Rowley Vice President None
Deborah A. Ryan Assistant Vice President None
Charles Ruys de Perez Vice President None
Catherine A. Saunders Senior Vice President None
Robbin L. Saunders Assistant Vice President None
Karl W. Saur Vice President None
Candice L. Schubert Associate Marketing Manager None
Christine A. Scordato Vice President None
Joseph W. Scott Assistant Vice President None
Kathleen G. Sharpless Senior Vice President None
John F. Sharry Managing Director None
John B. Shamburg Vice President None
Vincent P. Sheehan Vice President None
William N. Shiebler Director, Chief Executive Vice President
Officer and President
Daniel S. Shore Vice President None
Mark J. Siebold Assistant Vice President None
Gordon H. Silver Senior Managing Director None
Nicholas T. Stanojev Vice President None
Brian L. Sullivan Vice President None
Kevin J. Sullivan Vice President None
Moira A. Sullivan Vice President None
Janet C. Sweeney Vice President None
Edward M. Syring, Jr. Vice President None
James S. Tambone Senior Vice President None
B. Iris Tanner Assistant Vice President None
Louis Tasiopoulos Senior Vice President None
David S. Taylor Vice President None
John R. Telling Vice President None
Richard B. Tibbetts Senior Vice President None
Patrice M. Tirado Vice President None
Janet E. Tosi-Barry Assistant Vice President None
Bonnie L. Troped Vice President None
Larry R. Unger Vice President None
Douglas J. Vander Linde Vice President None
John F. Wallin Senior Vice President None
Edward F. Whalen Vice President None
Robert J. Wheeler Senior Vice President None
John B. White Vice President None
Kirk E. Williamson Senior Vice President None
Leigh T. Williamson Vice President None
Benjamin Woloshin Vice President None
William H. Woolverton Senior Vice President and Clerk None
Timothy R. Young Vice President None
SooHee L. Zebedee Assistant Vice President None
</TABLE>
The principal business address of each person listed above is One Post Office
Square,
Boston, MA 02109, except for:
Mr. Anwar 25-49 86th Street, Jackson Heights, NY 11369
Mr. Bartlett, 1946 Westholme Avenue, Los Angeles, CA 90025
Mr. Besher, 8141 S. 77th East Ave., Tulsa, OK 74133
Mr. Bouchard, 18 Brice Rd., Annapolis, MD 21401
Mr. Brogan, 1601-Q Bridge Mill Road, Marietta, GA 30067
Ms. Buckner, 235 Walton Street, Englewood, NJ 07631
Mr. Burke, 2333 Stormcroft Court, Westlake Village, CA 91361
Mr. Busher, 12005 Ridge Knoll Drive, Fairfax, VA 22033
Mr. Connelly, 4634 Mirada Way, Sarasota, FL 34238
Mr. Corvinus, 208 Water St., Newburyport, MA 01950
Mr. Edlin, 7 River Road, 305 Palmer Point, Cos Cob, CT 06807
Mr. English, 1184 Pintail Circle, Boulder, CO 80303
Mr. Goodman, 14 Clover Place, Cos Cob, CT 06807
Mr. Halloran, 19449 Misty Lake Drive, Strongsville, OH 44136
Mr. Hyde, 3305 Sulky, Marietta, GA 30067
Mr. Jacobsen, 3 Sylvan Court, Pompton Plains, NJ 07444
Ms. Kirk, 124 Rivermist Dr., Buffalo, NY 14202
Mr. Lewandowski, 805 Darrell Road, Hillsborough, CA 94010
Mr. Lewandowski, Jr., 2120 The Strand, Manhattan Beach, CA 90266
Mr. McFarland, P.O. Box 4189, Chesterfield, MO 63006
Mr. McMurtrie, 14529 Glastonbury, Detroit, MI 48223
Mr. Moret, 4519 Lawn Avenue, Western Springs, IL 60558
Mr. Murray, 528 Plum Street, Syracuse, NY 13024
Mr. Nadherny, 9714 Marmount Drive, Seattle, WA 98117
Mr. Nickodemus, 1232 B Louden St., Cincinnati, OH 45202
Mr. Nyhus, 7203 Oak Pointe Curve, Bloomington, MN 55438
Mr. O'Fee, 1012 Vista Del Mar Drive, Delray Beach, FL 33483
Mr. Padgett, Jr., 7709 Charleston Drive, Bethesda, MD 20817
Mr. Papes, 1127 Olive Lake Drive, St. Louis, MO 63132
Mr. Pataccoli, 125 41st Street, Manhattan Beach, Ca 90266
Mr. Phoenix, 1426 Asbury Avenue, Hubbard Woods, IL 60093
Mr. Place, 4211 Loch Highland Parkway, Roswell, GA 30075
Mr. Powell, 2823 34th Avenue West, Seattle, WA 98199
Mr. D. Rowe 2309 Woodmont Circle, Heath, TX 75087
Mr. R. Rowe, 109 Shore Drive, Longwood, FL 32779
Mr. Rowell, 3535 East Coast Highway, Corona Del Mar, CA 92625
Mr. Rowley, 10061 S. Wood, Chicago, IL 60643
Ms. Saunders, 6400 Christie Avenue, Emeryville, CA 94608
Mr. Shamburg, 10603 N. 100th Street, Scottsdale, AZ 85260
Mr. Sheehan, Parkway Center, 1150 Galapago, Denver, CO 80204
Mr. Shore, 1100 Charlotte, Austin, TX 78203
Mr. B. Sullivan, 777 Pinoake Road, Mt. Lebanon, PA 15243
Ms. M. Sullivan, 493 Zinfandel Lane, St. Helena, CA 94574
Ms. Sweeney, 8 Surf Street, Marblehead, MA 01945
Mr. Syring, 7540 Mandarian Dr., Boca Raton, FL 33433
Mr. Telling, 329 Belt Avenue, St. Louis, MO 63112
Mr. Unger, 212 E. Broadway, Suite 903, New York, NY 10002
Mr. Vessels, 7 Riverview Drive, Norwalk, CT 06850
Mr. Williamson, 32 Kramer Place, Mandeville, LA 70448
Mr. White, 23 Wellington St., Arlington, MA 02174
Mr. Woloshin, 730 North Bundy Drive, Los Angeles, CA 90049
<PAGE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
Persons maintaining physical possession of accounts,
books and other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 and the Rules
promulgated thereunder are Registrant's Clerk, Beverly Marcus;
Registrant's investment adviser, Putnam Investment Management,
Inc.; Registrant's principal underwriter, Putnam Mutual Funds
Corp.; Registrant's custodian, Putnam Fiduciary Trust Company
("PFTC"); and Registrant's transfer and dividend disbursing
agent, Putnam Investor Services, a division of PFTC. The address
of the Clerk, investment adviser, principal underwriter,
custodian and transfer and dividend disbursing agent is One Post
Office Square, Boston, Massachusetts 02109.
ITEM 31. MANAGEMENT SERVICES
None.
ITEM 32. UNDERTAKINGS
(a) Registrant hereby undertakes to file a post-
effective amendment to this Registration Statement on Form N-
1A , using financial statements which need not be
certified, within four to six months from the effective date
of this Registration Statement.
(b) Registrant hereby undertakes, if requested to do so
by the holders of at least 10% of its outstanding shares, to call
a meeting of shareholders for the purposes of voting upon the
question of removal of a Trustee or Trustees and to assist in
communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940.
(c) The Registrant undertakes to furnish to each person
to whom a prospectus of the Registrant is delivered a copy of the
Registrant's latest annual report to shareholders, upon request
and without charge.
----------------------------
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Statement of
Additional Information constituting part of this Registration
Statement on Form N-1A (File No. 33- 53135) of our report
dated May 24 , 1994, relating to the statement of assets
and liabilities of the Fund, which appears in such Statement of
Additional Information. We also consent to the references to us
under the heading "Independent Accountants and Financial
Statements" in such Statement of Additional Information.
Price Waterhouse
May 25, 1994
Boston, Massachusetts
--------------------------
NOTICE
A copy of the Agreement and Declaration of Trust of
Putnam Diversified Equity Trust is on file with the Secretary of
State of The Commonwealth of Massachusetts, and notice is hereby
given that this instrument is executed on behalf of the
Registrant by an officer of the Registrant as an officer and not
individually and the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets
and property of the Registrant.
<PAGE>
POWER OF ATTORNEY
We, the undersigned Officers and Trustees of Putnam
Diversified Equity Trust, hereby severally constitute and appoint
George Putnam, Charles E. Porter, Gordon H. Silver, Edward A.
Benjamin, Timothy W. Diggins and John W. Gerstmayr, and each of
them singly, our true and lawful attorneys, with full power to
them and each of them, to sign for us, and in our names and in
the capacities indicated below, the Registration Statement on
Form N-1A of Putnam Diversified Equity Trust and any and
all amendments (including post-effective amendments) to said
Registration Statement and to file the same with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto our said
attorneys, and each of them acting alone, full power and
authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to
all intents and purposes as he or she might or could do in
person, and hereby ratify and confirm all that said attorneys or
any of them may lawfully do or cause to be done by virtue
thereof.
WITNESS our hands and common seal on the date set forth
below.
Signature Title Date
/s/ George Putnam Principal Executive May 6,
1994 GEORGE PUTNAM Officer; President and
Chairman of the Trustees
/s/ William F. Pounds Trustee; Vice Chairman May 6, 1994
WILLIAM F. POUNDS
/s/ John D. Hughes Principal Financial May 6, 1994
JOHN D. HUGHES Officer; Treasurer
/s/ Paul G. Bucuvala Principal Accounting May 6, 1994
PAUL G. BUCUVALAS Officer; Assistant
Treasurer
/s/ Jameson A. Baxter Trustee May 6 ,
1994
JAMESON A. BAXTER
<PAGE>
/s/ Hans H. Estin Trustee May 6, 1994
HANS H. ESTIN
/s/ Elizabeth T. Kennan Trustee May 6, 1994
ELIZABETH T. KENNAN
/s/ Lawrence J. Lasser Trustee May
6 , 1994 LAWRENCE J. LASSER
/s/ John A. Hill Trustee May 6, 1994
JOHN A. HILL
/s/ Robert E. Patterson Trustee May 6, 1994
ROBERT E. PATTERSON
/s/ Donald S. Perkins Trustee May 6, 1994
DONALD S. PERKINS
/s/ George Putnam, III Trustee May 6, 1994
GEORGE PUTNAM, III
/s/ A.J.C. Smith Trustee May 6, 1994
A.J.C. SMITH
/s/ W. Nicholas Thorndike Trustee May 6, 1994
W. NICHOLAS THORNDIKE
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this Registration Statement to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of
Boston, and The Commonwealth of Massachusetts, on the 25th
day of May , 1994.
Putnam Diversified Equity Trust
By: Gordon H. Silver, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement of Putnam Diversified Equity Trust has
been signed below by the following persons in the capacities and
on the dates indicated:
SIGNATURE TITLE
George Putnam President and
Chairman of the
Board; Principal
Executive Officer;
Trustee
William F. Pounds Vice Chairman;
Trustee
John D. Hughes Vice President;
Treasurer and
Principal Financial
Officer
<PAGE>
Paul G. Bucuvalas Assistant Treasurer and
Principal Accounting
Officer
Jameson A. Baxter Trustee
Hans H. Estin Trustee
John A. Hill Trustee
Elizabeth T. Kennan Trustee
Lawrence J. Lasser Trustee
Robert E. Patterson Trustee
Donald S. Perkins Trustee
George Putnam, III Trustee
A.J.C. Smith Trustee
W. Nicholas Thorndike Trustee
By: Gordon H. Silver,
as Attorney-in-
Fact
May 25, 1994
PUTNAM DIVERSIFIED EQUITY TRUST
Class A Shares
Trust Certificate
Account No. Certificate No. Shares
CUSIP 746 702 10 9
THIS CERTIFIES THAT
is the owner of Class A shares of
beneficial interest in Putnam Diversified Equity Trust, fully
paid and nonassessable, the said shares being issued, received
and held under and subject to the terms and provisions of the
Agreement and Declaration of Trust dated as of April 13, 1994,
establishing Putnam Diversified Equity Trust, and all amendments
thereto, copies of which are on file with the Secretary of State
of The Commonwealth of Massachusetts. The said owner by
accepting this certificate agrees to and is bound by all of the
said terms and provisions. The shares represented hereby are
transferable in writing by the owner thereof in person or by
attorney upon surrender of this certificate to the Trustees
properly endorsed for transfer. This certificate is executed on
behalf of the Trustees as Trustees and not individually and the
obligations hereof are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets
and property of the Trust. This certificate is not valid unless
countersigned by the Investor Servicing Agent.
In Witness Whereof the Trustees of Putnam Diversified Equity
Trust have caused the following facsimile signatures to be
affixed to this certificate.
Dated: COUNTERSIGNED:
PUTNAM INVESTOR SERVICES
a division of Putnam Fiduciary
Trust Company
INVESTOR SERVICING AGENT
BY
FOR THE TRUSTEES AUTHORIZED SIGNATURE
PUTNAM DIVERSIFIED EQUITY TRUST
Class B Shares
Trust Certificate
Account No. Certificate No. Shares
CUSIP 746 702 20 8
THIS CERTIFIES THAT
is the owner of Class B shares of
beneficial interest in Putnam Diversified Equity Trust, fully
paid and nonassessable, the said shares being issued, received
and held under and subject to the terms and provisions of the
Agreement and Declaration of Trust dated as of April 13, 1994,
establishing Putnam Diversified Equity Trust, and all amendments
thereto, copies of which are on file with the Secretary of State
of The Commonwealth of Massachusetts. The said owner by
accepting this certificate agrees to and is bound by all of the
said terms and provisions. The shares represented hereby are
transferable in writing by the owner thereof in person or by
attorney upon surrender of this certificate to the Trustees
properly endorsed for transfer. This certificate is executed on
behalf of the Trustees as Trustees and not individually and the
obligations hereof are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets
and property of the Trust. This certificate is not valid unless
countersigned by the Investor Servicing Agent.
In Witness Whereof the Trustees of Putnam Diversified Equity
Trust have caused the following facsimile signatures to be
affixed to this certificate.
Dated: COUNTERSIGNED:
PUTNAM INVESTOR SERVICES
a division of Putnam Fiduciary
Trust Company
INVESTOR SERVICING AGENT
BY
FOR THE TRUSTEES AUTHORIZED SIGNATURE
PUTNAM DIVERSIFIED EQUITY TRUST
MANAGEMENT CONTRACT
Management Contract dated as of May 6, 1994 between PUTNAM
DIVERSIFIED EQUITY TRUST, a Massachusetts business trust (the
"Fund"), and PUTNAM INVESTMENT MANAGEMENT, INC., a Delaware
corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously
an investment program for the Fund, will determine what
investments shall be purchased, held, sold or exchanged by the
Fund and what portion, if any, of the assets of the Fund shall be
held uninvested and shall, on behalf of the Fund, make changes in
the Fund's investments. Subject always to the control of the
Trustees of the Fund and except for the functions carried out by
the officers and personnel referred to in Section 1(d), the
Manager will also manage, supervise and conduct the other affairs
and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the
provisions of the Agreement and Declaration of Trust and By-Laws
of the Fund and its stated investment objectives, policies and
restrictions, and will use its best efforts to safeguard and
promote the welfare of the Fund and to comply with other policies
which the Trustees may from time to time determine and shall
exercise the same care and diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is
paid by the Fund as provided in Section 1(d), will furnish (1)
all necessary investment and management facilities, including
salaries of personnel, required for it to execute its duties
faithfully; (2) suitable office space for the Fund; and (3)
administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of
the affairs of the Fund, including determination of the Fund's
net asset value, but excluding shareholder accounting services.
Except as otherwise provided in Section 1(d), the Manager will
pay the compensation, if any, of the officers of the Fund.
(c) The Manager, at its expense, shall place all orders for
the purchase and sale of portfolio investments for the Fund's
account with brokers or dealers selected by the Manager. In the
selection of such brokers or dealers and the placing of such
orders, the Manager shall use its best efforts to obtain for the
Fund the most favorable price and execution available, except to
the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described
below. In using its best efforts to obtain for the Fund the most
favorable price and execution available, the Manager, bearing in
mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration,
price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker
or dealer in other transactions. Subject to such policies as the
Trustees of the Fund may determine, the Manager shall not be
deemed to have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer that provides
brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in
excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Manager
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of
the Manager as to which the Manager exercises investment
discretion. The Manager agrees that in connection with purchases
or sales of portfolio investments for the Fund's account, neither
the Manager nor any officer, director, employee or agent of the
Manager shall act as a principal or receive any commission other
than as provided in Section 3.
(d) The Fund will pay or reimburse the Manager for the
compensation in whole or in part of such officers of the Fund and
persons assisting them as may be determined from time to time by
the Trustees of the Fund. The Fund will also pay or reimburse
the Manager for all or part of the cost of suitable office space,
utilities, support services and equipment attributable to such
officers and persons, as may be determined in each case by the
Trustees of the Fund. The Fund will pay the fees, if any, of the
Trustees of the Fund.
(e) The Manager shall pay all expenses incurred in
connection with the organization of the Fund and the initial
public offering and sale of its shares of beneficial interest,
provided that upon the issuance and sale of such shares to the
public pursuant to the offering, and only in such event, the Fund
shall become liable for, and to the extent requested reimburse
<PAGE>
the Manager for, registration fees payable to the Securities and
Exchange Commission and for an additional amount not exceeding
$125,000 as its agreed share of such expenses.
(f) The Manager shall not be obligated to pay any expenses
of or for the Fund not expressly assumed by the Manager pursuant
to this Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees,
officers and employees of the Fund may be a shareholder,
director, officer or employee of, or be otherwise interested in,
the Manager, and in any person controlled by or under common
control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have
an interest in the Fund. It is also understood that the Manager
and any person controlled by or under common control with the
Manager have and may have advisory, management, service or other
contracts with other organizations and persons, and may have
other interests and business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the
Manager's services rendered, for the facilities furnished and for
the expenses borne by the Manager pursuant to paragraphs (a),
(b), (c) and (e) of Section 1, a fee, computed and paid quarterly
at the annual rate of:
(a) 0.70 % of the first $500 million of the average net
asset value of the Fund;
(b) 0.60 % of the next $500 million of such average net
asset value;
(c) 0.55 % of the next $500 million of such average net
asset value; and
(f) 0.50 % of any excess over $1.5 billion of such average
net asset value.
<PAGE>
Such average net asset value shall be determined by taking an
average of all of the determinations of such net asset value
during such quarter at the close of business on each business day
during such quarter while this Contract is in effect. Such fee
shall be payable for each fiscal quarter within 30 days after the
close of such quarter and shall commence accruing as of the date
of the initial issuance of shares of the Fund to the public.
The fees payable by the Fund to the Manager pursuant to this
Section 3 shall be reduced by any commissions, fees, brokerage or
similar payments received by the Manager or any affiliated person
of the Manager in connection with the purchase and sale of
portfolio investments of the Fund, less any direct expenses
approved by the Trustees incurred by the Manager or any
affiliated person of the Manager in connection with obtaining
such payments.
In the event that expenses of the Fund for any fiscal year
should exceed the expense limitation on investment company
expenses imposed by any statute or regulatory authority of any
jurisdiction in which shares of the Fund are qualified for offer
or sale, the compensation due the Manager for such fiscal year
shall be reduced by the amount of excess by a reduction or refund
thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to
the Fund, voluntarily declare to be effective subject to such
terms and conditions as the Manager may prescribe in such notice,
the compensation due the Manager shall be reduced, and, if
necessary, the Manager shall assume expenses of the Fund to the
extent required by the terms and conditions of such expense
limitation.
If the Manager shall serve for less than the whole of a
quarter, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT.
This Contract shall automatically terminate, without the
payment of any penalty, in the event of its assignment; and this
Contract shall not be amended unless such amendment be approved
at a meeting by the affirmative vote of a majority of the
outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval,
of a majority of the Trustees of the Fund who are not interested
persons of the Fund or of the Manager.
<PAGE>
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and
shall remain in full force and effect continuously thereafter
(unless terminated automatically as set forth in Section 4) until
terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' nor less than thirty days'
written notice delivered or mailed by registered mail, postage
prepaid, to the other party, or
(b) If (i) the Trustees of the Fund or the shareholders by
the affirmative vote of a majority of the outstanding shares of
the Fund, and (ii) a majority of the Trustees of the Fund who are
not interested persons of the Fund or of the Manager, by vote
cast in person at a meeting called for the purpose of voting on
such approval, do not specifically approve at least annually the
continuance of this Contract, then this Contract shall
automatically terminate at the close of business on January 31,
1996 or the expiration of one year from the effective date of the
last such continuance, whichever is later.
Action by the Fund under (a) above may be taken either (i)
by vote of a majority of its Trustees, or (ii) by the affirmative
vote of a majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will
be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of
a majority of the outstanding shares of the Fund" means the
affirmative vote, at a duly called and held meeting of
shareholders of the Fund, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50%
of the outstanding shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders
of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated
person", "control", "interested person" and "assignment" shall
have their respective meanings defined in the Investment Company
Act of 1940 and the Rules and Regulations thereunder (the "1940
Act"), subject, however, to such exemptions as may be granted by
the Securities and Exchange Commission under said Act; the term
"specifically approve at least annually" shall be construed in a
manner consistent with the 1940 Act, and the Rules and
Regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the Securities Exchange
Act of 1934 and the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be
subject to any liability to the Fund or to any shareholder of the
Fund, for any act or omission in the course of, or connected
with, rendering services hereunder.
8. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND
SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Fund
is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Fund as Trustees and
not individually and that the obligations of or arising out of
this instrument are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon
the assets and property of the Fund.
IN WITNESS WHEREOF, PUTNAM DIVERSIFIED EQUITY TRUST and
PUTNAM INVESTMENT MANAGEMENT, INC. have each caused this
instrument to be signed in duplicate in its behalf by its
President or a Vice President thereunto duly authorized, all as
of the day and year first above written.
PUTNAM DIVERSIFIED EQUITY TRUST
/s/ Charles E. Porter
By: --------------------------------
Executive Vice President
PUTNAM INVESTMENT MANAGEMENT, INC.
/s/ Gordon H. Silver
By: --------------------------------
Senior Managing Director
PUTNAM DIVERSIFIED EQUITY TRUST
DISTRIBUTOR'S CONTRACT
Distributor's Contract dated May 6, 1994, by and between
PUTNAM DIVERSIFIED EQUITY TRUST, a Massachusetts business trust
(the "Fund"), and PUTNAM MUTUAL FUNDS CORP., a Massachusetts
corporation ("Putnam").
WHEREAS, the Fund and Putnam are desirous of entering into
this agreement to provide for the distribution by Putnam of
shares of the Fund;
NOW, THEREFORE, in consideration of the mutual agreements
contained in the Terms and Conditions of Distributor's Contract
attached to and forming a part of this Contract (the "Terms and
Conditions"), the Fund hereby appoints Putnam as a distributor of
shares of the Fund, and Putnam hereby accepts such appointment,
all as set forth in the Terms and Conditions.
A copy of the Agreement and Declaration of Trust of the Fund
is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Fund as Trustees and
not individually, and that the obligations of or arising out of
this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets
and property of the Fund.
IN WITNESS WHEREOF, PUTNAM DIVERSIFIED EQUITY TRUST and
PUTNAM MUTUAL FUNDS CORP. have each caused this Distributor's
Contract to be signed in duplicate in its behalf, all as of the
day and year first above written.
PUTNAM DIVERSIFIED EQUITY
TRUST
/s/ Charles E. Porter
By: -----------------------------
Executive Vice President
PUTNAM MUTUAL FUNDS CORP.
/s/ William N. Shiebler
By: -----------------------------
President<PAGE>
TERMS AND CONDITIONS
OF
DISTRIBUTOR'S CONTRACT
1. RESERVATION OF RIGHT NOT TO SELL. The Fund reserves the
right to refuse at any time or times to sell any of its shares of
beneficial interest ("shares") hereunder for any reason deemed
adequate by it.
2. PAYMENTS TO PUTNAM. In connection with the distribution of
shares of the Fund, Putnam will be entitled to receive: (a)
payments pursuant to any Distribution Plan and Agreement from
time to time in effect between the Fund and Putnam with respect
to the Fund or any particular class of shares of the Fund, (b)
any contingent deferred sales charges applicable to the
redemption of shares of the Fund or of any particular class of
shares of the Fund, determined in the manner set forth in the
then current Prospectus and Statement of Additional Information
of the Fund and (c) subject to the provisions of Section 3 below,
any front-end sales charges applicable to the sale of shares of
the Fund or of any particular class of shares of the Fund, less
any applicable dealer discount.
3. SALES OF SHARES TO PUTNAM AND SALES BY PUTNAM. Putnam will
have the right, as principal, to sell shares of the Fund to
investment dealers against orders therefor (a) at the public
offering price (calculated as described below) less a discount
determined by Putnam, which discount shall not exceed the amount
of the sales charge referred to below, or (b) at net asset value.
Upon receipt of an order to purchase Fund shares from an
investment dealer with whom Putnam has a Sales Contract, Putnam
will promptly purchase shares from the Fund to fill such order.
The public offering price of a class of shares shall be the net
asset value of such shares then in effect, plus any applicable
front-end sales charge determined in the manner set forth in the
then current Prospectus and Statement of Additional Information
of the Fund or as permitted by the Investment Company Act of
1940, as amended, and the Rules and Regulations of the Securities
and Exchange Commission promulgated thereunder. In no event
shall the public offering price exceed 1000/915ths of such net
asset value, and in no event shall any applicable sales charge
exceed 8 1/2% of the public offering price. The net asset value
of the shares shall be determined in the manner provided in the
Agreement and Declaration of Trust of the Fund as then amended
and when determined shall be applicable to transactions as
provided for in the then current Prospectus and Statement of
Additional Information of the Fund.
Putnam will also have the right, as principal, to purchase
shares from the Fund at their net asset value and to sell such
shares to the public against orders therefor at the public
offering price or at net asset value.
Putnam will also have the right, as principal, to sell
shares at their net asset value and not subject to a contingent
deferred sales charge to such persons as may be approved by the
Trustees of the Fund, all such sales to comply with the
provisions of the Investment Company Act of 1940, as amended, and
the Rules and Regulations of the Securities and Exchange
Commission promulgated thereunder.
Putnam will also have the right, as agent for the Fund, to
sell shares at the public offering price or at net asset value to
such persons and upon such conditions as the Trustees of the Fund
may from time to time determine.
On every sale the Fund shall receive the applicable net
asset value of the shares. Putnam will reimburse the Fund for
any increased issue tax paid on account of sales charges. Upon
receipt of registration instructions in proper form and payment
for shares, Putnam will transmit such instructions to the Fund or
its agent for registration of the shares purchased.
4. SALES OF SHARES BY THE FUND. The Fund reserves the right to
issue shares at any time directly to its shareholders as a stock
dividend or stock split and to sell shares to its shareholders or
to other persons approved by Putnam at not less than net asset
value.
5. REPURCHASE OF SHARES. Putnam will act as agent for the Fund
in connection with the repurchase of shares by the Fund upon the
terms and conditions set forth in the then current Prospectus and
Statement of Additional Information of the Fund.
6. BASIS OF PURCHASES AND SALES OF SHARES. Putnam will use its
best efforts to place shares sold by it on an investment basis.
Putnam does not agree to sell any specific number of shares.
Shares will be sold by Putnam only against orders therefor.
Putnam will not purchase shares from anyone other than the Fund
except in accordance with Section 5, and will not take "long" or
"short" positions in shares contrary to the Agreement and
Declaration of Trust of the Fund.
7. RULES OF NASD, ETC. Putnam will conform to the Rules of
Fair Practice of the National Association of Securities Dealers,
Inc. and the sale of securities laws of any jurisdiction in which
it sells, directly or indirectly, any shares. Putnam also agrees
to furnish to the Fund sufficient copies of any agreements or
plans it intends to use in connection with any sales of shares in
adequate time for the Fund to file and clear them with the proper
authorities before they are put in use, and not to use them until
so filed and cleared.
8. PUTNAM INDEPENDENT CONTRACTOR. Putnam shall be an
independent contractor and neither Putnam nor any of its officers
or employees as such is or shall be an employee of the Fund.
Putnam is responsible for its own conduct and the employment,
control and conduct of its agents and employees and for injury to
such agents or employees or to others through its agents or
employees. Putnam assumes full responsibility for its agents and
employees under applicable statutes and agrees to pay all
employer taxes thereunder.
Putnam will maintain at its own expense insurance against
public liability in such an amount as the Trustees of the Fund
may from time to time reasonably request.
9. EXPENSES. Putnam will pay all expenses of qualifying shares
of the Fund for sale under the so-called "Blue Sky" laws of any
state (except expenses of any action by the Fund relating to its
Agreement and Declaration of Trust or other matters in which the
Fund has a direct concern), and expenses of preparing, printing
and distributing advertising and sales literature (apart from
expenses of registering shares under the Securities Act of 1933,
as amended, and the Investment Company Act of 1940, as amended,
and the preparation and printing of Prospectuses and Statements
of Additional Information and reports as required by said Acts
and the direct expenses of the issue of shares, except that
Putnam will pay the cost of the preparation and printing of
Prospectuses and Statements of Additional Information and
shareholders' reports used by it and by others in the sale of
Fund shares to the extent such cost is not paid by others).
10. INDEMNIFICATION OF FUND. Putnam agrees to indemnify and
hold harmless the Fund and each person who has been, is, or may
hereafter be a Trustee of the Fund against expenses reasonably
incurred by any of them in connection with any claim or in
connection with any action, suit or proceeding to which any of
them may be a party, which arises out of or is alleged to arise
out of any misrepresentation or omission to state a material
fact, or out of any alleged misrepresentation or omission to
state a material fact, on the part of Putnam or any agent or
employee of Putnam or any other person for whose acts Putnam is
responsible or is alleged to be responsible unless such
misrepresentation or omission was made in reliance upon written
information furnished by the Fund. Putnam also agrees likewise
to indemnify and hold harmless the Fund and each such person in
connection with any claim or in connection with any action, suit
or proceeding which arises out of or is alleged to arise out of
Putnam's (or an affiliate of Putnam's) failure to exercise
reasonable care and diligence with respect to its services
rendered in connection with investment, reinvestment, automatic
withdrawal and other plans for shares. The term "expenses"
includes amounts paid in satisfaction of judgments or in
settlements which are made with Putnam's consent. The foregoing
rights of indemnification shall be in addition to any other
rights to which the Fund or a Trustee may be entitled as a matter
of law.
11. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT. This Contract shall automatically terminate, without
the payment of any penalty, in the event of its assignment. This
Contract may be amended only if such amendment be approved either
by action of the Trustees of the Fund or at a meeting of the
shareholders of the Fund by the affirmative vote of a majority of
the outstanding shares of the Fund, and by a majority of the
Trustees of the Fund who are not interested persons of the Fund
or of Putnam by vote cast in person at a meeting called for the
purpose of voting on such approval.
12. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT. This
Contract shall take effect upon the date first above written and
shall remain in full force and effect continuously (unless
terminated automatically as set forth in Section 11) until
terminated:
(a) Either by the Fund or Putnam by not more
than sixty (60) days' nor less than ten (10) days'
written notice delivered or mailed by registered
mail, postage prepaid, to the other party; or
(b) If the continuance of this Contract after
January 31, 1995 is not specifically approved at
least annually by the Trustees of the Fund or the
shareholders of the Fund by the affirmative vote of a
majority of the outstanding shares of the Fund, and
by a majority of the Trustees of the Fund who are not
interested persons of the Fund or of Putnam by vote
cast in person at a meeting called for the purpose of
voting on such approval.
Action by the Fund under (a) above may be taken either (i) by
vote of its Trustees or (ii) by the affirmative vote of a
majority of the outstanding shares of the Fund. The requirement
under (b) above that continuance of this Contract be
"specifically approved at least annually" shall be construed in a
manner consistent with the Investment Company Act of 1940, as
amended, and the Rules and Regulations thereunder.
Termination of this Contract pursuant to this Section 12
shall be without the payment of any penalty.
13. CERTAIN DEFINITIONS. For the purposes of this
Contract, the "affirmative vote of a majority of the outstanding
shares of the Fund" means the affirmative vote, at a duly called
and held meeting of shareholders of the Fund, (a) of the holders
of 67% or more of the shares of the Fund present (in person or by
proxy) and entitled to vote at such meeting, if the holders of
more than 50% of the outstanding shares of the Fund entitled to
vote at such meeting are present in person or by proxy, or (b) of
the holders of more than 50% of the outstanding shares of the
Fund entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "interested
person" and "assignment" shall have the meanings defined in the
Investment Company Act of 1940, as amended, subject, however, to
such exemptions as may be granted by the Securities and Exchange
Commission under said Act.
DEALER SALES CONTRACT
Between: PUTNAM MUTUAL FUNDS CORP. and
General Distributor of
The Putnam Family of Mutual Funds
P.O. Box 2701
Boston, MA 02208
As general distributor of The Putnam Family of Mutual Funds (the
"Funds"), we agree to sell you shares of beneficial interest
issued by the Funds (the "Shares"), subject to any limitations
imposed by any of the Funds and to confirmation by us in each
instance of such sales. By your acceptance hereof, you agree to
all of the following terms and conditions:
1. OFFERING PRICE AND FEES
The public offering price at which you may offer the Shares is
the net asset value thereof, as computed from time to time, plus
any applicable sales charge described in the then-current
Prospectus of the applicable Fund. As compensation for each sale
of Shares made by you, you will be allowed the dealer discount,
if any, on such Shares described in the then-current Prospectus
of the Fund whose Shares are sold. We reserve the right to
revise the dealer discount referred to herein upon ten days'
written notice to you. We will furnish you upon request with the
public offering prices for the Shares, and you agree to quote
such prices in connection with any Shares offered by you for
sale. Your attention is specifically called to the fact that
each sale is always made subject to confirmation by us at the
public offering price next computed after receipt of the order.
There is no sales charge or dealer discount to dealers on the
reinvestment of dividends and distributions.
In addition to the dealer discount, if any, allowed pursuant to
the foregoing provisions of this Section 1, we may, at our
expense, provide additional promotional incentives or payments to
dealers. If non-cash concessions are provided, each dealer
earning such a concession may elect to receive an amount in cash
equivalent to the cost of providing such concessions. Notice of
the availability of concessions will be given to you by us. All
dealer discounts, promotional incentives, payments and
concessions will be made by us in accordance with National
Association of Securities Dealers, Inc. ("NASD") guidelines and
rules.
<PAGE>
2. MANNER OF OFFERING,
SELLING AND PURCHASING SHARES
We have delivered to you a copy of each Fund's current Prospectus
and will provide you with such number of copies of each Fund's
Prospectus, Statement of Additional Information and shareholder
reports and of supplementary sales materials prepared by us, as
you may reasonably request. You will offer and sell the Shares
only in accordance with the terms and conditions of the current
Prospectus and Statement of Additional Information of the
applicable Fund. Neither you nor any other person is authorized
to give any information or to make any representations other than
those contained in such Prospectuses, Statements of Additional
Information and shareholder reports or in such supplementary
sales materials. You agree that you will not use any other
offering materials for the Funds without our written consent.
You hereby agree (i) to exercise your best efforts to find
purchasers for the Shares of the Funds, (ii) to furnish to each
person to whom any sale is made a copy of the then-current
Prospectus of the applicable fund, (iii) to transmit to us
promptly upon receipt any and all orders received by you, and
(iv) to pay to us the offering price, less any dealer discount to
which you are entitled, within five (5) business days of our
confirmation of your order, or such shorter time as may be
required by law. If such payment is not received within said
time period, we reserve the right, without prior notice, to
cancel the sale, or at our option to return the Shares to the
issuer for redemption or repurchase. In the latter case, we
shall have the right to hold you responsible for any loss
resulting to us. Should payment be made by check on your local
bank, liquidation of Shares may be delayed pending clearance of
your check. You agree to issue confirmations promptly for all
accepted purchase orders for accounts held in street name. You
shall make all sales subject to our confirmation. All orders are
subject to acceptance or rejection by us in our sole discretion,
and by the Funds in their sole discretion. The procedure stated
herein relating to the pricing and handling of orders shall be
subject to instructions which we may forward to you from time to
time.
3. COMPLIANCE WITH LAW
You hereby represent that you are registered as a broker-dealer
under the Securities Exchange Act of 1934, as amended, and are
licensed and qualified as a broker-dealer or otherwise authorized
to offer and sell the Shares under the laws of each jurisdiction
in which the Shares will be offered and sold by you. You further
confirm that you are a member in good standing of the NASD and
agree to maintain such membership in good standing or, in the
alternative, you are a foreign dealer not eligible for membership
in the NASD.
You agree that in selling Shares you will comply with all
applicable laws, rules and regulations, including the applicable
provisions of the Securities Act of 1933, as amended, the
applicable rules and regulations of the NASD, and the applicable
rules and regulations of any jurisdiction in which you sell,
directly or indirectly, any Shares. You agree not to offer for
sale or sell the Shares in any jurisdiction in which the Shares
are not qualified for sale or in which you are not qualified as a
broker-dealer.
4. RELATIONSHIP WITH DEALERS
In offering and selling Shares under this Contract, you shall be
acting as principal and nothing herein shall be construed to
constitute you or any of your agents, employees or
representatives as our agent or employee, or as an agent or
employee of the Funds. As general distributor of the Funds, we
shall have full authority to take such action as we may deem
advisable in respect of all matters pertaining to the
distribution of the Shares. We shall not be under any obligation
to you, except for obligations expressly assumed by us in this
Contract.
5. TERMINATION
Either party hereto may terminate this Contract, without cause,
upon ten days' written notice to the other party. We may
terminate this Contract for cause upon the violation by you of
any of the provisions hereof, such termination to become
effective on the date such notice of termination is mailed to
you. This Contract shall terminate automatically if either Party
ceases to be a member of the NASD.
6. ASSIGNABILITY
This Contract is not assignable or transferable, except that we
may assign or transfer this Contract to any successor which
becomes general distributor of the Funds.
7. GOVERNING LAW
This Contract and the rights and obligations of the parties
hereunder shall be governed by and construed under the laws of
The Commonwealth of Massachusetts.
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for
that purpose, whereupon this letter shall constitute a binding
agreement between us.
Very truly yours,
PUTNAM MUTUAL FUNDS CORP.
By: /s/William N. Shiebler
------------------------------
William N. Shiebler, President
and Chief Executive Officer
We accept and agree to the foregoing Contract as of the date set
forth below.
Dealer
----------------------------
By: ----------------------------
Authorized Signature, Title
----------------------------
----------------------------
Address
Dated ----------------------------
Please return the signed Putnam copy to Putnam Mutual Funds
Corp., P.O. Box 2701, Boston, MA 02208
NF-25
FINANCIAL INSTITUTION SALES CONTRACT
Between: and
PUTNAM MUTUAL FUNDS CORP.
General Distributor of
The Putnam Family of Mutual Funds
P. O. Box 2701
Boston, MA 02208
As general distributor of The Putnam Family of Mutual Funds (the
"Funds"), we agree that you will make available to your
customers, under an agency relationship with your customers,
shares of beneficial interest issued by the Funds (the "Shares"),
subject to any limitations imposed by any of the Funds and to
confirmation by us of each transaction. By your acceptance
hereof, you agree to all of the following terms and conditions:
1. OFFERING PRICES AND FEES
The public offering price at which you may make the Shares
available to your customers is the net asset value thereof, as
computed from time to time, plus any applicable sales charge
described in the then-current Prospectus of the applicable Fund.
In the case of purchases by you, as agent for your customers, of
Shares sold with a sales charge, you shall receive an agency
commission consisting of a portion of the public offering price,
determined on the same basis as the "dealer discount" described
in the then-current Prospectus of the Fund, and such other
compensation to dealers as may be described therein, which shall
be payable to you at the same time and on the same basis as the
same is paid to such dealers, consistent with applicable law,
rules and regulations. In determining the amount of any agency
commission payable to you hereunder, we reserve the right to
exclude any purchases for any accounts which we reasonably
determine are not made in accordance with the terms of the
applicable Fund Prospectus and the provisions of this Contract.
We reserve the right to revise the agency commission referred to
herein upon ten days' written notice to you. We will furnish you
upon request with the public offering prices for the Shares, and
you agree to quote such prices in connection with any Shares made
available by you as agent for your customers. Your attention is
specifically called to the fact that each purchase of Shares by
your customers is always made subject to confirmation by us at
the public offering price next computed after receipt of the
order. There is no sales charge or agency commission to you on
the reinvestment of dividends and distributions.
<PAGE>
2. MANNER OF MAKING SHARES AVAILABLE FOR PURCHASE
We will, upon request, deliver to you a copy of each Fund's then-
current Prospectus and will provide you with such number of
copies of each Fund's then-current Prospectus, Statement of
Additional Information and shareholder reports and of
supplementary sales materials prepared by us, as you may
reasonably request. It shall be your obligation to ensure that
all such information and materials are distributed to your
customers who own Shares, in accordance with securities and/or
banking law and regulations and any other applicable regulations.
Neither you nor any other person is authorized to give any
information or to make any representations other than those
contained in such Prospectuses, Statements of Additional
Information and shareholder reports or in such supplementary
sales materials. You shall not furnish or cause to be furnished
to any person, display or publish any information or materials
relating to any Fund (including, without limitation, promotional
materials and sales literature, advertisements, press releases,
announcements, statements, posters, signs or other similar
material), except such information and materials as may be
furnished to you by us or the Fund, and such other information
and materials as may be approved in writing by us.
You hereby agree:
(i) to not purchase any Shares as agent for any customer,
unless you deliver or cause to be delivered to such
customer, at or prior to the time of such purchase, a copy
of the then-current Prospectus of the applicable Fund unless
such customer has acknowledged receipt of the Prospectus of
such Fund. You hereby represent that you understand your
obligation to deliver a prospectus to customers who purchase
Shares pursuant to federal securities laws and you have
taken all necessary steps to comply with such prospectus
delivery requirements;
(ii) to transmit to us promptly upon receipt any and all
orders received by you, it being understood that no
conditional orders will be accepted;
(iii) to obtain from each customer for whom you act as agent
for the purchase of Shares any taxpayer identification
number certification and backup withholding information
required under the Internal Revenue Code of 1986, as amended
from time to time (the "Code"), and the regulations
promulgated thereunder, or other sections of the Code which
may become applicable, and to provide us or our designee
with timely written notice of any failure to obtain such
taxpayer identification number certification or information
in order to enable the implementation of any required backup
withholding in accordance with the Code and the regulations
thereunder; and
(iv) to pay to us the offering price, less any agency
commission to which you are entitled, within five (5)
business days of our confirmation of your customer's order,
or such shorter time as may be required by law. You may,
subject to our approval, remit the total public offering
price to us, and we will return to you your agency
commission. If such payment is not received within said
time period, we reserve the right, without prior notice, to
cancel the sale, or at our option to return the Shares to
the issuer for redemption or repurchase. In the latter
case, we shall have the right to hold you responsible for
any loss resulting to us. Should payment be made by local
bank check, liquidation of Shares may be delayed pending
clearance of your check.
Unless otherwise mutually agreed in writing or except as provided
below, each transaction placed by you shall be promptly confirmed
by us in writing to you, and shall be confirmed to the customer
promptly upon receipt by us of instructions from you as to such
customer. In the case of a purchase order by customer's
application, each transaction shall be promptly confirmed in
writing directly to the customer and a copy of each confirmation
shall be sent simultaneously to you. We reserve the right, at
our discretion and without notice, to suspend the sale of Shares
or withdraw entirely the sale of Shares of any or all of the
Funds. All orders are subject to acceptance or rejection by us
in our sole discretion, and by the Funds in their sole
discretion. The procedure stated herein relating to the pricing
and handling of orders shall be subject to instructions which we
may forward to you from time to time.
3. COMPLIANCE WITH LAW
You hereby represent that you are either (1) a "bank" as defined
in Section 3(a)(6) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and at the time of each transaction
in shares of the Funds, are not required to register as a broker-
dealer under the Exchange Act or regulations thereunder; or (2)
registered as a broker-dealer under the Exchange Act, a member in
good standing of the National Association of Securities Dealers,
Inc. ("NASD") and affiliated with a bank.
(a) If you are a bank, not required to register as a broker-
dealer under the Exchange Act: You further represent and warrant
to us that with respect to any sales in the United States, you
will use your best efforts to ensure that any purchase of Shares
by your customers constitutes a suitable investment for such
customers. You shall not effect any transaction in, or induce
any purchase or sale of, any Shares by means of any manipulative,
deceptive or other fraudulent device or contrivance, and shall
otherwise deal equitably and fairly with your customers with
respect to transactions in Shares of a Fund.
(b) If you are a NASD member broker-dealer affiliated with a
bank and registered under the Exchange Act: You further
represent and warrant to us that with respect to any sales in the
United States, you agree to abide by all of the applicable laws,
rules and regulations including applicable provisions of the
Securities Act of 1933, as amended, and the applicable rules and
regulations of the NASD, including, without limitation, its Rules
of Fair Practice, and the applicable rules and regulations of any
jurisdiction in which you make Shares available for sale to your
customers. You agree not to make available for sale to your
customers the Shares in any jurisdiction in which the Shares are
not qualified for sale or in which you are not qualified as a
broker-dealer. We shall have no obligation or responsibility as
to your right to make Shares of any Funds available to your
customers in any jurisdiction. You agree to notify us
immediately in the event of (i) your expulsion or suspension from
the NASD or your becoming subject to any enforcement action by
the Securities and Exchange Commission, NASD, or any other self-
regulatory organization, or (ii) your violation of any applicable
federal or state law, rule or regulation including, but not
limited to, those of the SEC, NASD or other self-regulatory
organization, arising out of or in connection with this
Agreement, or which may otherwise affect in any material way your
ability to act in accordance with the terms of this Contract.
You shall not make Shares of any Fund available to your
customers, including your fiduciary customers, except in
compliance with all federal and state laws and rules and
regulations of regulatory agencies or authorities applicable to
you, or any of your affiliates engaging in such activity, which
may affect your business practices. You confirm that you are not
in violation of any banking law or regulations as to which you
are subject.
4. RELATIONSHIP WITH CUSTOMER
With respect to any and all transactions in the Shares of any
Fund pursuant to this Contract, it is understood and agreed in
each case that: (a) you shall be acting solely as agent for the
account of your customer; (b) each transaction shall be initiated
solely upon the order of your customer; (c) we shall execute
transactions only upon receiving instructions from you acting as
agent for your customer or upon receiving instructions directly
from your customer; (d) as between you and your customer, your
customer will have full beneficial ownership of all Shares; (e)
each transaction shall be for the account of your customer and
not for your account; and (f) unless otherwise agreed in writing
we will serve as a clearing broker for you on a fully disclosed
basis, and you shall serve as the introducing agent for your
customers' accounts. Subject to the foregoing, however, and
except for Shares sold subject to a contingent deferred sales
charge, you may maintain record ownership of such customers'
Shares in an account registered in your name or the name of your
nominee, for the benefit of such customers. With respect to
Shares sold subject to a contingent deferred sales charge, you
agree not to hold shares of such Funds in an account registered
in your name or in the name of your nominee for the benefit of
certain of your customers. You understand that such Shares must
be held in a separate account for each shareholder of such Funds.
Each transaction shall be without recourse to you provided that
you act in accordance with the terms of this Agreement. You
represent and warrant to us that you will have full right, power
and authority to effect transactions (including, without
limitation, any purchases and redemptions) in Shares on behalf of
all customer accounts provided by you.
5. RELATIONSHIP WITH FINANCIAL INSTITUTION
Neither this Contract nor the performance of the services of the
respective parties hereunder shall be considered to constitute an
exclusive arrangement, or to create a partnership, association or
joint venture between you and us. In making available Shares of
the Funds under this Contract, nothing herein shall be construed
to constitute you or any of your agents, employees or
representatives as our agent or employee, or as an agent or
employee of the Funds, and you shall not make any representations
to the contrary. As general distributor of the Funds, we shall
have full authority to take such action as we may deem advisable
in respect of all matters pertaining to the distribution of the
Shares. We shall not be under any obligation to you, except for
obligations expressly assumed by us in this Contract.
6. TERMINATION
Either party hereto may terminate this Contract, without cause,
upon ten days' written notice to the other party. We may
terminate this Contract for cause upon the violation by you of
any of the provisions hereof, such termination to become
effective on the date such notice of termination is mailed to
you. If you are registered as a broker-dealer and affiliated
with a bank, this Contract shall terminate automatically if
either Party ceases to be a member of the NASD.
7. ASSIGNABILITY
This Contract is not assignable or transferable, except that we
may assign or transfer this Contract to any successor which
becomes general distributor of the Funds.
<PAGE>
8. MISCELLANEOUS
(a) All communications mailed to us should be sent to the above
address. Any notice to you shall be duly given if mailed or
delivered to you at the address specified by you below.
(b) This Contract constitutes the entire agreement and
understanding between the parties and supercedes any and all
prior agreements between the parties.
(c) This Contract and the rights and obligations of the parties
hereunder shall be governed by and construed under the laws of
The Commonwealth of Massachusetts.
Very truly yours,
PUTNAM MUTUAL FUNDS CORP.
By: ------------------------------
William N. Shiebler, President
and Chief Executive Officer
We accept and agree to the foregoing Contract as of the date
set forth below.
Financial Institution: ---------------------------
By: ----------------------------
Authorized Signature, Title
----------------------------
----------------------------
Address
Dated: ----------------------------
Please return the signed Putnam copy of this sales Contract to
Putnam Mutual Funds Corp., P. O. Box 2701, Boston, MA 02208.
NF-78
CUSTODIAN AGREEMENT
AGREEMENT MADE AS OF THE 3RD DAY OF MAY, 1991, AS AMENDED
JULY 13, 1992, BETWEEN EACH OF THE PUTNAM FUNDS LISTED IN
SCHEDULE A, EACH OF SUCH FUNDS ACTING ON ITS OWN BEHALF
SEPARATELY FROM ALL THE OTHER FUNDS AND NOT JOINTLY OR JOINTLY
AND SEVERALLY WITH ANY OF THE OTHER FUNDS (EACH OF THE FUNDS
BEING HEREINAFTER REFERRED TO AS THE "FUND"), AND PUTNAM
FIDUCIARY TRUST COMPANY (THE "CUSTODIAN").
WHEREAS, THE CUSTODIAN REPRESENTS TO THE FUND THAT IT IS
ELIGIBLE TO SERVE AS A CUSTODIAN FOR A MANAGEMENT INVESTMENT
COMPANY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF 1940, AS
AMENDED (THE "1940 ACT"), AND
WHEREAS, THE FUND WISHES TO APPOINT THE CUSTODIAN AS THE
FUND'S CUSTODIAN.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND
AGREEMENTS HEREIN CONTAINED, THE PARTIES HERETO AGREE AS FOLLOWS:
1. APPOINTMENT OF CUSTODIAN. The Fund hereby employs and
appoints the Custodian as custodian of its assets for the term
and subject to the provisions of this Agreement. At the
direction of the Custodian, the Fund agrees to deliver to the
Sub-Custodians appointed pursuant to Section 2 below (the "Sub-
Custodians") securities, funds and other property owned by it.
The Custodian shall have no responsibility or liability for or on
account of securities, funds or other property not so delivered
to the Sub-Custodians. Upon request, the Fund shall deliver to
the Custodian or to such Sub-Custodians as the Custodian may
direct such proxies, powers of attorney or other instruments as
may be reasonably necessary or desirable in connection with the
performance by the Custodian or any Sub-Custodian of their
respective obligations under this Agreement or any applicable
Sub-Custodian Agreement.
2. APPOINTMENT OF SUB-CUSTODIANS. The Custodian may at any
time and from time to time appoint, at its own cost and expense,
as a Sub-Custodian for the Fund any bank or trust company which
meets the requirements of the 1940 Act and the rules and
regulations thereunder to act as a custodian, provided that the
Fund shall have approved in writing any such bank or trust
company and the Custodian gives prompt written notice to the Fund
of any such appointment. The agreement between the Custodian and
any Sub-Custodian shall be substantially in the form of the Sub-
Custodian agreement attached hereto as Exhibit 1 (the "Sub-
Custodian Agreement") unless otherwise approved by the Fund,
provided, however, that the agreement between the Custodian and
any Sub-Custodian appointed primarily for the purpose of holding
foreign securities of the Fund shall be substantially in the form
of the Sub-Custodian Agreement attached hereto as Exhibit 1(A)
(the "Foreign Sub-Custodian Agreement"; the "Sub-Custodian
Agreement" and the "Foreign Sub-Custodian Agreement" are herein
referred to collectively and each individually as the "Sub-
Custodian Agreement"). All Sub-Custodians shall be subject to
the instructions of the Custodian and not the Fund. The
Custodian may, at any time in its discretion, remove any bank or
trust company which has been appointed as a Sub-Custodian but
shall in such case promptly notify the Fund in writing of any
such action. Securities, funds and other property of the Fund
delivered pursuant to this Agreement shall be held exclusively by
Sub-Custodians appointed pursuant to the provisions of this
Section 2.
The Sub-Custodians which the Fund has approved to date are
set forth in Schedule B hereto. Schedule B shall be amended from
time to time as Sub-Custodians are changed, added or deleted. The
Fund shall be responsible for informing the Custodian
sufficiently in advance of a proposed investment which is to be
held at a location not listed on Schedule B, in order that there
shall be sufficient time for the Custodian to put the appropriate
arrangements in place with such Sub-Custodian pursuant to such
Sub-Custodian Agreement.
With respect to the securities, funds or other property held
by a Sub-Custodian, the Custodian shall be liable to the Fund if
and only to the extent that such Sub-Custodian is liable to the
Custodian. The Custodian shall nevertheless be liable to the
Fund for its own negligence in transmitting any instructions
received by it from the Fund and for its own negligence in
connection with the delivery of any securities, funds or other
property of the Fund to any such Sub-Custodian.
In the event that any Sub-Custodian appointed pursuant to
the provisions of this Section 2 fails to perform any of its
obligations under the terms and conditions of the applicable Sub-
Custodian Agreement, the Custodian shall use its best efforts to
cause such Sub-Custodian to perform such obligations. In the
event that the Custodian is unable to cause such Sub-Custodian to
perform fully its obligations thereunder, the Custodian shall
forthwith terminate such Sub-Custodian and, if necessary or
desirable, appoint another Sub-Custodian in accordance with the
provisions of this Section 2. The Custodian may with the
approval of the Fund commence any legal or equitable action which
it believes is necessary or appropriate in connection with the
failure by a Sub-Custodian to perform its obligations under the
applicable Sub-Custodian Agreement. Provided the Custodian shall
not have been negligent with respect to any such matter, such
action shall be at the expense of the Fund. The Custodian shall
keep the Fund fully informed regarding such action and the Fund
may at any time upon notice to the Custodian elect to take
responsibility for prosecuting such action. In such event the
Fund shall have the right to enforce and shall be subrogated to
the Custodian's rights against any such Sub-Custodian for loss or
damage caused the Fund by such Sub-Custodian.
At the written request of the Fund, the Custodian will
terminate any Sub-Custodian appointed pursuant to the provisions
of this Section 2 in accordance with the termination provisions
of the applicable Sub-Custodian Agreement. The Custodian will
not amend any Sub-Custodian Agreement in any material manner
except upon the prior written approval of the Fund and shall in
any case give prompt written notice to the Fund of any amendment
to the Sub-Custodian Agreement.
3. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND
HELD BY SUB-CUSTODIANS.
3.1 HOLDING SECURITIES - The Custodian shall cause one or
more Sub-Custodians to hold and, by book-entry or otherwise,
identify as belonging to the Fund all non-cash property delivered
to such Sub-Custodian.
3.2 DELIVERY OF SECURITIES - The Custodian shall cause Sub-
Custodians holding securities of the Fund to release and deliver
securities owned by the Fund held by the Sub-Custodian or in a
Securities System account of the Sub-Custodian only upon receipt
of Proper Instructions, which may be continuing instructions when
deemed appropriate by the parties, and only in the following
cases:
3.2.1 Upon sale of such securities for the account
of the Fund and receipt of payment therefor;
PROVIDED, HOWEVER, that a Sub-Custodian may
release and deliver securities prior to the
receipt of payment therefor if (i) in the
Sub-Custodian's judgment, (A) release and
delivery prior to payment is required by the
terms of the instrument evidencing the
security or (B) release and delivery prior
to payment is the prevailing method of
settling securities transactions between
institutional investors in the applicable
market and (ii) release and delivery prior
to payment is in accordance with generally
accepted trade practice and with any
pplicable governmental regulations and the
rules of Securities Systems or other
securities depositories and clearing
agencies in the applicable market. The
Custodian agrees, upon request, to advise
the Fund of all pending transactions in
<PAGE>
which release and delivery will
prior to the receipt of payment therefor;
3.2.2 Upon the receipt of payment in connection
with any repurchase agreement related to
such securities entered into by the Fund;
3.2.3 In the case of a sale effected through a
Securities System, in accordance with the
provisions of Section 3.12 hereof;
3.2.4 To the depository agent in connection with
tender or other similar offers for portfolio
securities of the Fund; provided that, in
any such case, the cash or other
consideration is thereafter to be delivered
to the Sub-Custodian;
3.2.5 To the issuer thereof or its agent, when
such securities are called, redeemed,
retired or otherwise become payable;
provided that, in any such case, the cash or
other consideration is to be delivered to
the Sub-Custodian;
3.2.6 To the issuer thereof, or its agent for
transfer into the name of the Fund or into
the name of any nominee or nominees of the
Sub-Custodian or into the name or nominee
name of any agent appointed pursuant to
Section 3.11 or any other name permitted
pursuant to Section 3.3; or for exchange for
a different number of bonds, certificates or
other evidence representing the same
aggregate face amount or number of units;
provided that, in any such case, the new
securities are to be delivered to the Sub-
Custodian;
3.2.7 Upon the sale of such securities for the
account of the Fund, to the broker or its
clearing agent, against a receipt, for
examination in accordance with "street
delivery" custom; provided that in any such
case, the Sub-Custodian shall have no
responsibility or liability for any loss
arising from the delivery of such securities
prior to receiving payment for such
securities except as may arise from the Sub-
Custodian's own negligence or willful
misconduct;
3.2.8 For exchange or conversion pursuant to any
plan of merger, consolidation,
recapitalization, reorganization or
readjustment of the securities of the issuer
of such securities, or pursuant to
provisions for conversion contained in such
securities, or pursuant to any deposit
agreement; provided that, in any such case,
the new securities and cash, if any, are to
be delivered to the Sub-Custodian;
3.2.9 In the case of warrants, rights or similar
securities, the surrender thereof in the
exercise of such warrants, rights or similar
securities or the surrender of interim
receipts or temporary securities for
definitive securities; provided that, in any
such case, the new securities and cash, if
any, are to be delivered to the Sub-
Custodian;
3.2.10 For delivery in connection with any loans of
securities made by the Fund, but only
against receipt of adequate collateral as
agreed upon from time to time by the
Custodian and the Fund, which may be in the
form of cash or obligations issued by the
United States government, its agencies or
instrumentalities; except that in connection
with any loan of securities held in a
Securities System for which collateral is to
credited to the Sub-Custodian's account in
another Securities System, the Sub-Custodian
will not be held liable or responsible for
delivery of the securities prior to the
receipt of such collateral.
3.2.11 For delivery as security in connection with
any borrowings by the Fund requiring a
pledge of assets by the Fund, but only
against receipt of amounts borrowed;
3.2.12 Upon receipt of instructions from the
transfer agent ("Transfer Agent") for the
Fund, for delivery to such Transfer Agent or
to the shareholders of the Fund in
connection with distributions in kind, as
may be described from time to time in the
Fund's Declaration of Trust and currently
effective registration statement, if any, in
satisfaction of requests by Fund
shareholders for repurchase or redemption;
3.2.13 For delivery to another Sub-Custodian of the
Fund; and
3.2.14 For any other proper corporate purpose, but
only upon receipt of, in addition to Proper
Instructions, a certified copy of a
resolution of the Trustees or of the
Executive Committee of the Fund signed by an
officer of the Fund and certified by its
Clerk or an Assistant Clerk, specifying the
securities to be delivered, setting forth
the purpose for which such delivery is to be
made, declaring such purposes to be proper
corporate purposes, and naming the person or
persons to whom delivery of such securities
shall be made.
3.3 REGISTRATION OF SECURITIES. Securities of the
Fund held by the Sub-Custodians hereunder (other than bearer
securities) shall be registered in the name of the Fund or
in the name of any nominee of the Fund or of any nominee of
the Sub-Custodians or any 17f-5 Sub-Custodian or Foreign
Depository (as each of those terms is defined in the Foreign
Sub-Custodian Agreement, which nominee shall be assigned
exclusively to the Fund, unless the Fund has authorized in
writing the appointment of a nominee to be used in common
with other registered investment companies having the same
investment adviser as the Fund, or in the name or nominee
name of any agent appointed pursuant to Section 3.12.
Notwithstanding the foregoing, a Sub-Custodian, agent, 17f-5
Sub-Custodian or Foreign Depository may hold securities of
the Fund in a nominee name which is used for its other
clients provided that such name is not used by the Sub-
Custodian, agent, 17f-5 Sub-Custodian or Foreign Depository
for its own securities and that securities of the Fund are,
by book-entry or otherwise, at all times identified as
belonging to the Fund and distinguished from other
securities held for other clients using the same nominee
name. In addition, and notwithstanding the foregoing, a
Sub-Custodian or agent thereof or 17f-5 Sub-Custodian or
Foreign Depository may hold securities of the Fund in its
own name if such registration is the prevailing method in
the applicable market by which custodians register
securities of institutional clients and provided that
securities of the Fund are, by book-entry or otherwise, at
all times identified as belonging to the Fund and
distinguished from other securities held for other clients
or for the Sub-Custodian or agent thereof or 17f-5 Sub-
Custodian or Foreign Depository. All securities accepted by
a Sub-Custodian under the terms of a Sub-Custodian Agreement
shall be in good delivery form.
3.4 BANK ACCOUNTS. The Custodian shall cause one or
more Sub-Custodians to open and maintain a separate bank account
or accounts in the name of the Fund or the Custodian, subject
only to draft or order by the Sub-Custodian acting pursuant to
the terms of a Sub-Custodian Contract or by the Custodian acting
pursuant to this Agreement, and shall hold in such account or
accounts, subject to the provisions hereof, all cash received by
it from or for the account of the Fund, other than cash
maintained by the Fund in a bank account established and used in
accordance with Rule 17f-3 under the Investment Company Act of
1940. Funds held by the Sub-Custodian for the Fund may be
deposited by it to its credit as sub-custodian or to the
Custodian's credit as custodian in the Banking Department of the
Sub-Custodian or in such other banks or trust companies as it may
in its discretion deem necessary or desirable; provided, however,
that every such bank or trust company shall be qualified to act
as a custodian under the Investment Company Act of 1940 and that
each such bank or trust company and the funds to be deposited
with each such bank or trust company shall be approved by vote of
a majority of the Trustees of the Fund. Such funds shall be
deposited by the Sub-Custodian or the Custodian in its capacity
as sub-custodian or custodian, respectively, and shall be
withdrawable by the Sub-Custodian or the Custodian only in that
capacity. The Sub-Custodian shall be liable for actual losses
incurred by the Fund attributable to any failure on the part of
the Sub-Custodian to report accurate cash availability
information with respect to the Fund's or the Custodian's bank
accounts maintained by the Sub-Custodian or any of its agents.
3.5 PAYMENTS FOR SHARES. The Custodian shall cause one or
more Sub-Custodians to deposit into the Fund's account amounts
received from the Transfer Agent of the Fund for shares of the
Fund issued by the Fund and sold by its distributor. The
Custodian will provide timely notification to the Fund of any
receipt by the Sub-Custodian from the Transfer Agent of payments
for shares of the Fund.
3.6 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement
between the Fund and the Custodian, the Custodian shall cause one
or more Sub-Custodians, upon the receipt of Proper Instructions,
to make federal funds available to the Fund as of specified times
agreed upon from time to time by the Fund and the Custodian with
respect to amounts received by the Sub-Custodians for the
purchase of shares of the Fund.
3.7 COLLECTION OF INCOME. The Custodian shall cause one or
more Sub-Custodians to collect on a timely basis all income and
other payments with respect to registered securities held
hereunder, including securities held in a Securities System, to
which the Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely
basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such
securities are held by the Sub-Custodian or agent thereof and
shall credit such income, as collected, to the Fund's account.
Without limiting the generality of the foregoing, the Custodian
shall cause the Sub-Custodian to detach and present for payment
all coupons and other income items requiring presentation as and
when they become due and shall collect interest when due on
securities held under the applicable Sub-Custodian Agreement.
Arranging for the collection of income due the Fund on securities
loaned pursuant to the provisions of Section 3.2.10 shall be the
responsibility of the Fund. The Custodian will have no duty or
responsibility in connection therewith, other than to provide the
Fund with such information or data as may be necessary to assist
the Fund in arranging for the timely delivery to the Sub-
Custodian of the income to which the Fund is properly entitled.
3.8 PAYMENT OF FUND MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, the Custodian shall cause one or more
Sub-Custodians to pay out monies of the Fund in the following
cases only:
3.8.1 Upon the purchase of securities for the
account of the Fund but only (a) against the
delivery of such securities to the Sub-
Custodian (or any bank, banking firm or
trust company doing business in the United
States or abroad which is qualified under
the Investment Company Act of 1940, as
amended, to act as a custodian and has been
designated by the Sub-Custodian as its agent
for this purpose) or any 17f-5 Sub-Custodian
or any Foreign Depository registered in the
name of the Fund or in the name of a nominee
of the Sub-Custodian referred to in Section
3.3 hereof or in proper form for transfer;
PROVIDED, HOWEVER, that the Sub-Custodian
may cause monies of the Fund to be paid out
prior to delivery of such securities if (i)
in the Sub-Custodian's judgment, (A) payment
prior to delivery is required by the terms
of the instrument evidencing the security or
(B) payment prior to delivery is the
prevailing method of settling securities
transactions between institutional investors
in the applicable market and (ii) payment
prior to delivery is in accordance with
generally accepted trade practice and with
any applicable governmental regulations and
the rules of Securities Systems or other
securities depositories and clearing
agencies in the applicable market; the
Custodian agrees, upon request, to advise
the Fund of all pending transactions in
which payment will be made prior to the
receipt of securities in accordance with the
provision to the foregoing sentence; (b) in
the case of a purchase effected through a
Securities System, in accordance with the
conditions set forth in Section 3.13 hereof;
or (c)(i) in the case of a repurchase
agreement entered into between the Fund and
the Sub-Custodian, another bank, or a
broker-dealer against delivery of the
securities either in certificate form or
through an entry crediting the Sub-
Custodian's account at the Federal Reserve
Bank with such securities or (ii) in the
case of a repurchase agreement entered into
between the Fund and the Sub-Custodian,
against delivery of a receipt evidencing
purchase by the Fund of Securities owned by
the Sub-Custodian along with written
evidence of the agreement by the Sub-
Custodian to repurchase such securities from
the Fund; or (d) for transfer to a time
deposit account of the Fund in any bank,
whether domestic or foreign, which transfer
may be effected prior to receipt of a
confirmation of the deposit from the
applicable bank or a financial intermediary;
3.8.2 In connection with conversion, exchange or
surrender of securities owned by the Fund as
set forth in Section 3.2 hereof;
3.8.3 For the redemption or repurchase of Shares
issued by the Fund as set forth in Section
3.10 hereof;
3.8.4 For the payment of any expense or liability
incurred by the Fund, including but not
limited to the following payments for the
account of the Fund: interest, taxes,
management, accounting, transfer agent and
legal fees, including the Custodian's fee;
and operating expenses of the Fund whether
or not such expenses are to be in whole or
part capitalized or treated as deferred
expenses;
3.8.5 For the payment of any dividends or other
distributions declared to shareholders of
the Fund;
3.8.6 For transfer to another Sub-Custodian of the
Fund;
3.8.7 For any other proper purpose, but only upon
receipt of, in addition to Proper
Instructions, a certified copy of a
resolution of the Trustees or of the
Executive Committee of the Fund signed by an
officer of the Fund and certified by its
Clerk or an Assistant Clerk, specifying the
amount of such payment, setting forth the
purpose for which such payment is to be
made, declaring such purpose to be a proper
purpose, and naming the person or persons to
whom such payments is to be made.
3.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF
SECURITIES PURCHASED. Except as otherwise provided in this
Agreement, in any and every case where payment for purchase of
securities for the account of the Fund is made by a Sub-Custodian
in advance of receipt of the securities purchased in the absence
of specific written instructions from the Fund to so pay in
advance, the Custodian shall cause the Sub-Custodian to be
absolutely liable to the Fund in the event any loss results to
the Fund from the payment by the Sub-Custodian in advance of
delivery of such securities.
3.10 PAYMENTS FOR REPURCHASE OR REDEMPTIONS OF SHARES OF
THE FUND. From such funds as may be available, the Custodian
shall, upon receipt Proper Instructions, cause one or more Sub-
Custodians to make funds available for payment to a shareholder
who has delivered to the Transfer Agent a request for redemption
or repurchase of shares of the Fund. In connection with the
redemption or repurchase of shares of the Fund, the Custodian is
authorized, upon receipt of Proper Instructions, to cause one or
more Sub-Custodian, to wire funds to or through a commercial bank
designated by the redeeming shareholder. In connection with the
redemption or repurchase of Shares of the Fund, the Custodian,
upon receipt of Proper Instructions, shall cause one or more Sub-
Custodians to honor checks drawn on the Sub-Custodian by a
shareholder when presented to the Sub-Custodian in accordance
with such procedures and controls as are mutually agreed upon
from time to time among the Fund, the Custodian and the Sub-
Custodian.
3.11 APPOINTMENT OF AGENTS. The Custodian may permit
any Sub-Custodian at any time or times in its discretion to
appoint (and may at any time remove) any other bank or trust
company which is itself qualified under the Investment Company
Act of 1940, as amended, to act as a custodian, as its agent to
carry out such of the provisions of this Section 3 as the Sub-
Custodian may from time to time direct; provided, however, that
the appointment of any agent shall not relieve the Custodian or
any Sub-Custodian of its responsibilities or liabilities
hereunder and provided that any such agent shall have been
approved by vote of the Trustees of the Fund. The Custodian may
also permit any Sub-Custodian to which foreign securities of the
Fund have been delivered to direct such securities to be held by
17f-5 Sub-Custodians and to use the facilities of Foreign
Depositories, as those terms are defined in the Foreign Sub-
Custodian Agreement, in accordance with the terms of the Foreign
Sub-Custodian Agreement.
The agents which the Fund and the Custodian have approved to
date are set forth in Schedule B hereto. Schedule B shall be
amended from time to time as agents are changed, added or
deleted. The Fund shall be responsible for informing the
Custodian, and the Custodian shall be responsible for informing
the appropriate Sub-Custodian, sufficiently in advance of a
proposed investment which is to be held at a location not listed
on Schedule B, in order that there shall be sufficient time for
the Sub-Custodian to complete the appropriate contractual and
technical arrangements with such agent. Any Sub-Custodian
Agreement shall provide that the engagement by the Sub-Custodian
of one or more agents shall not relieve the Sub-Custodian of its
responsibilities or liabilities thereunder.
3.12 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The
Custodian may permit any Sub-Custodian to deposit and/or maintain
securities owned by the Fund in a clearing agency registered with
the Securities and Exchange Commission under Section 17A of the
Securities Exchange Act of 1934, which acts as a securities
depository, or in the book-entry system authorized by the U.S.
Department of the Treasury and certain federal agencies,
collectively referred to herein as "Securities System" in
accordance with applicable rules and regulations (including Rule
17f-4 of the 1940 Act) and subject to the following provisions:
3.12.1 The Sub-Custodian may, either directly or
through one or more agents, keep securities
of the Fund in a Securities System provided
that such securities are represented in an
account ("Account") of the Sub-Custodian in
the Securities System which shall not
include any assets of the Sub-Custodian
other than assets held as a fiduciary,
custodian or otherwise for customers;
3.12.2 The records of the Sub-Custodian with
respect to securities of the Fund which are
maintained in a Securities System shall
identify by book-entry those securities
belonging to the Fund;
3.12.3 The Sub-Custodian shall pay for securities
purchased for the account of the Fund upon
(i) receipt of advice from the Securities
System that such securities have been
transferred to the Account, and (ii) the
making of an entry on the records of the
Sub-Custodian to reflect such payment and
transfer for the account of the Fund. The
Sub-Custodian shall transfer securities sold
for the account of the Fund upon (i) receipt
of advice from the Securities System that
payment for such securities has been
transferred to the Account, and (ii) the
making of an entry on the records of the
Sub-Custodian to reflect such transfer and
payment for the account of the Fund. Copies
of all advices from the Securities System of
transfers of securities for the account of
the Fund shall identify the Fund, be
maintained for the Fund by the Sub-Custodian
or such an agent and be provided to the Fund
at its request. The Sub-Custodian shall
furnish the Fund confirmation of each
transfer to or from the account of the Fund
in the form of a written advice or notice
and shall furnish to the Fund copies of
daily transaction sheets reflecting each
day's transactions in the Securities System
for the account of the Fund on the next
business day;
3.12.4 The Sub-Custodian shall provide the Fund
with any report obtained by the Sub-
Custodian on the Securities System's
accounting system, internal accounting
controls and procedures for safeguarding
securities deposited in the Securities
System;
3.12.5 The Sub-Custodian shall utilize only such
Securities Systems as are approved by the
Board of Trustees of the Fund, and included
on a list maintained by the Custodian;
3.12.6 Anything to the contrary in this Agreement
notwithstanding, the Sub-Custodian shall be
liable to the Fund for any loss or damage to
the Fund resulting from use of the
Securities System by reason of any
negligence, misfeasance or misconduct of the
Sub-Custodian or any of its agents or of any
of its or their employees or from failure of
the Sub-Custodian or any such agent to
enforce effectively such rights as it may
have against the Securities System; at the
election of the Fund, it shall be entitled
to be subrogated to the rights of the Sub-
Custodian with respect to any claim against
the Securities System or any other person
which the Sub-Custodian may have as a
consequence of any such loss or damage if
and to the extent that the Fund has not been
made whole for any such loss or damage.
3.12A DEPOSITARY RECEIPTS. Only upon receipt of Proper
Instructions, the Sub-Custodian shall instruct a 17f-5 Sub-
Custodian or an agent of the Sub-Custodian appointed pursuant to
the applicable Foreign Sub-Custodian Agreement (an "Agent") to
surrender securities to the depositary used by an issuer of
American Depositary Receipts or International Depositary Receipts
(hereinafter collectively referred to as "ADRs") for such
securities against a written receipt therefor adequately
describing such securities and written evidence satisfactory to
the 17f-5 Sub-Custodian or Agent that the depositary has
acknowledged receipt of instructions to issue with respect to
such securities ADRs in the name of the Sub-Custodian, or a
nominee of the Sub-Custodian, for delivery to the Sub-Custodian.
Only upon receipt of Proper Instructions, the Sub-Custodian
shall surrender ADRs to the issuer thereof against a written
receipt therefor adequately describing the ADRs surrendered and
written evidence satisfactory to the Sub-Custodian that the
issuer of the ADRs has acknowledged receipt of instructions to
cause its depository to deliver the securities underlying such
ADRs to a 17f-5 Sub-Custodian or an Agent.
3.12B FOREIGN EXCHANGE TRANSACTIONS AND FUTURES
CONTRACTS. Only upon receipt of Proper Instructions, the Sub-
Custodian shall enter into foreign exchange contracts or options
to purchase and sell foreign currencies for spot and future
delivery on behalf and for the account of the Fund or shall enter
into futures contracts or options on futures contracts. Such
transactions may be undertaken by the Sub-Custodian with such
banking institutions, including the Sub-Custodian and 17f-5 Sub-
Custodian(s) appointed pursuant to the applicable Foreign Sub-
Custodian Agreement, as principals, as approved and authorized by
the Fund. Foreign exchange contracts, futures contracts and
options, other than those executed with the Sub-Custodian, shall
for all purposes of this Agreement be deemed to be portfolio
securities of the Fund.
3.12C OPTION TRANSACTIONS. Only upon receipt of Proper
Instructions, the Sub-Custodian shall enter into option
transactions in accordance with the provisions of any agreement
among the Fund, the Custodian and/or the Sub-Custodian and a
broker-dealer.
3.13 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The
Custodian shall cause one or more Sub-Custodians as may be
appropriate to execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection
with receipt of income or other payments with respect to
securities of the Fund held by the Sub-Custodian and in
connection with transfers of securities.
3.14 PROXIES. The Custodian shall, with respect to the
securities held by the Sub-Custodians, cause to be promptly
executed by the registered holder of such securities, if the
securities are registered other than in the name of the Fund or a
nominee of the fund, all proxies, without indication of the
manner in which such proxies are to be voted, and shall promptly
deliver to the Fund such proxies, all proxy soliciting materials
and all notices relating to such securities.
3.15 COMMUNICATIONS RELATING TO FUND PORTFOLIO
SECURITIES. The Custodian shall cause the Sub-Custodians to
transmit promptly to the Custodian, and the Custodian shall
transmit promptly to the Fund, all written information
(including, without limitation, pendency of calls and maturities
of securities and expirations of rights in connection therewith)
received by the Sub-Custodian from issuers of the securities
being held for the account of the Fund. With respect to tender
or exchange offers, the Custodian shall cause the Sub-Custodian
to transmit promptly to the Fund, all written information
received by the Sub-Custodian from issuers of the securities
whose tender or exchange is sought and from the party (or his
agents) making the tender or exchange offer. If the Fund desires
to take action with respect to any tender offer, exchange offer
or any other similar transaction, the Fund shall notify the
Custodian of the action the Fund desires such Sub-Custodian to
take, provided, however, neither the Custodian nor the Sub-
Custodian shall be liable to the Fund for the failure to take any
such action unless such instructions are received by the
Custodian at least four business days prior to the date on which
the Sub-Custodian is to take such action or, in the case of
foreign securities, such longer period as shall have been agreed
upon in writing by the Custodian and the Sub-Custodian.
3.16 PROPER INSTRUCTIONS. Proper Instructions as used
throughout this Agreement means a writing signed or initialed by
one or more person or persons who are authorized by the Trustees
of the Fund and the Custodian. Each such writing shall set forth
the specific transaction or type of transaction involved,
including a specific statement of the purpose for which such
action is requested. Oral instructions will be considered Proper
Instructions if the Custodian or Sub-Custodian, as the case may
be, reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved. All oral instructions shall be confirmed
in writing. Proper Instructions also include communications
effected directly between electro-mechanical or electronic
devices provided that the Trustees have approved such procedures.
Notwithstanding the foregoing, no Trustee, officer, employee or
agent of the Fund shall be permitted access to any securities or
similar investments of the Fund deposited with any Sub-Custodian
or any agent of any Sub-Custodian for any reason except in
accordance with the provisions of Rule 17f-2 under the 1940 Act.
3.17 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The
Custodian may in its discretion, and may permit one or more Sub-
Custodians in their discretion, without express authority from
the Fund to:
3.17.1 make payments to itself or others for minor
expenses of handling securities or other
similar items relating to its duties under
this Agreement, or in the case of a Sub-
Custodian, under the applicable Sub-
Custodian Agreement, provided that all such
payments shall be accounted for to the Fund;
3.17.2 surrender securities in temporary form for
securities in definitive form;
3.17.3 endorse for collection, in the name of the
Fund, checks, drafts and other negotiable
instruments; and
3.17.4 in general, attend to all non-discretionary
details in connection with the sale,
exchange, substitution, purchase, transfer
and other dealings with the securities and
property of the Fund except as otherwise
directed by the Trustees of the Fund.
3.18 EVIDENCE OF AUTHORITY. The Custodian shall be
protected in acting upon any instructions, notice, request,
consent, certificate or other instrument or paper believed by it
to be genuine and to have been properly executed by or on behalf
of the Fund.
3.19 INVESTMENT LIMITATIONS. In performing its duties
generally, and more particularly in connection with the purchase,
sale and exchange of securities made by or for the Fund, the
Custodian may assume, unless and until notified in writing to the
contrary, that Proper Instructions received by it are not in
conflict with or in any way contrary to any provisions of the
Fund's Declaration of Trust or By-Laws (or comparable documents)
or votes or proceedings of the shareholders or Trustees of the
Fund. The Custodian shall in no event be liable to the Fund and
shall be indemnified by the Fund for any violation of any
investment limitations to which the Fund is subject or other
limitations with respect to the Fund's powers to expend funds,
encumber securities, borrow or take similar actions affecting its
portfolio.
4. PERFORMANCE STANDARDS. The Custodian shall use its best
efforts to perform its duties hereunder in accordance with the
standards set forth in Schedule C hereto. Schedule C may be
amended from time to time as agreed to by the Custodian and the
Trustees of the Fund.
5. RECORDS. The Custodian shall create and maintain all
records relating to the Custodian's activities and obligations
under this Agreement and cause all Sub-Custodians to create and
maintain all records relating to the Sub-Custodian's activities
and obligations under the appropriate Sub-Custodian Agreement in
such manner as will meet the obligations of the Fund under the
1940 Act, with particular attention to Sections 17(f) and 31
thereof and Rules 17f-2, 31a-1 and 31a-2 thereunder, applicable
federal and state tax laws, and any other law or administrative
rules or procedures which may be applicable to the Fund. All
such records shall be the property of the Fund and shall at all
times during the regular business hours of the Custodian or
during the regular business hours of the Sub-Custodian, as the
case may be, be open for inspection by duly authorized officers,
employees or agents of the Custodian and Fund and employees and
agents of the Securities and Exchange Commission. At the Fund's
request, the Custodian shall supply the Fund and cause one or
more Sub-Custodians to supply the Custodian with a tabulation of
securities owned by the Fund and held under this Agreement. When
requested to do so by the Fund and for such compensation as shall
be agreed upon, the Custodian shall include and cause one or more
Sub-Custodians to include certificate numbers in such
tabulations.
6. OPINION AND REPORTS OF FUND'S INDEPENDENT ACCOUNTANTS. The
Custodian shall take all reasonable actions, as the Fund may from
time to time request, to furnish such information with respect to
its activities hereunder as the Fund's independent public
accountants may request in connection with the accountant's
verification of the Fund's securities and similar investments as
required by Rule 17f-2 under the 1940 Act, the preparation of the
Fund's registration statement and amendments thereto, the Fund's
reports to the Securities and Exchange Commission, and with
respect to any other requirements of such Commission.
The Custodian shall also direct any Sub-Custodian to take
all reasonable actions, as the Fund may from time to time
request, to furnish such information with respect to its
activities under the applicable Sub-Custodian Agreement as the
Fund's independent public accountant may request in connection
with the accountant's verification of the Fund's securities and
similar investments as required by Rule 17f-2 under the 1940 Act,
the preparation of the Fund's registration statement and
amendments thereto, the Fund's reports to the Securities and
Exchange Commission, and with respect to any other requirements
of such Commission.
7. REPORTS OF CUSTODIAN'S AND SUB-CUSTODIANS' INDEPENDENT
ACCOUNTANTS. The Custodian shall provide the Fund, at such times
as the Fund may reasonably require, with reports by its
independent public accountant on its accounting system, internal
accounting controls and procedures for safeguarding securities,
including securities deposited and/or maintained in Securities
Systems, relating to services provided by the Custodian under
this Agreement. The Custodian shall also cause one or more of
the Sub-Custodians to provide the Fund, at such time as the Fund
may reasonably require, with reports by independent public
accountants on their accounting systems, internal accounting
controls and procedures for safeguarding securities, including
securities deposited and/or maintained in Securities Systems,
relating to services provided by those Sub-Custodians under their
respective Sub-Custody Agreements. Such reports, which shall be
of sufficient scope and in sufficient detail as may reasonably be
required by the Fund, shall provide reasonable assurance that any
material inadequacies would be disclosed by such examinations,
and, if there is no such inadequacies, shall so state.
8. COMPENSATION. The Custodian shall be entitled to reasonable
compensation for its services and expenses as custodian, as
agreed upon from time to time between the Fund and the Custodian.
Such expenses shall not include, however, the fees paid by the
Custodian to any Sub-Custodian.
9. RESPONSIBILITY OF CUSTODIAN. The Custodian shall exercise
reasonable care and diligence in carrying out the provisions of
this Agreement and shall not be liable to the Fund for any action
taken or omitted by it in good faith without negligence. So long
as and to the extent that it is in the exercise of reasonable
care, neither the Custodian nor any Sub-Custodian shall be
responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered
by it pursuant to this Agreement and shall be held harmless in
acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and, if in
writing, reasonably believed by it to be signed by the proper
party or parties. It shall be entitled to rely on and may act
upon advice of counsel (who may be counsel for the Fund) on all
matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Notwithstanding the
foregoing, the responsibility of the Custodian or a Sub-Custodian
with respect to redemptions effected by check shall be in
accordance with a separate Agreement entered into between the
Custodian and the Fund. It is also understood that the Custodian
shall not be liable for any loss resulting from a Sovereign Risk.
A "Sovereign Risk" shall mean nationalization, expropriation,
devaluation, revaluation, confiscation, seizure, cancellation,
destruction or similar action by any governmental authority, de
facto or de jure; or enactment, promulgation, imposition or
enforcement by any such governmental authority of currency
restrictions, exchange controls, taxes, levies or other charges
affecting the Fund's property; or acts of war, terrorism,
insurrection or revolution; or any other similar act or event
beyond the Custodian's control.
If the Fund requires the Custodian which in turn may require
a Sub-Custodian to take any action with respect to securities,
which action involves the payment of money or which action may,
in the opinion of the Custodian or the Sub-Custodian result in
the Custodian or its nominee or a Sub-Custodian or its nominee
being liable for the payment of money or incurring liability of
some other form, the Fund, as a prerequisite to requiring the
Custodian or the Custodian requiring any Sub-Custodian to take
such action, shall provide indemnity to the Custodian in an
amount and form satisfactory to it.
The Fund agrees to indemnify and hold harmless the Custodian
and its nominee from and against all taxes, charges, expenses,
assessments, claims and liabilities (including counsel fees)
incurred or assessed against it or its nominee or any Sub-
Custodian or its nominee in connection with the performance of
this Agreement, or any Sub-Custodian Agreement except, as to the
Custodian, such as may arise from its or its nominee's own
negligent action, negligent failure to act or willful misconduct,
and as to a Sub-Custodian, such as may arise from such Sub-
Custodian's or its nominee's own negligent action, negligent
failure to act or willful misconduct. The negligent action,
negligent failure to act or willful misconduct of the Custodian
shall not diminish the Fund's obligation to indemnify the
Custodian in the amount, but only in the amount, of any indemnity
required to be paid to a Sub-Custodian under its Sub-Custodian
Agreement. The Custodian may assign this indemnity from the Fund
directly to, and for the benefit of, any Sub-Custodian. The
Custodian is authorized, and may authorize any Sub-Custodian, to
charge any account of the Fund for such items and such fees. To
secure any such authorized charges and any advances of cash or
securities made by the Custodian or any Sub-Custodian to or for
the benefit of the Fund for any purpose which results in the Fund
incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the
Fund (except a Fund specified in Schedule D to this Agreement)
hereby grants to the Custodian a security interest in and pledges
to the Custodian securities up to a maximum of 10% of the value
of the Fund's net assets for the purpose of securing payment of
any such advances and hereby authorizes the Custodian on behalf
of the Fund to grant to any Sub-Custodian a security interest in
and pledge of securities held for the Fund (including those which
may be held in a Securities System) up to a maximum of 10% of the
value of the net assets held by such Sub-Custodian. The specific
securities subject to such security interest may be designated in
writing from time to time by the Fund or its investment adviser.
In the absence of any designation of securities subject to such
security interest, the Custodian or the Sub-Custodian, as the
case may be, may designate securities held by it. Should the
Fund fail to repay promptly any authorized charges or advances of
cash or securities, the Custodian or the Sub-Custodian shall be
entitled to use such available cash and to dispose of pledged
securities and property as is necessary to repay any such
authorized charges or advances and to exercise its rights as a
secured party under the U.C.C. The Fund agrees that a Sub-
Custodian shall have the right to proceed directly against the
Fund and not solely as subrogee to the Custodian with respect to
any indemnity hereunder assigned to a Sub-Custodian, and in that
regard, the Fund agrees that it shall not assert against any Sub-
Custodian proceeding against it any defense or right of set-off
the Fund may have against the Custodian arising out of the
negligent action, negligent failure to act or willful misconduct
of the Custodian, and hereby waives all rights it may have to
object to the right of a Sub-Custodian to maintain an action
against it.
10. SUCCESSOR CUSTODIAN. If a successor custodian shall be
appointed by the Trustees of the Fund, the Custodian shall, upon
termination, cause to be delivered to such successor custodian,
duly endorsed and in the form for transfer, all securities, funds
and other properties then held by the Sub-Custodians and all
instruments held by the Sub-Custodians relative thereto and cause
the transfer to an account of the successor custodian all of the
Fund's securities held in any Securities System.
If no such successor custodian shall be appointed, the
Custodian shall, in like manner, upon receipt of a certified copy
of a vote of the Trustees of the Fund, cause to be delivered at
the office of the Custodian and transfer such securities, funds
and other properties in accordance with such vote.
In the event that no written order designating a successor
custodian or certified copy of a vote of the Trustees shall have
been delivered to the Custodian on or before the date when such
termination shall become effective, then the Custodian shall have
the right to deliver to a bank or trust company, which meets the
requirements of the 1940 Act and the rules and regulations
thereunder, such securities, funds and other properties.
Thereafter, such bank or trust company shall be the successor of
the Custodian under this Agreement.
In the event that such securities, funds and other
properties remain in the possession of the Custodian or any Sub-
Custodian after the date of termination hereof owing to failure
of the Fund to procure the certified copy of the vote referred to
or of the Trustees to appoint a successor custodian, the
Custodian shall be entitled to fair compensation for its services
during such period as the Sub-Custodians retain possession of
such securities, funds and other properties and the provisions of
this Agreement relating to the duties and obligations of the
Custodian shall remain in full force and effect.
11. EFFECTIVE PERIOD, TERMINATION AND AMENDMENT. This Agreement
shall become effective as of its execution, shall continue in
full force and effect until terminated as hereinafter provided,
may be amended at any time by mutual agreement of the parties
hereto and may be terminated by either party by an instrument in
writing delivered or mailed, postage prepaid to the other party,
such termination to take effect not sooner than thirty (30) days
after the date of such delivery or mailing; provided either party
may at any time immediately terminate this Agreement in the event
of the appointment of a conservator or receiver for the other
party or upon the happening of a like event at the direction of
an appropriate regulatory agency or court of competent
jurisdiction. No provision of this Agreement may be amended or
terminated except by a statement in writing signed by the party
against which enforcement of the amendment or termination is
sought.
Upon termination of the Agreement, the Fund shall pay to the
Custodian such compensation as may be due as of the date of such
termination and shall likewise reimburse the Custodian and
through the Custodian any Sub-Custodian for its costs, expenses
and disbursements.
12. INTERPRETATION. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to
the subject matter hereof. In connection with the operation of
this Agreement, the Custodian and the Fund may from time to time
agree in writing on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their
joint opinion be consistent with the general tenor of this
Agreement. No interpretive or additional provisions made as
provided in the preceding sentence shall be deemed to be an
amendment of this Agreement.
13. GOVERNING LAW. This instrument is executed and delivered in
The Commonwealth of Massachusetts and shall be governed by and
construed according to the internal laws of said Commonwealth,
without regard to principles of conflicts of law.
14. NOTICES. Notices and other writings delivered or mailed
postage prepaid to the Fund addressed to the Fund attention: John
Hughes, or to such other person or address as the Fund may have
designated to the Custodian in writing, or to the Custodian at
One Post Office Square, Boston, Massachusetts 02109 attention:
George Crane, or to such other address as the Custodian may have
designated to the Fund in writing, shall be deemed to have been
properly delivered or given hereunder to the respective
addressee.
15. BINDING OBLIGATION. This Agreement shall be binding on and
shall inure to the benefit of the Fund and the Custodian and
their respective successors and assigns, provided that neither
party hereto may assign this Agreement or any of its rights or
obligations hereunder without the prior written consent of the
other party.
16. DECLARATION OF TRUST. A copy of the Declaration of Trust of
each of the Funds is on file with the Secretary of The
Commonwealth of Massachusetts and notice is hereby given that
this instrument is executed on behalf of the Trustees of each of
the Funds as Trustees and not individually and that the
obligations of this instrument are not binding on any of the
Trustees or officers or shareholders individually, but are
binding only on the assets and property of each Fund with respect
to its obligations hereunder.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf as of the day
and year first above written.
THE PUTNAM FUNDS LISTED
IN SCHEDULE A
/s/ John D. Hughes
By ----------------------------
Vice President and Treasurer
PUTNAM FIDUCIARY TRUST COMPANY
/s/ Robert F. Lucey
By ----------------------------
President
Putnam Investments, Inc. ("Putnam"), the sole owner of the
Custodian, agrees that Putnam shall be the primary obligor with
respect to compensation due the Sub-Custodians pursuant to the
Sub-Custodian Agreements in connection with the Sub-Custodians'
performance of their responsibilities thereunder and agrees to
take all actions necessary and appropriate to assure that the
Sub-Custodians shall be compensated in the amounts and on the
schedules agreed to by the Custodian and the Sub-Custodians
pursuant to those Agreements.
PUTNAM INVESTMENTS, INC.
/s/ Douglas B. Jamieson
By ------------------------------
<PAGE>
EXHIBIT 1
MASTER SUB-CUSTODIAN AGREEMENT
AGREEMENT made this day of , 199 , between
Putnam Fiduciary Trust Company, a Massachusetts-chartered trust
company (the "Custodian"), and , a
(the "Sub-Custodian").
WHEREAS, the Sub-Custodian represents to the Custodian that
it is eligible to serve as a custodian for a management
investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), and
WHEREAS, the Custodian has entered into a Custodian
Agreement between it and each of the Putnam Funds listed in
Schedule A, each of such Funds acting on its own behalf
separately from all the other Funds and not jointly or jointly
and severally with any of the other Funds (each of the Funds
being hereinafter referred to as the "Fund"), and
WHEREAS, the Custodian and the Fund desire to utilize sub-
custodians for the purpose of holding cash and securities of the
Fund, and
WHEREAS, the Custodian wishes to appoint the Sub-Custodian
as the Fund's Sub-Custodian,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF CUSTODIAN. The Custodian hereby employs
and appoints the Sub-Custodian as a Sub-Custodian for the Fund
for the term and subject to the provisions of this Agreement.
Upon request, the Custodian shall deliver to the Sub-Custodian
such proxies, powers of attorney or other instruments as may be
reasonably necessary or desirable in connection with the
performance by the Sub-Custodian of its obligations under this
Agreement on behalf of the Fund.
2. DUTIES OF THE SUB-CUSTODIAN WITH RESPECT TO PROPERTY OF
THE FUND HELD BY IT. The Custodian may from time to time deposit
securities or cash owned by the Fund with the Sub-Custodian. The
Sub-Custodian shall have no responsibility or liability for or on
account of securities, funds or other property of the Fund not so
delivered to it. The Sub-Custodian shall hold and dispose of the
securities hereafter held by or deposited with the Sub-Custodian
as follows:
2.1 HOLDING SECURITIES. The Sub-Custodian shall hold and
physically segregate for the account of the Fund all non-cash
property, including all securities owned by the Funds, other than
securities which are maintained pursuant to Section 2.13 in a
Securities System. All such securities are to be held or
disposed of for, and subject at all times to the instructions of,
the Custodian pursuant to the terms of this Agreement. The Sub-
Custodian shall maintain adequate records identifying the
securities as being held by it as Sub-Custodian of the Fund.
2.2 DELIVERY OF SECURITIES. The Sub-Custodian shall
release and deliver securities of the Fund held by it hereunder
(or in a Securities System account of the Sub-Custodian) only
upon receipt of Proper Instructions (as defined in Section 2.17),
which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account of
the Fund and receipt of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into by
the Fund;
3) In the case of a sale effected through a
Securities System, in accordance with the provisions of Section
2.13 hereof;
4) To the depository agent in connection with tender
or other similar offers for portfolio securities of the Fund;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise become
payable; provided that, in any such case, the cash or other
consideration is to be delivered to the Sub-Custodian;
6) To the issuer thereof, or its agent, for transfer
into the name of the Fund or into the name of any nominee or
nominees of the Sub-Custodian or into the name or nominee name of
any agent appointed pursuant to Section 2.12; or for exchange for
a different number of bonds, certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new securities are to be
delivered to the Sub-Custodian;
7) Upon the sale of such securities for the account
of the Fund, to the broker or its clearing agent, against a
receipt, for examination in accordance with "street delivery"
custom; provided that, in any such case, the Sub-Custodian shall
have no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Sub-Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan of
merger, consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such securities,
or pursuant to provisions for conversion contained in such
securities, or pursuant to any deposit agreement; provided that,
in any such case, the new securities and cash, if any, are to be
delivered to the Sub-Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of such
warrants, rights or similar securities or the surrender of
interim receipts or temporary securities for definitive
securities; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Sub-Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against receipt of adequate
collateral as agreed upon from time to time by the Custodian and
the Sub-Custodian, which may be in the form of cash or
obligations issued by the United States government, its agencies
or instrumentalities;
11) For delivery as security in connection with any
borrowings by the Fund requiring a pledge of assets by the Fund,
but only against receipt of amounts borrowed;
12) Upon receipt of instructions from the transfer
agent for the Fund (the "Transfer Agent"), for delivery to such
Transfer Agent or to the shareholders of the Fund in connection
with distributions in kind, as may be described from time to time
in the Fund's Declaration of Trust and currently effective
registration statement, if any, in satisfaction of requests by
shareholders for repurchase or redemption;
13) For delivery to another Sub-Custodian of the Fund;
and
14) For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Trustees or of the Executive Committee of
the Fund signed by an officer of the Fund and certified by its
Clerk or an Assistant Clerk, specifying the securities to be
delivered, setting forth the purpose for which such delivery is
to be made, declaring such purposes to be proper corporate
purposes, and naming the person or persons to whom delivery of
such securities is to be made.
2.3 REGISTRATION OF SECURITIES. Securities of the Fund
held by the Sub-Custodian hereunder (other than bearer
securities) shall be registered in the name of the Fund or in the
name of any nominee of the Fund or of any nominee of the Sub-
Custodian, which nominee shall be assigned exclusively to the
Fund, unless the Fund has authorized in writing the appointment
of a nominee to be used in common with other registered
investment companies having the same investment adviser as the
Fund, or in the name or nominee name of any agent appointed
pursuant to Section 2.12. Notwithstanding the foregoing, a Sub-
Custodian or agent thereof may hold securities of the Fund in a
nominee name which is used for its other clients provided such
name is not used by the Sub-Custodian or agent for its own
securities and that securities of the Fund are physically
segregated at all times from other securities held for other
clients using the same nominee name. All securities accepted by
the Sub-Custodian under the terms of this Agreement shall be in
"street name" or other good delivery form.
2.4 BANK ACCOUNTS. The Sub-Custodian shall open and
maintain a separate bank account or accounts in the name of the
Fund, subject only to draft or order by the Sub-Custodian acting
pursuant to the terms of this Agreement, and shall hold in such
account or accounts, subject to the provisions hereof, all cash
received for the account of the Funds, other than cash maintained
by the Fund in a bank account established and used in accordance
with Rule 17f-3 under the 1940 Act. Funds held by the Sub-
Custodian for the Fund shall be deposited by it to its credit as
Sub-Custodian of the Fund in the Banking Department of the Sub-
Custodian or other banks. Such funds shall be deposited by the
Sub-Custodian in its capacity as Sub-Custodian and shall be
withdrawable by the Sub-Custodian only in that capacity. The
Sub-Custodian shall be liable for losses incurred by the Fund
attributable to any failure on the part of the Sub-Custodian to
report accurate cash availability information with respect to the
Fund's bank accounts maintained by the Sub-Custodian or any of
its agents, provided that such liability shall be determined
solely on a cost-of-funds basis.
2.5 PAYMENTS FOR SHARES. The Sub-Custodian shall receive
from any distributor of the Fund's shares or from the Transfer
Agent of the Fund and deposit into the Fund's account such
payments as are received for shares of the Fund issued or sold
from time to time by the Fund. The Sub-Custodian will provide
timely notification to the Custodian, and the Transfer Agent of
any receipt by it of payments for shares of the Fund.
2.6 INVESTMENT AND AVAILABILITY OF FEDERAL FUNDS. Upon
mutual agreement between the Custodian and the Sub-Custodian, the
Sub-Custodian shall, upon the receipt of Proper Instructions,
1) invest in such instruments as may be set forth in
such instructions on the same day as received all federal funds
received after a time agreed upon between the Sub-Custodian and
the Custodian; and
2) make federal funds available to the Fund as of
specified times agreed upon from time to time by the Custodian
and the Sub-Custodian in the amount of checks, when cleared
within the Federal Reserve System, received in payment for shares
of the Fund which are deposited into the Fund's account or
accounts.
2.7 COLLECTION OF INCOME. The Sub-Custodian shall collect
on a timely basis all income and other payments with respect to
registered securities held hereunder to which the Fund shall be
entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and
other payments with respect to bearer securities if, on the date
of payment by the issuer, such securities are held hereunder and
shall credit such income, as collected, to the Fund's account.
Without limiting the generality of the foregoing, the Sub-
Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they become
due and shall collect interest when due on securities held
hereunder. Arranging for the collection of income due the Fund
on securities loaned pursuant to the provisions of Section
2.2(10) shall be the responsibility of the Custodian. The Sub-
Custodian will have no duty or responsibility in connection
therewith, other than to provide the Custodian with such
information or data as may be necessary to assist the Custodian
in arranging for the timely delivery to the Sub-Custodian of the
income to which the Fund is properly entitled.
2.8 PAYMENT OF FUND MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, the Sub-Custodian shall cause monies
of a Fund to be paid out in the following cases only:
1) Upon the purchase of securities for the account of
the Fund but only (a) against the delivery of such securities to
the Sub-Custodian (or any bank, banking firm or trust company
doing business in the United States or abroad which is qualified
under the 1940 Act, as amended, to act as a custodian and has
been designated by the Sub-Custodian as its agent for this
purpose) registered in the name of the Fund or in the name of a
nominee referred to in Section 2.3 hereof or in proper form for
transfer; (b) in the case of a purchase effected through a
Securities System, in accordance with the conditions set forth in
Section 2.13 hereof; or (c) in the case of repurchase agreements
entered into between the Fund and the Sub-Custodian, or another
bank, (i) against delivery of the securities either in
certificate form or through an entry crediting the Sub-
Custodian's account at the Federal Reserve Bank with such
securities or (ii) against delivery of the receipt evidencing
purchase by the Fund of securities owned by the Sub-Custodian
along with written evidence of the agreement by the Sub-Custodian
to repurchase such securities from the Fund;
2) In connection with conversion, exchange or
surrender of securities owned by the Fund as set forth in Section
2.2 hereof;
3) For the redemption or repurchase of shares issued
by the Fund as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability
incurred by the Fund, including but not limited to the following
payments for the account of the Fund: interest, taxes,
management, accounting, custodian and Sub-Custodian, transfer
agent and legal fees, including the Custodian's fee; and
operating expenses of the Fund whether or not such expenses are
to be in whole or part capitalized or treated as deferred
expenses;
5) For the payment of any dividends declared pursuant
to the governing documents of the Fund;
6) For transfer to another Sub-Custodian of the Fund;
and
7) For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Trustees or of the Executive Committee of
the Fund signed by an officer of the Fund and certified by its
Clerk or an Assistant Clerk, specifying the amount of such
payment, setting forth the purpose for which such payment is to
be made, declaring such purpose to be a proper purpose, and
naming the person or persons to whom such payment is to be made.
2.9 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF
SECURITIES PURCHASED. In any and every case where payment for
purchase of securities for the account of a Fund is made by the
Sub-Custodian in advance of receipt of the securities purchased
in the absence of specific written instructions from the
Custodian to so pay in advance, the Sub-Custodian shall be
absolutely liable to the Fund and the Custodian in the event any
loss results to the Fund or the Custodian from the failure of the
Sub-Custodian to make such payment against delivery of such
securities, except that in the case of repurchase agreements
entered into by the Fund with a bank which is a member of the
Federal Reserve System, the Sub-Custodian may transfer funds to
the account of such bank prior to the receipt of written evidence
that the securities subject to such a repurchase agreement have
been transferred by book-entry into a segregated non-proprietary
account of the Sub-Custodian maintained with any Federal Reserve
Bank or of the safe-keeping receipt, provided that such
securities have in fact been so transferred by book-entry.
2.10 PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES
OF THE FUND. From such funds as may be available for the purpose
but subject to the limitations of the Declaration of Trust and
By-Laws and any applicable votes of the Trustees of the Fund
pursuant thereto, the Sub-Custodian shall, upon receipt of
instructions from the Custodian, make funds available for payment
to shareholders of the Fund who have delivered to the Transfer
Agent a request for redemption or repurchase of their shares. In
connection with the redemption or repurchase of shares of the
Fund, the Sub-Custodian, upon receipt of Proper Instructions, is
authorized to wire funds to or through a commercial bank
designated by the redeeming shareholders. In connection with the
redemption or repurchase of shares of the Fund, the Sub-
Custodian, upon receipt of Proper Instructions, shall honor
checks drawn on the Sub-Custodian by a shareholder, when
presented to the Sub-Custodian in accordance with such procedures
and controls as are mutually agreed upon from time to time among
the Fund, the Custodian and the Sub-Custodian.
2.11 VARIANCES. The Sub-Custodian may accept
securities or cash delivered in settlement of trades
notwithstanding variances between the amount of securities or
cash so delivered and the amount specified in the instructions
furnished to it by the Custodian, provided that the variance in
any particular transaction does not exceed (i) $25 in the case of
transactions of $1,000,000 or less, and (ii) $50 in the case of
transactions exceeding $1,000,000. The Sub-Custodian shall
maintain a record of any such variances and notify the Custodian
of such variances in periodic transaction reports submitted to
the Custodian. The Sub-Custodian will not advise any party with
whom the Fund effects securities transactions of the existence of
these variance provisions without the consent of the Fund and the
Custodian.
2.12 APPOINTMENT OF AGENTS. Without limiting its own
responsibility for its obligations assumed hereunder, the Sub-
Custodian may at any time and from time to time engage, at its
own cost and expense, as an agent to act for the Fund on the Sub-
Custodian's behalf with respect to any such obligations any bank
or trust company which meets the requirements of the 1940 Act,
and the rules and regulations thereunder, to perform services
delegated to the Sub-Custodian hereunder, provided that the Fund
shall have approved in writing any such bank or trust company and
the Sub-Custodian shall give prompt written notice to the
Custodian and the Fund of any such engagement. All agents of the
Sub-Custodian shall be subject to the instructions of the Sub-
Custodian and not the Custodian. The Sub-Custodian may, at any
time in its discretion, and shall at the Custodian's direction,
remove any bank or trust company which has been appointed as an
agent, and shall in either case promptly notify the Custodian and
the Fund in writing of the completion of any such action.
The agents which the Fund has approved to date are set forth
in Schedule B hereto. Schedule B shall be amended from time to
time as approved agents are changed, added or deleted. The
Custodian shall be responsible for informing the Sub-Custodian
sufficiently in advance of a proposed investment which is to be
held at a location not listed on Schedule B, in order that there
shall be sufficient time for the Fund to give the approval
required by the preceding paragraph and for the Sub-Custodian to
complete the appropriate contractual and technical arrangements
with such agent. The engagement by the Sub-Custodian of one or
more agents to carry out such of the provisions of this Section 2
shall not relieve the Sub-Custodian of its responsibilities or
liabilities hereunder.
2.13 DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS. The
Sub-Custodian may deposit and/or maintain securities owned by the
Fund in a clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities Exchange
Act of 1934, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the
Treasury (collectively referred to herein as "Securities System")
in accordance with applicable Federal Reserve Board and
Securities and Exchange Commission rules and regulations
(including Rule 17f-4 of the 1940 Act), and subject to the
following provisions:
1) The Sub-Custodian may keep securities of the Fund
in a Securities System provided that such securities are
represented in an account ("Account") of the Sub-Custodian in the
Securities System which shall not include any assets other than
assets held as a fiduciary, custodian or otherwise for customers;
2) The records of the Sub-Custodian with respect to
securities of the Fund which are maintained in a Securities
System shall identify by book-entry those securities belonging to
the Fund;
3) The Sub-Custodian shall pay for securities
purchased for the account of the Fund upon (i) receipt of advice
from the Securities System that such securities have been
transferred to the Account, and (ii) the making of an entry on
the records of the Sub-Custodian to reflect such payment and
transfer for the account of the Fund. The Sub-Custodian shall
transfer securities sold for the account of the Fund upon (a)
receipt of advice from the Securities System that payment for
such securities has been transferred to the Account, and (b) the
making of an entry on the records of the Sub-Custodian to reflect
such transfer and payment for the account of the Fund. Copies of
all advices from the Securities System of transfers of securities
for the account of the Fund shall identify the Fund, be
maintained for the Fund by the Sub-Custodian and be provided to
the Fund or the Custodian at the Custodian's request. The Sub-
Custodian shall furnish the Custodian confirmation of each
transfer to or from the account of the Fund in the form of a
written advice or notice and shall furnish to the Custodian
copies of daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the Fund
on the next business day;
4) The Sub-Custodian shall provide the Custodian with
any report obtained by the Sub-Custodian on the Securities
System's accounting system, internal accounting control and
procedures for safeguarding securities deposited in the
Securities System;
5) The Sub-Custodian shall have received the initial
or annual certificate, as the case may be, required by Section
2.10 hereof;
6) Anything to the contrary in this Agreement
notwithstanding, the Sub-Custodian shall be liable to the Fund
and the Custodian for any loss or damage to the Fund or the
Custodian resulting from use of the Securities System by reason
of any negligence, misfeasance or misconduct of the Sub-Custodian
or any of its agents or of any of its or their employees or from
failure of the Sub-Custodian or any such agent to enforce
effectively such rights as it may have against the Securities
System; at the election of the Custodian, it shall be entitled to
be subrogated to the rights of the Sub-Custodian with respect to
any claim against the Securities System or any other person which
the Sub-Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund and the Custodian have
not been made whole for any such loss or damage.
2.14 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Sub-
Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection
with receipt of income or other payments with respect to
securities held by it hereunder and in connection with transfers
of securities.
2.15 PROXIES. The Sub-Custodian shall, with respect to
the securities held hereunder, cause to be promptly executed by
the registered holder of such securities, if the securities are
registered otherwise than in the name of a Fund, all proxies,
without indication of the manner in which such proxies are to be
voted, and shall promptly deliver to the Custodian such proxies,
all proxy soliciting materials and all notices relating to such
securities.
2.16 COMMUNICATIONS RELATING TO FUND PORTFOLIO
SECURITIES. The Sub-Custodian shall transmit promptly to the
Custodian all written information (including, without limitation,
pendency of calls and maturities of securities and expirations of
rights in connection therewith) received by the Sub-Custodian
from issuers of the securities being held for the account of the
Fund. With respect to tender or exchange offers, the Sub-
Custodian shall transmit promptly to the Custodian all written
information received by the Sub-Custodian from issuers of the
securities whose tender or exchange is sought and from the party
(or his agents) making the tender or exchange offer. If the Fund
desires to take action with respect to any tender offer, exchange
offer or any other similar transactions, the Custodian shall
notify the Sub-Custodian of the action the Fund desires the Sub-
Custodian to take; provided, however, that the Sub-Custodian
shall not be liable to the Fund or the Custodian for the failure
to take any such action unless such instructions are received by
the Sub-Custodian at least two business days prior to the date on
which the Sub-Custodian is to take such action.
2.17 PROPER INSTRUCTIONS. Proper Instructions as used
throughout this Agreement means a writing signed or initialed by
one or more persons who are authorized by the Trustees of the
Fund and by vote of the Board of Directors of the Custodian.
Each such writing shall set forth the specific transaction or
type of transaction involved, including a specific statement of
the purpose for which such action is requested. Oral
instructions will be considered Proper Instructions if the Sub-
Custodian reasonably believes them to have been given by a person
authorized to give such instructions with respect to the
transaction involved. The Custodian shall cause all oral
instructions to be confirmed in writing. Upon receipt of a
certificate of the Clerk or an Assistant Clerk as to the
authorization by the Trustees of the Funds accompanied by a
detailed description of procedures approved by the Trustees,
Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices, provided that
the Trustees, the Custodian and the Sub-Custodian are satisfied
that such procedures afford adequate safeguards for the Fund's
assets. Notwithstanding the foregoing, no Trustee, officer,
employee or agent of the Fund shall be permitted access to any
securities or similar investments of the Fund deposited with the
Sub-Custodian or any agent for any reason except in accordance
with the provisions of Rule 17f-2 under the 1940 Act.
2.18 ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The
Sub-Custodian may in its discretion, without express authority
from the Custodian:
1) make payments to itself or others for minor
expenses of handling securities or other similar items relating
to its duties under this Agreement, provided that all such
payments shall be accounted for to the Fund and the Custodian;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the Fund,
checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities and
property of the Fund held by the Sub-Custodian hereunder except
as otherwise directed by the Custodian or the Trustees of the
Fund.
2.19 EVIDENCE OF AUTHORITY. The Sub-Custodian shall be
protected in acting upon any instruction, notice, request,
consent, certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly executed
by or on behalf of the Fund or the Custodian as custodian of the
Fund. The Sub-Custodian may receive and accept a certified copy
of a vote of the Trustees of the Fund or the Board of Directors
of the Custodian, as conclusive evidence (a) of the authority of
any person to act in accordance with such vote or (b) of any
determination or of any action by the Trustees pursuant to the
Declaration of Trust and By-Laws and the Board of Directors of
the Custodian, as the case may be as described in such vote, and
such vote may be considered as in full force and effect until
receipt by the Sub-Custodian of written notice to the contrary.
3. PERFORMANCE STANDARDS; PROTECTION OF THE FUND. The
Sub-Custodian shall use its best efforts to perform its duties
hereunder in accordance with the standards set forth in Schedule
C hereto. Schedule C may be amended from time to time as agreed
to by the Custodian and the Trustees of the Fund.
4. RECORDS. The Sub-Custodian shall cooperate with and
supply necessary information to the entity or entities appointed
by the Trustees of the Fund to keep the books of account of the
Funds or, if directed in writing to do so by the Custodian, shall
itself keep such books of account. The Sub-Custodian shall
create and maintain all records relating to its activities and
obligations under this Agreement in such manner as will meet the
obligations of the Custodian under its Custodian Agreement with
the Fund under the 1940 Act, with particular attention to
Sections 17(f) and 31 thereof and Rules 17f-2, 31a-1 and 31a-2
thereunder, applicable federal and state tax laws, and any other
law or administrative rules or procedures which may be applicable
to the Fund or the Custodian. All such records shall be the
property of the Fund and shall at all times during the regular
business hours of the Sub-Custodian be open for inspection by
duly authorized officers, employees or agents of the Custodian
and the Fund and employees and agents of the Securities and
Exchange Commission. The Sub-Custodian shall, at the Custodian's
request, supply the Custodian with a tabulation of securities
owned by the Fund and held under this Agreement and shall, when
requested to do so by the Custodian and for such compensation as
shall be agreed upon between the Custodian and Sub-Custodian,
include certificate numbers in such tabulations.
5. OPINION AND REPORTS OF THE FUND'S INDEPENDENT
ACCOUNTANTS. The Sub-Custodian shall take all reasonable
actions, as the Custodian may from time to time request, to
obtain from year to year favorable opinions from the Fund's
independent public accountants with respect to its activities
hereunder in connection with the preparation of the Fund's
registration statements and amendments thereto, the Fund's
reports to the Securities and Exchange Commission and with
respect to any other requirements of such Commission.
6. REPORTS OF SUB-CUSTODIAN'S INDEPENDENT ACCOUNTANTS.
The Sub-Custodian shall provide the Custodian, at such times as
the Custodian may reasonably require, with reports by independent
public accountants on the accounting system, internal accounting
control and procedures for safeguarding securities, including
securities deposited and/or maintained in a Securities System,
relating to the services provided by the Sub-Custodian under this
Agreement; such reports, which shall be of sufficient scope and
in sufficient detail as may reasonably be required by the
Custodian, shall provide reasonable assurance that any material
inadequacies would be disclosed by such examination, and, if
there are no such inadequacies, shall so state.
7. COMPENSATION. The Sub-Custodian shall be entitled to
reasonable compensation for its services and expenses as Sub-
Custodian, as agreed upon from time to time between the Custodian
and the Sub-Custodian.
8. RESPONSIBILITY OF SUB-CUSTODIAN. The Sub-Custodian
shall exercise reasonable care and diligence in carrying out the
provisions of this Agreement and shall not be liable to the Fund
or the Custodian for any action taken or omitted by it in good
faith without negligence. So long as and to the extent that it
is in the exercise of reasonable care, the Sub-Custodian shall
not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered
by it pursuant to this Agreement and shall be held harmless in
acting upon any notice, request, consent, certificate or other
instrument reasonably believed by it to be genuine and to be
signed by the proper party or parties. It shall be entitled to
rely on and may act upon advice of counsel (who may be counsel
for the Fund) on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the Sub-
Custodian with respect to redemptions effected by check shall be
in accordance with a separate agreement entered into between the
Custodian and the Sub-Custodian.
The Sub-Custodian shall protect the Fund and the Custodian
from direct losses to the Fund resulting from any act or failure
to act of the Sub-Custodian in violation of its duties hereunder
or of law and shall maintain customary errors and omissions and
fidelity insurance policies in an amount not less than $25
million to cover losses to the Fund resulting from any such act
or failure to act.
If the Custodian requires the Sub-Custodian to take any
action with respect to securities, which action involves the
payment of money or which action may, in the opinion of the Sub-
Custodian, result in the Sub-Custodian's being liable for the
payment of money or incurring liability of some other form, the
Custodian, as a prerequisite to requiring the Sub-Custodian to
take such action, shall provide indemnity to the Sub-Custodian in
an amount and form satisfactory to it.
The Custodian agrees to indemnify and hold harmless the Sub-
Custodian from and against all taxes, charges, expenses,
assessments, claims and liabilities (including counsel fees)
incurred or assessed against it or its nominee in connection with
the performance of this Agreement, except such as may arise from
its own negligent action, negligent failure to act or willful
misconduct. To secure any such authorized charges and any
advances of cash or securities made by the Sub-Custodian to or
for the benefit of the Fund for any purpose which results in the
Fund's incurring an overdraft at the end of any business day or
for extraordinary or emergency purposes during any business day,
the Custodian on behalf of the Fund, unless prohibited from doing
so by one or more of the Fund's fundamental investment
restrictions, hereby represents that it has obtained from the
Fund authorization to apply available cash in any account
maintained by the Sub-Custodian on behalf of the Fund and a
security interest in and pledge to it of securities held for the
Fund by the Sub-Custodian, in an amount not to exceed the amount
not prohibited by such restrictions, for the purposes of securing
payment of any such advances, and that the Fund has agreed, from
time to time, to designate in writing, or to cause its investment
adviser to designate in writing, the specific securities subject
to such security interest and pledge. The Custodian hereby
assigns the benefits of such security interest and pledge to the
Sub-Custodian, and agrees that, should the Fund or the Custodian
fail to repay promptly any advances of cash or securities, the
Sub-Custodian shall be entitled to use such available cash and to
dispose of such pledged securities as is necessary to repay any
such advances.
9. SUCCESSOR SUB-CUSTODIAN. If a successor Sub-Custodian
shall be appointed by the Custodian, the Sub-Custodian shall,
upon termination, cause to be delivered to such successor Sub-
Custodian, duly endorsed and in the form for transfer, all
securities then held by it, shall cause the transfer to an
account of the successor Sub-Custodian all of the Fund's
securities held in a Securities System and shall cause to be
delivered to such successor Sub-Custodian all funds and other
property held by it or any of its agents.
If no such successor Sub-Custodian shall be appointed, the
Sub-Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Trustees of the Fund, cause to be delivered
at the office of the Sub-Custodian and transfer such securities,
funds and other properties in accordance with such vote.
In the event that no written order designating a successor
Sub-Custodian or certified copy of a vote of the Trustees shall
have been delivered to the Sub-Custodian on or before the date
when such termination shall become effective, then the Sub-
Custodian shall have the right to deliver to a bank or trust
company, which is a "bank" as defined in the 1940 Act, doing
business in Boston, Massachusetts, of its own selection, having
an aggregate capital, surplus, and undivided profits, as shown by
its last published report, of not less than $25,000,000, all
securities, funds and other properties held by the Sub-Custodian
and its agents and all instruments held by the Sub-Custodian and
its agents relative thereto and all other property held by it and
its agents under this Agreement and to cause to be transferred to
an account of such successor Sub-Custodian all of the Fund's
securities held in any Securities System. Thereafter, such bank
or trust company shall be the successor of the Sub-Custodian
under this Agreement.
In the event that securities, funds and other properties
remain in the possession of the Sub-Custodian after the date of
termination hereof owing to failure of the Custodian to obtain
the certified copy of vote referred to or of the Trustees to
appoint a successor Sub-Custodian, the Sub-Custodian shall be
entitled to fair compensation for its services during such period
as the Sub-Custodian retains possession of such securities, funds
and other properties and the provisions of this Agreement
relating to the duties and obligations of the Sub-Custodian shall
remain in full force and effect.
Upon termination, the Sub-Custodian shall, upon receipt of a
certified copy of a vote of the Trustees of the Fund, cause to be
delivered to any other Sub-Custodian designated in such vote such
assets, securities and other property of the Fund as are
designated in such vote, or pursuant to Proper Instructions,
cause such assets, securities and other property of the Fund as
are designated by the Custodian to be delivered to one or more of
the sub-custodians designated on Schedule D hereto, as from time
to time amended.
10. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT. This
Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid, to
the other party, such termination to take effect not sooner than
thirty (30) days after the date of mailing; provided, however,
that the Sub-Custodian shall not act under Section 2.13 hereof in
the absence of receipt of an initial certificate of the Clerk or
an Assistant Clerk that the Trustees of the Fund have approved
the initial use of a particular Securities System and the receipt
of an annual certificate of the Clerk or an Assistant Clerk that
the Trustees have reviewed the use by the Fund of such Securities
System, as required in each case by Rule 17f-4 under the
Investment Company Act of 1940; and provided, further, however,
that the Custodian shall not amend or terminate this Agreement in
contravention of any applicable federal or state regulations or
any provision of the Declarations of Trust or By-Laws of the
Fund; and provided, further, that the Custodian may at any time,
by action of its Board of Directors, or the Trustees of the Fund,
as the case may be, immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the
Sub-Custodian by the Comptroller of the Currency or upon the
happening of a like event at the direction of an appropriate
regulatory agency or court of competent jurisdiction.
Upon termination of this Agreement, the Custodian shall pay
to the Sub-Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the Sub-
Custodian for its reimbursable costs, expenses and disbursements.
11. AMENDMENT AND INTERPRETATION. This Agreement
constitutes the entire understanding and agreement of the parties
hereto with respect to the subject matter hereof. No provision
of this Agreement may be amended or terminated except by a
statement in writing signed by the party against which
enforcement of the amendment or termination is sought.
In connection with the operation of this Agreement, the Sub-
Custodian and the Custodian may from time to time agree in
writing on such provisions interpretive of or in addition to the
provisions of this Agreement as may in their joint opinion be
consistent with the general tenor of this Agreement. No
interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Agreement.
12. GOVERNING LAW. This Agreement is executed and
delivered in The Commonwealth of Massachusetts and shall be
governed by and construed according to the laws of said
Commonwealth.
13. NOTICES. Notices and other writings delivered or
mailed postage prepaid to the Custodian addressed to the
Custodian attention: , or to such other person or
address as the Custodian may have designated to the Sub-Custodian
in writing, or to the Sub-Custodian at , or to such
other address as the Sub-Custodian may have designated to the
Custodian in writing, shall be deemed to have been properly
delivered or given hereunder to the respective addressee.
14. BINDING OBLIGATION. This Agreement shall be binding on
and shall inure to the benefit of the Custodian and the Sub-
Custodian and their respective successors and assigns, provided
that neither party hereto may assign this Agreement or any of its
rights or obligations hereunder without the prior written consent
of the other party.
15. PRIOR AGREEMENTS. This Agreement supersedes and
terminates, as of the date hereof, all prior contracts between
the Fund or the Custodian and the Sub-Custodian relating to the
custody of the Fund's assets.
16. DECLARATION OF TRUST. A copy of the Agreement and
Declaration of Trust of the Fund is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given
that the obligations of or arising out of this instrument are not
binding upon any of the Trustees or beneficiaries individually
but binding only upon the assets and property of the Funds.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the day of , 199 .
PUTNAM FIDUCIARY TRUST COMPANY
By ---------------------------
(SUB-CUSTODIAN)
By ---------------------------
<PAGE>
EXHIBIT 1(A)
MASTER FOREIGN SUB-CUSTODIAN AGREEMENT
AGREEMENT made this day of , 199 , between
Putnam Fiduciary Trust Company, a Massachusetts-chartered trust
company (the "Custodian"), and ,
(the "Sub-Custodian").
WHEREAS, the Sub-Custodian represents to the Custodian that
it is eligible to serve as a custodian for a management
investment company registered under the Investment Company Act of
1940, as amended (the "1940 Act"), and
WHEREAS, the Custodian has entered into a Custodian
Agreement between it and each of the Putnam Funds listed in
Schedule A to this Agreement, each of such Funds acting on its
own behalf separately from all the other Funds and not jointly or
jointly and severally with any of the other Funds (each of the
Funds being hereinafter referred to as the "Fund"), and
WHEREAS, the Custodian and the Fund desire to utilize
sub-custodians for the purpose of holding cash and securities of
the Fund, and
WHEREAS, the Custodian wishes to appoint the Sub-Custodian
as the Fund's Sub-Custodian,
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
1. APPOINTMENT OF SUB-CUSTODIAN. The Custodian hereby employs
and appoints the Sub-Custodian as a sub-custodian for safekeeping
of securities and other assets of the Fund for the term and
subject to the provisions of this Agreement. Upon request, the
Custodian shall deliver to the Sub-Custodian such proxies, powers
of attorney or other instruments as may be reasonably necessary
or desirable in connection with the performance by the
Sub-Custodian of its obligations under this Agreement on behalf
of the Fund.
2. DUTIES OF THE SUB-CUSTODIAN WITH RESPECT TO PROPERTY OF
THE FUND HELD BY IT. The Custodian may from time to time deposit
or direct the deposit of securities or cash owned by the Fund
with the Sub-Custodian. The Sub-Custodian shall have no
responsibility or liability for or on account of securities,
funds or other property of the Fund not so delivered to it.
Except for securities and funds held by 17f-5 Sub-Custodians (as
defined in Section 2.11(b)) the Sub-Custodian shall hold and
dispose of the securities or cash hereafter held by or deposited
with the Sub-Custodian as follows:
2.1. HOLDING SECURITIES. The Sub-Custodian shall hold
and, by book-entry or otherwise, identify as belonging to the
Fund all non-cash property which has been delivered to the
Sub-Custodian. All such securities are to be held or disposed of
for, and subject at all times to the instructions of, the
Custodian pursuant to the terms of this Agreement. The
Sub-Custodian shall maintain adequate records identifying the
securities as being held by it as sub-custodian of the Fund.
2.2. DELIVERY OF SECURITIES. The Sub-Custodian shall
release and deliver securities of the Fund held by it hereunder
(or in a Securities System account of the Sub-Custodian) only
upon receipt of Proper Instructions (as defined in Section 2.19),
which may be continuing instructions when deemed appropriate by
the parties, and only in the following cases:
1) Upon sale of such securities for the account
of the Fund and receipt of payment therefor, provided, however,
that the Sub-Custodian may release and deliver securities prior
to the receipt of payment therefor if (i) in the Sub-Custodian's
judgment, (A) release and delivery prior to payment is required
by the terms of the instrument evidencing the security or (B)
release and delivery prior to payment is the prevailing method of
settling securities transactions between institutional investors
in the applicable market and (ii) release and delivery prior to
payment is in accordance with generally accepted trade practice
and with any applicable governmental regulations and the rules of
Securities Systems or other securities depositories and clearing
agencies in the applicable market. The Sub-Custodian agrees,
upon request, to advise the Custodian of all pending transactions
in which release and delivery will be made prior to the receipt
of payment therefor;
2) Upon the receipt of payment in connection with any
repurchase agreement related to such securities entered into by
the Fund;
3) In the case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.12 hereof;
4) To the depository agent in connection with tender
or other similar offers for such securities; provided that, in any
such case, the cash or other consideration is thereafter to be
delivered to the Sub-Custodian;
5) To the issuer thereof or its agent when such
securities are called, redeemed, retired or otherwise become
payable; provided that, in any such case, the cash or other
consideration is thereafter to be delivered to the Sub-Custodian;
6) To the issuer thereof, or its agent, for
transfer into the name of the Fund or into the name of any nominee
or nominees of the Sub-Custodian or into the name or nominee name
of any agent appointed pursuant to Section 2.11 or any other name
permitted pursuant to Section 2.3; or for exchange for a different
number of bonds, certificates or other evidence representing the
same aggregate face amount or number of units; provided that, in
any such case, the new securities are thereafter to be delivered
to the Sub-Custodian;
7) Upon the sale of such securities for the
account of the Fund, to the broker or its clearing agent, against
a receipt, for examination in accordance with "street delivery"
custom; provided that, in any such case, the Sub-Custodian shall
have no responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for such
securities except as may arise from the Sub-Custodian's own
negligence or willful misconduct;
8) For exchange or conversion pursuant to any plan
of merger, consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such securities,
or pursuant to provisions for conversion contained in such
securities, or pursuant to any deposit agreement; provided that,
in any such case, the new securities and cash, if any, thereafter
are to be delivered to the Sub-Custodian;
9) In the case of warrants, rights or similar
securities, the surrender thereof in the exercise of such
warrants, rights or similar securities or the surrender of interim
receipts or temporary securities for definitive securities;
provided that, in any such case, the now securities and cash, if
any, are thereafter to be delivered to the Sub-Custodian;
10) For delivery in connection with any loans of
securities made by the Fund, but only against receipt of
collateral the adequacy and timing of receipt of which shall be as
agreed upon from time to time in writing by the Custodian and the
Sub-Custodian, which may be in the form of cash or obligations
issued by the United States government, its agencies or
instrumentalities;
11) For delivery as security in connection with
any borrowings by the Fund requiring a pledge of assets by the
Fund, but only against receipt of amounts borrowed;
12) Upon receipt of instructions from the transfer
agent for the Fund (the "Transfer Agent"), for delivery to such
Transfer Agent or to the shareholders of the Fund in connection
with distributions in kind, in satisfaction of requests by
shareholders for repurchase or redemption;
13) For delivery to the Custodian or another
sub-custodian of the Fund; and
14) For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Trustees or of the Executive Committee of
the Fund signed by an officer of the Fund and certified by its
Clerk or an Assistant Clerk, specifying the securities to be
delivered, setting forth the purpose for which such delivery is to
be made, declaring such purposes to be proper corporate purposes,
and naming the person or persons to whom delivery of such
securities is to be made.
2.3. REGISTRATION OF SECURITIES. Securities of the
Fund held by the Sub-Custodian hereunder (other than bearer
securities) shall be registered in the name of the Fund or in the
name of any nominee of the Fund or of any nominee of the
Sub-Custodian or any 17f-5 Sub-Custodian or Foreign Depository (as
each of those terms is defined in Section 2.11(b)), which nominee
shall be assigned exclusively to the Fund, unless the Fund has
authorized in writing the appointment of a nominee to be used in
common with other registered investment companies having the same
investment adviser as the Fund, or in the name or nominee name of
any agent appointed pursuant to Section 2.11(a). Notwithstanding
the foregoing, the Sub-Custodian or agent thereof or any 17f-5
Sub-Custodian or Foreign Depository may hold securities of the
Fund in a nominee name which is used for its other clients
provided that such name is not used by the Sub-Custodian, agent,
17f-5 Sub-Custodian or Foreign Depository for its own securities
and that securities of the Fund are, by book-entry or otherwise,
at all times identified as belonging to the Fund and distinguished
from other securities held for other clients using the same
nominee name. In addition, and notwithstanding the foregoing, the
Sub-Custodian or agent thereof or 17f-5 Sub-Custodian or Foreign
Depository may hold securities of the Fund in its own name if such
registration is the prevailing method in the applicable market by
which custodians register securities of institutional clients and
provided that securities of the Fund are, by book-entry or
otherwise, at all times identified as belonging to the Fund and
distinguished from other securities held for other clients or for
the Sub-Custodian or agent thereof or 17f-5 Sub-Custodian or
Foreign Depository. All securities accepted by the Sub-Custodian
under the terms of this Agreement shall be in good delivery form.
2.4. BANK ACCOUNTS. The Sub-Custodian shall open and
maintain a separate bank account or accounts in the name of the
Fund or of the Custodian for the benefit of the Fund, subject only
to draft or order by the Sub-Custodian acting pursuant to the
terms of this Agreement or by the Custodian acting pursuant to the
Custodian Agreement, and shall hold in such account or accounts,
subject to the provisions hereof, to the Sub-Custodian's credit as
sub-custodian of the Fund or the Custodian's credit as custodian
for the Fund, cash received for the account of the Fund other than
cash maintained by the Fund in a bank account established and used
in accordance with Rule 17f-3 under the 1940 Act or cash held as
deposits with 17f-5 Sub-Custodians in accordance with the
following paragraph. The responsibilities of the Sub-Custodian
for cash, including foreign currency, of the Fund accepted on the
Sub-Custodian's books as a deposit shall be that of a U.S. bank
for a similar deposit.
The Sub-Custodian may open a bank account on the books of a
17f-5 Sub-Custodian in the name of the Fund or of the Sub-
Custodian as a sub-custodian for the Fund, and may deposit cash,
including foreign currency, of the Fund in such account, and such
funds shall be withdrawable only pursuant to draft or order of the
Sub-Custodian. The records for such account will be maintained by
the Sub-Custodian but such account shall not constitute a deposit
liability of the Sub-Custodian. The responsibilities of the Sub-
Custodian for deposits maintained in such account shall be the
same as and no greater than the Sub-Custodian's responsibility in
respect of other portfolio securities of the Fund.
The Sub-Custodian shall be liable for actual losses incurred
by the Fund attributable to any failure on the part of the Sub-
Custodian to report accurate cash availability information with
respect to the bank accounts referred to in this Section 2.4.
2.5. PAYMENTS FOR SHARES. The Sub-Custodian shall
maintain custody of amounts received from the Transfer Agent of
the Fund for shares of the Fund issued by the Fund and sold by its
distributor and deposit such amounts into the Fund's account. The
Sub-Custodian will provide timely notification to the Custodian
and the Transfer Agent of any receipt by it of payments for shares
of the Fund.
2.6. AVAILABILITY OF FEDERAL FUNDS. Upon mutual
agreement between the Custodian and the Sub-Custodian, the
Sub-Custodian shall, upon the receipt of Proper Instructions, make
federal funds available to the Custodian for the account of the
Fund as of specified times agreed upon from time to time by the
Custodian and the Sub-Custodian with respect to amounts received
by the Sub-Custodian for the purchase of shares of the Fund.
2.7. COLLECTION OF INCOME. The Sub-Custodian shall
collect on a timely basis all income and other payments with
respect to registered securities held hereunder, including
securities held in a Securities System, to which the Fund shall be
entitled either by law or pursuant to custom in the securities
business, and shall collect on a timely basis all income and other
payments with respect to bearer securities if, on the date of
payment by the issuer, such securities are held hereunder and
shall credit such income, as collected, to the Fund's account.
Without limiting the generality of the foregoing, the
Sub-Custodian shall detach and present for payment all coupons and
other income items requiring presentation as and when they become
due and shall collect interest when due on securities held
hereunder. Arranging for the collection of income due the Fund on
securities loaned pursuant to the provisions of Section 2.2(10)
shall be the responsibility of the Custodian. The Sub-Custodian
will have no duty or responsibility in connection therewith, other
than to provide the Custodian with such information or data as may
be necessary to assist the Custodian in arranging for the timely
delivery to the Sub-Custodian of the income to which the Fund is
properly entitled.
2.8. PAYMENT OF FUND MONIES. Upon receipt of Proper
Instructions, which may be continuing instructions when deemed
appropriate by the parties, the Sub-Custodian shall cause monies
of the Fund to be paid out in the following cases only:
1) Upon the purchase of securities for the account
of the Fund but only (a) against the delivery of such securities
to the Sub-Custodian (or any bank, banking firm or trust company
doing business in the United States or abroad which is qualified
under the 1940 Act, as amended, to act as a custodian and has been
designated by the Sub-Custodian as its agent for this purpose) or
any 17f-5 Sub-Custodian or any Foreign Depository (as each of
those terms is defined in Section 2.11(b)) registered in the name
of the Fund or in the name of a nominee referred to in Section 2.3
hereof or in proper form for transfer, provided, however, that the
Sub-Custodian may cause monies of the Fund to be paid out prior to
delivery of such securities if (i) in the Sub-Custodian's
judgment, (A) payment prior to delivery is required by the terms
of the instrument evidencing the security or (B) payment prior to
delivery is the prevailing method of settling securities
transactions between institutional investors in the applicable
market and (ii) payment prior to delivery is in accordance with
generally accepted trade practice and with any applicable
governmental regulations and the rules of Securities Systems or
other securities depositories and clearing agencies in the
applicable market. The Sub-Custodian agrees, upon request, to
advise the Custodian of all pending transactions in which payment
will be made prior to the receipt of securities in accordance with
the proviso to the foregoing sentence; (b) in the case of a
purchase effected through a Securities System, in accordance with
the conditions set forth in Section 2.12 hereof; or (c) (i) in the
case of a repurchase agreement entered into between the Fund and
the Sub-Custodian, another bank or a broker-dealer, against
delivery of the securities either in certificate form or through
an entry crediting the Sub-Custodian's or its agent's
non-proprietary account at any Federal Reserve Bank with such
securities or (ii) in the case of a repurchase agreement entered
into between the Fund and the Sub-Custodian, against delivery of a
receipt evidencing purchase by the Fund of securities owned by the
Sub-Custodian along with written evidence of the agreement by the
Sub-Custodian to repurchase such securities from the Fund; or (d)
for transfer to a time deposit account of the Fund in any bank,
whether domestic or foreign, which transfer may be effected prior
to receipt of a confirmation of the deposit from the applicable
bank or a financial intermediary;
2) In connection with conversion, exchange or
surrender or tender or exercise of securities owned by the Fund as
set forth in Section 2.2 hereof;
3) For the redemption or repurchase of shares
issued by the Fund as set forth in Section 2.10 hereof;
4) For the payment of any expense or liability
incurred by the Fund, including but not limited to the following
payments for the account of the Fund: interest, taxes, management,
accounting, custodian and sub-custodian, transfer agent and legal
fees, including the Custodian's fee; and operating expenses of the
Fund whether or not such expenses are to be in whole or part
capitalized or treated as deferred expenses;
5) For the payment of any dividends or other
distributions declared to shareholders of the Fund;
6) For transfer to the Custodian or another
sub-custodian of the Fund; and
7) For any other proper purpose, but only upon
receipt of, in addition to Proper Instructions, a certified copy
of a resolution of the Trustees or of the Executive Committee of
the Fund signed by an officer of the Fund and certified by its
Clerk or Assistant Clerk, specifying the amount of such payment,
setting forth the purpose for which such payment is to be made,
declaring such purpose to be a proper purpose, and naming the
person or persons to whom such payment is to be made.
2.9. LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF
SECURITIES PURCHASED. Except as otherwise provided in this
Agreement, in any and every case where payment for purchase of
securities for the account of the Fund is made by the
Sub-Custodian in advance of receipt of the securities purchased in
the absence of Proper Instructions from the Custodian to so pay in
advance, the Sub-Custodian shall be absolutely liable to the Fund
and the Custodian in the event any loss results to the Fund or the
Custodian from the payment by the Sub-Custodian in advance of
delivery of such securities.
2.10. PAYMENTS FOR REPURCHASES OR REDEMPTIONS OF SHARES
OF THE FUND. From such funds as may be available, the
Sub-custodian shall, upon receipt of Proper Instructions, make
funds available for payment to a shareholder of the Fund who has
delivered to the Transfer Agent a request for redemption or
repurchase of shares of the Fund. In connection with the
redemption or repurchase of shares of the Fund, the Sub-Custodian,
upon receipt of Proper Instructions, is authorized to wire funds
to or through a commercial bank designated by the redeeming
shareholder. In connection with the redemption or repurchase of
shares of the Fund, the Sub-Custodian, upon receipt of Proper
Instructions, shall honor checks drawn on the Sub-Custodian by a
shareholder, when presented to the Sub-Custodian in accordance
with such procedures and controls as are mutually agreed upon from
time to time among the Fund, the Custodian and the Sub-Custodian.
2.11. APPOINTMENT OF AGENTS AND SUB-CUSTODIANS PURSUANT
TO RULE 17F-5.
(a) Agents. Without limiting its own responsibility
for its obligations assumed hereunder, the Sub-Custodian may at
any time and from time to time engage, at its own cost and
expense, as an agent to act for the Fund on the Sub-Custodian's
behalf with respect to any such obligations any bank or trust
company which meets the requirements of the 1940 Act, and the
rules and regulations thereunder, to perform services delegated to
the Sub-Custodian hereunder, provided that the Fund and the
Custodian shall have approved in writing any such bank or trust
company. All agents of the Sub-Custodian shall be subject to the
instructions of the Sub-Custodian and not the Custodian. The Sub-
Custodian may, at any time in its discretion, and shall at the
Custodian's direction, remove any bank or trust company which has
been appointed as an agent, and shall in either case promptly
notify the Custodian and the Fund in writing of the completion of
any such action.
The agents which the Fund has approved to date are set forth
in Schedule B hereto. Schedule B shall be amended from time to
time as approved agents are changed, added or deleted. The
Custodian shall be responsible for informing the Sub-Custodian
sufficiently in advance of a proposed investment which is to be
held at a location not listed on Schedule B, in order that there
shall be sufficient time for the Fund to give the approval
required by the preceding paragraph and for the Sub-Custodian to
complete the appropriate contractual and technical arrangements
with such agent. The engagement by the Sub-Custodian of one or
more agents shall not relieve the Sub-Custodian of its
responsibilities or liabilities hereunder.
(b) 17f-5 Sub-Custodians. Securities, funds and other
property of the Fund may be held by sub-custodians appointed
pursuant to the provisions of this Section 2.11 (each, a "17f-5
Sub-Custodian"). The Sub-Custodian may, at any time and from time
to time, appoint any bank or trust company (that meets the
requirements of a custodian or a foreign custodian under the
Investment Company Act of 1940 and the rules and regulations
thereunder, including without limitation Rule 17f-5 thereunder, or
that has received an order of the Securities and Exchange
Commission ("SEC") exempting it from any of such requirements that
it does not meet) to act as a 17f-5 Sub-Custodian for the Fund,
provided that the Fund shall have approved in writing (1) any such
bank or trust company and the sub-custodian agreement to be
entered into between such bank or trust company and the Sub-
Custodian, and (2) the 17f-5 Sub-Custodian's offices or branches
at which the 17f-5 Sub-Custodian is authorized to hold securities,
cash and other property of the Fund. Upon such approval by the
Fund, the Sub-Custodian is authorized on behalf of the Fund to
notify each 17f-5 Sub-Custodian of its appointment as such. The
Sub-Custodian may, at any time in its discretion, remove any bank
or trust company that has been appointed as a 17f-5 Sub-Custodian.
Those 17f-5 Sub-Custodians and their offices or branches
which the Fund has approved to date are set forth on Schedule C
hereto. Such Schedule C shall be amended from time to time as
17f-5 Sub-Custodians, branches or offices are changed, added or
deleted. The Custodian shall be responsible for informing the
Sub-Custodian sufficiently in advance of a proposed investment
which is to be held at a location not listed on Schedule C, in
order that there shall be sufficient time for the Fund to give the
approval required by the preceding paragraph and for the Sub-
Custodian to put the appropriate arrangements in place with such
17f-5 Sub-Custodian pursuant to such sub-custodian agreement.
With respect to the securities and funds held by a 17f-5 Sub-
Custodian, either directly or indirectly, including demand and
interest bearing deposits, currencies or other deposits and
foreign exchange contracts, the Sub-Custodian shall be liable to
the Custodian and the Fund if and only to the extent that such
17f-5 Sub-Custodian is liable to the Sub-Custodian and the Sub-
Custodian recovers under the applicable sub-custodian agreement,
provided, however, that the foregoing limitation shall not apply
if such 17f-5 Sub-Custodian's liability to the Sub-Custodian is
limited because the applicable sub-custodian agreement does not
contain provisions substantially similar to the provisions of
Section 2 (but not including Section 2.12) of this Agreement. The
Sub-Custodian shall also be liable to the Custodian and the Fund
for its own negligence in transmitting any instructions received
by it from the Fund or the Custodian and for its own negligence in
connection with the delivery of any securities or funds held by it
to any such 17f-5 Sub-Custodian.
The Custodian or the Fund may authorize the Sub-Custodian or
one or more of the 17f-5 Sub-Custodians to use the facilities of
one or more foreign securities depositories or clearing agencies
(each, a "Foreign Depository") that is permitted to be used by
registered investment companies by a Rule or Rules of the SEC or
that has received an order of the SEC exempting it from any of
such requirements that it does not meet. The records of the Sub-
Custodian or a 17f-5 Sub-Custodian employing a Foreign Depository
or clearing agency shall identify those securities belonging to
the Fund which are maintained in such a Foreign Depository. The
engagement by the Sub-Custodian of one or more Foreign
Depositories shall not relieve the Sub-Custodian of its
responsibilities or liabilities hereunder. The Foreign
Depositories which the Fund has approved to date are set forth in
Schedule C hereto. Schedule C shall be amended from time to time
as approved Foreign Depositories are changed, added or deleted.
The Custodian shall be responsible for informing the Sub-Custodian
sufficiently in advance of a proposed investment which is to be
held at a location not listed on Schedule C, in order that there
shall be sufficient time for the Fund to give the approval
required by the preceding paragraph and for the Sub-Custodian to
complete the appropriate contractual and technical arrangements
with such Foreign Depository.
In the event that any 17f-5 Sub-Custodian appointed pursuant
to the provisions of this Section 2.11 fails to perform any of its
obligations under the terms and conditions of the applicable sub-
custodian agreement, the Sub-Custodian shall use its best efforts
to cause such 17f-5 Sub-Custodian to perform such obligations. In
the event that the Sub-Custodian is unable to cause such 17f-5
Sub-Custodian to perform fully its obligations thereunder, the
Sub-Custodian shall forthwith upon the Custodian's request
terminate such 17f-5 Sub-Custodian as a sub-custodian for the Fund
and, if necessary or desirable, appoint another 17f-5 Sub-
Custodian in accordance with the provisions of this Section 2.11.
At the election of the Custodian, it shall have the right to
enforce and shall be subrogated to the Sub-Custodian's rights
against any such 17f-5 Sub-Custodian for loss or damage caused the
Fund by such 17f-5 Sub-Custodian.
At the written request of the Fund, the Sub-Custodian will
terminate as a sub-custodian for the Fund any 17f-5 Sub-Custodian
appointed pursuant to the provisions of this Section 2.11 in
accordance with the termination provisions under the applicable
sub-custodian agreement. The Sub-Custodian will not amend any
sub-custodian agreement or agree to change or permit any changes
thereunder except upon the prior written approval of the Fund.
In the event the Sub-Custodian makes any payment to a 17f-5
Sub-Custodian under the indemnification provisions of any sub-
custodian agreement, no more than thirty days after written notice
to the Custodian of the Sub-Custodian's having made such payment,
the Custodian will reimburse the Sub-Custodian the amount of such
payment except in respect of any negligence or misconduct of the
Sub-Custodian.
2.12. DEPOSIT OF FUND ASSETS IN SECURITIES SYSTEMS.
The Sub-Custodian may deposit and/or maintain securities owned by
the Fund in a clearing agency registered with the Securities and
Exchange Commission under Section 17A of the Securities Exchange
Act of 1934, which acts as a securities depository, or in the
book-entry system authorized by the U.S. Department of the
Treasury or by a federal agency (collectively referred to herein
as "Securities System") in accordance with applicable rules and
regulations (including Rule 17f-4 of the 1940 Act), and subject to
the following provisions:
1) The Sub-Custodian may, either directly or
through one or more agents, keep securities of the Fund in a
Securities System provided that such securities are represented in
an account ("Account") of the Sub-Custodian or such an agent in
the Securities System which shall not include any assets other
than assets held as a fiduciary, custodian or otherwise for
customers;
2) The records of the Sub-Custodian with respect
to securities of the Fund which are maintained in a Securities
System shall identify by book-entry those securities belonging to
the Fund;
3) The Sub-Custodian shall pay for securities
purchased for the account of the Fund upon (i) receipt of advice
from the Securities System that such securities have been
transferred to the Account, and (ii) the making of an entry on the
records of the Sub-Custodian to reflect such payment and transfer
for the account of the Fund. The Sub-Custodian shall transfer
securities sold for the account of the Fund upon (i) receipt of
advice from the Securities System that payment for such securities
has been transferred to the Account, and (ii) the making of an
entry on the records of the Sub-Custodian to reflect such transfer
and payment for the account of the Fund. Copies of all advices
from the Securities System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for the
Fund by the Sub-Custodian or such an agent and be provided to the
Fund or the Custodian at the Custodian's request. The
Sub-Custodian shall furnish the Custodian confirmation of each
transfer to or from the account of the Fund in the form of a
written advice or notice and shall furnish to the Custodian copies
of daily transaction statements reflecting each day's transactions
in the Securities System for the account of the Fund on the next
business day;
4) The Sub-Custodian shall provide the Custodian
with any report obtained by the Sub-Custodian on the Securities
System's accounting system, internal accounting controls and
procedures for safeguarding securities deposited in the Securities
System;
5) The Sub-Custodian shall utilize only such
Securities Systems as are set forth in a list provided by the
Custodian of Securities Systems approved for use by the Board of
Trustees of the Fund, which list will be amended from time to time
by the Custodian as may be necessary to reflect any subsequent
action taken by the Trustees of the Fund;
6) Anything to the contrary in this Agreement
notwithstanding, the Sub-Custodian shall be liable to the Fund and
the Custodian for any loss or damage to the Fund or the Custodian
resulting from use of the Securities System by reason of any
negligence, misfeasance or misconduct of the Sub-Custodian or any
of its agents or of any of its or their employees or from failure
of the Sub-Custodian or any such agent or employee to enforce
effectively such rights as it may have against the Securities
System. At the election of the Custodian, it shall be entitled to
be subrogated to the rights of the Sub-Custodian with respect to
any claim against the Securities System or any other person which
the Sub-Custodian may have as a consequence of any such loss or
damage if and to the extent that the Fund and the Custodian have
not been made whole for any such loss or damage.
2.13. DEPOSITARY RECEIPTS. Only upon receipt of Proper
Instructions, the Sub-Custodian shall instruct a 17f-5 Sub-
Custodian appointed pursuant to Section 2.11(b) hereof or an agent
of the Sub-Custodian appointed pursuant to Section 2.11(a) hereof
(an "Agent") to surrender securities to the depositary used by an
issuer of American Depositary Receipts or International Depositary
Receipts (hereinafter collectively referred to as "ADRs") for such
securities against a written receipt therefor adequately
describing such securities and written evidence satisfactory to
the 17f-5 Sub-Custodian or Agent that the depositary has
acknowledged receipt of instructions to issue with respect to such
securities ADRs in the name of the Sub-Custodian, or a nominee of
the Sub-Custodian, for delivery to the Sub-Custodian in Boston,
Massachusetts, or at such other place as the Sub-Custodian may
from time to time designate.
Only upon receipt of Proper Instructions, the Sub-Custodian
shall surrender ADRs to the issuer thereof against a written
receipt therefor adequately describing the ADRs surrendered and
written evidence satisfactory to the Sub-Custodian that the issuer
of the ADRs has acknowledged receipt of instructions to cause its
depository to deliver the securities underlying such ADRs to a
17f-5 Sub-Custodian or an Agent.
2.14. FOREIGN EXCHANGE TRANSACTIONS AND FUTURES
CONTRACTS. Only upon receipt of Proper Instructions, the Sub-
Custodian shall enter into foreign exchange contracts or options
to purchase and sell foreign currencies for spot and future
delivery on behalf and for the account of the Fund or shall enter
into futures contracts or options on futures contracts. Such
transactions may be undertaken by the Sub-Custodian with such
banking institutions, including the Sub-Custodian and 17f-5 Sub-
Custodian(s) appointed pursuant to Section 2.11(b), as principals,
as approved and authorized by the Fund. In connection with such
transaction, the Sub-Custodian is authorized to make free outgoing
payments of cash in the form of U.S. Dollars or foreign currency
without receiving confirmation of a foreign exchange contract,
futures contract or option thereon or confirmation that the
countervalue currency completing the foreign exchange contract or
futures contract has been delivered or received or that the option
has been delivered or received. Foreign exchange contracts,
futures contracts and options, other than those executed with the
Sub-Custodian as principal, shall for all purposes of this
Agreement be deemed to be portfolio securities of the Fund.
2.15. OPTION TRANSACTIONS. Only upon receipt of Proper
Instructions, the Sub-Custodian shall enter into option
transactions in accordance with the provisions of any agreement
among the Fund, the Custodian, and/or the Sub-Custodian and a
broker-dealer.
2.16. OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The
Sub-Custodian shall execute ownership and other certificates and
affidavits for all federal and state tax purposes in connection
with receipt of income or other payments with respect to
securities held by it hereunder and in connection with transfers
of securities.
2.17. PROXIES. The Sub-Custodian shall, with respect
to the securities held hereunder, cause to be promptly executed by
the registered holder of such securities, if the securities are
registered other than in the name of the Fund, all proxies that
are received by the Sub-Custodian, without indication of the
manner in which such proxies are to be voted, and shall promptly
deliver to the Custodian such proxies, all proxy soliciting
materials and all notices relating to such securities.
2.18. COMMUNICATIONS RELATING TO FUND PORTFOLIO
SECURITIES. The Sub-Custodian shall transmit promptly to the
Custodian all written information (including, without limitation,
pendency of calls and maturities of securities and expirations of
rights in connection therewith) received by the Sub-Custodian from
issuers of the securities being held for the account of the Fund.
With respect to tender or exchange offers, the Sub-Custodian shall
transmit promptly to the Custodian all written information
received by the Sub-Custodian from issuers of the securities whose
tender or exchange is sought and from the party (or his agents)
making the tender or exchange offer. If the Fund desires to take
action with respect to any tender offer, exchange offer or any
other similar transactions, the Custodian shall notify the
Sub-Custodian of the action the Fund desires the Sub-Custodian to
take; provided, however, that the Sub-Custodian shall not be
liable to the Fund or the Custodian for the failure to take any
such action unless Proper Instructions are received by the
Sub-Custodian at least two business days prior to the date on
which the Sub-Custodian is to take such action, or in the case of
foreign securities, such longer periods as shall have been agreed
upon in writing by the Custodian and the Sub-Custodian, which may
be in the form of written operating procedures or standards.
2.19. PROPER INSTRUCTIONS. Proper Instructions as used
throughout this Agreement means a writing signed or initialed by
one or more persons who are authorized by the Trustees of the Fund
and by the Custodian. Each such writing shall set forth the
specific transaction or type of transaction involved. Oral
instructions will be considered Proper Instructions if the
Sub-Custodian reasonably believes them to have been given by a
person authorized to give such instructions with respect to the
transaction involved. The Custodian shall cause all oral
instructions to be confirmed in writing. Proper Instructions
shall also include communications effected directly between the
Custodian and Sub-Custodian by electro-mechanical or electronic
devices, provided that the Custodian and the Sub-Custodian have
approved such procedures. Notwithstanding the foregoing, no
Trustee, officer, employee or agent of the Fund
shall be permitted access to any securities or similar investments
of the Fund deposited with the Sub-Custodian or any agent for any
reason except in accordance with the provisions of Rule 17f-2
under the 1940 Act.
2.20. ACTIONS PERMITTED WITHOUT EXPRESS AUTHORITY. The
Sub-Custodian may in its discretion, without express authority
from the Custodian:
1) make payments to itself or others for minor
expenses of handling securities or other similar items relating to
its duties under this Agreement, provided that all such payments
shall be accounted for to the Custodian;
2) surrender securities in temporary form for
securities in definitive form;
3) endorse for collection, in the name of the
Fund, checks, drafts and other negotiable instruments; and
4) in general, attend to all non-discretionary
details in connection with the sale, exchange, substitution,
purchase, transfer and other dealings with the securities and
property of the Fund held by the Sub-Custodian hereunder except as
otherwise directed by the Custodian.
2.21. EVIDENCE OF AUTHORITY. The Sub-Custodian shall
be protected in acting upon any instruction, notice, request,
consent, certificate or other instrument or paper reasonably
believed by it to be genuine and to have been properly executed by
or on behalf of the Fund or the Custodian as custodian of the
Fund.
2.22. PERFORMANCE STANDARDS. The Sub-Custodian shall
use its best efforts to perform its duties hereunder in accordance
with such standards as are agreed upon from time to time by the
Custodian and the Sub-Custodian.
3. RECORDS. The Sub-Custodian shall cooperate with and
supply necessary information to the entity or entities appointed
by the Trustees of the Fund to keep the books of account of the
Fund or, if directed in writing to do so by the Custodian, shall
itself keep such books of account. The Sub-Custodian shall create
and maintain all records relating to its activities and
obligations under this Agreement in such manner as will meet the
obligations of the Fund under the 1940 Act, with particular
attention to Sections 17(f) and 31 thereof and Rules 17f-2, 31a-1
and 31a-2 thereunder; the Sub-Custodian shall also create and
maintain such records as are required by applicable federal and
state tax laws, and any other law or administrative rules or
procedures which may be applicable to the Fund or the Custodian,
such laws, rules or procedures to be specified by the Custodian
from time to time. All such records shall be the property of the
Fund and shall at all times during the regular business hours of
the Sub-Custodian be open for inspection by duly authorized
officers, employees or agents of the Custodian and the Fund and
employees and agents of the Securities and Exchange Commission.
The Sub-Custodian shall, at the Custodian's request, supply the
Custodian with a tabulation of securities owned by the Fund and
held under this Agreement and shall, when requested to do so by
the Custodian and for such compensation as shall be agreed upon
between the Custodian and Sub-Custodian, include certificate
numbers in such tabulations.
4. Opinion and Reports of the Fund's Independent Accountant.
The Sub-Custodian shall take all reasonable actions, as the
Custodian may from time to time request, to furnish such
information with respect to its activities hereunder as the Fund's
independent public accountant may request in connection with the
accountant's verification of the Fund's securities and similar
investments as required by Rule 17f-2 under the 1940 Act, the
preparation of the Fund's registration statement and amendments
thereto, the Fund's reports to the Securities and Exchange
Commission and with respect to any other requirements of such
Commission.
5. Reports of Sub-Custodian's Independent Accountant. The
Sub-Custodian shall provide the Custodian, at such times as the
Custodian may reasonably require, with reports by an independent
public accountant on the accounting system, internal accounting
controls and procedures for safeguarding securities, including
securities deposited and/or maintained in a Securities System,
relating to the services provided by the Sub-Custodian under this
Agreement; such reports, which shall be of sufficient scope and in
sufficient detail as may reasonably be required by the Custodian,
shall provide reasonable assurance that any material inadequacies
would be disclosed by such examination, and if there are no such
inadequacies, shall so state.
6. Compensation. The Sub-Custodian shall be entitled to
reasonable compensation for its services and expenses as
sub-custodian, as agreed upon from time to time between the
Custodian and the Sub-Custodian.
7. Responsibility of Sub-Custodian. The Sub-Custodian shall
exercise reasonable care and diligence in carrying out the
provisions of this Agreement and shall not be liable to the Fund
or the Custodian for any action taken or omitted by it in good
faith without negligence or willful misconduct. So long as and to
the extent that it is in the exercise of reasonable care, the
Sub-Custodian shall not be responsible for the title, validity or
genuineness of any property or evidence of title thereto received
by it or delivered by it pursuant to this Agreement and shall be
held harmless in acting upon any notice, request, consent,
certificate or other instrument reasonably believed by it to be
genuine and, if in writing, reasonably believed to be signed by
the proper party or parties. It shall be entitled to rely on and
may act upon advice of counsel (who may be counsel for the Fund)
on all matters and shall be without liability for any action
reasonably taken or omitted pursuant to such advice.
Notwithstanding the foregoing, the responsibility of the
Sub-Custodian with respect to redemptions effected by check shall
be in accordance with a separate agreement entered into between
the Custodian and the Sub-Custodian. It is also understood that
the Sub-Custodian shall not be liable for any loss resulting from
a Sovereign Risk. A "Sovereign Risk" shall mean nationalization,
expropriation, devaluation, revaluation, confiscation, seizure,
cancellation, destruction or similar action by any governmental
authority, de facto or de jure; or enactment, promulgation,
imposition or enforcement by any such governmental authority of
currency restrictions, exchange controls, taxes, levies or other
charges affecting the Fund's property; or acts of war, terrorism,
insurrection or revolution; or any other similar act or event
beyond the Sub-Custodian's control.
The Sub-Custodian shall protect the Fund and the Custodian
from losses to the Fund resulting from any act or failure to act
of the Sub-Custodian in violation of its duties hereunder or of
any law applicable to the Sub-Custodian's duties hereunder.
If the Custodian requires the Sub-Custodian to take any
action with respect to securities, which action involves the
payment of money or which action may, in the opinion of the
Sub-Custodian, result in the Sub-Custodian's being liable for the
payment of money or incurring liability of some other form, the
Custodian, as a prerequisite to requiring the Sub-Custodian to
take such action, shall provide indemnity to the Sub-Custodian in
an amount and form satisfactory to the Sub-Custodian.
The Custodian agrees to indemnify and hold harmless the
Sub-Custodian from and against all taxes, charges, expenses,
assessments, claims and liabilities (including counsel fees)
(collectively, "Authorized Charges") incurred or assessed against
it or its nominee in connection with the performance of this
Agreement, except such as may arise from its own negligent action,
negligent failure to act or willful misconduct. The Sub-Custodian
is authorized to charge any account of the Fund for such items and
such fees. To secure any such Authorized Charges and any advances
of cash or securities made by the Sub-Custodian to or for the
benefit of the Fund for any purpose which results in the Fund's
incurring an overdraft at the end of any business day or for
extraordinary or emergency purposes during any business day, the
Custodian on behalf of the Fund hereby represents that it has
obtained from the Fund authorization to apply available cash in
any account maintained by the Sub-Custodian on behalf of the Fund
and a security interest in and pledge to the Sub-Custodian of
securities of the Fund held by the Sub-Custodian (including those
which may be held in a Securities System) up to a maximum of 10%
of the value of the net assets held by the Sub-Custodian for the
purposes of securing payment of any Authorized Charges and any
advances of cash or securities, and that the Fund has agreed, from
time to time, to designate in writing, or to cause its investment
adviser to, or permit the Custodian to, designate in writing, the
securities subject to such security interest and pledge with such
specificity and detail as the Sub-Custodian may reasonably request
(and in the absence of such designation to permit the Sub-
Custodian so to designate securities). The Custodian hereby
grants on behalf of the Fund a security interest and pledge to the
Sub-Custodian, as aforesaid, in securities and available cash, as
security for any Authorized Charges and any advances of cash or
securities and agrees that, should the Fund or the Custodian fail
to repay promptly any Authorized Charges and any advances of cash
or securities, the Sub-Custodian shall be entitled to use such
available cash and to dispose of such pledged securities as is
necessary to repay any such Authorized Charges or any advances of
cash or securities and to exercise the rights of a secured party
under the Uniform Commercial Code.
The Custodian agrees not to amend the third paragraph of
Section 9 of the Custodian Agreement unless it provides the Sub-
Custodian with at least thirty (30) days' prior written notice of
the substance of any proposed amendments, provided that the
foregoing shall not be construed to in any way to provide that the
Sub-Custodian's consent shall be required to make such an
amendment effective or that the Sub-Custodian's failure to give
such consent shall in any way affect its obligations under this
Agreement.
8. SUCCESSOR SUB-CUSTODIAN. If a successor sub-custodian
shall be appointed by the Custodian, the Sub-Custodian shall, upon
termination and upon receipt of Proper Instructions, cause to be
delivered to such successor sub-custodian, duly endorsed and in
the form for transfer, all securities, funds and other property of
the Fund then held by it and all instruments held by the
Sub-Custodian related thereto and cause the transfer to an account
of the successor sub-custodian all of the Fund's securities held
in any Securities Systems.
If no such successor sub-custodian shall be appointed, the
Sub-Custodian shall, in like manner, upon receipt of a certified
copy of a vote of the Trustees of the Fund, cause to be
transferred such securities, funds and other property in
accordance with such vote.
In the event that no written order designating a successor
sub-custodian or certified copy of a vote of the Trustees shall
have been delivered to the Sub-Custodian on or before the date
when such termination shall become effective, then the Sub-
Custodian shall have the right to deliver to a bank or trust
company, which meets the requirements of the 1940 Act and the
rules and regulations thereunder, all securities, funds and other
properties of the Fund. Thereafter, such bank or trust company
shall be the successor of the Sub-Custodian under this Agreement.
In the event that securities, funds and other property remain
in the possession of the Sub-Custodian after the date of
termination hereof owing to failure of the Custodian to obtain a
certified copy of the Trustees appointing a successor sub-
custodian, the Sub-Custodian shall be entitled to fair
compensation for its services during such period as the Sub-
Custodian retains possession of such securities, funds and other
property and the provisions of this Agreement relating to the
duties and obligations of the Sub-Custodian shall remain in full
force and affect.
9. EFFECTIVE PERIOD; TERMINATION AND AMENDMENT. This
Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter
provided, may be amended at any time by mutual agreement of the
parties hereto and may be terminated by either party by an
instrument in writing delivered or mailed, postage prepaid, to the
other party, such termination to take effect not sooner than
thirty (30) days after the date of mailing; provided, that either
party may at any time immediately terminate this Agreement in the
event of the appointment of a conservator or receiver for the
other party or upon the happening of a like event at the direction
of an appropriate regulatory agency or court of competent
jurisdiction. No provision of this Agreement may be amended or
terminated except by a statement in writing signed by the party
against which enforcement of the amendment or termination is
sought.
Upon termination of this Agreement, the Custodian shall pay
to the Sub-Custodian such compensation as may be due as of the
date of such termination and shall likewise reimburse the
Sub-Custodian for its reimbursable costs, expenses and
disbursements. The provisions of Section 7, including, until any
Authorized Charges and any advances of cash or securities referred
to therein are repaid, all liens and security interests created
pursuant thereto, and all rights to indemnification, shall survive
any termination of this Agreement.
10. INTERPRETATION. This Agreement constitutes the entire
understanding and agreement of the parties hereto with respect to
the subject matter hereof. In connection with the operation of
this Agreement, the Sub-Custodian and the Custodian may from time
to time agree in writing on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement.
No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Agreement.
11. GOVERNING LAW. This Agreement is executed and delivered
in The Commonwealth of Massachusetts and shall be governed by and
construed according to the internal laws of said Commonwealth,
without regard to principles of conflicts of law.
12. NOTICES. Notices and other writings delivered or mailed
postage prepaid to the Custodian addressed to the Custodian
attention: George H. Crane, Senior Vice President, The Putnam
Companies, 99 High Street, Boston, MA 02109 or to such other
person or address as the Custodian may have designated to the Sub-
Custodian in writing, or to the Sub-Custodian attention:
or to such other address as the SubCustodian may have designated
to the Custodian in writing, shall be deemed to have been properly
delivered or given hereunder to the respective addressee.
13. BINDING OBLIGATION. This Agreement shall be binding on
and shall inure to the benefit of the Custodian and the Sub-
Custodian and their respective successors and assigns, provided
that neither party hereto may assign this Agreement or any of its
rights or obligations hereunder without the prior written consent
of the other party.
14. PRIOR AGREEMENTS. This Agreement supersedes and
terminates, as of the date hereof, all prior contracts between the
Fund or the Custodian and the Sub-Custodian relating to the
custody of the Fund's assets.
15. DECLARATION OF TRUST. A copy of the Declaration of
Trust of the Fund is on file with the Secretary of The
Commonwealth of Massachusetts, and notice is hereby given that the
obligations of or arising out of this instrument are not binding
upon any of the Trustees or beneficiaries individually but binding
only upon the assets and property of the Fund.
IN WITNESS WHEREOF, each of the parties has caused this
instrument to be executed in its name and behalf by its duly
authorized representative and its seal to be hereunder affixed as
of the day of , 199 .
PUTNAM FIDUCIARY TRUST COMPANY
By--------------------------------
Name:
Title:
(Sub-Custodian)
By---------------------------------
Name:
Title:
The Sub-Custodian and Putnam Investments, Inc. ("Putnam"),
the sole owner of the Custodian, agree that Putnam shall be the
primary obligor with respect to compensation due the Sub-Custodian
pursuant to Section 6 of this Agreement in connection with the
Sub-Custodian's performance of its responsibilities hereunder.
The Custodian and Putnam agree to take all actions necessary and
appropriate to assure that the Sub-Custodian shall be
compensatedin the amounts and on the schedule agreed to by the
Custodian and the Sub-Custodian pursuant to Section 6.
PUTNAM INVESTMENTS, INC.
By:-------------------------------
Name:
Title:
PUTNAM FIDUCIARY TRUST COMPANY
By:--------------------------------
Name:
Title:
(Sub-Custodian)
By:----------------------------------
Name:
Title:
OPEN-END FUND
INVESTOR SERVICING AGREEMENT
AGREEMENT made as of the 3rd day of June, 1991, between
each of the Putnam Funds listed in Appendix A hereto (as the same
may from time to time be amended to add one or more additional
Putnam Funds or to delete one or more of such Funds), each of
such Funds acting severally on its own behalf and not jointly
with any of such other Funds (each of such Funds being
hereinafter referred to as the "Fund"), and The Putnam Management
Company, Inc. (the "Manager"), a Delaware corporation, and Putnam
Fiduciary Trust Company (the "Agent"), a Massachusetts trust
company.
W I T N E S S E T H:
WHEREAS, the Fund is an investment company registered
under the Investment Company Act of 1940; and
WHEREAS, the Fund desires to engage the Manager and the
Agent to provide all services required by the Fund in connection
with the establishment, maintenance and recording of shareholder
accounts, including without limitation all related tax and other
reporting requirements, and the implementation of investment and
redemption arrangements offered in connection with the sale of
the Fund's shares; and
WHEREAS, the Agent, an affiliate of the Manager, is
willing to provide such services on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants set forth herein, the parties hereto agree as
follows:
1. APPOINTMENT.
The Fund hereby appoints the Agent as its "Investor
Servicing Agent" on the terms and conditions set forth herein.
In such capacity the Agent shall act as transfer, distribution
disbursing and redemption agent for the Fund and shall act as
agent for the shareholders of the Fund in connection with the
various shareholder investment and/or redemption plans from time
to time made available to shareholders. The Agent hereby accepts
such appointment and agrees to perform the respective duties and
functions of such offices in accordance with the terms of this
agreement and in a manner generally consistent with the practices
and standards customarily followed by other high quality investor
servicing agents for registered investment companies.
Notwithstanding such appointment, however, the parties
agree that the Manager may, upon thirty (30) days prior written
notice to the Fund, assume such appointment and perform such
duties and functions itself. Pending any such assumption,
however, the Manager hereby guarantees the performance of the
Agent hereunder and shall be fully responsible to the Fund,
financially and otherwise, for the performance by the Agent of
its agreements contained herein.
2. GENERAL AUTHORITY AND DUTIES.
By its acceptance of the foregoing appointment, the Agent
shall be responsible for performing all functions and duties
which, in the reasonable judgment of the Fund, are necessary or
desirable in connection with the establishment, maintenance and
recording of the Fund's shareholder accounts and the conduct of
its relations with shareholders with respect to their accounts.
Without limiting the generality of the foregoing, the Agent shall
be responsible:
(a) as transfer agent, for performing all functions
customarily performed by transfer agents for registered
investment companies, including without limitation all
functions necessary or desirable to establish and maintain
accounts evidencing the ownership of securities issued by
the Fund and, to the extent applicable, the issuance of
certificates representing such securities, the recording of
all transactions pertaining to such accounts, and effecting
the issuance and redemption of securities issued by the
Fund;
(b) as distribution disbursing agent, for performing
all functions customarily performed by distribution
disbursing agents for registered investment companies,
including without limitation all functions necessary or
desirable to effect the payment to shareholders of
distributions declared from time to time by the Trustees of
the Fund;
(c) as redemption agent for the Fund, for performing
all functions necessary or desirable to effect the
redemption of securities issued by the Fund and payment of
the proceeds thereof; and
(d) as agent for shareholders of the Fund, performing
all functions necessary or desirable to maintain all plans
or arrangements from time to time made available to
shareholders to facilitate the purchase or redemption of
securities issued by the Fund.
In performing its duties hereunder, in addition to the
provisions set forth herein, the Agent shall comply with the
terms of the Declaration of Trust, the Bylaws and the current
Prospectus and Statement of Additional Information of the Fund,
and with the terms of votes adopted from time to time by the
Trustees and shareholders of the Fund, relating to the subject
matters of this Agreement, all as the same may be amended from
time to time.
3. STANDARD OF SERVICE; COMPLIANCE WITH LAWS.
The Agent will use its best efforts to provide high
quality services to the Fund's shareholders and in so doing will
seek to take advantage of such innovations and technological
improvements as may be appropriate or desirable with a view to
improving the quality and, where possible, reducing the cost of
its services to the Fund. In performing its duties hereunder,
the Agent shall comply with the provisions of all applicable laws
and regulations and shall comply with the requirements of any
governmental authority, having jurisdiction over the Agent or the
Fund with respect to the duties of the Agent hereunder.
4. COMPENSATION.
The Fund shall pay to the Agent, for its services rendered
and its costs incurred in connection with the performance of its
duties hereunder, such compensation and reimbursements as may
from time to time be approved by vote of the Trustees of the
Fund.
5. DUTY OF CARE; INDEMNIFICATION.
The Agent will at all times act in good faith and exercise
reasonable care in performing its duties hereunder. The Agent
will not be liable or responsible for delays of errors resulting
from circumstances beyond its control, including acts of civil or
military authorities, national emergencies, labor difficulties,
fire, mechanical breakdown beyond its control, flood or
catastrophe, acts of God, insurrection, war, riots or failure
beyond its control of transportation, communication or power
supply.
The Agent may rely on certifications of the Clerk, the
President, the Vice Chairman, the Executive Vice President, the
Senior Vice President or the Treasurer of the Fund as to any
action taken by the shareholders or trustees of the Fund, and
upon instructions not inconsistent with this Agreement received
from the President, Vice Chairman, the Executive Vice President,
the Senior Vice President or the Treasurer of the Fund. If any
officer of the Fund shall no longer be vested with authority to
sign for the Fund, written notice thereof shall forthwith be
given to the Agent by the Fund and, until receipt of such notice
by it, the Agent shall be entitled to recognize and act in good
faith upon certificates or other instruments bearing the
signatures or facsimile signatures of such officers. The Agent
may request advice of counsel for the Fund, at the expense of the
Fund, with respect to the performance of its duties hereunder.
The Fund will indemnify and hold the Agent harmless from
any and all losses, claims, damages, liabilities and expenses
(including reasonable fees and expenses of counsel) arising out
of (i) any action taken by the Agent in good faith consistent
with the exercise of reasonable care in accordance with such
certifications, instructions or advice, (ii) any action taken by
the Agent in good faith consistent with the exercise of
reasonable care in reliance upon any instrument or certificate
for securities believed by it (a) to be genuine, and (b) to be
executed by any person or persons authorized to execute the same;
PROVIDED, HOWEVER, that the Agent shall not be so indemnified in
the event of its failure to obtain a proper signature guarantee
to the extent the same is required by the Declaration of Trust,
Bylaws, current Prospectus or Statement of Additional Information
of the Fund or a vote of the Trustees of the Fund, and such
requirement has not been waived by vote of the Trustees of the
Fund, or (iii) any other action taken by the Agent in good faith
consistent with the exercise of reasonable care in connection
with the performance of its duties hereunder.
In the event that the Agent proposes to assert the right
to be indemnified under this Section 5 in connection with any
action, suit or proceeding against it, the Agent shall promptly
after receipt of notice of commencement of such action, suit or
proceeding notify the Fund of the same, enclosing a copy of all
papers served. In such event, the Fund shall be entitled to
participate in such action, suit or proceeding, and, to the
extent that it shall wish, to assume the defense thereof, and
after notice from the Fund to the Agent of its election so to
assume the defense thereof the Fund shall not be liable to the
Agent for any legal or other expenses. The parties shall
cooperate with each other in the defense of any such action, suit
or proceeding. In no event shall the Fund be liable for any
settlement of any action or claim effected without its consent.
6. MAINTENANCE OF RECORDS.
The Agent will maintain and preserve all records relating
to its duties under this Agreement in compliance with the
requirements of applicable statutes, rules and regulations,
including, without limitation, Rule 31a-1 under the Investment
Company Act of 1940. Such records shall be the property of the
Fund and shall at all times be available for inspection and use
by the officers and agents of the Fund. The Agent shall furnish
to the Fund such information pertaining to the shareholder
accounts of the Fund and the performance of its duties hereunder
as the Fund may from time to time request. The Agent shall
notify the Fund promptly of any request or demand by any third
party to inspect the records of the Fund maintained by it and
will act upon the instructions of the Fund in permitting or
refusing such inspection.
7. FUND ACCOUNTS.
All moneys of the Fund from time to time made available
for the payment of distributions to shareholders or redemptions
of shares, or otherwise coming into the possession or control of
the Agent or its officers, shall be deposited and held in one or
more accounts maintained by the Agent solely for the benefit of
the Funds.
8. INSURANCE.
The Agent will at all times maintain in effect insurance
coverage, including, without limitation, Errors and Omissions,
Fidelity Bond and Electronic Data Processing coverages, at levels
of coverage consistent with those customarily maintained by other
high quality investor servicing agents for registered investment
companies and with such policies as the Trustees of the Fund may
from time to time adopt.
9. EMPLOYEES.
The Agent shall be responsible for the employment, control
and conduct of its agents and employees and for injury to such
agents or employees or to others caused by such agents or
employees. The Agent shall assume full responsibility for its
agents and employees under applicable statutes and agrees to pay
all applicable employer taxes thereunder with respect to such
agents and employees, and such agents and employees shall in no
event be considered to be agents or employees of the Fund.
10. TERMINATION.
This Agreement shall continue indefinitely until
terminated by not less than ninety (90) days prior written notice
given by the Fund to the Agent, or by not less than six months
prior written notice given by the Agent to the Fund.
In the event that in connection with any such termination
a successor to any of the Agent's duties or responsibilities
hereunder is designated by the Fund by written notice to the
Agent, the Agent will cooperate fully in the transfer of such
duties and responsibilities, including provision for assistance
by the Agent's personnel in the establishment of books, records
and other data by such successor. The Fund will reimburse the
Agent for all expenses incurred by the Agent in connection with
such transfer.
<PAGE>
11. MISCELLANEOUS.
This Agreement shall be construed and enforced in
accordance with and governed by the laws of The Commonwealth of
Massachusetts.
The captions in this Agreement are included for
convenience of reference only and in no way define or limit any
of the provisions of this Agreement or otherwise affect their
construction or effect. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall
be deemed an original, but all of which taken together shall
constitute one and the same instrument.
A copy of the Declaration of Trust (including any
amendments thereto) of the Fund is on file with the Secretary of
The Commonwealth of Massachusetts, and notice is hereby given
that this instrument is executed on behalf of the Trustees of the
Fund as Trustees and not individually and that the obligations of
or arising out of this instrument are not binding upon any of the
Trustees or officers or shareholders individually, but binding
only upon the assets and property of the Fund.
IN WITNESS WHEREOF, the parties have caused this Agreement
to be executed by their duly authorized officers as of the date
and year first above written.
THE PUTNAM FUNDS, listed on Appendix A
/s/Charles E. Porter
By -----------------------------------
Charles E. Porter
Executive Vice President
PUTNAM FIDUCIARY TRUST COMPANY
/s/John R. Verani
By -----------------------------------
John R. Verani
President
THE PUTNAM MANAGEMENT COMPANY, INC.
/s/Gordon H. Silver
By -----------------------------------
Gordon H. Silver
Senior Managing Director<PAGE>
APPENDIX A
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Putnam Investors Fund
Putnam Income Fund
Putnam Global Growth Fund
Putnam Vista Fund
Putnam Voyager Fund
Putnam Convertible Income-Growth Trust
Putnam Daily Dividend Trust
Putnam Tax Exempt Income Fund
Putnam High Yield Trust
Putnam Health Sciences Trust
Putnam OTC Emerging Growth Fund
Putnam Corporate Asset Trust
Putnam U.S. Government Income Trust
Putnam American Government Income Fund
Putnam Energy-Resources Trust
Putnam Tax-Free Income Trust
Putnam High Yield Advantage Fund
Putnam Federal Income Trust
Putnam Massachusetts Tax Exempt Income Fund II
Putnam Global Governmental Income Trust
Putnam Michigan Tax Exempt Income Fund II
Putnam Minnesota Tax Exempt Income Fund II
Putnam Ohio Tax Exempt Income Fund II
Putnam Adjustable Rate U.S. Government Fund
Putnam Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Capital Manager Trust
Putnam Diversified Income Trust
Putnam Dividend Growth Fund
Putnam Municipal Income Fund
Putnam Pennsylvania Tax Exempt Income Fund
Putnam New Jersey Tax Exempt Income Fund
Putnam Europe Growth Fund
Putnam New Opportunities Fund
Putnam Florida Tax Exempt Income Fund
Putnam Utilities Growth and Income Fund
Putnam New York Tax Exempt Opportunities Fund
Putnam Overseas Growth Fund
Putnam Asia Pacific Growth Fund
Putnam Arizona Tax Exempt Income Fund
Putnam Equity Income Fund
Putnam Texas Tax Exempt Income Fund
Putnam Managed Income Trust
Putnam Research Analysts Fund
Putnam Balanced Government Fund
Putnam Growth Fund
<PAGE>
APPENDIX A CONTINUED
Putnam Capital Appreciation Fund
Putnam Capital Growth and Income Fund
Putnam Asset Allocation Funds
Putnam California Tax Exempt Income Trust
Putnam California Tax Exempt Money Fund
Putnam Intermediate Tax Exempt Fund
Putnam New York Tax Exempt Income Trust
Putnam Diversified Equity Trust
Dated: May 6, 1994
ROPES & GRAY
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
617 951-7000
May 23, 1994
Putnam Diversified Equity Trust
One Post Office Square
Boston, Massachusetts 02109
Gentlemen:
We are furnishing this opinion in connection with the
Registration Statement on Form N-1A (the "Registration
Statement") filed under the Securities Act of 1933, as amended,
by Putnam Diversified Equity Trust (the "Fund") for the
registration of an indefinite number of its shares of beneficial
interest (the "Shares"). The Shares are proposed to be sold
pursuant to a Distributor's Contract dated May 6, 1994 (the
"Distributor's Contract") between the Fund and Putnam Mutual
Funds Corp.
We have acted as counsel for the Fund since its
organization. We are familiar with the action taken by its
Trustees to authorize this issuance of the Shares. We have
examined its records of Trustee and shareholder action, its
Bylaws, and its Agreement and Declaration of Trust on file at the
office of the Secretary of State of The Commonwealth of
Massachusetts. We have examined copies of such Registration
Statement, in the form filed or to be filed with the Securities
and Exchange Commission, and such other documents as we deem
necessary for the purpose of this opinion.
We assume that upon sale of the Shares the Fund will receive
the net asset value thereof.
Based upon the foregoing, we are of the opinion that the
Fund is authorized to issue an unlimited number of Shares, and
that when the Shares are issued and sold pursuant to the
Distributor's Contract, they will be validly issued, fully paid
and nonassessable by the Fund.
The Fund is an entity of the type commonly known as a
"Massachusetts business trust". Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Fund. However, the
Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Fund and requires that
notice of such disclaimer be given in each agreement, obligation,
or instrument entered into or executed by the Fund or the
Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the Fund's property for all loss and
expense of any shareholder held personally liable solely by <PAGE>
ROPES & GRAY
Putnam Diversified Equity Trust -2- May 23, 1994
reason of his being or having been a shareholder. Thus, the risk
of a shareholder's incurring financial loss on account of
shareholder liability is limited to circumstances in which the
Fund itself would be unable to meet its obligations.
We consent to the filing of this opinion as an exhibit to
such Registration Statement.
Very truly yours,
Ropes & Gray
May 23, 1994
Putnam Diversified Equity Trust
One Post Office Square
Boston, MA 02109
Gentlemen:
In connection with your sale to us today of 5,882.353 Class
A and 5,882.353 Class B shares of beneficial interest (the
"Shares") in Putnam Diversified Equity Trust (the "Fund"), we
understand that: (i) the Shares have not been registered under
the Securities Act of 1933, as amended; (ii) your sale of the
Shares to us is in reliance on the sale's being exempt under
Section 4(2) of the Act as not involving any public offering; and
(iii) in part, your reliance on such exemption is predicated on
our representation, which we hereby confirm, that we are
acquiring the Shares for investment and for our own account as
the sole beneficial owner hereof, and not with a view to or in
connection with any resale or distribution of any or all of the
Shares or of any interest therein. We hereby agree that we will
not sell, assign or transfer the Shares or any interest therein
except upon repurchase or redemption by the Fund unless and until
the Shares have been registered under the Securities Act of 1933,
as amended, or you have received an opinion of your counsel
indicating to your satisfaction that such sale, assignment or
transfer will not violate the provisions of the Securities Act of
1933, as amended, or any rules and regulations promulgated
thereunder.
We further agree, pursuant to the requirements of the Staff
of the Securities and Exchange Commission, that if any of the
Shares are redeemed during the first five years of the Fund's
operations by any holder thereof, the redemption proceeds will be
reduced by the amount of the then unamortized organizational
expenses in the same ratio as the number of Shares redeemed bears
to the number of Shares held at the time of redemption.
This letter is intended to take effect as an instrument
under seal, shall be construed under the laws of Massachusetts,
and is delivered at Boston, Massachusetts, as of the date written
above.
Very truly yours,
PUTNAM INVESTMENTS, INC.
/s/ Lawrence J. Lasser
By: -----------------------------
Lawrence J. Lasser, President
<PAGE>
PUTNAM IRA PLAN
ARTICLE I
INTRODUCTION
By executing the related Adoption Agreement, the
Participant, or the Employer on behalf of the Participants, has
established an Individual Retirement Account Plan for the
exclusive benefit of the Participant(s) and his or their
Beneficiaries intended to qualify under Section 408(a) or 408(c),
in the case of a Plan established by the Employer on behalf of
the Participants, of the Code.
ARTICLE II
DEFINITIONS
As used in this Plan the following terms shall have the
following meanings, unless a different meaning is plainly
required by the context:
2.1 "Agreement" shall mean the Adoption Agreement pursuant
to which the Participant or the Employer has adopted the Plan.
2.2 "Annuity" shall mean an annuity contract or
participation therein (participating interests) which is made
available as a funding option by the Trustee to an Employer or a
particular class of Participants under the Plan. Each such
contract or participating interest, when it is issued in the name
of any person other than the Trustee, shall provide that it is
non-transferable, that the owner shall have no right or power to
sell, assign, discount or pledge as collateral or security for
the performance of any obligation or for any other purpose
interest in such annuity contract other than to the issuer.
2.3 "Beneficiary" shall mean the person or persons
designated by a Participant pursuant to Section 7.3.
2.4 "Code" shall mean the Internal Revenue Code of 1986, as
it may be amended from time to time.
2.5 "Compensation" shall mean wages, salaries, professional
fees, or other amounts derived from or received for personal
service actually rendered (including, but not limited to,
commissions paid salesmen, compensation for services on the basis
of a percentage of profits, commissions on insurance premiums,
tips, and bonuses) and include earned income, as defined in
Section 401(c)(2) of the Code (reduced by the deduction the self-
employed individual takes for contributions to a plan qualified
under Section 401(a) of the Code). Compensation shall not
include any amounts derived from or received as earnings or
profits from property (including, but not limited to, interest
and dividends) or amounts not includible in gross income.
Compensation shall not include any amount received as a pension
or annuity or as deferred compensation. Compensation shall
include any amount includible in the individual's gross income
under Section 71 of the Code with respect to a divorce or
separation instrument described in subparagraph (A) of Section
71(b)(2) of the Code.
2.6 "Designated Beneficiary" shall mean the Beneficiary who
is considered as such under Sections 401(a)(9) and 408 of the
Code and the regulations promulgated thereunder.
2.7 "Effective Date" shall mean the date on which the
Employer or Participant signs the Agreement.
2.8 "Employer" shall mean the employer or an association of
employees (within the meaning of Section 408(c) of the Code)
named in the Agreement, if any is so named.
2.9 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as it may be amended from time to time.
2.10 "Excess Contribution" shall mean the amount of any
contribution (other than a Rollover Contribution) made by or on
behalf of a Participant for any Plan Year which is in excess of
the limitations under Sections 219 and 408(o) of the Code.
2.11 "Investment Company Shares" shall mean shares issued by
any registered investment company for which The Putnam Management
Company, Inc., or its affiliate, serves as investment advisor, or
for which Putnam Financial Services, Inc., or its affiliate,
serves as principal underwriter; provided, however, that in the
case of any open-end investment company, the then current
prospectus of such investment company offers its shares for
purchase under the Plan.
2.12 "IRA Account" shall mean the property held in trust by
the Trustee for the account of the Participant and his
Beneficiaries.
2.13 "Participant" shall mean each individual named as a
participant in the Agreement.
2.14 "Plan" shall mean The Putnam Individual Retirement
Account Plan set forth in this instrument, as it may be amended
from time to time.
2.15 "Plan Year" shall mean the calendar year.
2.16 "Required Beginning Date" shall mean April 1 following
the calendar year in which the Participant attains age 70-1/2.
2.17 "Rollover Contribution" shall mean a contribution
described in Section 402(a)(5), 402(a)(7), 403(a)(4), 403(b)(8),
or 408(d)(3) of the Code.
2.18 "Service Company" shall mean Putnam Investor Services,
Inc.
2.19 "Simplified Employee Pension Program" shall mean an
arrangement as defined in Section 408(k) of the Code.
2.20 "Term Deposit" shall mean a deposit offered by a bank
and which is made available as a funding option by the Trustee to
an Employer or a particular class of Participants under the Plan.
2.21 "Trustee" shall mean Putnam Fiduciary Trust Company.
2.22 A pronoun in the masculine gender includes the feminine
gender unless the context indicates otherwise.
ARTICLE III
Contributions
3.1 For each Plan Year, contributions to the IRA Account of
each Participant may be made in accordance with the following
provisions:
(a) by or on behalf of each Participant, an amount not
exceeding the lesser of $2,000 or 100% of the Participant's
Compensation.
(b) if the Participant has no Compensation (or elects
to be treated as having no Compensation) and is the spouse of
another Participant in a similar individual account retirement
plan, an amount not to exceed the amount in (a); provided, that
the aggregate of (a) and (b) may not exceed the lesser of $2,250
or 100% of the spouse's Compensation.
(c) on behalf of a Participant by an Employer pursuant
to a Simplified Employee Pension Program, an amount in accordance
with the terms of a Simplified Employee Pension Program as
described in Section 408(k) of the Code.
(d) if the Participant has attained age 70-1/2 before
the close of a Plan Year, no contribution may be made for the
Plan Year except Rollover Contributions or Employer contributions
made pursuant to a Simplified Employee Pension.
3.2 In addition to the current cash contributions
contemplated by Section 3.1, any Participant may cause to be
contributed to his IRA Account from time to time a Rollover
<PAGE>
Contribution to the extent permitted by Sections 402(a)(5),
402(a)(7), 403(a)(4), 403(b)(8) and 408(d)(3) of the Code.
3.3 In no event shall a contribution, other than a Rollover
Contribution, by or on behalf of a Participant be made if (a) the
contribution, when added to other contributions (other than
Rollover Contributions) for the same Plan Year, exceeds the
applicable limits set forth in Section 3.1, or (b) the
contribution is not in cash.
A Rollover Contribution shall not be accepted under the
Plan unless it is in cash or is in a form of investment permitted
under Article V.
The Participant assumes sole responsibility for making
sure that all contributions made to his IRA Account satisfy the
applicable limits set forth in Section 3.1 and the Service
Company and the Trustee shall have no duty to determine whether
such contributions are in excess of such limits.
3.4 The Employer shall notify the Service Company in
writing or other medium acceptable to the Service Company of the
amount of each contribution made by it on behalf of each
Participant (and such Participant's spouse).
3.5 For purposes of Section 3.1, a contribution to a
Participant's IRA Account shall be deemed to have been made for
the Plan Year in which it is made unless the Participant directs
that it was made with respect to the preceding Plan Year. A
contribution shall be deemed to have been made on the last day of
the preceding Plan Year if the contribution is made on account of
such Plan Year, and it is made no later than the due date of the
Participant's Federal income tax return.
3.6 The deductibility or non-deductibility of contributions
made by or on behalf of the Participant (other than contributions
made under Section 3.1(c)) shall be determined under Sections 219
and 408(o) of the Code. The Participant, and not the Trustee or
the Service Company, determines whether contributions are
deductible or non-deductible.
ARTICLE IV
Participants' IRA Accounts
4.1 Each Participant's interest in his IRA Account shall be
fully vested and nonforfeitable at all times.
4.2 The Service Company shall keep records showing the
amount of each Participant's interest in his IRA Account. The
Service Company and the Trustee shall establish and maintain such
other accounts and records as each deems in its discretion to be
reasonably required in order to discharge its duties under the
Plan.
4.3 The Trustee and the Service Company shall have no duty
to account for deductible contributions separately from non-
deductible contributions. In determining the taxable amount of a
distribution, the Participant shall only rely on his annual
Federal income tax returns and not on any reports of the Trustee
or the Service Company. The Trustee and Service Company shall
withhold Federal income tax from any distribution from the
Participant's IRA Account as if the total amount of the
distribution is includible in the Participant's income, unless
otherwise permitted by applicable law.
ARTICLE V
INVESTMENT OF THE IRA ACCOUNT
The Participant shall determine what proportion of each
contribution by or on behalf of the Participant to the IRA
Account shall be invested in Investment Company Shares, an
Annuity, a Term Deposit, and/or in such other securities that are
acceptable to the Trustee. The Participant shall from time to
time direct the Trustee with respect to the investment and
reinvestment of assets held in the IRA Account by means of
written instructions given to the Service Company in such manner
required by the Service Company. Notwithstanding the foregoing,
the Employer may limit on the Agreement the funding choices
available to the Participant.
The Trustee shall invest all contributions made to the IRA
Account and all income received thereon in the funding option(s)
in accordance with the Participant's directions and shall
reinvest in each such funding option all income, interest or
other distributions thereon (unless directed otherwise by the
Participant). If at any time investment instructions given by
the Participant to the Trustee are unclear in the opinion of the
Trustee, the Trustee may invest part or all of the assets in the
IRA Account in the Putnam Daily Dividend Trust or any other
similar fund. The Trustee and the Service Company reserve the
right, however, when prudent, to postpone the investment of
initial contributions for seven days from the date of adoption of
the Agreement.
The Participant may change the choice of funding options as
often as desired but subject to any restrictions or penalties
imposed by the underlying investment. Any such change shall be
made in the manner required by the Service Company; except that
the Employer may place further restrictions on the change of
funding options by the Participant if the Employer so elects in
the Agreement.
The Trustee and the Service Company assume no responsibility
for rendering advice with respect to the investment and
reinvestment of the Participant's IRA Account and shall not be
liable for any loss incurred with respect to any investment made
or retained in accordance with the Participant's instructions.
The Participant shall have and exercise exclusive responsibility
and control over the investment of the assets of his IRA Account
in accordance with the terms of this Plan and the Agreement, and
the Trustee and the Service Company shall have no duty to
question his instructions in that regard or to advise him
regarding purchase, retention, or sale of such assets.
No part of the IRA Account shall be invested in life
insurance contracts or in collectibles, as defined in Section
408(m) of the Code. No part of the IRA Account shall be
commingled with any other property except in a common trust fund
or common investment fund (within the meaning of Section
408(a)(5) of the Code and the regulations thereunder), and no
part of the IRA Account shall be commingled with other property
in any common trust fund or common investment fund which includes
assets other than the assets of individual retirement accounts as
described in Section 408(a) or (c) of the Code and the assets of
trusts exempt from taxation under Section 501(a) of the Code
which are parts of plans described in Section 401(a) of the Code.
If the Participant authorizes the Employer to withhold
contributions from the Participant's pay and remit them to the
Trustee periodically, those contributions may be invested in a
group trust maintained by the Trustee, and commingled with
contributions made by other individual retirement plan
participants pending allocation of the Participant's
contributions to his IRA Account. The group trust assets shall
be invested, and its earnings shall be allocated, as described in
the Adoption Agreement signed by the Participant, and the
governing instrument of that group trust shall be deemed to be
adopted as a part of this Plan.
ARTICLE VI
Powers and Duties of the Trustee and
Service Company
6.1 Each Participant may direct the manner in which any
Investment Company Shares (including fractional Shares) held in
his IRA Account shall be voted with respect to any matters coming
before any meeting of shareholders of the investment company
which issued such shares. The Participant's directions must be
in writing on a form approved by the Service Company, signed by
the Participant and delivered to the Service Company within the
time prescribed by it. Subject to any requirements of applicable
law, the Service Company shall deliver to each Participant copies
of any notices of shareholders' meetings, proxies and proxy-
soliciting materials, prospectuses and the annual and other
reports to shareholders which have been received by the Service
Company with respect to Investment Company Shares held for that
Participant. The Trustee and the Service Company shall not vote
any Investment Company Shares except upon receipt by the Service
Company of adequate written instructions from the Participant.
6.2 In addition to and not in limitation of such powers as
the Trustee has by law or under any other provisions of the Plan,
the Trustee shall, subject to the limitations set forth in
Article V hereof, have the following powers:
(a) to deal with all or any part of the IRA Account;
(b) to retain uninvested such cash as it may deem
necessary or advisable, without liability for interest thereon;
(c) to enforce by suit or otherwise, or to waive, its
rights on behalf of the IRA Account, and to defend claims
asserted against it or the IRA Account, provided that the Trustee
is indemnified by the Participant to its satisfaction against
liability and expenses;
(d) to compromise, adjust and settle any and all
claims against or in favor of it or the IRA Account;
(e) to register securities in its own name (with or
without indication of its fiduciary capacity hereunder),
including commingling with other securities held by the Trustee
as provided in Article V;
(f) to enter into contracts or participating interests
for investments permitted under the Plan;
(g) to make, execute, acknowledge and deliver any and
all instruments that it deems necessary or appropriate to carry
out the powers herein granted; and
(h) except as otherwise provided herein, generally to
exercise any of the powers of an owner with respect to all or any
part of the IRA Account.
6.3 Within a reasonable period after (a) the end of each
Plan Year and (b) the termination of the Plan, the Service
Company shall render to each Participant, and to other persons as
required by law, accounts for its administration under the Plan
during the preceding Plan Year or interim period. The Trustee,
through the Service Company as its agent, shall make reports
regarding such accounts to the Commissioner of Internal Revenue
or his delegate and individuals for whom the IRA Account is
maintained with respect to contributions, distributions and such
other matters as the Commissioner or his delegate may required by
regulation. The Participant or, in the case of a Plan adopted by
an Employer, the Employer shall furnish such information as is
necessary to prepare such reports. Such reports shall be filed
at such time and in such manner and furnished to such individuals
at such time and in such manner as may be required by regulation.
The Trustee and the Service Company shall also give access to
their respective records with respect to the Plan at reasonable
times and upon reasonable notice to any person designated by a
Participant or to any person required by law to have access to
such records. Should no person or persons to whom an account is
rendered, as required by law, file with the Service Company
written objection to specific items in such account within a
period of 60 days after its mailing, and commence legal
proceedings within a further 60 days after the filing of written
objection, the account shall be considered approved to the extent
permitted by applicable law, with the same effect as though it
had been judicially allowed. If any Participant, or any other
person required by law to receive such accounts, files any
exceptions or objections within such 60-day period with respect
to any matters or transactions stated or shown in the account and
questions raised in such exception or objections cannot be
amicably settled, the Service Company or any person required by
law to receive such accounts shall have the right to have such
questions settled by judicial proceedings although the
Participant or any person required by law to receive such
accounts shall have, to the extent permitted by applicable law,
only 60 days from the filing of written objection to the account
to commence legal proceedings. Nothing herein contained shall be
construed as depriving the Trustee or the Service Company of the
right to have a judicial settlement of accounts. In any
proceeding for a judicial settlement, the only necessary parties,
except as required by law, shall be the Trustee, the Service
Company and all persons to whom the accounting was rendered; and
any judgment or decree entered in any such pro- ceeding shall, to
the extent permitted by applicable law, be binding and conclusive
on all persons claiming to have any interest in the IRA Account.
6.4 The Trustee and the Service Company shall be entitled
to reasonable compensation for services, determined from time to
time on such basis as shall be specified in the last preceding
account rendered by the Service Company and shared by them in
such manner as they may determine. Unless otherwise provided,
their compensation and all reasonable expenses incurred by them
in the administration of the Plan shall be paid from the
Participant's IRA Account. The Service Company is expressly
authorized to cause IRA Account assets to be redeemed for the
purpose of paying such amounts.
6.5 Any corporation into which the Trustee or Service
Company may merge or with which it may consolidate or any
corporation resulting from any such merger or consolidation shall
be the successor of the Trustee or Service Company, as the case
may be, without the execution or filing of any additional
instrument or the performance of any further act.
6.6 Except as may otherwise be required by law and other
provisions of this Plan:
(a) the Trustee and the Service Company shall be
responsible only for the management and disbursement of amounts
actually contributed to the IRA Account; and
(b) neither the Trustee nor the Service Company shall
have any responsibility for determining the correctness of the
amount of any contributions, the propriety of any contribution as
a Rollover Contribution, the failure of a Participant or an
Employer to make the contributions provided for in the Agreement,
the correctness of any disbursement made pursuant to the written
directions of a Participant or an Employer, the taxable amount of
a distribution or whether any Participant is an individual by or
on behalf of whom deductible contributions within the meaning of
Section 219 of the Code may be made; and
(c) neither the Trustee nor the Service Company shall
be liable for any acts or omissions except its own negligence or
bad faith in failing to carry out the terms contained in the Plan
and the Agreement; and
(d) neither the Trustee nor the Service Company shall
be liable for any loss or breach caused by any Participant's
exercise of control over assets in his IRA Account.
ARTICLE VII
Payments to Participant and Beneficiary
7.1 Subject to the further provisions of this Article VII,
the Service Company shall make distributions to a Participant
and/or his Beneficiary from the Participant's IRA Account in
accordance with instructions in writing from the Participant (or
his Beneficiary if the Participant is deceased). It shall be the
responsibility of the Participant (or his Beneficiary if the
Participant is deceased) to determine that any such distribution
is in accordance with Sections 408(a)(6) and 408(b)(3) of the
Code and the regulations promulgated thereunder. Neither the
Trustee nor the Service Company assumes any responsiblity to make
any distributions to the Participant (or his Beneficiary if the
Participant is deceased) unless and until such written
instructions specify the occasion for such distribution, the
amount of such distribution, the elected manner of distribution,
and any written statement required by this Article VII. Prior to
making any such distributions from the IRA Account, the Service
Company shall be furnished with any and all applications,
certificates, tax waivers, signature guarantees, and other
documents (including power of any legal representative's
authority) deemed necessary or desirable by the Service Company,
but the Service Company shall not be liable for complying with
written instructions which appear on their face to be genuine, or
for refusing to comply if not satisfied that such instructions
are genuine, and assumes no duty of further inquiry. Upon
receipt of proper written instructions as required above, the
Service Company shall cause the assets of the IRA Account to be
distributed in cash and/or in Investment Company Shares, as
specified in such written instructions, to the Participant (or
his Beneficiary if the Participant is deceased).
7.2 (a) Distributions to a Participant may be paid in any
one or more of the following ways as the Participant may direct
the Service Company in writing, on a form acceptable to the
Service Company:
(i) in a lump sum in cash and/or in Investment
Company Shares;
(ii) in systematic monthly, quarterly, semi-annual
or annual installments in cash and/or in Investment Company
Shares over a period not to exceed the life expectancy of the
Participant or the joint life and last survivor expectancy of the
Participant and his Designated Beneficiary;
(iii) in systematic monthly, quarterly, semi-
annual or annual installments in cash and/or in Investment
Company shares over a period designated by the Participant.
(iv) in a dollar amount designated by the
Participant in cash and/or in Investment Company shares;
(v) in installments in cash consisting of current
dividends and capital gains earned by the IRA Account; or
(vi) in installments in cash consisting only of
current dividends earned by the IRA Account.
(b) With respect to any distributions made under this
Article VII to or on behalf of a Participant who has not attained
the age of 59-1/2 (unless the distribution is made after the
Participant's death or the Participant has become disabled), the
Service Company prior to making a distribution must receive a
written statement, on a form acceptable to it, addressed to the
Trustee from that Participant declaring his intention as to the
disposition of the amount distributed.
A Participant shall be considered to be disabled only if he
is unable to engage in any substantial gainful activity by reason
of any medically determinable physical or mental impairment which
can be expected to result in death or to be of long continued and
indefinite duration. All other distributions may be subject to
any penalties imposed by the Code. Any distributions from the
Term Deposit or Annuity may be subject to penalties and other
conditions.
7.3 Unless distribution of the entire balance standing in
the credit of a Participant's IRA Account has been made or
provided for in accordance with Section 7.1 by the Participant's
Required Beginning Date, the Participant shall direct the Service
Company to begin the distribution of his remaining balance in his
IRA Account beginning no later than his Required Beginning Date
pursuant to the distribution method specified in either Section
7.2(a)(i) or (ii) as the Participant may select in writing on a
form acceptable to the Service Company.
If distribution is to be made over a period under Section
7.2(a)(ii) above, the minimum amount to be distributed for each
year, beginning with the Participant's Required Beginning Date
and each December 31 thereafter, shall be at least an amount
equal to the lesser of the balance standing to the credit of the
Participant's IRA Account or the quotient obtained by dividing
the Participant's entire interest in his IRA Account as of the
close of business on December 31 of the preceding year by the
life expectancy of the Participant or the joint life and last
survivor expectancy of the Participant and his Designated
Beneficiary, whichever is applicable. Life expectancy and joint
and last survivor expectancy shall be computed by use of the
return multiples contained in Section 1.72-9 of the Income Tax
Regulation. The initial life expectancy or joint life and last
survivor expectancy shall be computed using the attained ages of
the Participant and his Designated Bene- ficiary as of their
birthdays in the year the Participant attains age 70-1/2. The
life expectancy of the Participant (and the life expectancy of
his spouse, if applicable) shall be recalculated annually using
their attained ages as of their birthdays in the year for which
the minimum annual payment is being determined. The life
expectancy of any other Designated Beneficiary shall not be
recalculated. If the Designated Beneficiary of a Participant is
not his spouse, the method of distribution selected must assure
that at least 50% of the present value of the amount available
for distribution is paid within the life expectancy of the
Participant. Therefore, the period over which annual
distributions shall be made to the Participant and his
Beneficiary shall not exceed the applicable period determined by
use of the table contained in Section 1.401(a)(9)-2 of the
Proposed Income Tax Regulations.
7.4 Upon the death of a Participant after his Required
Beginning Date but before his entire interest in his IRA Account
has been distributed, the Participant's remaining interest in his
IRA Account shall continue to be distributed to his Beneficiary
at least as rapidly as under the method of dis-tribution being
used prior to the Participant's death. The Beneficiary shall be
the person whom the Participant shall have designated in a
writing prior to his death, which writing shall have been
deposited with the Service Company in a form acceptable to it.
Such designation may be changed by the Participant during his
lifetime. If no Beneficiary has been properly designated, or if
no Beneficiary survives the Participant, distribution shall be
made to the Participant's surviving spouse, or if no spouse, to
his issue PER STIRPES, or if none, to his estate.
7.5 If the Participant dies prior to his Required Beginning
Date, the following provisions shall apply:
(a) Distribution to his Beneficiary may be made by one
of the following methods as the Beneficiary shall request in
writing on a form acceptable to the Service Company:
(i) lump sum in cash and/or in Investment Company
Shares distributed no later than December 31 of the year
containing the fifth anniversary of the Participant's death;
(ii) in systematic monthly, quarterly, semi-annual
or annual installments in cash and/or in Investment Company
Shares over a period of time ending no later than December 31 of
the year containing the fifth anniversary of the Participant's
death; provided, however, that the Service Company shall not be
required to pay installments amounting to less than fifty dollars
per month;
(iii) in systematic monthly, quarterly, semi-
annual or annual installments in cash and/or in Investment
Company Shares over a period of years not exceeding the life
expectancy of the Designated Beneficiary; provided, however, that
the Service Company shall not be required to pay installments
amounting to less than fifty dollars per month.
(b) The Beneficiary who is other than a surviving
spouse shall elect one of the distribution methods described in
(a) above no later than December 31 of the year following the
year of the Participant's death and shall so inform the Service
Company in writing. The Beneficiary who is a surviving spouse
shall elect one of the distribution methods described in (a)
above no later than December 31 of the year containing the fifth
(5th) anniversary of the Participant's death and shall so inform
the Service Company in writing. If the Beneficiary or
Beneficiaries do not make such election, the Service Company
shall make a distribution in cash in accordance with Section
7.5(a)(i) if the Beneficiary is other than the surviving spouse,
and in accordance with Section 7.5(a)(iii) if the Beneficiary is
the Participant's surviving spouse.
<PAGE>
(c) If distribution is to be made in accordance with
Section 7.5(a)(iii), it must commence by the December 31 of the
year following the year of the Participant's death; provided,
however, that if the Participant's spouse is the Designated
Beneficiary, distribution may be delayed until the December 31 of
the year the Participant would have attained age 70-1/2, if
later. The minimum amount to be distributed each year shall be
at least an amount equal to the lesser of the balance standing to
the credit of the Participant's IRA Account or the quotient
obtained by dividing the Participant's entire interest in his IRA
Account as of the close of business on December 31 of the
preceding year by the life expectancy of the Designated
Beneficiary. The Beneficiary may elect at any time to receive a
greater amount of distribtuion or to accelerate the method of
distribution.
Life expectancy shall be calculated by use of the return
multiplies specified in Section 1.72-9 of the Income Tax
Regulations. The initial life expectancy shall be computed using
the attained age of the Designated Beneficiary as of his birthday
in the year distributions are required to commence. Life
expectancy of a surviving spouse shall be recalculated annually
using the spouse's attained age as of the spouse's birthday in
the year for which the minimum annual payment is being
determined. In the case of any other Designated Beneficiary,
payments for any calendar year after the year in which
distributions are required to commence shall be based on the
initial life expectancy minus the number of whole years passed
since distribution first commenced.
To the extent provided by regulations, for purposes of the
foregoing distribution requirements, any amount paid to a child
of the Participant will be treated as if it had been paid to the
surviving spouse if the remainder of the interest becomes payable
to the surviving spouse when the child reaches the age of
majority.
7.6 Notwithstanding the foregoing, if the Designated
Beneficiary is the Participant's surviving spouse, such spouse
may treat the IRA Account as the spouse's own individual
retirement account (IRA). This election will be deemed to have
been made if such surviving spouse makes a regular IRA
contribution to the account, makes a rollover to or from such
account, or fails to receive distribution pursuant to Section 7.4
or 7.5 above.
7.7 In making distributions to a Participant, the Service
Company shall, to the extent allowed by applicable law, be
entitled to rely on the written certification by a Participant as
to the Participant's and Designated Beneficiary's age or as to
<PAGE>
the Participant's having become disabled within the meaning of
Section 7.2(b).
7.8 Whenever the consent of the Participant or a direction
by the Participant is required under this Article VII, action by
the Service Company may be taken without such consent or
direction by reason of death, illness or absence of the
Participant.
7.9 Notwithstanding any of the foregoing, any Employer
contribution to the IRA Account pursuant to a Simplified Employee
Pension may be withdrawn by the Participant at any time.
ARTICLE VIII
RETURN OF EXCESS CONTRIBUTIONS;
LIABILITY OF TAXES
8.1 In the event the Trustee or the Service Company
receives written notice from a Participant, an Employer on behalf
of the Participant if the Agreement so provides or from the
Commissioner of Internal Revenue, that there has been made by or
on behalf of the Participant a contribution which has been
determined by the Participant or the Commissioner to be an Excess
Contribution or nondeductible contribution, the Service Company
shall, as soon as practicable, pay to such Participant in cash
(if permitted by the terms of the investment in his IRA Account)
an amount equal to the amount of the Excess Contribution or
nondeductible contribution made by him or on his behalf and, if
the payment is made on or prior to the due date of the
Participant's tax return (including extensions) for the year in
which the Excess Contribution or nondeductible contribution was
made, the net income attributable thereto (reduced by any
administrative charge or penalty applicable thereto).
Alternatively, the Participant may, by written instructions on a
form acceptable to the Service Company, elect to treat the Excess
Contribution and the net income attributable thereto (reduced by
any administrative charge applicable thereto), to the extent it
does not exceed the limitations under Section 219 and 408(o) of
the Code, as a contribution for the Plan Year in which notice is
received (and reducing, as is appropriate, the contributions that
can be made under Section 3.1 for such Plan Year).
8.2 In the event the Trustee or the Service Company
receives written notice from a Participant, or an Employer on
behalf of the Participant in the case of an IRA Account
established under a Simplified Employee Pension, that there has
been an employer contribution to the IRA Account which is in
excess of the limitation under Section 402(h) or
408(k)(6)(A)(iii) of the Code, the Service Company shall, as soon
as practicable, pay to such Participant in cash (if permitted by
the terms of the investment in his IRA Account) an amount equal
to the amount of such excess employer contribution made on his
behalf, as adjusted for income or loss, and reduced by any
administrative charge or penalty applicable thereto.
8.3 In the event the Trustee or the Service Company shall
be required to pay any tax with respect to an IRA Account, the
amount of such tax (including interest) shall be paid from such
IRA Account.
ARTICLE IX
AMENDMENT AND TERMINATION
9.1 A Participant may at any time terminate the Plan
adopted by the Participant, and an Employer may at any time
terminate a Plan adopted by the Employer. Termination may be
effected by delivering to the Service Company a written notice of
termination addressed to the Trustee and the Service Company and
signed by the Participant or the Employer. On termination, if
permitted by the terms of the investment, distribution of the IRA
Account (reduced by any penalty applicable thereto) shall be made
by payment of a lump sum in cash and/or in Investment Company
Shares to the Participant. Upon complete distribution of the
assets in the IRA Account, this Plan shall terminate and shall
have no further force and effect and the Trustee and the Service
Company shall be relieved from all further liability with respect
to the Plan, the IRA Account, and all assets thereof so
established.
9.2 Putnam Fiduciary Trust Company may at any time and from
time to time modify or amend this Plan as is necessary or
appropriate to qualify this Plan as an Individual Retirement
Account under Section 408(a) of the Code, or as is necessary or
appropriate under any applicable law by delivering to the Trustee
and mailing to the Employer, or, in the case of a Plan where
there is no Employer, the Participant at his last known address
shown on the books of the Service Company or the Trustee, a copy
of such amendment. Each Participant and each Employer shall be
deemed to have consented to any modification or amendment so
made. No amendment of this Plan shall cause any part of the IRA
Account to be used for a purpose other than for the exclusive
benefit of the Participant and his Beneficiary. No amendment
shall change the rights, duties or responsibilities of the
Trustee or the Service Company without the written consent of
either of them.
ARTICLE X
TRANSFER TO OTHER QUALIFIED PLANS
A Participant or an Employer, subject to the provisions of
the Agreement and to the extent allowed by applicable law, may
request the Trustee to transfer assets held in the IRA Account of
the Participant or Participants to another bank or banks as
custodian or trustee or to any other plan or plans maintained by
the Participant or the Employer or the Employers of a Participant
for the benefit of the Participant, provided the Trustee or the
Service Company, before transfer, may at its discretion require
an opinion of counsel satisfactory to it that the requirements of
Section 401(a) or Section 408, whichever is applicable, of the
Code or any successor provision of law are satisfied by such
other plan or plans; and provided, further, that the Trustee and
the Service Company shall have the right to reduce from the
amount to be transferred (a) any amounts referred to in Section
6.4, and (b) any amounts required to be distributed in the
calendar year of the transfer to the Participant under Section
408(a)(6) or 408(b)(3) of the Code. Upon such transfer, the
provisions of the plan to which such transfer is made shall
govern and the provisions of this Plan shall have no further
effect.
ARTICLE XI
RESIGNATION OF THE TRUSTEE OR THE SERVICE COMPANY
11.1 Either the Trustee or the Service Company may resign at
any time upon thirty (30) days' notice, in writing, to the
Participant or the Employer in the case of a Plan established by
the Employer.
11.2 Within thirty (30) days of the effective date of a
successor trustee's appointment, the Trustee shall perform all
acts necessary to transfer and deliver the assets of IRA Account
to its successor. Within thirty (30) days of the effective date
of a successor service company's appointment, the Service Company
shall perform all acts necessary to transfer records held by it
to its successor. However, the Trustee may reserve such portion
of the IRA Account as it may reasonably determine to be necessary
for payment of its fees and any taxes and expenses and any
balance of such reserve remaining after payment of such fees,
taxes and expenses shall be paid over to the successor.
11.3 Resignation of the Trustee or the Service Company will
not terminate the Plan adopted by an Employer or a Participant.
In the event of any vacancy due to the resignation of the Trustee
or the Service Company, the Service Company shall appoint a
successor unless the Agreement is sooner terminated. Any
successor Trustee shall be a "bank" within the meaning of Section
581 of the Code or another person found qualified to act as a
trustee or custodian under an individual retirement account plan
by the Secretary of the Treasury, or his delegate. The
appointment of a successor Trustee or Service Company shall be
effective upon receipt by the Trustee and the Service Company of
such written acceptance which shall be submitted to the
Participant, the Employer in the case of a Plan established by
the Employer, the Trustee and the Service Company. In the event
no successor Trustee is appointed within thirty (30) days after
resignation becomes effective, each Participant or Employer may
request the Trustee to transfer the assets held in the
Participant's IRA Account as is provided in Article X.
ARTICLE XII
NOTICES
12.1 All notices required to be given by the Trustee or the
Service Company to a Participant or an Employer shall be deemed
to have been given when sent by mail to the address of the
Participant or the Employer indicated by the Service Company's
records.
12.2 All notices required to be given by a Participant or an
Employer to the Trustee or Service Company shall be deemed to
have been given when received by the Service Company.
12.3 Whenever the Trustee or the Service Company is required
or authorized to take any action under the Plan on the direction
of a Participant, such action shall be taken on the direction of
the duly appointed representative of the Participant or his
estate, in the event of his incompetency or death.
ARTICLE XIII
SPENDTHRIFT PROVISION
To the extent permitted by applicable law, a Participant's
beneficial interest in the Plan shall not be assignable, subject
to hypothecation, pledge, or lien, nor subject to attachment or
receivership, nor shall it pass to any trustee in bankruptcy or
be reached or applied by the legal process for the payment of any
obligation of the Participant or any Beneficiary hereunder;
provided, however, that in the case of the Participant's death
the value of his IRA Account shall be paid, as provided in
Article VII; and provided, further, that the Participant (or the
Trustee or Service Company, where applicable) shall have the
right to direct the transfer or distribution of the value of his
IRA Account, or any part thereof as provided in Articles VII,
VIII, X or XI.
ARTICLE XIV
GOVERNING LAW
The terms of this Plan and the Agreement shall be construed,
administered and enforced according to the laws of the
<PAGE>
Commonwealth of Massachusetts except to the extent such laws are
preempted by the provisions of ERISA.
PUTNAM INDIVIDUAL RETIREMENT
ACCOUNT DISCLOSURE STATEMENT
As an individual establishing an Individual Retirement
Account ("IRA"), or as an employee of an Employer-Sponsored IRA,
you should be aware that you may elect to revoke the account if
you do so within seven days of the date of establishment of your
account, which is the date on which you signed the adoption
agreement. In order to revoke your account, you should mail or
deliver a written request stating that "I hereby elect to revoke
my IRA account," with your signature written exactly as it
appears on your application, to Putnam Investor Services, Inc.,
P.O. Box 2701, Boston, MA 02208. The revocation request will be
considered given as of the date of the postmark (or date of
certification of registration if sent certified or registered
mail). Upon receipt of the revocation request, the entire amount
of your contribution, without adjustment for administrative fees,
interest accrued, or fluctuation in market value, will be
returned to you. If you have any questions relative to this
procedure you may contact the Retirement Plans Services by phone
at 1-800-662-0019. You should also be aware that, whenever it
may be considered prudent to do so, Putnam Investor Services,
Inc., acting on behalf of the Plan Trustee, reserves the right to
postpone the establishment of the account and investment of the
contributions for seven days from the date of adoption.
IRAs are a means for all individuals, regardless of whether
they are participants in any employer-sponsored retirement plan,
to provide for their own retirement. Contributions (up to a
maximum) may be deductible from your income subject to federal
income tax, (See paragraph 6). Whether or not your full
contribution is deductible, investment income from your IRA is
not taxed until distributed. Please consult your tax adviser as
to state income tax treatment, which may differ.
There are several important conditions and restrictions
imposed by the Internal Revenue Code on you as the owner of an
IRA:
1. Contributions (other than "rollover" contributions as
described in paragraph 18) must be made in cash. Therefore,
securities or other assets cannot be contributed directly to an
IRA but can be converted to cash and the cash can then be
contributed.
2. Any person with Compensation (as defined in the Putnam
IRA Plan, and generally including amounts paid for personal
services rendered), and who is younger than age 70-1/2, is
eligible for an IRA.
Additionally, regardless of your age, you may establish an
IRA to receive your employer's contribution under a Simplified
Employee Pension Plan or may transfer certain qualified plan
distributions or funds from another IRA to a Rollover IRA.
Rollover rules are described in paragraph 18 of this Disclosure
Statement.
3. Your maximum annual contribution is the lesser of $2000
or 100% of your Compensation. "Rollover" contributions are not
subject to this limit.
Your employer may also contribute to your IRA, pursuant to a
Simplified Employee Pension Plan ("SEP"), up to the lesser of 15%
of your Compensation from such employer or $30,000. Your
employer's SEP contribution should NOT be included as part of,
and should not be deducted from, your gross income on your
federal income tax return.
4. If you and your spouse both have Compensation, both you
and your spouse can make contributions to separate IRAs. Your
(or your spouse's) allowable contribution is computed separately
based on your (or your spouse's) income.
If one spouse does not have any Compensation or earns $250
or less and elects to be treated as not having any Compensation,
then a spousal IRA containing two separate accounts may be
established if you and your spouse file a joint Federal tax
return. The annual contribution to both accounts combined cannot
exceed the lesser of $2,250, or 100% of the earning spouse's
Compensation. No more than $2,000 can be contributed to one
account each year.
5. If you are a divorced spouse, all taxable alimony
received by you under a decree of divorce or separate maintenance
will be treated as Compensation for purposes of the IRA
contribution limit. Accordingly, you can make annual IRA
contributions of up to $2,000, or 100% of Compensation (including
taxable alimony), whichever is less.
6. You may deduct the full amount of your IRA contribution
up to the annual maximum if you are not an "active participant"
in an employer-sponsored retirement plan (including qualified
plans, Simplified Employee Pension plans, tax-sheltered annuity
plans, and certain governmental plans) for any part of such year.
If you are married, you will be deemed to be an active
participant in an employer-sponsored retirement plan if either
you or your spouse is an active participant in such a plan. For
this purpose, a husband and wife who file separate tax returns
for any year and who live apart at all times during the year are
not considered to be married.
<PAGE>
In addition, even if you are an active participant in such a
plan, you may deduct the full amount of your IRA contribution if
you have adjusted gross income equal to or below a specified
level ($40,000 for married taxpayers filing joint returns and
$25,000 for single taxpayers). If your adjusted gross income
exceeds this specified level, the amount of your IRA contribution
which is deductible is phased out on the basis of adjusted gross
income between $25,000 and $35,000 if you are a single taxpayer
and adjusted gross income of $10,000 and under if you are a
married taxpayer who files a separate return. If you are married
and you file a joint return, if either you or your spouse is an
active participant in an employer-sponsored retirement plan, the
amount of your IRA contribution which is deductible will be
phased out on the basis of your combined adjusted gross income
between $40,000 and $50,000. If your adjusted gross income
exceeds the level specified in the preceding sentences and you
are an active participant in an employer-sponsored retirement
plan (or your spouse is an active participant in such a plan),
then you may not deduct any portion of your IRA contribution.
Special rules apply for purposes of determining whether or not
you are an active participant in an employer-sponsored retirement
plan. Your (or your spouse's) Form W-2 should indicate whether
you (or your spouse) is an active participant. However, you
should consult your own tax or financial advisor if you should
have any questions about this.
In general, the IRA deduction is phased out at a rate of
$200 per $1,000 of adjusted gross income in excess of the levels
described above. However, if you contribute to a spousal IRA,
your IRA deduction is phased out at a rate of $225 per $1,000 of
adjusted gross income in excess of the levels described above.
When calculating your reduced IRA deduction limit, you
always round up to the next lowest $10. Therefore, your
deduction limit is always a multiple of $10. In addition, if
your adjusted gross income is within the phase-out range and your
reduced deduction limit is more than $0 but less than $200, you
are permitted to deduct up to $200 of your IRA contributions.
Even if you will not be able to DEDUCT the full amount of
your IRA contribution under the rules described above, you can
still contribute up to your annual maximum amount with all or
part of the contribution being a non tax-deductible contribution.
Of course, the combined total of deductible and non-deductible
contributions must not exceed your annual maximum amount. Any
earnings on ALL your IRA contributions accumulate tax-deferred
until you withdraw them.
7. Even if you are otherwise able to deduct all or part of
your IRA contributions, no deduction is allowed for (a) excess
contributions; (b) contributions made during the taxable year in
which you attain age 70-1/2 or thereafter; or (c) any amount you
contribute which was a distribution from another retirement plan
("rollover" contribution).
8. Contributions to an IRA may be made for a particular
year not later than the time prescribed by law for filing your
federal tax returns (excluding any extensions) for that year. A
contribution shall be deemed made for the calendar year in which
it was made unless you direct that it was made with respect to
the preceding calendar year.
9. Your interest in your IRA is nonforfeitable at all
times.
10. If you engage in a so-called "prohibited transaction"
as defined in the Internal Revenue Code, your IRA will be
disqualified and the entire balance in your IRA will be taxed as
ordinary income during the year in which such transaction occurs.
You may also have to pay the 10% penalty tax on premature
distributions. A "prohibited transaction" includes:
(a) the sale, exchange, or leasing of any property
between your IRA account and you;
(b) the lending of money or other extension of credit
between your IRA account and you;
(c) the furnishing of goods, services, or facilities
between your IRA account and you; or
(d) the transfer of assets of your IRA account for
your use or for your benefit.
Additionally, if you pledge your IRA as security for a loan,
or invest your IRA in "collectibles" such as art, antiques, coins
(other than United States gold and silver coins or state coins)
or gems, the amount so pledged or invested is considered by the
Internal Revenue Service to have been distributed to you and will
be taxed as ordinary income during the year in which you make
such pledge or investment. You may also have to pay the 10%
penalty tax on premature distributions.
11. Penalty taxes may be imposed as follows:
(a) A 6% nondeductible penalty tax on contributions
exceeding the allowable contribution limits.
(b) A nondeductible penalty tax of 10% of any amounts
prematurely distributed before age 59-1/2, UNLESS
(a) the distribution is made because of your death
or permanent disability, (b) the distribution is
an exempt withdrawal of excess contributions, (c)
the distribution is rolled over into another IRA
or qualified plan, or (d) the distribution is paid
in installment payments in substantially equal
amounts over a period that does not exceed your
life expectancy or the life expectancy of you and
your designated beneficiary. You should be aware,
however, that the 10% penalty tax will be applied
retroactively to all installment payments if you
alter the method of distribution before you attain
age 59-1/2 to a method that does not qualify for
the exception. This 10% penalty tax will also
apply retroactively if you do not receive the
installment payments under a method that qualifies
for the exception for at least five years.
The 10% penalty tax does not apply to the portion
of your IRA distribution which is not includible
in your gross income.
(c) A nondeductible penalty tax of 50% of the
difference between the required distributions (see
paragraph 13, below) and the amount actually
distributed (if less than the required amount).
You can avoid the 6% penalty tax described in (a) above by
removing the excess contribution and all net earnings
attributable to it before the due date for filing your Federal
income tax return for that year. Upon removing an excess
contribution in this manner, the net earnings attributable to it
are includible in your income for the tax year in which the
excess contribution was made. You may also have to pay an
additional 10% tax on premature distributions (discussed in (b)
above) on the amount of net earnings. However, the excess
contribution amount will not be included in your taxable income
and will not be subject to the 10% tax on premature
distributions. You can also remove any nondeductible IRA
contributions by following this same procedure.
If you elect not to withdraw an excess contribution, you can
eliminate the excess by contributing less to your IRA in a later
year. Further, to the extent you have not contributed the
maximum permissible amount for that later year, the amount of the
excess so eliminated may be deductible as a "make-up" deduction.
The 6% excise tax will, however, be imposed each year until the
year in which you eliminate the excess.
If you do not withdraw an excess contribution on or before
the due date for filing your Federal income tax return and your
contribution to your IRA did not exceed $2,250, you can withdraw
the excess at any later time as long as you have not deducted it
on your Federal income tax return. The excess amount which you
withdraw will not be included in your gross income and will not
be subject to the 10% tax on premature distributions. However,
the 6% excise tax will be imposed each year until the year of
withdrawal.
If you do not withdraw an excess contribution on or before
the due date for filing your Federal income tax return and your
contribution to your IRA exceeded $2,250, you must include in
your gross income any excess amount which you withdraw even if
you have not deducted it on your Federal income tax return. You
may also have to pay a 10% tax on premature distributions on the
amount you withdraw. Additionally, the 6% excise tax will be
imposed each year until the year of withdrawal.
12. You can begin to withdraw funds held in your IRA
without incurring the 10% penalty tax at any time, in any amount,
and for any reason after you reach age 59-1/2. However, when you
reach age 70-1/2, you must elect to receive distributions in
either a lump sum or in installments. The law requires that you
begin to receive distributions from your IRA no later than April
1 following the calendar year in which you reach age 70-1/2 (the
"Required Distribution Date"). There is a minimum amount which
you must withdraw by the Required Distribution Date, and by each
December 31 thereafter. This minimum amount is determined by
your life expectancy or the joint life and last survivor
expectancy of you and your designated beneficiary (as defined by
law). Your life expectancy (and your spouse's life expectancy if
your spouse is your designated beneficiary) will be recalculated
each year. Moreover, beginning in 1989, distributions must
comply with the minimum incidental death benefit rule under
Federal law if your beneficiary is not your spouse. If the
amount distributed during a taxable year is less than the minimum
amount required to be distributed, you will be subject to a
penalty tax equal to 50% of the deficiency unless you can prove
that the failure to make such minimum distribution was due to
reasonable cause, or demonstrate that reasonable steps are being
taken to remedy the shortfall.
13. If you should die before all the funds held in your IRA
have been distributed, the remaining funds in your IRA will be
distributed to your designated beneficiary either outright or
periodically as selected by your beneficiary. Putnam Investor
Services, Inc. will make distributions to your beneficiary in
accordance with his or her specific instructions. Your
beneficiary should be aware that he or she is subject to minimum
distributions rules and it is his or her responsibility to make
sure that the rules are met. Under the post-death minimum
distributions rules, if you die after your Required Distribution
Date, the funds remaining in your account must continue to be
distributed to your designated beneficiary at least as rapidly as
under the method of distribution in effect prior to your death.
If you die prior to your Required Distribution Date, then the
entire account balance must generally be completely distributed
to your designated beneficiary by December 31 of the calendar
year containing the fifth anniversary of your death. However,
there are exceptions to this five-year distribution rule. First,
the five-year distribution rule does not apply if the funds in
your IRA will be payable to your designated beneficiary over a
fixed period that is not longer than the life expectancy of the
beneficiary and if the distribution commences no later than
December 31 of the calendar year following the calendar year in
which you die. Second, if your beneficiary is your surviving
spouse, he or she may elect, by December 31 of the calendar year
following the calendar year in which you die, to receive the
funds in your IRA over a fixed period that is not longer than his
or her life expectancy and commencing on or before December 31 of
the calendar year in which you would have attained age 70-1/2.
In all instances, if your beneficiary is your surviving spouse,
he or she may elect to rollover the funds in your IRA into his or
her own IRA, or treat your IRA as his or her own by making
regular or rollover deposits into such IRA or by failing to
receive required distributions in a timely manner. In this case,
he or she is not required to make withdrawals from the IRA until
April 1 following the year in which he or she reaches age 70 1/2.
14. Generally, amounts distributed to you are includible in
your gross income in the taxable year you receive them and are
taxed as ordinary income without any special lump sum
distribution privileges.
15. If you withdraw an amount from any IRA during a taxable
year and you have previously made BOTH deductible and
nondeductible IRA contributions, then part of the amount
withdrawn is excludible from ordinary income and not subject to
taxation. The amount excludible for the taxable year is the
portion of the amount withdrawn which bears the same ratio to the
amount withdrawn for the taxable year as your aggregate non-
deductible IRA contributions bear to the aggregate balance of all
your IRAs at the end of the year plus the amount of the
distribution during the year. FOR EXAMPLE, assume an individual
previously made both deductible and nondeductible contributions
to his IRAs. In 1989 he withdraws $1000 from an IRA. At the end
of 1989, the account balances of all his IRAs equal $4,000, of
which $2,500 was nondeductible contributions. The amount
excludible from income is $500. ($2,500/$5,000 x $1,000).
It is your responsibility to keep records of your
nondeductible contributions on Form 8606 and your deductible
contributions to each of your IRAs. You will need this
information to calculate your taxable income when distributions
from your IRAs begin.
16. In general, if you receive distributions from your
IRAs, 403(b) annuities and qualified plans which, in the
aggregate, exceed $150,000 in any year, you may be subject to a
15% penalty tax on the amount in excess of $150,000. If the
total amount of your benefits payable from such plans at your
death exceed a certain permissible level, a similar 15% estate
tax is imposed on the amount in excess of the permissible level.
Special rules apply in certain circumstances and you should
consult your tax advisor if you have any question regarding this
tax.
17. Deductions for IRA contributions are claimed on Form
1040 or Form 1040A. The only separate return which you may be
required to file with the Internal Revenue Service in connection
with an IRA are Form 5329 and Form 8606. Form 5329 is filed as
an attachment to Form 1040 or Form 1040A for any year, if any of
the special IRA penalty taxes apply to you. If you make any non-
deductible contributions to any IRA, you must designate these as
non-deductible contributions on Form 8606 and attach it to your
Form 1040 or Form 1040A. There is a $100 penalty each time you
overstate the amount of your non-deductible contributions unless
you can prove that the overstatement was due to reasonable cause.
You will also be required to give additional information on your
Form 8606 in years in which you receive a distribution from your
IRA. If you fail to file a required Form 8606, there is a $50
penalty for each such failure unless you can prove that the
failure was due to reasonable cause.
18. You may "rollover" (tax free) all or part of a
qualified partial or total distribution received from a qualified
plan within 60 days after you receive it. A "rollover" from a
qualified retirement plan should be made to a separate IRA. You
should not make additional contributions to the "rollover" IRA,
in order to permit a subsequent tax-free "rollover" to a
qualified retirement plan at a later date, should you become a
participant in such a plan. Strict limitations apply to
"rollovers," and you should seek competent tax advice in order to
comply with all of the rules governing "rollovers."
19. The proceeds from the Putnam Individual Retirement
Account may be used as a "rollover" contribution to another
account or annuity if you pay all or part of the amount received
into the new account or annuity not later than the 60th day after
the day on which you receive the distribution. Once in
each 12-month period you are allowed to "rollover" your
investment from one IRA to another without any tax liability,
provided you contribute the rollover amount to the new IRA within
60 days of the date you receive it. Strict rules and limitations
apply to rollovers, and you should consult your tax adviser in
order to comply with all the rules governing rollovers. Upon
your death, this privilege is also available to your beneficiary
if your beneficiary is your surviving spouse.
A transfer of the proceeds of your IRA from one trustee
directly to another is not a rollover. It is a transfer that is
not affected by the one-year waiting period discussed in the
preceding paragraph. Do not include this amount in your gross
income if you do not receive any part of it.
20. The Putnam Individual Retirement Account Plan was most
recently approved as to form for use as an account by the
Internal Revenue Service on March 11, 1983, with I.R.S. Serial
Number 1751609A. The plan has since been amended further to
incorporate the changes dictated by the Tax Equity and Fiscal
Responsibility Act of 1982, the Deficit Reduction Act of 1984,
the Tax Reform Act of 1986 and the Tax and Miscellaneous Revenue
Act of 1988, respectively, and it is expected that I.R.S.
approval will be obtained in due course. I.R.S. approval is only
an approval of the form of the IRA and should not be considered a
determination as to the merits of the IRA.
21. You have the right to determine what proportion of the
amounts contributed to your IRA shall be invested in mutual fund
shares or, if applicable, an annuity, a term deposit, or any
other permitted investment. You may change your choice of
investments as often as desired, subject to any limitations or
penalties imposed by your Employer (if applicable) or by the
underlying form of investment. To the extent you do not direct
how amounts in your IRA are to be invested, or to the extent your
investment directions are unclear, amounts contributed to your
IRA will be invested in the Putnam Daily Dividend Fund or any
other similar fund.
There is an annual maintenance fee of $10 per IRA,
irrespective of the number of mutual funds or other investments,
if applicable. Unless you have already paid the fee by separate
payment, this fee will be deducted from your IRA on or about June
1 of the following year. If you redeem (or exchange) from a
mutual fund account before the deduction date, the fee may be
deducted from the first such redemption. Certain corporate IRA
programs may be entitled to a reduced fee, determined by the
Trustee and Putnam Investor Services, Inc. If you invest in a
mutual fund, up to $45 or $85 will be deducted from every $1,000
of contributions that you make, depending upon whether you are
investing on a group or an individual basis. Please consult your
mutual fund prospectus(es) for details. The mutual fund in which
you may invest is under contract to its investment adviser to pay
certain annual management fees and also pays operating expenses
up to a specified maximum; these are also described in the
prospectus(es).
The prospectus(es) also outline the investment objectives of
the mutual fund(s) you may have selected for your IRA. You
should consider these objectives carefully to determine if they
are consistent with your own planning for retirement. You should
also understand that fluctuations in market value will affect the
value of the IRA and that growth in value of your IRA is neither
guaranteed nor projected. If you select as an investment an
annuity, a term deposit or other permitted investment, we will
furnish you with additional information which will constitute
part of this disclosure statement.
22. The designation of a beneficiary to receive funds from
your IRA at your death is not considered a transfer subject to
Federal gift taxes. However, funds remaining in your IRA at the
time of your death would be includible in your Federal gross
estate for tax purposes.
23. For any further information regarding Individual
Retirement Programs and the conditions and requirements to which
they are subject, you should contact your local district office
of the Internal Revenue Service.
PUTNAM INVESTOR SERVICES, INC.
<PAGE>
PUTNAM BASIC PLAN DOCUMENT
ARTICLE
Introduction
By executing the Plan Agreement, the Employer has
established a retirement plan (the "Plan") according to the terms
and conditions of the Plan Agreement and this Putnam Basic Plan
Document, for the purpose of providing a retirement fund for the
benefit of Participants and Beneficiaries.
ARTICLE
Definitions
The terms defined in Sections 2.1 through 2.50 appear
generally throughout the document. Sections 2.51 through 2.63
and Article 5 contain definitions of terms used only in a CODA or
in a Variable Plan which permits nondeductible Participant
Contributions pursuant to Section 5.9and Section 10.4 contains
additional definitions related to distributions from the Plan.
Articles 6 and 11 contain additional definitions of terms used
only in those Articles.
Account means any of, and Accounts means all of, a
Participant's Employer Contribution Account, Participant
Contribution Account, Rollover Account, and if the Plan contains
a CODA, the accounts maintained for the Participant pursuant to
Article 5.
Affiliated Employer, for purposes of the Plan other
than Article 6, means the Employer and a trade or business,
whether or not incorporated, which is any of the following:
A member of a group of controlled corporations
(within the meaning of Section 414(b) of the Code) which includes
the Employer; or
A trade or business under common control (within
the meaning of Section 414(c) of the Code) with the Employer; or
A member of an affiliated service group (within
the meaning of Section 414(m) of the Code) which includes the
Employer; or
An entity otherwise required to be aggregated with
the Employer pursuant to Section 414(o) of the Code.
<PAGE>
In determining an Employee's service for vesting and for
eligibility to participate in the Plan, all employment with
Affiliated Employers will be treated as employment by the
Employer.
In a Variable Plan, in addition to the Employer, any
Affiliated Employer may adopt the Plan for the benefit of its
Employees by executing a Plan Agreement.
For purposes of Article 6 only, the definitions in
paragraphs (a) and (b) of this Section 2.2 shall be modified by
adding at the conclusion of the parenthetical phrase in each such
paragraph the words "as modified by Section 415(h) of the Code."
Authorized Leave of Absence means a leave of absence
from employment granted in writing by an Affiliated Employer.
Authorized Leave of Absence shall be granted on account of
military service for any period during which an Employee's right
to re-employment is guaranteed by law, and for such other reasons
and periods as an Affiliated Employer shall consider proper,
provided that Employees in similar situations shall be similarly
treated.
Base Contribution Percentage means the percentage so
specified in the Plan Agreement.
Beneficiary means a person entitled to receive benefits
under the Plan upon the death of a Participant, in accordance
with Section 7.2 and Articles 10 and 11.
CODA means a cash or deferred arrangement that meets
the requirements of Section 401(k) of the Code, adopted as part
of a profit sharing plan.
Code means the Internal Revenue Code of 1986, as
amended.
Compensation means all of an Employee's (a) Form W-2
earnings or (b) compensation as defined in Section 415(c)(3) of
the Code, as elected by the Employer in the Plan Agreement.
Compensation shall include only amounts actually paid to the
Employee during the Plan Year, except that if the Employer so
elects in the Plan Agreement, Compensation shall include any
amount which is contributed to an employee benefit plan for the
Employee by the Employer pursuant to a salary reduction
agreement, and which is not includible in the gross income of the
Employee under Section 125, 402(a)(8), 402(h) or 403(b) of the
Code.
Date of Employment means the first date on which an
Employee performs an Hour of Service; or, in the case of an
Employee who has incurred one or more One-Year Eligibility Breaks
and who is treated as a new Employee under the rules of Section
3.3, the first date on which he performs an Hour of Service after
his return to employment.
Deductible Employee Contribution Account means an
account maintained on the books of the Plan on behalf of a
Participant, in which are recorded amounts contributed by him to
the Plan on a tax-deductible basis under prior law, and the
income, expenses, gains and losses thereon.
Disabled means unable to engage in any substantial
gainful activity by reason of any medically determinable physical
or mental impairment that can be expected to result in death or
which has lasted or can be expected to last for a continuous
period of not less than 12 months. The permanence and degree of
such impairment shall be supported by medical evidence.
Earned Income means a Self-Employed Individual's net
earnings from self-employment in the trade or business with
respect to which the Plan is established, excluding items not
included in gross income and the deductions allocable to such
items, and reduced by (i) contributions by the Employer to
qualified plans, to the extent deductible under Section 404 of
the Code, and (ii) the deduction allowed to the Employer under
Section 164(f) of the Code for taxable years beginning after
December 31, 1989.
Earnings, effective for all Plan Years beginning after
December 31, 1988, means the first $200,000 (as adjusted by the
Secretary of the Treasury at the same time and in the same manner
as under Section 415(d) of the Code) of the sum of the
Compensation and the Earned Income received by an Employee during
a Plan Year. In determining the Earnings of a Participant, the
rules of Section 414(q)(6) of the Code shall apply, except that
in applying those rules the term "family" shall include only the
Participant's spouse and the Participant's lineal descendants who
have not reached age 19 by the last day of the Plan Year. If, as
a result of the application of such rules the adjusted $200,000
limitation is exceeded, then (except for purposes of determining
the portion of compensation up to the Integration Level), the
limitation shall be prorated among the affected individuals in
proportion to each such individual's compensation as determined
under this section prior to the application of this limitation.
Effective Date means the date so designated in the Plan
Agreement. If the Plan Agreement indicates that the Employer is
adopting the Plan as an amendment of an existing plan, the
provisions of the existing plan apply to all events preceding the
Effective Date, except as to specific provisions of the Plan
which set forth a retroactive effective date in accordance with
Section 1140 of the Tax Reform Act of 1986.
Eligibility Period means a period of 12 consecutive
months beginning on an Employee's most recent Date of Employment
or any anniversary thereof, in which he is credited with at least
1,000 Hours of Service; provided that if the Employer has elected
in the Plan Agreement to establish a number less than 1,000 as
the requisite for crediting an Eligibility Period, that number
shall be substituted for 1,000, and provided further that in the
case of an Employee in a seasonal industry (as defined under
regulations prescribed by the Secretary of Labor) in which the
customary extent of employment during a calendar year is fewer
than 1,000 Hours of
Service, the number specified in any regulations prescribed by
the Secretary of Labor dealing with years of service shall be
substituted for 1,000.
Employee means a common law Employee of an Affiliated
Employer; in the case of an Affiliated Employer which is a sole
proprietorship, the sole proprietor thereof; in the case of an
Affiliated Employer which is a partnership, a partner thereof;
and a Leased Employee of an Affiliated Employer. The term
"Employee" includes an individual on Authorized Leave of Absence,
a Self-employed Individual and an Owner-Employee.
Employer means the Employer named in the Plan Agreement
and any successor to all or the major portion of its assets or
business which assumes the obligations of the Employer under the
Plan Agreement.
Employer Contribution Account means an account
maintained on the books of the Plan on behalf of a Participant,
in which are recorded the amounts allocated for his benefit from
contributions by the Employer (other than contributions pursuant
to Article 5), Forfeitures by former Participants (if the Plan
provides for reallocation of Forfeitures), amounts reapplied
under Section 6.1(d), and the income, expenses, gains and losses
incurred thereon.
ERISA means the Employee Retirement Income Security Act
of 1974, as amended.
Excess Earnings means a Participant's Earnings in
excess of the Integration Level of the Plan.
Forfeiture means a nonvested amount forfeited by a
former Participant in a Variable Plan, pursuant to Section 8.3,
or an amount forfeited by a former Participant or Beneficiary who
cannot be located, pursuant to Section 9.5.
Hour of Service means each hour described in paragraphs
(a), (b), (c), (d) or (e) below, subject to paragraphs (f) and
(g) below.
Each hour for which an Employee is paid, or
entitled to payment, for the performance of duties for an
Affiliated Employer. These hours shall be credited to the
Employee for the computation period or periods in which the
duties are performed.
Each hour for which an Employee is paid, or
entitled to payment, by an Affiliated Employer on account of a
period of time during which no duties are performed (irrespective
of whether the employment relationship has terminated) due to
vacation, holiday, illness, incapacity (including disability),
layoff, jury duty, military duty or leave of absence. No more
than 501 Hours of Service shall be credited under this paragraph
for any single continuous period of absence (whether or not such
period occurs in a single computation period) unless the
Employee's absence is not an Authorized Leave of Absence. Hours
under this paragraph shall be calculated and credited pursuant to
Section 2530.200b-2 of the Department of Labor Regulations, which
are incorporated herein by this reference.
Each hour for which back pay, irrespective of
mitigation of damages, is either awarded or agreed to by an
Affiliated Employer. The same Hours of Service shall not be
credited under both paragraph (a) or paragraph (b), as the case
may be, and under this paragraph (c); and no more than 501 Hours
of Service shall be credited under this paragraph (c) with
respect to payments of back pay, to the extent that such pay is
agreed to or awarded for a period of time described in paragraph
(b) during which the Employee did not perform or would not have
performed any duties. These hours shall be credited to the
Employee for the computation period or periods to which the award
or agreement pertains rather than the computation period in which
the award, agreement or payment is made.
Each hour during an Authorized Leave of Absence.
Such hours shall be credited at the rate of a customary full work
week for an Employee.
Solely for purposes of determining whether a One-
Year Vesting Break or a One-Year Eligibility Break has occurred,
each hour which otherwise would have been credited to an Employee
but for an absence from work by reason of: the pregnancy of the
Employee, the birth of a child of the Employee, the placement of
a child with the Employee in connection with the adoption of the
child by the Employee, or caring for a child for a period
beginning immediately after its birth or placement. If the Plan
Administrator cannot determine the hours which would normally
have been credited during such an absence, the Employee shall be
credited with eight Hours of Service for each day of absence. No
more than 501 Hours of Service shall be credited under this
paragraph by reason of any pregnancy or placement. Hours
credited under this paragraph shall be treated as Hours of
Service only in the Plan Year or Eligibility Period or both, as
the case may be, in which the absence from work begins, if
necessary to prevent the Participant's incurring a One-Year
Vesting Break or One-Year Eligibility Break in that period, or,
if not, in the period immediately following that in which the
absence begins. The Employee must timely furnish to the Employer
information reasonably required to establish (i) that an absence
from work is for a reason specified above, and (ii) the number of
days for which the absence continued.
Hours of Service shall be determined on the basis of
actual hours for which an Employee is paid or entitled to
payment, or as otherwise specified in the Plan Agreement.
If the Employer maintains the plan of a
predecessor employer, service for the predecessor Employer shall
be treated as service for the Employer.
Insurance Trustee means the person named in the Plan
Agreement as Insurance Trustee, and any successor thereto.
Integration Level means the Earnings amount selected by
the Employer in the Plan Agreement.
Investment Company means an open-end registered
investment company for which Putnam Financial Services, Inc., or
its affiliate acts as principal underwriter, or for which The
Putnam Management Company, Inc., or its affiliate serves as an
investment adviser; provided that its prospectus offers its
shares under the Plan.
Investment Company Shares means shares issued by an
Investment Company.
Investment Products means any of the investment
products specified by the Employer in accordance with Section
13.2, from the group of those products sponsored, underwritten or
managed by Putnam as shall be made available by Putnam under the
Plan, and such other products as shall be accepted in writing by
Putnam for availability under the Plan. The term "Investment
Products" does not include any Policy selected pursuant to
Article 14.
Leased Employee means any person (other than an
Employee of the recipient) who pursuant to an agreement between
the recipient and any other person ("leasing organization") has
performed services for the recipient (or for the recipient and
related persons determined in accordance with Section 414(n)(6)
of the Code) on a substantially full time basis for a period of
at least one year, and such services are of a type historically
performed by Employees in the business field of the recipient
Employer. The compensation of a Leased Employee for purposes of
the Plan means the Compensation (as defined in Section 2.8) of
the Leased Employee attributable to services performed for the
recipient Employer. Contributions or benefits provided to a
leased Employee by the leasing organization which are
attributable to services performed for the recipient Employer
shall be treated as provided by the recipient Employer. Provided
that leased Employees do not constitute more than 20 percent of
the recipient's nonhighly compensated workforce, a leased
Employee shall not be considered an Employee of the recipient if
he is covered by a money purchase pension plan providing: (1) a
nonintegrated Employer contribution rate of at least 10 percent
of compensation (as defined in Section 415(c)(3) of the Code, but
including amounts contributed pursuant to a salary reduction
agreement which are excludable from the
Employee's gross income under Section 125, Section 402(a)(8),
Section 402(h) or Section 403(b) of the Code), (2) immediate
participation, and (3) full and immediate vesting.
One-Year Eligibility Break means an Eligibility Period
during which an individual is not credited with more than 500
Hours of Service; provided, however, that in the case of an
Employee in a seasonal industry, there shall be substituted for
500 the number of Hours of Service specified in any regulations
of the Secretary of Labor dealing with breaks in service, and
provided further that if the Employer has elected in the Plan
Agreement to establish a number less than 500 as the requisite
Hours of Service for crediting an Eligibility Period, that number
shall be substituted for 500.
One-Year Vesting Break means a Plan Year during which
an individual is not credited with more than 500 Hours of
Service; provided, however, that in the case of an Employee in a
seasonal industry, there shall be substituted for 500 the number
of Hours of Service specified in any regulations for the
Secretary of Labor dealing with breaks in service, and provided
further that if the Employer has elected in the Plan Agreement to
establish a number less than 500 as the requisite Hours of
Service for crediting a Year of Service, that number shall be
substituted for 500.
Owner-Employee means the sole proprietor of an
Affiliated Employer that is a sole proprietorship, or a partner
owning more than 10 percent of either the capital or profits
interest of an Affiliated Employer that is a partnership.
Participant means each Employee who has met the
requirements for participation in Article 3.
Participant Contribution Account means an account
maintained on the books of the Plan, in which are recorded
nondeductible contributions by a Participant in accordance with
Section 4.2(e) or a similar provision in effect under the Plan or
a predecessor plan for periods before the first Plan Year
beginning after December 31, 1986, and any income, expenses,
gains or losses incurred thereon.
Plan means the form of defined contribution retirement
plan and trust agreement adopted by the Employer, consisting of
the Plan Agreement and the Putnam Basic Plan Document as set
forth herein, together with any and all amendments and
supplements thereto.
Plan Administrator means the Employer or its appointee
pursuant to Section 16.1.
Plan Agreement means the separate agreement entered
into between the Employer and the Trustee (and the Insurance
Trustee, if any) and accepted by Putnam, under which the Employer
adopts the Plan and selects among its optional provisions.
Plan Year means the period of 12 consecutive months
specified by the Employer in the Plan Agreement; provided that if
the Effective Date is not the first day of the Employer's taxable
year, the initial Plan Year shall begin on the Effective Date and
end on the last day of the Employer's taxable year.
Policy means an ordinary life insurance, term
insurance, retirement income or endowment policy or an individual
or group annuity contract issued by a life insurance company in
connection with the Plan, or an interest therein. An ordinary
life insurance policy within the meaning of this definition
provides non-decreasing death benefits and non-increasing
premiums.
Putnam means Putnam Financial Services, Inc., or a
company affiliated with it which Putnam Financial Services, Inc.
has designated as its agent to perform specified actions or
procedures in connection with the prototype Plan.
Qualified Participant means (i) in a Standard Plan, any
Participant who is an active Employee on the last day of the Plan
Year in question or who is credited with more than 500 Hours of
Service during the Plan Year in question or whose Retirement or
death occurred during the Plan Year in question; and (ii) in a
Variable Plan, any Participant who meets the requirements
specified by the Employer in the Plan Agreement. If the Plan is
not adopted to replace an existing plan, this Section 2.40 is
effective on the Effective Date. If the Plan replaces an
existing plan, this Section 2.40 is effective on the first day of
the first Plan Year that begins after December 31, 1988, or if
later, on the Effective Date, and the provision of the existing
plan that this Section 2.40 replaces shall continue to apply
until that time.
Recordkeeper means the person or entity designated by
the Employer in the Plan Agreement to perform the duties
described in Section 16.4, and any successor thereto.
Retirement means ceasing to be an Employee in
accordance with Section 7.1.
Rollover Account means an account established for an
Employee who makes a rollover contribution to the Plan pursuant
to Section 4.5.
Self-Employed Individual means an individual whose
personal services are a material income-producing factor in the
trade or business for which the Plan is established, and who has
Earned Income for the taxable year from that trade or business,
or would have Earned Income but for the fact that the trade or
business had no net profits for the taxable year.
Shareholder-Employee means any officer or Employee of
an electing small business corporation, within the meaning of
Section 1362 of the Code, who on any day during a taxable year of
the Employer owns (or is considered as owning under Section
318(a)(1) of the Code) more than 5% of the outstanding stock of
the Employer.
Social Security Wage Base means the maximum amount
considered as wages under Section 3121(a)(1) of the Code as in
effect on the first day of the Plan Year.
Standard Plan means a Plan adopted by execution of a
Putnam Standard Profit Sharing Plan Agreement #001 (including
such a Plan with a CODA) or a Putnam Standard Money Purchase
Pension Plan Agreement #002.
Trust and Trust Fund mean the trust fund established
under Section 13.1.
Trustee means the person, or the entity with trustee
powers, named in the Plan Agreement as trustee, and any successor
thereto.
Valuation Date means (i) for a Standard Plan, each
business day, and (ii) for a Variable Plan, the last day of each
Plan Year, and such other dates as the Employer may designate by
written agreement with the Recordkeeper.
Variable Plan means a Plan adopted by execution of a
Putnam Variable Profit Sharing Plan Agreement #003 or a Putnam
Variable Money Purchase Pension Plan Agreement #004.
Year of Service means a Plan Year in which an Employee
is credited with at least 1,000 Hours of Service; provided,
however, that if the Employer has elected in the Plan Agreement
to establish a number less than 1,000 as the requisite for
crediting a Year of Service, that number shall be substituted for
1,000, and provided further that in the case of an Employee in a
seasonal industry (as defined under regulations prescribed by the
Secretary of Labor) in which the customary extent of employment
during a calendar year is fewer than 1,000 Hours of Service, the
number specified in any regulations prescribed by the Secretary
of Labor dealing with years of service shall be substituted for
1,000. An Employee's Years of Service shall include service
credited prior to the Effective Date under any predecessor plan.
If the initial Plan Year is shorter than 12 months, each Employee
who is credited with at least 1,000 Hours of Service in the 12-
month period ending on the last day of the initial Plan Year
shall be credited with a Year of Service with respect to the
initial Plan Year.
If the Employer has so elected in the Plan Agreement, Years
of Service shall not include:
Service in any Plan Year (or comparable period
prior to the Effective Date) completed before the Employee
reached age 18;
Service completed during a period in which the Employer
did not maintain the Plan or any predecessor plan (as defined
under regulations prescribed by the Secretary of the Treasury).
The following definitions apply only to cash or deferred
arrangements under Section 401(k)(CODA) and to Variable Plans
which permits nondeductible Participant Contributions pursuant to
Section 5.9:
Deferral Agreement means an Employee's agreement to
make one or more Elective Deferrals in accordance with Section
5.2.
Elective Deferral means any contribution made to the
Plan by the Employer at the election of a Participant, in lieu of
cash compensation, including contributions made pursuant to a
Deferral Agreement or other deferral mechanism.
Elective Deferral Account means an account maintained
on the books of the Plan, in which are recorded a Participant's
Elective Deferrals and the income, expenses, gains and losses
incurred thereon.
Employer Matching Contribution means a contribution
made by the Employer (i) to the Plan pursuant to Section 5.8, or
(ii) to another defined contribution plan on account of a
<PAGE>
Participant's "elective deferrals" or "employee contributions,"
as those terms are defined in Section 401(m)(4) of the Code.
Employer Matching Account means an account maintained
on the books of the Plan, in which are recorded the Employer
Matching Contributions made on behalf of a Participant and the
income, expenses, gains and losses incurred thereon.
Highly Compensated Employee means any highly
compensated active Employee or highly compensated former
Employee, as defined in this Section 2.58. For this purpose, the
"determination year" shall be the Plan Year, and the "look-back
year" shall be the 12-month period immediately preceding the
determination year.
A highly compensated active Employee includes any Employee
who performs service for the Employer during the determination
year and who during the look-back year: (i) received compensation
from the Employer in excess of $75,000 (as adjusted pursuant to
Section 415(d) of the Code); (ii) received compensation from the
Employer in excess of $50,000 (as adjusted pursuant to Section
415(d) of the Code) and was a member of the top-paid group for
such year; or (iii) was an officer of the Employer and received
compensation during such year that is greater than 50 percent of
the dollar limitation in effect under Section 415(b)(1)(A) of the
Code. The term also includes (i) Employees who are both
described in the preceding sentence if the term "determination
year" is substituted for the term "look-back year," and among the
100 Employees who received the most compensation from the
Employer during the
determination year; and (ii) Employees who are 5 percent owners
at any time during the look-back year or determination year. If
no officer has satisfied the compensation requirement of (iii)
above during either a determination year or look-back year, the
highest paid officer for such year shall be treated as a Highly
Compensated Employee.
A highly compensated former Employee includes any Employee
who separated from service (or was deemed to have separated)
before the determination year, performed no service for the
Employer during the determination year, and was a highly
compensated active Employee for either the year of separation
from service or any determination year ending on or after the
Employee's 55th birthday.
If during a determination year or look-back year an Employee
is a family member of either a 5 percent owner who is an active
or former Employee, or a Highly Compensated Employee who is one
of the 10 most highly paid Highly Compensated Employees ranked on
the basis of compensation paid by the Employer during the year,
then the family member and the 5 percent owner or top-ten Highly
Compensated Employee shall be treated as a single Employee
receiving compensation and plan contributions or benefits equal
to the sum of the compensation and contributions or benefits of
the family member and the 5 percent owner or top-ten highly
compensated Employee. For purposes of this Section 2.58, family
members include the spouse, lineal ascendants and descendants of
the Employee or former Employee and the spouses of such lineal
ascendants and descendants.
The determination of who is a Highly Compensated Employee,
including the determinations of the number and identity of
Employees in the top-paid group, the top 100 Employees, the
number of Employees treated as officers and the compensation that
is considered, will be made in accordance with Section 414(q) of
the Code and the regulations thereunder.
Non-Highly Compensated Employee means an Employee who
is not a Highly Compensated Employee.
Qualified Matching Contribution means a contribution
made by the Employer that: (i) is allocated in proportion to a
Participant's Elective Deferrals or Participant Contributions, as
specified by the Employer in the Plan Agreement; (ii) is fully
vested at all times, and (iii) is distributable only in
accordance with Section 5.13.
Qualified Matching Account means an account maintained
on the books of the Plan, in which are recorded the Qualified
Matching Contributions on behalf of a Participant and the income,
expense, gain and loss attributable thereto.
Qualified Nonelective Contribution means a contribution
(other than an Employer Matching Contribution or Qualified
Matching Contribution) made by the Employer, that: (i) a
Participant may not elect to receive in cash until it is
distributed from the Plan; (ii) is fully vested at all times; and
(iii) is distributable only in accordance with Section 5.13.
Qualified Nonelective Contribution Account means an
account maintained on the books of the Plan, in which are
recorded the Qualified Nonelective Contributions on behalf of a
Participant and the income, expense, gain and loss attributable
thereto.
ARTICLE
Participation
Initial Participation. An Employee shall become a
Participant in the Plan as of the first day of the month in which
he first satisfies the age and service requirements specified by
the Employer in the Plan Agreement, or as of the Effective Date,
whichever is later; provided, however, that:
If the Plan is adopted as an amendment of a
predecessor plan of the Employer, every Employee who was
participating under the predecessor plan when it was so amended
shall become a Participant in the Plan as of the Effective Date,
whether or not he has satisfied the age and service requirements
specified in the Plan Agreement; and
Unless the Employer specifies otherwise in the
Plan Agreement, any individual who is (i) a nonresident alien
receiving no earned income from an Affiliated Employer which
constitutes income from sources within the United States, or (ii)
included in a unit of Employees covered by a collective
bargaining agreement between the Employer and Employee
representatives if retirement benefits were the subject of good
faith bargaining (unless the collective bargaining agreement
specifically provides for coverage by the Plan or involves as an
employee representative an organization more than one-half of
whose members are Employees who are owners, officers or
executives of the Employer) shall not participate in the Plan;
and
If the Plan is a Variable Plan and is not adopted
as an amendment of a predecessor plan of the Employer, all
Employees on the Effective Date shall become Participants on the
Effective Date, if the Employer so elects in the Plan Agreement;
and
If the Plan is a Variable Plan, (i) only Employees in
the eligible classes specified by the Employer in the Plan
Agreement shall participate in the Plan; and (ii) eligible
Employees will begin participation on the entry date specified in
the Plan Agreement.
Notwithstanding paragraphs (c) and (d), the Plan must comply
with the coverage and participation rules of Sections 410(b) and
401(a)(26) of the Code and the regulations thereunder.
Special Participation Rule. With respect to a Standard
Plan, or a Variable Plan in which the Employer has specified full
and immediate vesting in the Plan Agreement, an Employee who
incurs a One-Year Eligibility Break before completing the number
of Eligibility Periods required under Section 3.1 shall not
thereafter be credited with any Eligibility Period completed
before the One-Year Eligibility Break.
Resumed Participation. A former Employee who incurs a
One-Year Eligibility Break after having become a Participant
shall participate in the Plan as of the date on which he again
becomes an Employee, if (i) his Employer Contribution Account or
Employer Matching Account had become partially or fully vested
before he incurred a One-Year Vesting Break, or (ii) he incurred
fewer than five consecutive One-Year Eligibility Breaks. In any
other case, when he again becomes an Employee he shall be treated
as a new Employee under Section 3.1.
Changes in Classification (Variable Plans Only). If a
Participant in a Variable Plan ceases to be a member of a
classification of Employees eligible to participate in the Plan,
but does not incur a One-Year Eligibility Break, he will continue
to be credited with Eligibility Periods while he remains an
Employee, and he will resume participation as of the date on
which he again becomes a member of a classification of Employees
eligible to participate in the Plan. If such a Participant
incurs a One-Year Eligibility Break, Section 3.3 will apply.
If an Employee who is not a member of a classification of
Employees eligible to participate in the Plan satisfies the age
and service requirements specified in the Plan Agreement, he will
begin to participate immediately upon becoming a member of an
eligible classification.
Benefits for Owner-Employees. If the Plan provides
contributions or benefits for one or more Owner-Employees who
control both the trade or business with respect to which the Plan
is established and one or more other trades or businesses, the
Plan and plans established with respect to such other trades or
businesses must, when looked at as a single plan, satisfy
Sections 401(a) and (d) of the Code with respect to the Employees
of this and all such other trades or businesses. If the Plan
provides contributions or benefits for one or more Owner
Employees who control one or more other trades or businesses, the
Employees of each such other trade or business must be included
in a plan which satisfies Sections 401(a) and (d) of the Code and
which provides contributions and benefits not less favorable than
those provided for such Owner-Employees under the Plan. If an
individual is covered as an Owner-Employee under the plans of two
or more trades or businesses which he does not control and such
individual controls a trade or business, then the contributions
or benefits of the Employees under the plan of the trade or
business which he does control must be as favorable as those
provided for him under the most favorable plan of the trade or
business which he does not control. For purposes of this Section
3.5, an Owner-Employee, or two or more Owner-Employees, shall be
considered to control a trade or business if such Owner-Employee,
or such two or more Owner-Employees together:
own the entire interest in an unincorporated trade
or business, or
in the case of a partnership, own more than 50
percent of either the capital interest or the profits interest in
such partnership.
<PAGE>
For purposes of the preceding sentence, an Owner-Employee or
two or more Owner-Employees shall be treated as owning any
interest in a partnership which is owned, directly or indirectly,
by a partnership which such Owner-Employee or such two or more
Owner-Employees are considered to control within the meaning of
the preceding sentence.
ARTICLE
Contributions
Provisions Applicable to All Plans.
Payment and Crediting of Employer Contributions.
The Employer shall pay to the order of the Trustee the aggregate
contribution to the Trust Fund (other than the premium payments
on any Policy) for each Plan Year. Each contribution shall be
accompanied by written instructions from the Employer, in the
manner prescribed by Putnam. Neither the Trustee nor Putnam shall
be under any duty to inquire into the correctness of the amount
or the timing of any contribution, or to collect any amount if
the Employer fails to make a contribution as provided in the
Plan.
Responsibility for Premium Payments.
Contributions to be applied to the payment of the premiums on any
Policy shall be paid by the Employer directly to the insurer in
cash. In determining the amount of any premium due under any
Policy with respect to any Participant, the Employer and the
Insurance Trustee may rely conclusively upon information
furnished by the provider of the Policy. For purposes of
Sections 4.2(a), 4.3(a) and Article 5, all Employer contributions
used to pay premiums on Policies shall be treated as
contributions made to the appropriate Participant's Employer
Contribution Account. If the Employer omits any premium payment
or makes any mistake concerning a premium payment, neither the
Employer nor the Insurance Trustee shall have any liability in
excess of the premium to be paid.
Time for Payment. The aggregate of all
contributions with respect to a Plan Year shall be transferred in
accordance with paragraphs (a) and (b) no later than the due date
(including extensions) for filing the Employer's federal income
tax return for that Plan Year.
Limitations on Allocations. All allocations shall
be subject to the limitations in Article 6.
Establishment of Accounts. The Employer will
establish and maintain (or cause to be established and
maintained) for each Participant individual accounts adequate to
disclose his interest in the Trust Fund, including such of the
following separate accounts as shall apply to the Participant:
Deductible Employee Contribution Account, Employer Contribution
Account, Participant Contribution Account, and Rollover Account;
and in a Plan with a CODA, Elective Deferral Account, Qualified
Nonelective Account, Qualified Matching Account and Employer
Matching Account. The maintenance of such accounts shall be only
for recordkeeping purposes, and the assets of separate accounts
shall not be required to be segregated for purposes of
investment.
Restoration of Accounts (Variable Plans Only).
Notwithstanding any other provision of the Plan, for any Plan
Year in which it is necessary to restore any portion of a
Participant's Account pursuant to Section 8.3(b) or 9.5, to the
extent that the amount of Forfeitures available is insufficient
to accomplish such restoration, the Employer shall contribute the
amount necessary to eliminate the insufficiency, regardless of
whether the contribution is currently deductible by the Employer
under Section 404 of the Code. Forfeitures shall be considered
available for allocation pursuant to Sections 4.2, 4.3 and 5.8 in
a Plan Year only after all necessary restoration of Accounts has
been accomplished.
Provisions Applicable Only to Profit Sharing Plans.
Amount of Annual Contribution. The Employer will
contribute for each Plan Year an amount determined in accordance
with the formula specified by the Employer in the Plan Agreement,
less any amounts reapplied for the Plan Year under Section
6.1(d), not to exceed the amount deductible under Section 404 of
the Code. In a Variable Plan, if the Employer so elects in the
Plan Agreement, the amount of Forfeitures occurring in a Plan
Year shall be applied to reduce the Employer's contribution by a
like amount, and such Forfeitures shall be treated as a portion
of the Employer contribution for purposes of paragraphs (b) and
(c).
Allocation of Contributions: General Rule. As of the
last day of each Plan Year, the Employer's contribution (and any
amounts reapplied under Section 6.1(d)) for the Plan Year shall
be allocated among the Employer Contribution Accounts of
Qualified Participants in proportion to their Earnings. This
general rule does not apply to a Plan that is integrated with
Social Security or to allocations in a CODA.
Plans Integrated with Social Security. If the
Employer elects in the Plan Agreement an allocation formula
integrated with Social Security, Employer contributions (and any
amounts reapplied under Section 6.1(d)) shall be allocated as of
the last day of the Plan Year, as follows:
Top-Heavy Integration Formula. If the Plan
is required to provide a minimum allocation for the Plan Year
pursuant to the Top-Heavy Plan rules of Article 15, or if the
Employer has specified in the Plan Agreement that this paragraph
(1) will apply whether or not the Plan is Top-Heavy, then:
(A) First, among the Employer Contribution
Accounts of all Qualified Participants, in the ratio that each
Qualified Participant's Earnings bears to all Qualified
Participants' Earnings. The total amount allocated in this
manner shall be equal to 3% of all Qualified Participants'
Earnings (or, if less, the entire amount to be allocated).
(B) Next, among the Employer Contribution
Accounts of all Qualified Participants who have Excess Earnings,
in the ratio that each Qualified Participant's Excess Earnings
bears to all Qualified Participants' Excess Earnings. The total
amount allocated in this manner shall be equal to 3% of all
Qualified Participants' Excess Earnings (or, if less, the entire
amount remaining to be allocated).
(C) Next, among the Employer Contribution
Accounts of all Qualified Participants, in the ratio that the sum
of each Qualified Participant's Earnings and Excess Earnings
bears to the sum of all Qualified Participants' Earnings and
Excess Earnings. The total amount allocated in this manner shall
not exceed the lesser of (i) the sum of all Participants'
Earnings and Excess Earnings multiplied by the Top-Heavy Maximum
Disparity Percentage determined under subparagraph (1)(E), or
(ii) the entire amount remaining to be allocated.
(D) Finally, any amount remaining shall be
allocated among the Employer Contribution Accounts of all
Qualified Participants in the ratio that each Qualified
Participant's Earnings bears to all Qualified Participants'
Earnings.
(E) The Top-Heavy Maximum Disparity
Percentage shall be the lesser of (i) 2.7% or (ii) the applicable
percentage from the following table:
If the Plan's
Integration
Level is But not The applicable
more than: more than: percentage is:
$0 The greater of $10,000
or 20% of the Social
Security Wage Base 2.7%
<PAGE>
The greater of 80% of the Social
$10,000 or 20% Security Wage Base
of the Social
Security Wage Base 1.3%
80% of the Social Less than the Social
Security Wage Security Wage Base 2.4%
Base
If the Plan's Integration Level is equal to the Social
Security Wage Base, the Top-Heavy Maximum Disparity Percentage is
2.7%.
Non-Top-Heavy Integration Formula. If the
Plan is not required to provide a minimum allocation for the Plan
Year pursuant to the Top-Heavy Plan rules of Article 15, and the
Employer has not specified in the Plan Agreement that paragraph
(1) will apply whether or not the Plan is Top-Heavy, then:
(A) An amount equal to (i) the Maximum
Disparity Percentage determined under subparagraph (2)(C)
multiplied by the sum of all Qualified Participants' Earnings and
Excess Earnings, or (ii) if less, the entire amount to be
allocated, shall be allocated among the Employer Contribution
Amounts of all Participants in the ratio that the sum of each
Qualified Participant's Earnings and Excess Earnings bears to the
sum of all Qualified Participants' Earnings and Excess Earnings.
(B) Any amount remaining after the
allocation in paragraph (2)(A) shall be allocated among the
Employer Contribution Accounts of all Qualified Participants in
the ratio that each Qualified Participant's Earnings bears to all
Qualified Participants' Earnings.
(C) The Maximum Disparity Percentage shall
be the lesser of (i) 5.7% or (ii) the applicable percentage from
the following table:
If the Plan's
Integration
Level is But not The applicable
more than: more than: percentage is:
$0 The greater of $10,000
or 20% of the Social
Security Wage Base 5.7%
The greater of 80% of the Social
$10,000 or 20% of Security Wage Base
the Social Security
Wage Base 4.3%
80% of the Social Less than the Social
Security Wage Security Wage Base 5.4%
Base
If the Plan's Integration Level is equal to the Social
Security Wage Base, the Maximum Disparity Percentage is 5.7%.
In this Section 4.2, Earnings means Earnings as
defined in Section 2.13.
Allocation of Forfeitures. Forfeitures shall be allocated
among the Employer Contribution Amounts of all Qualified
Participants in accordance with paragraph (b) or (c), whichever
applies to Employer Contributions. Forfeitures may be allocated
pursuant to paragraphs (c)(1)(B), (c)(1)(C) and (c)(2)(A) only to
the extent that the limitation described therein has not been
fully utilized by the allocation of Employer Contributions and
amounts reapplied under Section 6.1(d).
Participant Contributions. Except in the case of a Variable
Plan in which the Employer has provided in the Plan Agreement for
nondeductible Participant contributions, the Plan will accept no
such contributions for any Plan Year beginning after the Plan
Year in which the Employer adopts this Plan. Nevertheless, a
Participant Contribution Account shall be maintained in any Plan
which accepted nondeductible Participant contributions for any
Plan Year beginning after December 31, 1986, and such
contributions, together with any matching contributions (as
defined in Section 401(m)(4) of the Code), shall be limited so as
to meet the nondiscrimination test of Section 401(m) of the Code.
Rules applicable to Participant contributions to a Variable Plan
in Plan Years beginning after the adoption of this Plan are set
forth in Section 5.9. All Participant Contribution Accounts will
be fully vested at all times.
Provisions Applicable Only to Money Purchase Pension Plans.
Amount of Annual Contributions. The Employer will
contribute for each Plan Year an amount described in paragraph
(b) or (c) below, whichever is applicable, less any amounts
reapplied for the Plan Year under Section 6.1(d), not to exceed
the amount deductible under Section 404(c) of the Code. In a
Variable Plan, if the Employer so elects in the Plan Agreement,
the amount of Forfeitures occurring in a Plan Year shall be
applied to reduce the Employer's contribution by a like amount,
and such Forfeitures shall be treated as a portion of the
Employer contribution for purposes of paragraphs (b) and (c).
Allocation of Contributions: General Rule. The
Employer shall contribute an amount equal to the product of the
Earnings of all Qualified Participants and the Base Contribution
Percentage, and the contribution shall be allocated as of the
last day of the Plan Year among the Employer Contribution
Accounts of all Qualified Participants in the ratio that the
Earnings of each Qualified Participant bears to the Earnings of
all Qualified Participants. This general rule does not apply to
a Plan that is integrated with Social Security.
Plans Integrated with Social Security. If the Employer
has elected in the Plan Agreement to integrate the Plan with
Social Security, the Employer shall contribute an amount equal to
the sum of the following amounts, and the contribution shall be
allocated as of the last day of the Plan Year as follows:
To the Employer Contribution Account of each
Qualified Participant, an amount equal to the product of the Base
Contribution Percentage and his Earnings, and
To the Employer Contribution Account of each Qualified
Participant who has Excess Earnings, the product of his Excess
Earnings and the lesser of (i) the Base Contribution Percentage
or (ii) the Money Purchase Maximum Disparity Percentage
determined under paragraph (d).
The Base Contribution Percentage shall be no
less than three percent in either of the following circumstances:
(i) any Plan Year of a Standard Plan for which the Plan Agreement
does not specify that the Employer will perform annual Top-Heavy
testing, or (ii) any Plan Year in which the Plan is required to
provide a minimum allocation for the Plan Year pursuant to the
Top-Heavy Plan rules of Article 15.
The Money Purchase Maximum Disparity Percentage is
equal to the lesser of (i) 5.7% or (ii) the applicable percentage
from the following table:
If the Plan's
Integration
Level is But not The applicable
more than: more than: percentage is:
$0 The greater of $10,000
or 20% of the Social
Security Wage Base 5.7%
The greater of 80% of the Social
$10,000 or 20% Security Wage Base
of the Social
Security Wage Base 4.3%
80% of the Social Less than the Social
Security Wage Security Wage Base 5.4%
Base
If the Plan's Integration Level is equal to the Social
Security Wage Base, the Money Purchase Maximum Disparity
Percentage is 5.7%.
In this Section 4.3, Earnings means Earnings as
defined in Section 2.13.
Separate Allocation of Forfeitures. If the
Employer has not elected in the Plan Agreement to use Forfeitures
to reduce the amount of its contribution, Forfeitures shall be
allocated among the Employer Contribution Accounts of all
Qualified Participants in proportion to their Earnings.
Paired Plans. An Employer may adopt as paired plans
Putnam Standard Profit Sharing Plan (Plan Agreement #001) and
Putnam Standard Money Purchase Pension Plan (Plan Agreement
#002). Only one of the two paired plans may be integrated with
Social Security. In any Plan Year in which Putnam Standard
paired plans are top-heavy, each non-key employee who is eligible
to participate in both plans will have allocated to his Account
in the Putnam Standard Money Purchase Pension Plan a minimum
contribution that meets the requirements of Section 15.3.
Rollover Contributions. An Employee in an eligible
class may contribute at any time cash or other property (which is
not a collectible within the meaning of Section 408(m) of the
Code) acceptable to the Trustee representing qualified rollover
amounts under Sections 402, 403, or 408 of the Code. Amounts so
contributed shall be credited to a Rollover Account for the
Participant.
No Deductible Employee Contributions. The Plan
Administrator shall not accept deductible employee contributions
for a taxable year beginning after December 31, 1986. In the
event that the Plan is adopted as an amendment of a plan which
previously accepted such contributions from any Participant, the
Employer will establish and maintain (or cause to be established
and maintained) a separate account in which shall be recorded the
amount of such contributions and the income, expenses, gains and
losses incurred thereon. Such an account shall be nonforfeitable
at all times and shall in no event be used to pay premiums on any
life insurance policy. Subject to Article 10, Joint and Survivor
Annuity Requirements, the Participant may withdraw any part of
such an account at any time upon written request to the Plan
Administrator.
ARTICLE
Cash or Deferred Arrangement under Section 401(k)(CODA)
Applicability; Allocations. This Article 5 applies to
any profit sharing plan for which the Employer has elected in the
Plan Agreement to include a CODA. The Employer may specify in
the Plan Agreement that contributions will be made to the Plan
only under the CODA, or that contributions may be made under
Section 4.2 as well as under the CODA. Allocations to
Participants' Accounts of contributions made pursuant to this
Article 5 shall be made as soon as administratively feasible
after their receipt by the Trustee, but in any case no later than
as of the last day of the Plan Year for which the contributions
were made.
CODA Participation. Each Employee who has met the
eligibility requirements of Article 3 may make Elective Deferrals
to the Plan by completing and returning to the Plan Administrator
a Deferral Agreement form which provides that the Participant's
cash compensation from the Employer will be reduced by the amount
indicated in the Deferral Agreement, and that the Employer will
contribute an equivalent amount to the Trust on behalf of the
Participant. The following rules will govern Elective Deferrals:
Subject to the limits specified in the Plan
Agreement and set forth in Section 5.3, a Deferral Agreement may
apply to any amount or percentage of either or both of the
Earnings payable to a Participant in each regular payroll period
of the Employer, or one or more bonuses payable to a Participant
from time to time as specified by the Employer.
In accordance with such reasonable rules as the
Plan Administrator shall specify, a Deferral Agreement will
become effective as soon as is administratively feasible after
the Deferral Agreement is returned to the Plan Administrator, and
will remain effective until it is modified or terminated. No
Deferral Agreement may become effective retroactively.
A Participant may modify his Deferral Agreement by
completing and returning to the Plan Administrator a new Deferral
Agreement form as of any of the dates specified in the Plan
Agreement, and any such modification will become effective as
described in paragraph (b).
A Participant may terminate his Deferral Agreement
at any time upon advance written notice to the Plan
Administrator, and any such termination will become effective as
described in paragraph (b).
Annual Limit on Elective Deferrals. During any taxable
year of a Participant, his Elective Deferrals under the Plan and
any other qualified plan of an Affiliated Employer shall not
exceed the dollar limit contained in Section 402(g) of the Code
in effect at the beginning of the taxable year. With respect to
any taxable year, a Participant's Elective Deferrals for purposes
of this Section 5.3 include all Employer contributions made on
his behalf pursuant to an election to defer under any qualified
CODA as described in Section 401(k) of the Code, any simplified
employee pension cash or deferred arrangement (SARSEP) as
described in Section 402(h)(1)(B) of the Code, any eligible
deferred compensation plan under Section 457 of the Code, any
plan described under Section 501(c)(18) of the Code, and any
Employer contributions made on behalf of the Participant for the
purchase of an annuity contract under Section 403(b) of the Code
pursuant to a salary reduction agreement. The amount of Elective
Deferrals of a Participant who receives a hardship distribution
pursuant to Section 5.14 shall be reduced, for the taxable year
next following the distribution, by the amount of Elective
Deferrals made in the taxable year of the hardship distribution.
Distribution of Excess Elective Deferrals. "Excess
Elective Deferrals" means those Elective Deferrals described in
Section 5.3 that are includible in a Participant's gross income
under Section 402(g) of the Code, to the extent that the
Participant's aggregate elective deferrals for a taxable year
exceed the dollar limitation under that Code Section. Excess
Elective Deferrals shall be treated as Annual Additions under the
Plan, whether or not they are distributed under this Section 5.4.
A Participant may designate to the Plan any Excess Elective
Deferrals made during his taxable year by notifying the Employer
on or before the following March 15 of the amount of the Excess
Elective Deferrals to be so designated.
Notwithstanding any other provision of the Plan, Excess
Elective Deferrals, plus any income and minus any loss allocable
thereto, shall be distributed no later than April 15 to any
Participant to whose Account Excess Elective Deferrals were
designated for the preceding year and who claims Excess Elective
Deferrals for such taxable year. Excess Elective Deferrals shall
be adjusted for any income or loss up to the date of
distribution. The income or loss allocable to Excess Elective
Deferrals is the sum of: (1) income or loss allocable to the
Participant's Elective Deferral Account for the taxable year
multiplied by a fraction, the numerator of which is the
Participant's Excess Elective Deferrals for the year and the
denominator of which is the Participant's Account balance
attributable to Elective Deferrals without regard to any income
or loss occurring during the year; and (2) ten percent of the
amount determined under (1), multiplied by the number of whole
calendar months between the end of the Participant's taxable year
and the date of distribution, counting the month of distribution
if distribution occurs after the 15th day of that month.
Satisfaction of ADP and ACP Tests. In each Plan Year,
the Plan must satisfy the ADP test described in Section 5.6 and
the ACP test described in Section 5.11. The Employer may cause
the Plan to satisfy the ADP or ACP test or both tests for a Plan
Year by any of the following methods or by any combination of
them:
By the distribution of Excess Contributions in
accordance with Section 5.7, or the distribution of Excess
Aggregate Contributions in accordance with Section 5.12, or both;
In a Variable Plan that permits all Participants
to make Participant Contributions, by recharacterization of
Excess Contributions in accordance with Section 5.10; or
If the Employer has so elected in the Plan
Agreement, by making Qualified Nonelective Contributions or
Qualified Matching Contributions or both, in accordance with the
Plan Agreement and this Section 5.5.
Actual Deferral Percentage Test Limit. The Actual
Deferral Percentage (hereinafter "ADP") for Participants who are
Highly Compensated Employees for each Plan Year and the ADP for
Participants who are Non-Highly Compensated Employees for the
same Plan Year must satisfy one of the following tests:
The ADP for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the ADP
for Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
The ADP for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the ADP
for Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by 2.0, provided that the ADP for
Participants who are Highly Compensated Employees does not exceed
the ADP for Participants who are Non-Highly Compensated Employees
by more than two percentage points.
The following special rules shall apply to the computation
of the ADP:
"Actual Deferral Percentage" means, for a
specified group of Participants for a Plan Year, the average of
the ratios (calculated separately for each Participant in the
group) of (1) the amount of Employer contributions actually paid
over to the Trust on behalf of the Participant for the Plan Year
to (2) the Participant's Earnings for the Plan Year (whether or
not the Employee was a Participant for the entire Plan Year).
Employer contributions on behalf of any Participant shall
include: (i) his Elective Deferrals, including Excess Elective
Deferrals, but excluding Elective Deferrals that are taken into
account in the Average Contribution Percentage test described in
Section 5.11 (provided the ADP test is satisfied both with and
without exclusion of these Elective Deferrals); and (ii) if the
Employer has elected to make Qualified Nonelective Contributions,
such amount of Qualified Nonelective Contributions, if any, as
shall be necessary to enable the Plan to satisfy the ADP test;
and (iii) if the Employer has elected to make Qualified Matching
Contributions, such amount of Qualified Matching Contributions,
if any, as shall be necessary to enable the Plan to satisfy the
ADP test. For purposes of computing Actual Deferral Percentages,
an Employee who would be a Participant but for his failure to
make Elective Deferrals shall be treated as a Participant on
whose behalf no Elective Deferrals are made.
In the event that the Plan satisfies the
requirements of Sections 401(k), 401(a)(4), or 410(b) of the Code
only if aggregated with one or more other plans, or if one or
more other plans satisfy the requirements of such sections of the
Code only if aggregated with the Plan, then this Section 5.6
shall be applied by determining the ADP of Employees as if all
such plans were a single plan. For Plan Years beginning after
December 31, 1989, plans may be aggregated in order to satisfy
Section 401(k) of the Code only if they have the same Plan Year.
The ADP for any Participant who is a Highly Compensated
Employee for the Plan Year and who is eligible to have Elective
Deferrals (and Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, if these are treated as Elective
Deferrals for purposes of the ADP test) allocated to his Accounts
under two or more CODAs described in Section 401(k) of the Code
that are maintained by the Affiliated Employers shall be
determined as if such Elective Deferrals (and, if applicable,
such Qualified Nonelective Contributions or Qualified Matching
Contributions, or both) were made under a single CODA. If a
Highly Compensated Employee participates in two or more CODAs
that have different Plan Years, all CODAs ending with or within
the same calendar year shall be treated as a single CODA.
For purposes of determining the ADP of a
Participant who is a 5-percent owner or one of the ten most
highly-paid Highly Compensated Employees, the Elective Deferrals
(and Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, if these are treated as Elective
Deferrals for purposes of the ADP test) and the Compensation of
such a Participant shall include the Elective Deferrals (and, if
applicable, Qualified Nonelective contributions and Qualified
Matching Contributions, or both) and Compensation for the Plan
Year of his Family Members (as defined in section 414(q)(6) of
the Code). Family Members of such Highly Compensated Employees
shall be disregarded as separate employees in determining the ADP
both for Participants who are Non-Highly Compensated Employees
and for Participants who are Highly Compensated Employees.
For purposes of the ADP test, Elective Deferrals,
Qualified Nonelective Contributions and Qualified Matching
Contributions must be made before the last day of the 12-month
period immediately following the Plan Year to which those
contributions relate.
The Employer shall maintain records sufficient to
demonstrate satisfaction of the ADP test and the amount of
Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, used in satisfying the test.
The determination and treatment of the ADP amounts
of any Participant shall satisfy such other requirements as may
be prescribed by the Secretary of the Treasury.
Distribution of Excess Contributions. "Excess
Contributions" means, with respect to any Plan Year, the excess
of:
The aggregate amount of Employer contributions
actually taken into account in computing the ADP of Highly
Compensated Employees for the Plan Year, over
The maximum amount of Employer contributions permitted
by the ADP test, determined by reducing contributions made on
behalf of Highly Compensated Employees in order of their ADPs,
beginning with the highest of such percentages.
Notwithstanding any other provision of the Plan, Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of each
Plan Year to Participants to whose Accounts Excess Contributions
were allocated for the preceding Plan Year; provided, however,
that in the case of a Variable Plan in which the Employer has
elected in the Plan Agreement to recharacterize Excess
Contributions pursuant to Section 5.10, distribution shall be
made pursuant to this Section 5.7 to the extent that Excess
Contributions are not so recharacterized. If such excess amounts
are distributed more than two and one-half months after the last
day of the Plan Year in which the excess amounts arose, an excise
tax equal to ten percent of the excess amounts will be imposed on
the Employer maintaining the Plan. Such distributions shall be
made to Highly Compensated Employees on the basis of the
respective portions of the Excess Contributions attributable to
each of them. Excess Contributions shall be allocated to
Participants who are subject to the family member aggregation
rules of Section 414(q)(6) of the Code in the manner prescribed
by the regulations under that Section. Excess Contributions
(including any amounts recharacterized in accordance with Section
5.10) shall be treated as Annual Additions under the Plan.
Excess Contributions shall be adjusted for any income or
loss up to the date of distribution. The income or loss
allocable to Excess Contributions is the sum of: (1) income or
loss allocable to the Participant's Elective Deferral Account
(and, if applicable, his Qualified Nonelective Account or
Qualified Matching Account or both) for the Plan Year multiplied
by a fraction, the numerator of which is the Participant's Excess
Contributions for the year and the denominator is the
Participant's account balance attributable to Elective Deferrals
(and Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, if any of these are included in the ADP
test) without regard to any income or loss occurring during such
Plan Year; and (2) ten percent of the amount determined under
(1), multiplied by the number of whole calendar months between
the end of the Plan Year and the date of distribution, counting
the month of distribution if distribution occurs after the 15th
day of that month.
Excess Contributions shall be distributed from the
Participant's Elective Deferral Account and Qualified Matching
Account (if applicable) in proportion to the Participant's
Elective Deferrals and Qualified Matching Contributions (to the
extent used in the ADP test) for the Plan Year. Excess
Contributions shall be distributed from the Participant's
Qualified Nonelective Account only to the extent that such Excess
Contributions exceed the balance in the Participant's Elective
Deferral Account and Qualified Matching Account.
Employer Matching Contributions (Variable Plans Only).
If so specified in the Plan Agreement, the Employer will make
Employer Matching Contributions to the Plan in accordance with
the Plan Agreement. Employer Matching Contributions will be
allocated among the Employer Matching Accounts of Participants in
proportion to their Elective Deferrals or their Participant
Contributions, as specified by the Employer in the Plan
Agreement. Employer Matching Accounts shall become vested
according to the vesting schedule specified in the Plan
Agreement, but regardless of that schedule shall be fully vested
upon the Participant's Retirement (or, if earlier, his
fulfillment of the requirements for early retirement, if any, or
attainment the normal retirement age specified in the Plan
Agreement), his death during employment with an Affiliated
Employer, and in accordance with Section 19.3. Forfeitures of
Employer Matching Contributions, other than Excess Aggregate
Contributions, shall be made in accordance with Section 8.3.
Forfeitures of Employer Matching Accounts for a Plan Year shall
be applied to reduce the total Employer Matching Contribution for
the Plan Year, or allocated among the Employer Matching Accounts
of Participants in addition to the Employer Matching Contribution
for the Plan Year, as elected by the Employer in the Plan
Agreement.
Participant Contributions (Variable Plans Only). If so
specified in the Plan Agreement for a Variable Plan, a
Participant may make nondeductible Participant Contributions to
the Plan in accordance with the Plan Agreement and subject to the
terms and conditions of this Article 5. Participant
Contributions will be allocated to the Participant Contributions
<PAGE>
Account of the contributing Participant. All Participant
Contribution Accounts will be fully vested at all times.
Recharacterization of Excess Contributions (Variable
Plans Only). Provided that the Plan Agreement permits all
Participants to make Participant Contributions, the Employer may
treat a Participant's Excess Contributions to a Variable Plan as
an amount distributed to the Participant and then contributed by
the Participant to the Plan as a Participant Contribution.
Recharacterized amounts will remain nonforfeitable and subject to
the same distribution requirements as Elective Deferrals.
Amounts may not be recharacterized by a Highly Compensated
Employee to the extent that a recharacterized amount in
combination with other Participant Contributions made by that
Employee would exceed any stated limit under the Plan on
Participant Contributions. Recharacterization must occur no later
than two and one-half months after the last day of the Plan Year
in which the Excess Contributions arose, and is deemed to occur
no earlier than the date the last Highly Compensated Employee is
informed in writing by the Employer of the amount recharacterized
and the consequences thereof. Recharacterized amounts will be
taxable to the Participant for his tax year in which the
Participant would have received them in cash.
Average Contribution Percentage Test Limit and Aggregate
Limit. The Average Contribution Percentage (hereinafter "ACP")
for Participants who are Highly Compensated Employees for each
Plan Year and the ACP for Participants who are Non-Highly
Compensated Employees for the same Plan Year must satisfy one of
the following tests:
The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the ACP
for Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by 1.25; or
The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the ACP
for Participants who are Non-Highly Compensated Employees for the
same Plan Year multiplied by two (2), provided that the ACP for
Participants who are Highly Compensated Employees does not exceed
the ACP for Participants who are Non-Highly Compensated Employees
by more than two percentage points.
The following rules shall apply to the computation of the
ACP:
Average Contribution Percentage means the average
of the Contribution Percentages of the Eligible Participants in a
group.
<PAGE>
Contribution Percentage means the ratio (expressed
as a percentage) of a Participant's Contribution Percentage
Amounts to the Participant's Earnings for the Plan Year (whether
or not the Employee was a Participant for the entire Plan Year).
Contribution Percentage Amounts means the sum of
the Participant Contributions, Employer Matching Contributions,
and Qualified Matching Contributions (to the extent not taken
into account for purposes of the ADP test) made under the Plan on
behalf of the Participant for the Plan Year. Such Contribution
Percentage Amounts shall include Forfeitures of Excess Aggregate
Contributions or Employer Matching Contributions allocated to the
Participant's Account, taken into account in the year in which
the allocation is made. If the Employer has elected in the Plan
Agreement to make Qualified Nonelective Contributions, such
amount of Qualified Nonelective Contributions, if any, as shall
be necessary to enable the Plan to satisfy the ACP test shall be
in the Contribution Percentage Amounts. Elective Deferrals shall
also be included in the Contribution Percentage Amounts to the
extent, if any, needed to enable the Plan to satisfy the ACP
test, so long as the ADP test is met before the Elective
Deferrals are used in the ACP test, and continues to
be met following the exclusion of those Elective Deferrals that
are used to meet the ACP test.
Eligible Participant means any Employee who is
eligible to make a Participant Contribution (or an Elective
Deferral, if Elective Deferrals are taken into account in the
calculation of the Contribution Percentage), or to receive an
Employer Matching Contribution (or a Forfeiture thereof) or a
Qualified Matching Contribution. If a Participant Contribution
is required as a condition of participation in the Plan, any
Employee who would be a Participant in the Plan if he made such a
contribution shall be treated as an Eligible Participant on
behalf of whom no Participant Contributions are made.
Aggregate Limit means the sum of (i) 125 percent
of the greater of the ADP of the Non-Highly Compensated Employees
for the Plan Year, or the ACP of Non-Highly Compensated Employees
under the Plan subject to Code Section 401(m) for the Plan Year
beginning with or within the Plan Year of the CODA, and (ii) the
lesser of 200 percent of, or two plus, the lesser of the ADP or
ACP.
If one or more Highly Compensated Employees
participate in both a CODA and a plan subject to the ACP test
maintained by an Affiliated Employer, and the sum of the ADP and
ACP of those Highly Compensated Employees subject to either or
both tests exceeds the Aggregate Limit, then the ACP of those
Highly Compensated Employees who also participate in a CODA will
be reduced (beginning with the Highly Compensated Employee whose
ACP is the highest) so that the Aggregate Limit is not exceeded.
The amount by which each Highly Compensated Employee's
Contribution Percentage Amounts is reduced shall be treated as an
Excess Aggregate Contribution. In determining the Aggregate
Limit, the ADP and ACP of Highly Compensated Employees are
determined after any corrections required to met the ADP and ACP
tests. The Aggregate Limit will be considered satisfied if both
the ADP and ACP of the Highly Compensated Employees does not
exceed 1.25 multiplied by the ADP and ACP of the Non-Highly
Compensated Employees.
For purposes of this section, the Contribution
Percentage for any Participant who is a Highly Compensated
Employee and who is eligible to have Contribution Percentage
Amounts allocated to his account under two or more plans
described in Section 401(a) of the Code, or CODAs described in
Section 401(k) of the Code, that are maintained by an Affiliated
Employer, shall be determined as if the total of such
Contribution Percentage Amounts was made under each plan. If a
Highly Compensated Employee participates in two or more CODAs
that have different plan years, all CODAs ending with or within
the same calendar year shall be treated as a single CODA.
In the event that the Plan satisfies the requirements
of Sections 401(m), 401(a)(4) or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more other
plans satisfy the requirements of such sections of the Code only
if aggregated with the Plan, then this Section 5.10 shall be
applied by determining the Contribution Percentage of Employees
as if all such plans were a single plan. For Plan Years
beginning after December 31, 1989, plans may be aggregated in
order to satisfy Section 401(m) of the Code only if they have the
same Plan Year.
For purposes of determining the Contribution
Percentage of a Participant who is a five-percent owner or one of
the ten most highly-paid Highly Compensated Employers, the
Contribution Percentage Amounts and Compensation of the
Participant shall include the Contribution Percentage Amounts and
Compensation for the Plan Year of Family Members (as defined in
Section 414(q)(6) of the Code). Family Members of such Highly
Compensated Employees shall be disregarded as separate employees
in determining the Contribution Percentage both for Participants
who are Non-Highly Compensated Employees and for Participants who
are Highly Compensated Employees.
For purposes of the ACP test, Participant
Contributions are considered to have been made in the Plan Year
in which they were contributed to the Trust. Matching
Contributions and Qualified Nonelective Contributions will be
considered made for a Plan Year if made no later than the end of
<PAGE>
the 12-month period beginning on the day after the close of the
Plan Year.
The Employer shall maintain records sufficient to
demonstrate satisfaction of the ACP test and the amount of
Qualified Nonelective Contributions or Qualified Matching
Contributions, or both, used in the ACP test.
The determination and treatment of the
Contribution Percentage of any Participant shall satisfy such
other requirements as may be prescribed by the Secretary of the
Treasury.
Distribution of Excess Aggregate Contributions.
Notwithstanding any other provision of the Plan, Excess Aggregate
Contributions, plus any income and minus any loss allocable
thereto, shall be forfeited if forfeitable, or if not
forfeitable, distributed no later than the last day of each Plan
Year to Participants to whose accounts such Excess Aggregate
Contributions were allocated for the preceding Plan Year. Excess
Aggregate Contributions shall be allocated to Participants who
are subject to the family member aggregation rules of Section
414(q)(6) of the Code in the manner prescribed by the
regulations. If excess amounts attributable to Excess Aggregate
Contributions are distributed more than two and one-half months
after the last day of the Plan Year in which such excess amounts
arose, an excise tax
equal to ten percent of the excess amounts will be imposed on the
Employer maintaining the Plan. Excess Aggregate Contributions
shall be treated as Annual Additions under the Plan.
Excess Aggregate Contributions shall be adjusted for any
income or loss up to the date of distribution. The income or
loss allocable to Excess Aggregate Contributions is the sum of:
(1) income or loss allocable to the Participant's Participant
Contribution Account, Employer Matching Contribution Account (if
any, and if all amounts therein are not used in the ADP test)
and, if applicable, Qualified Nonelective Account and Elective
Deferral Account for the Plan Year, multiplied by a fraction, the
numerator of which is the Participant's Excess Aggregate
Contributions for the year and the denominator of which is the
Participant's account balance(s) attributable to Contribution
Percentage Amounts without regard to any income or loss occurring
during the Plan Year; and (2) ten percent of the amount
determined under (1), multiplied by the number of whole calendar
months between the end of the Plan Year and the date of
distribution, counting the month of distribution if distribution
occurs after the 15th of that month.
Forfeitures of Excess Aggregate Contributions shall either
be reallocated to the accounts of Non-Highly Compensated
<PAGE>
Employees or applied to reduce Employer contributions, as elected
by the Employer in the Plan Agreement.
Excess Aggregate Contributions shall be forfeited if
forfeitable, or distributed on a pro-rata basis from the
Participant's Participant Contribution Account, Employer Matching
Account, and Qualified Matching Account (and, if applicable, the
Participant's Qualified Nonelective Account or Elective Deferral
Account, or both).
Excess Aggregate Contributions means, with respect to any
Plan Year, the excess of:
The aggregate Contribution Percentage Amounts
taken into account in computing the numerator of the Contribution
Percentage and actually made on behalf of Highly Compensated
Employees for the Plan Year, over
The maximum Contribution Percentage Amounts
permitted by the ACP test (determined by reducing contributions
made on behalf of Highly Compensated Employees in order of their
Contribution Percentages, beginning with the highest of such
percentages).
Such determination shall be made after first determining
Excess Elective Deferrals pursuant to Section 5.4, and then
determining Excess Contributions pursuant to Section 5.7.
Restriction on Distributions. No distribution may be
made from a Participant's Elective Deferral Account, Qualified
Nonelective Account or Qualified Matching Account until the
occurrence of one of the following events:
The Participant's Disability, death or termination
of employment with the Affiliated Employers;
Termination of the Plan without the establishment
of another defined contribution plan;
If the Plan is a profit sharing plan, the
Participant's attainment of age 59\ (if the Employer has elected
in the Plan Agreement to permit such distributions); or
In the case of an Employer that is a corporation,
the disposition by the Employer to an unrelated entity of (i)
substantially all of the assets (within the meaning of Section
409(d)(2) of the Code) used in a trade or business of the
Employer, if the Employer continues to maintain the Plan after
the disposition, but only with respect to Employees who continue
employment with the entity acquiring such assets; or (ii) the
Employer's interest in a subsidiary (within the meaning of
Section 409(d)(3) of the Code), if the Employer continues to
maintain the Plan after the disposition, but only with respect to
Employees who continue employment with such subsidiary.
In addition, if the Employer has elected in the Plan
Agreement to permit such distributions, a distribution may be
made from a Participant's Elective Deferral Account in the event
of his financial hardship as described in Section 5.14. All
distributions upon any of the events listed above are subject to
the conditions of Article 10, Joint and Survivor Annuity
Requirements.
Hardship Distributions. If the Employer has so elected
in the Plan Agreement, upon a Participant's written request the
Employer may permit a distribution from his Elective Deferral
Account (and, in a Variable Plan, from his Employer Matching
Account). The terms and conditions of Section 12.2 and the
special vesting rule contained in Section 8.4 shall apply to
hardship distributions from an Employer Contribution Account or
an Employer Matching Account. The further terms of this Section
5.14 shall apply to hardship distributions from an Elective
Deferral Account. No hardship distribution shall be made from a
Qualified Nonelective Account or a Qualified Matching Account.
The maximum amount that may be distributed on
account of hardship from an Elective Deferral Account after
December 31, 1988, shall not exceed the sum of (1) the amount
credited to the Account as of December 31, 1988, and (2) the
aggregate amount of the Elective Deferrals made by the
Participant after December 31, 1988, and before the hardship
distribution.
Hardship distributions shall be permitted only on
account of the following financial needs:
Medical expenses (within the meaning of Section
213(d) of the Code) of the Participant, his spouse, children and
dependents, which are deductible for purposes of federal income
tax;
Purchase of the principal residence of the
Participant (excluding regular mortgage payments);
Payment of tuition for the upcoming quarter or
semester of post-secondary education for the Participant, his
spouse, children or dependents; or
Payments necessary to prevent the Participant's
eviction from, or the foreclosure of a mortgage on, his principal
residence.
Hardship distributions shall be subject to the
spousal consent requirements contained in Sections 401(a)(11) and
417 of the Code, to the same extent that those requirements apply
to a Participant pursuant to Section 10.1.
A hardship distribution will be made to a
Participant only upon satisfaction of the following conditions:
The Participant has obtained all nontaxable loans
and all distributions other than hardship distributions available
to him from all plans maintained by the Affiliated Employers;
The hardship distribution does not exceed the
amount of the Participant's financial need (as described in
paragraph (b));
All plans maintained by the Affiliated Employers
provide that the Participant's Elective Deferrals and Participant
Contributions will be suspended for a period of 12 months
following his receipt of a hardship distribution; and
All plans maintained by the Affiliated Employers
provide that the amount of Elective Deferrals that the
Participant may make in his taxable year immediately following
the year of a hardship distribution will not exceed the
applicable limit under Section 402(g) of the Code for the taxable
year, reduced by the amount of Elective Deferrals made by the
Participant in the taxable year of the hardship distribution.
If this Article 5 is adopted as an amendment of an
existing plan that at any time after the beginning of the first
Plan Year beginning after December 31, 1988, has determined the
existence of immediate and heavy financial need, or the
availability of other resources, or both, on the basis of all of
the facts and circumstances, such determinations shall continue
to be made by the Plan Administrator on the basis of all the
facts and circumstances, with respect to amounts attributable to
contributions made before the adoption of the Plan.
Special Effective Dates. If the Plan is adopted as an
amendment of an existing plan, the provisions of Sections 5.3 and
Section 5.7 through 5.11 are effective as of the first day of the
first Plan Year beginning after December 31, 1986.
ARTICLE
Limitations On Allocations
No Additional Plan. If the Participant does not
participate in and has never participated in another qualified
plan, or a welfare benefit fund, (as defined in Section 419(e) of
the Code), or an individual medical account (as defined in
Section 415(l)(2) of the Code) which provides an Annual Addition
<PAGE>
as defined in Section 6.5(a), maintained by an Affiliated
Employer:
The amount of Annual Additions which may be
credited to the Participant's accounts for any Limitation Year
will not exceed the lesser of the Maximum Annual Additions or any
other limitation contained in this Plan. If the Employer
contribution that would otherwise be contributed or allocated to
the Participant's Account would cause the Annual Additions for
the Limitation Year to exceed the Maximum Annual Additions, the
amount contributed or allocated will be reduced so that the
Annual Additions for the Limitation Year will equal the Maximum
Annual Additions.
Before determining a Participant's actual Section
415 compensation for a Limitation Year, the Employer may
determine the Maximum Annual Additions for the Participant on the
basis of a reasonable estimation of the Participant's Section 415
Compensation for the Limitation Year, uniformly determined for
all Participants similarly situated.
As soon as is administratively feasible after the
end of the Limitation Year, the Maximum Annual Additions for the
Limitation Year will be determined on the basis of the
Participant's actual Section 415 Compensation for the Limitation
Year.
If pursuant to paragraph (c) or as a result of the
reallocation of Forfeitures the Annual Additions exceed the
Maximum Annual Additions, the Excess Amount will be disposed of
as follows:
Any nondeductible voluntary Participant
contributions, to the extent they would reduce the Excess Amount,
will be returned to the Participant.
If after the application of (1) above an Excess
Amount still exists, and the Participant is covered by the Plan
at the end of the Limitation Year, the Excess Amount in the
Participant's Accounts will be used to reduce Employer
contributions (including any allocation of Forfeitures) for such
Participant in the next Limitation Year, and each succeeding
Limitation Year if necessary.
If after the application of (1) above an Excess
Amount still exists, and the Participant is not covered by the
Plan at the end of a Limitation Year, the Excess Amount will be
held unallocated in a suspense account. The suspense account
will be applied to reduce future Employer contributions
(including allocation of any Forfeitures) for all remaining
Participants in the next Limitation Year, and each succeeding
Limitation Year if necessary.
If a suspense account is in existence at any time
during a Limitation Year pursuant to this Section 6.1(d), it will
participate in the allocation of the Trust's investment gains and
losses. If a suspense account is in existence at any time during
a particular Limitation Year, all amounts in the suspense account
must be allocated and reallocated to Participants' Accounts
before any Employer or any Employee contributions may be made to
the Plan for that Limitation Year. Excess amounts may not be
distributed to Participants or former Participants.
Additional Master or Prototype Plan. If in addition to
this Plan a Participant is covered under another qualified Master
or Prototype defined contribution plan or a welfare benefit fund
(as defined in Section 419(e) of the Code), or an individual
medical account (as defined in Section 415(l)(2) of the Code)
which provides an Annual Addition as defined in Section 6.5(a),
maintained by an Affiliated Employer during any Limitation Year:
The Annual Additions which may be credited to a
Participant's Accounts under this Plan for any such Limitation
Year will not exceed the Maximum Annual Additions reduced by the
Annual Additions credited to a Participant's accounts under the
other plans and welfare benefit funds for the same Limitation
Year. If the Annual Additions with respect to the
Participant under other defined contribution plans and welfare
benefit funds maintained by an Affiliated Employer are less than
the Maximum Annual Additions, and the Employer contribution that
would otherwise be contributed or allocated to the Participant's
Accounts under this Plan would cause the Annual Additions for the
Limitation Year to exceed this limitation, the amount contributed
or allocated will be reduced so that the Annual Additions under
all such plans and funds for the Plan Year will equal the Maximum
Annual Additions. If the Annual Additions with respect to the
Participant under such other defined contribution plans and
welfare benefit funds in the aggregate are equal to or greater
than the Maximum Annual Additions, no amount will be contributed
or allocated to the Participant's Accounts under this Plan for
the Limitation Year.
Before determining a Participant's actual Section
415 Compensation for a Limitation Year, the Employer may
determine the Maximum Annual Additions for the Participant in the
manner described in Section 6.1(b).
As soon as is administratively feasible after the
end of the Plan Year, the Maximum Annual Additions for the Plan
Year will be determined on the basis of the Participant's actual
Section 415 Compensation for the Plan Year.
If, pursuant to Section 6.2(c) or as a result of
the allocation of Forfeitures, a Participant's Annual Additions
under this Plan and such other plans would result in an Excess
Amount for a Limitation Year, the Excess Amount will be deemed to
consist of the Annual Additions last allocated under any
qualified Master or Prototype defined contribution plan, except
that Annual Additions to any welfare benefit fund or individual
medical account will be deemed to have been allocated first
regardless of the actual allocation date.
If an Excess Amount was allocated to a Participant
on an allocation date of this Plan which coincides with an
allocation date of another plan, the Excess Amount attributed to
this Plan will be the product of X and Y, where (X) is the total
Excess Amount allocated as of such date, and (Y) is the ratio of:
(1) the Annual Additions allocated to the Participant for the
Limitation Year as of such date under this Plan to (2) the total
Annual Additions allocated to the Participant for the Limitation
Year as of such date under this and all the other qualified
Master or Prototype defined contribution plans.
Any Excess Amount attributed to this Plan will be
disposed of in the manner described in Section 6.1(d).
Additional Non-Master or Non-Prototype Plan. If the
Participant is covered under another qualified defined
contribution plan maintained by an Affiliated Employer which is
not a Master or
Prototype plan, Annual Additions which may be credited to the
Participant's Accounts under this Plan for any Limitation Year
will be limited in accordance with Section 6.2 as though the
other plan were a Master or Prototype plan, unless the Employer
provides other limitations in the Plan Agreement.
Additional Defined Benefit Plan. If an Affiliated
Employer maintains, or at any time maintained, a qualified
defined benefit plan covering any Participant in this Plan, the
sum of the Participant's Defined Benefit Plan Fraction and
Defined Contribution Plan Fraction will not exceed 1.0 in any
Limitation Year. The Annual Additions which may be credited to
the Participant's Accounts under this Plan for any Limitation
Year will be limited in accordance with the Plan Agreement.
Definitions.
Annual Additions means the sum of the following
amounts credited to a Participant's Accounts for the Limitation
Year:
Employer contributions;
For any Limitation Year beginning after December
31, 1986, after-tax Employee contributions;
Forfeitures;
Amounts allocated after March 31, 1984, to any
individual medical account, as defined in Section 415(l)(2) of
the Code, which is part of a pension or annuity plan maintained
by an Affiliated Employer;
Amounts derived from contributions paid or accrued
after December 31, 1985, in taxable years ending after such date,
which are attributable to post-retirement medical benefits
allocated to the separate account of a key Employee, as defined
in Section 419A(d)(3) of the Code, under a welfare benefit fund
as defined in Section 419(e) of the Code, maintained by an
Affiliated Employer; and
In a Plan that includes a CODA, Excess Elective
Deferrals, Excess Contributions (including recharacterized
Elective Deferrals) and Excess Aggregate Contributions.
For this purpose, any Excess Amount applied under Sections
6.1(d) or 6.2(e) in the Limitation Year to reduce Employer
contributions will be considered Annual Additions for such
Limitation Year. Any rollover contribution will not be
considered an Annual Addition.
Section 415 Compensation means a Participant's
earned income or wages, salaries, and fees for professional
services and other amounts received for personal services
actually rendered in the course of employment with the Employer
maintaining the Plan (including, but not limited, to commissions
paid salesmen, compensation for services on the basis of a
percentage of profits, commissions on insurance premiums, tips
and bonuses), and excluding the following:
Employer contributions to a plan of deferred
compensation which are not includible in the Participant's gross
income for the taxable year in which contributed, or Employer
contributions under a simplified Employee pension plan to the
extent such contributions are deductible by the Employee, or any
distributions from a plan of deferred compensations;
Amounts realized from the exercise of a non-
qualified stock option, or when restricted stock (or property)
held by the Participant either becomes freely transferable or is
no longer subject to a substantial risk of forfeiture;
Amounts realized from the sale, exchange or other
disposition of stock acquired under a qualified stock option; and
Other amounts which received special tax benefits,
or contributions made by the Employer (whether or not under a
salary reduction agreement) towards the purchase of an annuity
described in Section 403(b) of the Code (whether or not the
<PAGE>
amounts are actually excludable from the gross income of the
Participant).
For purposes of applying the limitations of this Article 6,
Section 415 Compensation for a Limitation Year is the Section 415
Compensation actually paid or includible in gross income during
such Limitation Year.
Defined Benefit Fraction means a fraction, the
numerator of which is the sum of the Participant's Projected
Annual Benefits under all the defined benefit plans (whether or
not terminated) maintained by the Affiliated Employers, and the
denominator of which is the lesser of 125 percent of the dollar
limitation in effect for the Limitation Year under Sections
415(b) and (d) of the Code, or 140 percent of the Participant's
Highest Average Compensation including any adjustments under
Section 415(b) of the Code. Notwithstanding the foregoing, if the
Participant was a Participant as of the first day of the first
Limitation Year beginning after December 31, 1986, in one or more
defined benefit plans maintained by an Affiliated Employer which
were in existence
on May 6, 1986, the denominator of this fraction will not be less
than 125 percent of the sum of the annual benefits under such
plans which the Participant had accrued as of the close of the
last Limitation Year beginning before January 1, 1987,
disregarding any change in the terms and conditions of the Plan
after May 5, 1986. The preceding sentence applies only if the
defined benefit plans individually and in the aggregate satisfied
the requirements of Section 415 of the Code for all Limitation
Years beginning before January 1, 1987.
Defined Contribution Dollar Limitation means
$30,000 or if greater, one-fourth of the defined benefit dollar
limitation set forth in Section 415(b)(1) of the Code as in
effect for the Limitation Year.
Defined Contribution Fraction means a fraction,
the numerator of which is the sum of the Annual Additions to the
Participant's accounts under all the defined contribution plans
(whether or not terminated) maintained by Affiliated Employers
for the current and all prior Limitation Years (including the
Annual Additions attributable to the Participant's nondeductible
Employee contributions to all defined benefit plans, whether or
not terminated, maintained by the Affiliated Employers, and the
Annual Additions attributable to all welfare benefit funds, as
defined in Section 419(e) of the Code, and individual medical
accounts, as defined in Section 415(l)(2) of the Code), and the
denominator of which is the sum of the Maximum Annual Additions
for the current and all prior Limitation Years of service with
the Affiliated Employers (regardless of whether a defined
contribution plan was maintained by any Affiliated Employer).
The Maximum Annual Additions in any Plan Year is the lesser of
125 percent of the dollar limitation determined under Sections
415(b) and (d) of the Code in effect under Section 415(c)(1)(A)
of the Code, or 35 percent of the Participant's Section 415
Compensation for such year. If the Employee was a Participant as
of the end of the first day of the first Limitation Year
beginning after December 31, 1986 in one or more defined
contribution plans maintained by an Affiliated Employer which
were in existence on May 6, 1986, the numerator of this fraction
will be adjusted if the sum of this fraction and the Defined
Benefit Fraction would otherwise exceed 1.0 under the terms of
this Plan. Under the adjustment, an amount equal to product of
the excess of the sum of the fractions over 1.0, multiplied by
the denominator of this fraction, will be permanently subtracted
from the numerator of this fraction. The adjustment is
calculated using the fractions as they would be computed as of
the end of the last Limitation Year beginning before January 1,
1987, and disregarding any changes in the terms and conditions of
the Plan after May 5, 1986, but using the Section 415 limitation
applicable to the first Limitation Year beginning on or after
January 1, 1987. The Annual Addition for any Limitation Year
beginning before January 1, 1987, shall not be recomputed to
treat 100% of nondeductible Employee contributions as Annual
Additions.
Excess Amount means, with respect to any
Participant, the amount by which Annual Additions exceed the
Maximum Annual Additions.
Highest Average Compensation means the average
compensation for the three consecutive Years of Service with the
Employer that produces the highest average. A Year of Service
with the Employer is the period of 12 consecutive months
specified as the Limitation Year in the Plan Agreement.
Limitation Year means the period of 12 consecutive
months specified in the Plan Agreement. All qualified plans
maintained by the Employer must use the same Limitation Year. If
the Limitation Year is amended to a different period of 12
consecutive months, the new Limitation Year must begin on a date
within the Limitation Year in which the amendment is made.
Master or Prototype plan means a plan the form of
which is the subject of a favorable opinion letter from the
Internal Revenue Service.
Maximum Annual Additions, which is the maximum
annual addition that may be contributed or allocated to a
Participant's account under the plan for any Limitation Year,
means an amount not exceeding the lesser of (a) the Defined
Contribution Dollar Limitation or (b) 25 percent of the
Participant's Section 415 Compensation for the Limitation Year.
The compensation limitation referred to in (b) shall not apply to
any contribution for medical benefits (within the meaning of
Section 401(h) or Section 419A(f)(2) of the Code) which is
otherwise treated as an Annual Addition under Section 415(l)(1)
or Section 419A(d)(2) of the Code.
If a short Limitation Year is created because of an
amendment changing the Limitation Year to a different period of
12 consecutive months, the Maximum Annual Additions will not
exceed the Defined Contribution Dollar Limitation multiplied by
the following fraction:
number of months in the
short Limitation Year
12
Projected Annual Benefit means the annual
retirement benefit (adjusted to an actuarially equivalent
straight life annuity if such benefit is expressed in a form
other than a straight life annuity or Qualified Joint and
Survivor Annuity) to which the Participant would be entitled
under the terms of the plan assuming:
the Participant will continue employment until normal
retirement age under the Plan (or current age, if later), and
The Participant's Section 415 Compensation for the
current Limitation Year and all other relevant factors used to
determine benefits under the plan will remain constant for all
future Limitation Years.
ARTICLE
Eligibility for Distribution of Benefits
Retirement. After his Retirement, the amount credited
to a Participant's Accounts will be distributed to him in
accordance with Article 9. The termination of a Participant's
employment with the Affiliated Employers after he has (i)
attained the normal retirement age specified in the Plan
Agreement, (ii) in a Variable Plan, fulfilled the requirements
for early retirement (if any) specified in the Plan Agreement, or
(iii) become Disabled, will constitute his Retirement. In a
Variable Plan, upon a Participant's Retirement (or, if earlier,
his attainment of the normal retirement age specified in the Plan
Agreement or fulfillment of the requirements for early
retirement, if any, specified in the Plan Agreement) the
Participant's Accounts shall become fully vested, regardless of
the vesting schedule specified by the Employer in the Plan
Agreement. In a Variable Plan, a Participant who separates from
service with any vested balance in his Accounts, after satisfying
the service requirements for early retirement (if any is
specified in the Plan Agreement) but before satisfying the age
requirement for early retirement (if any is specified in the Plan
Agreement), shall be entitled to a fully vested early retirement
benefit upon his satisfaction of such age requirement.
Death. If a Participant dies before the distribution
of his Accounts has been completed, his Beneficiary will be
entitled to distribution of benefits in accordance with Article
9. In a Variable Plan, a Participant's Accounts will become
fully vested upon his death before termination of his employment
with the Affiliated Employers, regardless of the vesting schedule
specified by the Employer in the Plan Agreement.
A Participant may designate a Beneficiary by completing and
returning to the Plan Administrator a form provided for this
purpose. The form most recently completed and returned to the
Plan Administrator before the Participant's death shall supersede
any earlier form. If a Participant has not designated any
Beneficiary before his death, or if no Beneficiary so designated
survives the Participant, his Beneficiary shall be his surviving
spouse, or if there is no surviving spouse, his estate. A
married Participant in a profit sharing plan may designate a
Beneficiary other than his
spouse only if his spouse consents in writing to the designation,
and the spouse's consent acknowledges the effect of the consent
and is witnessed by a notary public or a representative of the
Plan. The beneficiary or beneficiaries named in the designation
to which the spouse has so consented may not be changed without
further written spousal consent unless the terms of the spouse's
original written consent expressly permit such a change, and
acknowledge that the spouse voluntarily relinquishes the right to
limit the consent to a specific beneficiary. The marriage of a
Participant shall nullify any designation of a beneficiary
previously executed by the Participant. If it is established to
the satisfaction of the Plan Administrator that the Participant
has no spouse or that the spouse cannot be located, the
requirement of spousal consent shall not apply. Any spousal
consent, or establishment that spousal consent cannot be
obtained, shall apply only to the particular spouse involved.
Other Termination of Employment. A Participant whose
employment terminates for any reason other than his Retirement or
death will be entitled to distribution, in accordance with
Article 9, of benefits equal to the amount of the vested balance
of his Accounts as determined under Article 8.
ARTICLE
Vesting
Vested Balance. The vested balance of a Participant's
Accounts will be determined as follows:
General Rule. A Participant's Deductible Employee
Contribution Account, Participant Contribution Account and
Rollover Account, and in a Standard Plan, all of his Accounts,
shall be fully vested at all times. The vested portion of his
Employer Contribution Account in a Variable Plan shall be equal
to the percentage that corresponds, in the vesting schedule
specified in the Plan Agreement (or, if the Plan has become top-
heavy, the vesting schedule determined under Section 15.5), to
the number of Years of Service credited to the Participant as of
the end of the Plan Year in which his employment terminates.
Special Rules for CODA. In a Plan that includes a
CODA, a Participant's Elective Deferral Account, Qualified
Nonelective Account, and Qualified Matching Account shall be
fully vested at all times. The vested portion of his Employer
Matching Account in a Variable Plan shall be equal to the
percentage that corresponds, in the vesting schedule specified in
the Plan Agreement (or, if the Plan has become top-heavy, the
vesting schedule determined under Section 15.5), to the number of
Years of Service credited to the Participant as of the end of the
Plan Year in which his employment terminates.
Retirement. In a Variable Plan, all of a Participant's
Accounts shall become fully vested upon his Retirement or his
earlier attainment of early retirement age (if any) or the normal
retirement age elected by the Employer in the Plan Agreement.
For so long as a former Employee does not receive a
distribution (or a deemed distribution) of the vested portion of
his Accounts, the undistributed portion shall be held in a
separate account which shall be invested pursuant to Section 13.3
and shall share in earnings and losses of the Trust Fund pursuant
to Section 13.4 in the same manner as the Accounts of active
Participants.
Vesting of Accounts of Returned Former Employees
(Variable Plans Only). The following rules apply in determining
the vested portion of the Accounts of a Participant who incurs
one or more consecutive One-Year Vesting Breaks and then returns
to employment with an Affiliated Employer:
If the Participant incurred fewer than five
consecutive One-Year Vesting Breaks, then all of his Years of
Service will be taken into account in determining the vested
portion of his Accounts, as soon as he has completed one Year of
Service following his return to employment.
If the Participant incurred five or more
consecutive One-Year Vesting Breaks, then:
No Year of Service completed after his return to
employment will be taken into account in determining the vested
portion of his Accounts as of any time before he incurred the
first One-Year Vesting Break;
Years of Service completed before he incurred the
first One-Year Vesting Break will not be taken into account in
determining the vested portion of his Accounts as of any time
after his return to employment (i) unless some portion of his
Employer Contribution Account or Employer Matching Account had
become vested before he incurred the first One-Year Vesting
Break, and (ii) until he has completed one Year of Service
following his return to employment; and
Separate sub-accounts will be maintained for the
Participant's pre-break and post-break Employer Contribution
Account and Employer Matching Account, until both sub-accounts
become fully vested. Both sub-accounts will share in the
earnings and losses of the Trust Fund.
Forfeiture of Non-Vested Amounts (Variable Plans Only).
The portion of a former Employee's Accounts that has not become
vested under Section 8.1 shall become a Forfeiture in accordance
with the following rules, and shall be reallocated in accordance
with Section 4.2 or 4.3 or Article 5 (whichever applies) no later
than the end of the Plan Year in which it becomes a Forfeiture.
If Distribution Is Made. If any or all of the
vested portion of a Participant's Accounts is distributed in
accordance with Section 9.1 or 9.2 before the Participant incurs
five consecutive One-Year Vesting Breaks, the nonvested portion
of his Accounts shall become a Forfeiture in the Plan Year in
which the distribution occurs. For purposes of this Section 8.3,
if the value of the vested portion of a Participant's Accounts is
zero, he shall be deemed to have received a distribution of the
entire vested balance of his Accounts on the day his employment
terminates. If the Participant elects to have distributed less
than the entire vested portion of his Employer Contribution
Account or Employer Matching Accounts, the part of the nonvested
portion that will become a Forfeiture is the total nonvested
portion multiplied by a fraction, the numerator of which is the
amount of the distribution and the denominator of which is the
total value of the entire vested portion of such Accounts.
Right of Repayment. If a Participant who receives
a distribution pursuant to paragraph (a) returns to employment
with an Affiliated Employer, the balance of his Employer
Contribution Account and Employer Matching Account will be
restored to the amount of such balance on the date of
distribution, if he repays to the Plan the full amount of the
distribution, before the earlier of (i) the fifth anniversary of
his return to employment or (ii) the date he incurs five
consecutive One-Year Vesting Breaks following the date of
distribution. If an Employee is deemed to receive a distribution
pursuant to this Section 8.3, and he resumes employment covered
under this Plan before the date he incurs 5 consecutive One-Year
Vesting Breaks, upon his reemployment the Employer-derived
account balance of the Employee will be restored to the amount on
the date of such deemed distribution. Such restoration will be
made, first, from the amount of any Forfeitures available for
reallocation as the last day of the Plan Year in which repayment
is made, to the extent thereof; and to the extent that
Forfeitures are not available or are insufficient to restore the
balance, from contributions made by the Employer pursuant to
Section 4.1(f).
If No Distribution Is Made. If no distribution
(or deemed distribution) is made to a Participant before he
incurs five consecutive One-Year Vesting Breaks, the nonvested
portion of his Accounts shall become a Forfeiture in the Plan
Year that constitutes his fifth consecutive One-Year Vesting
Break.
Adjustment of Accounts. Before a Forfeiture is
incurred, a Participant's Accounts shall share in earnings and
losses of the Trust Fund pursuant to Section 13.4 in the same
manner as the Accounts of active Participants.
Accumulated Deductible Contributions. For Plan
Years beginning before January 1, 1989, a Participant's vested
Account balance shall not include accumulated deductible
contributions within the meaning of Section 72(o)(5)(B) of the
Code.
Special Rule in the Event of a Withdrawal (Variable
Plans Only). If a withdrawal pursuant to Section 12.2 or 12.3 is
made from a Participant's Employer Contribution Account or
Employer Matching Account before the Account is fully vested, and
the Participant may increase the vested percentage in the
Account, then a separate account will be established at the time
of the withdrawal, and at any relevant time after the withdrawal
the vested portion of the separate account will be equal to the
amount "X" determined by the following formula:
X = P(AB + D) - D
For purposes of the formula, P is the Participant's vested
percentage at the relevant time, AB is the account balance at the
relevant time, and D is the amount of the withdrawal.
Vesting Election. If the Plan is amended to change any
vesting schedule, or is amended in any way that directly or
indirectly affects the computation of a Participant's vested
percentage, or is deemed amended by an automatic change to a top
heavy vesting schedule pursuant to Article 15, each Participant
who has completed not less than three Years of Service may elect,
within a reasonable period after the adoption of the amendment or
change, in a writing filed with the Employer to have his vested
percentage computed under the Plan without regard to such
amendment. For a Participant who is not credited with at least
one Hour of Service in a Plan Year beginning after December 31,
1988, the preceding sentence shall be applied by substituting
"five Years of Service" for "three Years of Service." The period
during which the election may be made shall commence with the
date the amendment is adopted, or deemed to be made, and shall
end on the latest of 60 days after the amendment is adopted;
60 days after the amendment becomes effective; or 60 days after
the Participant is issued written notice of the amendment by the
Employer.
ARTICLE
Payment of Benefits
Distribution of Accounts. A Participant or Beneficiary
who has become eligible for a distribution of benefits pursuant
to Article 7 may elect to receive such benefits at any time,
subject to the terms and conditions of this Article 9, Article 10
and Article 11. Unless a Participant or Beneficiary elects
otherwise,
distribution of benefits will begin no later than the 60th day
after the end of the Plan Year in which the latest of the
following events occurs:
The Participant attains age 65 (or if earlier, the
normal retirement age specified by the Employer in the Plan
Agreement); or
The tenth anniversary of the year in which the
Participant commenced participation in the Plan; or
The Participant's employment with the Affiliated
Employers terminates.
A Beneficiary who is the surviving spouse of a Participant may
elect to have distribution of benefits begin within the 90-day
period following the Participant's death.
For purposes of this Section 9.1, the failure of a Participant
(and his spouse, if spousal consent is required pursuant to
Article 10) to consent to a distribution while a benefit is
"immediately distributable" within the meaning of Section 9.2
shall be considered an election to defer commencement of payment.
In a Variable Plan, if the Employer has so specified in the Plan
Agreement, the vested portion of a Participant's Accounts will be
distributed in a lump sum in cash no later than 60 days after the
end of the Plan Year in which his employment terminates, if at
the time the Participant first became entitled to a distribution
the value of such vested portion, derived from Employer and
Employee contributions, does not exceed $3,500. Commencement of
distributions in any case shall be subject to Section 9.4.
Restriction on Immediate Distributions. A
Participant's account balance is considered "immediately
distributable" if any part of the account balance could be
distributed to the Participant (or his surviving spouse) before
the Participant attains, or would have attained if not deceased,
the later of the normal retirement age specified in the Plan
Agreement or age 62.
If the value of a Participant's vested account balance
derived from Employer and Employee contributions exceeds (or at
the time of any prior distribution exceeded) $3,500, and the
account balance is immediately distributable, the Participant and
his spouse (or where either the Participant or the spouse has
died, the survivor) must consent to any such distribution, unless
an exception described in paragraph (b) applies. The consent of
the Participant and his spouse shall be obtained in writing
within the 90-day period ending on the annuity starting date,
which is the first day of the first period for which an amount is
paid as an annuity (or any other form). The Plan Administrator
shall notify the Participant and the spouse, no less than 30 days
and no more than 90 days before the annuity starting date, of the
right to defer any distribution until the Participant's account
balance is no longer immediately distributable. Such
notification shall include a general description of the material
features of the optional forms of benefit available under the
Plan and an explanation of their relative values, in a manner
that would satisfy the notice requirements of Section 417(a)(3)
of the Code.
Notwithstanding paragraph (a), only the Participant
need consent to the commencement of a distribution in the form of
a Qualified Joint and Survivor Annuity while the account balance
is immediately distributable. Furthermore, if payment in the form
of a Qualified Joint and Survivor Annuity is not required with
respect to the Participant pursuant to Section 10.1(b) of the
Plan, only the Participant need consent to the distribution of an
account balance that is immediately distributable. Neither the
consent of the Participant nor the spouse shall be required to
the extent that a distribution is required to satisfy Section
401(a)(9) or Section 415 of the Code. In addition, upon
termination of the Plan, if the Plan does not offer an annuity
option (purchased from a commercial provider), a Participant's
account balance may be distributed to the Participant or
transferred to another defined contribution plan (other than an
Employee stock ownership plan as defined in Section 4975(e)(7) of
the Code) maintained by an Affiliated Employer, without the
Participant's consent. For purposes of determining the
applicability of the foregoing consent requirements to
distributions made before the first day of the first Plan Year
beginning after December 31, 1988, the Participant's vested
account balance shall not include amounts attributable to
accumulated deductible employee contributions within the meaning
of section 72(o)(5)(B) of the Code.
Optional Forms of Distribution. If at the time a
Participant first becomes entitled to a distribution the value of
his vested Account balance derived from Employer and Employee
contributions does not exceed $3,500, distribution shall be made
in a lump sum in cash. Subject to the preceding sentence and to
the rules of Article 10 concerning joint and survivor annuities,
a Participant or Beneficiary may elect to receive benefits in any
of the following optional forms:
A lump sum payment in cash or in kind or in a
combination of both;
A series of installments over a period certain that
meets the requirements of Article 11; or
A nontransferable annuity contract, purchased from a
commercial provider, with terms complying with the requirements
of Article 11; provided, however, that an annuity for the life of
any person shall be available as an optional form of distribution
in a Profit Sharing Plan only if the Employer has so elected in
the Plan Agreement.
In the event that the Plan is adopted as an amendment
to an existing plan, each optional form of distribution available
under the existing plan shall be made available under the Plan
through the purchase of an appropriate annuity contract in
accordance with paragraph (c).
Distribution Procedure. The Trustee shall make or
commence distributions to or for the benefit of Participants only
on receipt of a written order from the Employer certifying that a
distribution of a Participant's benefits is payable pursuant to
the Plan, and specifying the time and manner of payment. The
amount to be distributed shall be determined as of the Valuation
Date coincident with or next following the Employer's written
order. The Trustee shall be fully protected in acting upon the
written directions of the Employer in making benefit
distributions, and shall have no duty to determine the rights or
benefits of any person under the Plan or to inquire into the
right or power of the Employer to direct any such distribution.
The Trustee shall be entitled to assume conclusively that any
determination by the Employer with respect to a distribution
meets the requirements of the Plan. The Trustee shall not be
required to make any payment hereunder in excess of the net
realizable value of the assets of the Account in question at the
time of such payment, nor to make any payment in cash unless the
Employer has furnished written instructions as to the assets to
be converted to cash for the purposes of making payment.
Lost Distributee. In the event that the Plan
Administrator is unable with reasonable effort to locate a person
entitled to distribution under the Plan, the Accounts
distributable to such a person shall become a Forfeiture at the
end of the third Plan Year after the Plan Administrator's efforts
to locate such person began; provided, however, that the amount
of the Forfeiture shall be restored in the event that such person
thereafter submits a claim for benefits under the Plan. Such
restoration will be made, first, from the amount of Forfeitures
available for reallocation as of the last day of the Plan Year in
which the claim is made, to the extent thereof; and to the extent
that Forfeiturers are not available or are insufficient to
restore the balance, from contributions made by the Employer
pursuant to Section 4.1(f). In a Standard Plan, a Forfeiture
occurring under this Section 9.5 shall be reallocated as though
it were an Employer contribution.
ARTICLE
Joint and Survivor Annuity Requirements
Applicability.
Generally. The provisions of Sections 10.2
through 10.5 shall generally apply to a Participant who is
credited with at least one Hour of Service on or after August 23,
1984, and such other Participants as provided in Section 10.6.
Exception for Certain Profit Sharing Plans. The
provisions of Sections 10.2 through 10.5 shall not apply to a
Participant in a profit sharing plan if: (i) the Participant
does not or cannot elect payment of benefits in the form of a
life annuity, and (ii) on the death of the Participant, his
Vested Account Balance will be paid to his surviving spouse
(unless there is no surviving spouse, or the surviving spouse has
consented to the designation of another Beneficiary in a manner
conforming to a Qualified Election) and the surviving spouse may
elect to have distribution of the Vested Account Balance
(adjusted in accordance with Section 13.4 for gains or losses
occurring after the Participant's death) commence within the 90-
day period following the date of the Participant's death. The
Participant may waive the spousal death benefit described in this
paragraph (b) at any time, provided that no such waiver shall be
effective unless it satisfies the conditions applicable under
Section 10.4(c) to a Participant's waiver of a Qualified
Preretirement Survivor Annuity. The exception in this paragraph
(b) shall not be operative with respect to a Participant in a
profit sharing plan if the Plan:
Is a direct or indirect transferee of a defined
benefit plan, money purchase pension plan, target benefit plan,
stock bonus plan, or profit sharing plan which is subject to the
survivor annuity requirements of Sections 401(a)(11) and 417 of
the Code; or
Is adopted as an amendment of a plan that did not
qualify for the exception in this paragraph (b) before the
amendment was adopted.
For purposes of this paragraph (b), Vested Account
Balance shall have the meaning provided in Section 10.4(f). The
provisions of Sections 10.2 through 10.6 set forth the survivor
annuity requirements of Sections 401(a)(11) and 417 of the Code.
Exception for Certain Amounts. The provisions of
Sections 10.2 through 10.5 shall not apply to any distribution
made on or after the first day of the first Plan Year beginning
after December 31, 1988, from or under a separate account
attributable solely to accumulated deductible employee
contributions as defined in Section 72(o)(5)(B) of the Code, and
maintained on behalf of a Participant in a money purchase pension
plan or a target benefit plan, provided that the exceptions
applicable to certain profit sharing plans under paragraph (b)
are applicable with respect to the separate account (for this
purpose, Vested Account Balance means the Participant's separate
account balance attributable solely to accumulated deductible
employee contributions within the meaning of Section 72(o)(5)(B)
of the Code).
Qualified Joint and Survivor Annuity. Unless an
optional form of benefit is selected pursuant to a Qualified
Election within the 90-day period ending on the Annuity Starting
Date, a married Participant's Vested Account Balance will be paid
in the form of a Qualified Joint and Survivor Annuity and an
unmarried Participant's Vested Account Balance will be paid in
the form of a life annuity. In either case, the Participant may
elect to have such an annuity distributed upon his attainment of
the Earliest Retirement Age under the Plan.
Qualified Preretirement Survivor Annuity. Unless an
optional form of benefit has been selected within the Election
Period pursuant to a Qualified Election, the Vested Account
Balance of a Participant who dies before the Annuity Starting
Date shall be applied toward the purchase of an annuity for the
life of his surviving spouse (a "Qualified Preretirement Survivor
Annuity"). The surviving spouse may elect to have such an
annuity distributed within a reasonable period after the
Participant's death. For purposes of this Article 10, the term
"spouse" means the current spouse or surviving spouse of a
Participant, except that a former spouse will be treated as the
spouse or surviving spouse (and a current spouse will not be
treated as the spouse or surviving spouse) to the extent provided
under a qualified domestic relations order as described in
Section 414(p) of the Code.
Definitions. The following definitions apply:
Election Period means the period beginning on the
first day of the Plan Year in which a Participant attains age 35
and ending on the date of the Participant's death. If a
Participant separates from service before the first day of the
Plan Year in which he reaches age 35, the Election Period with
respect to his account balance as of the date of separation shall
begin on the date of separation. A Participant who will not
attain age 35 as of the end of a Plan Year may make a special
Qualified Election to waive the Qualified Preretirement Survivor
Annuity for the period beginning on the date of such election and
ending on the first day of the Plan Year in which the Participant
will attain age 35. Such an election shall not be valid unless
the Participant receives a written explanation of the Qualified
Preretirement Survivor Annuity in such terms as are comparable to
the explanation required under Section 10.5. Qualified
Preretirement Survivor
Annuity coverage will be automatically reinstated as of the first
day of the Plan Year in which the Participant attains age 35.
Any new waiver on or after that date shall be subject to the full
requirements of this article.
Earliest Retirement Age means the earliest date on
which the Participant could elect to receive Retirement benefits
under the Plan.
Qualified Election means a waiver of a Qualified
Joint and Survivor Annuity or a Qualified Preretirement Survivor
Annuity. Any such waiver shall not be effective unless: (1) the
Participant's spouse consents in writing to the waiver; (2) the
waiver designates a specific Beneficiary, including any class of
beneficiaries or any contingent beneficiaries, which may not be
changed without spousal consent (unless the spouse's consent
expressly permits designations by the Participant without any
further spousal consent); (3) the spouse's consent acknowledges
the effect of the waiver; and (4) the spouse's consent is
witnessed by a plan representative or notary public.
Additionally, a Participant's waiver of the Qualified Joint and
Survivor Annuity shall not be effective unless the waiver
designates a form of benefit payment which may not be changed
without spousal consent (unless the spouse's consent expressly
permits designations by the Participant without any further
spousal consent). If it is established to the satisfaction of a
plan representative that there is no spouse or that the spouse
cannot be located, a waiver will be deemed a Qualified Election.
Any consent by a spouse obtained under these provisions (and any
establishment that the consent of a spouse may not be obtained)
shall be effective only with respect to the particular spouse
involved. A consent that permits designations by the Participant
without any requirement of further consent by the spouse must
acknowledge that the spouse has the right to limit the consent to
a specific Beneficiary and a specific form of benefit where
applicable, and that the spouse voluntarily elects to relinquish
either or both of those rights. A revocation of a prior waiver
may be made by a Participant without the consent of the spouse at
any time before the commencement of benefits. The number of
revocations shall not be limited. No consent obtained under this
provision shall be valid unless the Participant has received
notice as provided in Section 10.5.
Qualified Joint and Survivor Annuity means an
immediate annuity for the life of a Participant, with a survivor
annuity for the life of the spouse which is not less than 50
percent and not more than 100 percent of the amount of the
annuity which is payable during the joint lives of the
Participant and the spouse, and which is the amount of benefit
that can be purchased with the Participant's Vested Account
Balance. The percentage of the survivor annuity under the Plan
shall be 50 percent.
Annuity Starting Date means the first day of the
first period for which an amount is paid as an annuity (or any
other form).
Vested Account Balance means the aggregate value
of the Participant's vested account balance derived from Employer
and Employee contributions (including rollovers), whether vested
before or upon death, including the proceeds of insurance
contracts, if any, on the Participant's life. The provisions of
this Article 10 shall apply to a Participant who is vested in
amounts attributable to Employer contributions, Employee
contributions or both at the time of death or distribution.
Notice Requirements. In the case of a Qualified Joint
and Survivor Annuity, no less than 30 days and no more than 90
days before a Participant's Annuity Starting Date the Plan
Administrator shall provide to him a written explanation of (i)
the terms and conditions of a Qualified Joint and Survivor
Annuity, (ii) the Participant's right to make, and the effect of,
an election to waive the Qualified Joint and Survivor Annuity
form of benefit, (iii) the rights of the Participant's spouse,
and (iv) the right to make, and the effect of, a revocation of a
previous election to waive the Qualified Joint and Survivor
Annuity.
In the case of a Qualified Preretirement Survivor Annuity,
within the applicable period for a Participant the Plan
Administrator shall provide to him a written explanation of the
Qualified Preretirement Survivor Annuity, in terms and manner
comparable to the requirements applicable to the explanation of a
Qualified Joint and Survivor Annuity as described in the
preceding paragraph. The applicable period for a Participant is
whichever of the following periods ends last: (i) the period
beginning with the first day of the Plan Year in which the
Participant attains age 32 and ending with the close of the Plan
Year preceding the Plan Year in which the Participant attains age
35; (ii) a reasonable period ending after an individual becomes a
Participant; (iii) a reasonable period ending after this Article
10 first applies to the Participant. Notwithstanding the
foregoing, in the case of a Participant who separates from
service before attaining age 35, notice must be provided within a
reasonable period ending after his separation from service.
For purposes of applying the preceding paragraph, a
reasonable period ending after the enumerated events described in
(ii) and (iii) is the end of the two-year period beginning one
year before the date the applicable event occurs, and ending one
year after that date. In the case of a Participant who separates
from service before the Plan Year in which he reaches age 35,
notice shall be provided within the two-year period beginning one
year before the separation and ending one year after the
separation. If such a Participant thereafter returns to
employment with the Employer, the applicable period for the
Participant shall be redetermined.
Transitional Rules.
Any living Participant not receiving benefits on
August 23, 1984, who would otherwise not receive the benefits
prescribed by the preceding sections of this Article 10, must be
given the opportunity to elect to have those sections apply if
the Participant is credited with at least one Hour of Service
under the Plan or a predecessor plan in a Plan Year beginning on
or after January 1, 1976, and the Participant had at least ten
years of vesting service when he or she separated from service.
Any living Participant not receiving benefits on
August 23, 1984, who was credited with at least one Hour of
Service under the Plan or a predecessor plan on or after
September 2, 1974, and who is not otherwise credited with any
service in a Plan Year beginning on or after January 1, 1976,
must be given the opportunity to have his benefits paid in
accordance with paragraph (d) of this Section 10.6.
The respective opportunities to elect (as
described in paragraphs (a) and (b) above) must be afforded to
the appropriate Participants during the period commencing on
August 23, 1984, and ending on the date benefits would otherwise
commence to be paid to those Participants.
<PAGE>
Any Participant who has so elected pursuant to
paragraph (b) of this Section 10.6, and any Participant who does
not elect under paragraph (a), or who meets the requirements of
paragraph (a) except that he does not have at least ten years of
vesting service when he separates from service, shall have his
benefits distributed in accordance with all of the following
requirements, if his benefits would otherwise have been payable
in the form of a life annuity:
Automatic joint and survivor annuity. If
benefits in the form of a life annuity become payable to a
married Participant who:
begins to receive payments under the Plan on
or after normal retirement age; or
dies on or after normal retirement age while
still working for the Employer; or
begins to receive payments on or after the
qualified early retirement age; or
separates from service on or after attaining
normal retirement age (or the qualified early retirement age) and
after satisfying the eligibility requirements for the payment of
benefits under the Plan and thereafter dies before beginning to
receive such benefits;
then such benefits will be received under the Plan in the form of
a Qualified Joint and Survivor Annuity, unless the Participant
has elected otherwise during the election period, which must
begin at least six months before the Participant attains
qualified early retirement age and end not more than 90 days
before the commencement of benefits. Any election hereunder will
be in writing and may be changed by the Participant at any time.
Election of early survivor annuity. A
Participant who is employed after attaining the qualified early
retirement age will be given the opportunity to elect during the
election period to have a survivor annuity payable on death. If
the Participant elects the survivor annuity, payments under such
annuity must not be less than the payments which would have been
made to the spouse under the Qualified Joint and Survivor Annuity
if the Participant had retired on the day before his death. Any
election under this provision will be in writing and may be
changed by the Participant at any time. The election period
begins on the later of (i) the 90th day before the Participant
attains the qualified early retirement age, or (ii) the date on
which participation begins, and ends on the date the Participant
terminates employment.
For purposes of this Section 10.6, qualified
early retirement age is the latest of the earliest date under the
Plan on which the Participant may elect to receive Retirement
benefits, the first day of the 120th month beginning before the
Participant reaches normal retirement age, or the date the
Participant begins participation.
ARTICLE
Minimum Distribution Requirements
General Rules. Subject to Article 10, Joint and
Survivor Annuity Requirements, the requirements of this Article
11 shall apply to any distribution of a Participant's interest
and will take precedence over any inconsistent provisions of the
Plan. Unless otherwise specified, the provisions of this Article
11 apply to calendar years beginning after December 31, 1984.
All distributions required under this Article 11 shall be
determined and made in accordance with the Income Tax Regulations
issued under Section 401(a)(9) of the Code (including proposed
regulations, until the adoption of final regulations), including
the minimum distribution incidental benefit requirement of
Section 1.401(a)(9)-2 of the proposed regulations.
Required Beginning Date. The entire interest of a
Participant must be distributed, or begin to be distributed, no
later than the Participant's required beginning date, determined
as follows.
General Rule. The required beginning date of a
Participant is the first day of April of the calendar year
following the calendar year in which the Participant attains age
70 1/2.
Transitional Rules. The required beginning date
of a Participant who attains age 70 1/2 before January 1, 1988,
shall be determined in accordance with (1) or (2) below:
Non-5-percent owners. The required beginning
date of a Participant who is not a 5-percent owner is the first
day of April of the calendar year following the calendar year in
which the later of his Retirement or his attainment of age 70 1/2
occurs.
5-percent owners. The required beginning
date of a Participant who is a 5-percent owner during any year
beginning after December 31, 1979, is the first day of April
following the later of :
the calendar year in which the
Participant attains age 70 1/2, or
the earlier of the calendar year with or
within which ends the Plan Year in which the Participant becomes
a 5-percent owner, or the calendar year in which the Participant
retires.
The required beginning date of a Participant who is not a 5-
percent owner, who attains age 70 1/2 during 1988 and who has not
retired as of January 1, 1989, is April 1, 1990.
Rules for 5-percent Owners. A Participant is
treated as a 5-percent owner for purposes of this Section 11.2 if
he is a 5-percent owner as defined in Section 416(i) of the Code
(determined in accordance with Section 416 but without regard to
whether the Plan is top heavy) at any time during the Plan Year
ending with or within the calendar year in which he attains age
66 1/2, or any subsequent Plan Year. Once distributions have
begun to a 5-percent owner under this Section 11.2, they must
continue, even if the Participant ceases to be a 5-percent owner
in a subsequent year.
Limits on Distribution Periods. As of the first
Distribution Calendar Year, distributions not made in a single
sum may be made only over one or a combination of the following
periods:
(a) the life of the Participant,
(b) the life of the Participant and his Designated
beneficiary,
(c) a period certain not extending beyond the Life
Expectancy of the Participant, or
(d) a period certain not extending beyond the Joint
and Last Survivor Expectancy of the Participant and his
Designated Beneficiary.
Designated Beneficiary means the individual who is
designated as the Beneficiary under the Plan in accordance with
Section 401(a)(9) of the Code and the regulations issued
thereunder (including proposed regulations, until the adoption of
final regulations) and Section 7.2.
Distribution Calendar Year means a calendar year for which a
minimum distribution is required under Section 401(a)(9) of the
Code and this Section 11.3. For distributions beginning before
the Participant's death, the first Distribution Calendar Year is
the calendar year immediately preceding the calendar year which
contains the Participant's required beginning date. For
distributions beginning after the Participant's death, the first
Distribution Calendar Year is the calendar year in which
distributions are required to begin pursuant to Section 11.5.
Life Expectancy and Joint and Last Survivor Expectancy are
computed by use of the expected return multiples in Tables V and
VI of Section 1.72-9 of the Income Tax Regulations. Unless
otherwise elected by the Participant (or his spouse, in the case
of distributions described in Section 11.5(b)) by the time
distributions are required to begin, Life Expectancies shall be
recalculated annually. Any such election shall be irrevocable as
to the Participant (or spouse) and shall apply to all subsequent
years. The Life Expectancy of a nonspouse beneficiary may not be
recalculated.
Determination of Amount To Be Distributed Each Year.
If the Participant's interest is to be distributed in other than
a single sum, the following minimum distribution rules shall
apply on or after the required beginning date. Paragraphs (a)
through (d) apply to distributions in forms other than the
purchase of an annuity contract.
If a Participant's Benefit is to be distributed
over (1) a period not extending beyond the Life Expectancy of the
Participant or the Joint Life and Last Survivor Expectancy of the
Participant and his Designated Beneficiary, or (2) a period not
extending beyond the Life Expectancy of the Designated
Beneficiary, the amount required to be distributed for each
calendar year, beginning with distributions for the first
Distribution Calendar Year, must at least equal the quotient
obtained by dividing the Participant's Benefit by the Applicable
Life Expectancy.
For calendar years beginning before January 1,
1989, if the Participant's spouse is not the Designated
Beneficiary, the method of distribution selected must assure that
at least 50 percent of the present value of the amount available
for distribution is paid within the Life Expectancy of the
Participant.
For calendar years beginning after December 31,
1988, the amount to be distributed each year, beginning with
distributions for the first Distribution Calendar Year, shall not
be less than the quotient obtained by dividing the Participant's
Benefit by the lesser of (1) the Applicable Life Expectancy or
(2) if the Participant's spouse is not the Designated
Beneficiary, the applicable divisor determined from the table set
forth in Q&A-4 of Section 1.401(a)(9)-2 of the Proposed Income
Tax Regulations. Distributions after the death of the
Participant shall be distributed using the Applicable Life
Expectancy in paragraph (a) above as the relevant divisor,
without regard to Proposed Regulations Section 1.401(a)(9)-2.
The minimum distribution required for the
Participant's first Distribution Calendar Year must be made on or
before the Participant's required beginning date. The minimum
distribution for other calendar years, including the minimum
distribution for the Distribution Calendar Year in which the
Employee's required beginning date occurs, must be made on or
before December 31 of that Distribution Calendar Year.
If the Participant's Benefit is distributed in the
form of an annuity contract purchased from an insurance company,
distributions thereunder shall be made in accordance with the
requirements of Section 401(a)(9) of the Code and the regulations
issued thereunder (including proposed regualtions, until the
adoption of final regulations).
Applicable Life Expectancy means the Life Expectancy (or
Joint and Last Survivor Expectancy) calculated using the attained
age of the Participant (or Designated Beneficiary) as of the
Participant's (or Designated Beneficiary's) birthday in the
applicable calendar year, reduced by one for each calendar year
which has elapsed since the date Life Expectancy was first
calculated. If Life Expectancy is being recalculated, the
Applicable Life Expectancy shall be the Life Expectancy as so
recalculated. The applicable calendar year shall be the first
Distribution Calendar Year, and if Life Expectancy is being
recalculated such succeeding calendar year. If annuity payments
commence in accordance with Section 11.4(e) before the required
beginning date, the applicable calendar year is the year such
payments commence. If distribution is in the form of an
immediate annuity purchased after the Participant's death with
the Participant's remaining interest in the Plan, the applicable
calendar year is the year of purchase.
Participant's Benefit means the account balance as of the
last valuation date in the calendar year immediately preceding
the Distribution Calendar Year (valuation calendar year),
increased by the amount of any contributions or Forfeitures
allocated to the account balance as of dates in the valuation
calendar year after the valuation date and decreased by
distributions made in the valuation calendar year after the
valuation date. For purposes of the preceding sentence, if any
portion of the minimum distribution for the first Distribution
Calendar Year is made in the second Distribution Calendar Year on
or before the required beginning date, the amount of the minimum
distribution made in the second Distribution Calendar Year shall
be treated as if it had been made in the immediately preceding
Distribution Calendar Year.
Death Distribution Provisions.
Distribution Beginning before Death. If the
Participant dies after distribution of his interest has begun,
the remaining portion of his interest will continue to be
distributed at least as rapidly as under the method of
distribution being used before the Participant's death.
Distribution Beginning after Death. If the
Participant dies before distribution of his interest begins,
distribution of his entire interest shall be completed by
December 31 of the calendar year containing the fifth anniversary
of the Participant's death, except to the extent that an election
is made to receive distributions in accordance with (1) or (2)
below:
If any portion of the Participant's interest
is payable to a Designated Beneficiary, distributions may be made
over the Designated Beneficiary's life, or over a period certain
not greater than the Life Expectancy of the Designated
Beneficiary, commencing on or before December 31 of the calendar
year immediately following the calendar year in which the
Participant died; or
If the Designated Beneficiary is the
Participant's surviving spouse, the date distributions are
required to begin in accordance with (1) above shall not be
earlier than the later of (i) December 31 of the calendar year
immediately following the calendar year in which the Participant
died, and (ii) December 31 of the calendar year in which the
Participant would have attained age 70 1/2.
If the Participant has not made an election
pursuant to this Section 11.5 by the time of his death, the
Participant's Designated Beneficiary must elect the method of
distribution no later than the earlier of (i) December 31 of the
calendar year in which distributions would be required to begin
under this Section 11.5, or (ii) December 31 of the calendar year
which contains the fifth anniversary of the date of death of the
Participant. If the Participant has no Designated Beneficiary,
or if the Designated Beneficiary does not elect a method of
distribution, distribution of the Participant's entire interest
must be completed by December 31 of the calendar year containing
the fifth anniversary of the Participant's death.
For purposes of paragraph (b), if the surviving
spouse dies after the Participant, but before payments to the
spouse begin, the provisions of paragraph (b), with the exception
of subparagraph (2) therein, shall be applied as if the surviving
spouse were the Participant.
For purposes of this Section 11.5, any amount paid
to a child of the Participant will be treated as if it had been
paid to the surviving spouse of the Participant if the amount
becomes payable to the surviving spouse when the child reaches
the age of majority.
For the purposes of this Section 11.5,
distribution of a Participant's interest is considered to begin
on the Participant's required beginning date (or, if paragraph
(c) above is applicable, the date distribution is required to
begin to the surviving spouse pursuant to paragraph (b) above).
If distribution in the form of an annuity contract described in
Section 11.4(e) irrevocably commences to the Participant before
the required beginning date, the date distribution is considered
to begin is the date distribution actually commences.
Transitional Rule. Notwithstanding the other
requirements of this Article 11, and subject to the requirements
of Article 10, Joint and Survivor Annuity Requirements,
distribution on behalf of any Participant, including a 5-percent
owner, may be made in accordance with all of the following
requirements (regardless of when such distribution commences):
The distribution is one which would not have
disqualified the Trust under Section 401(a)(9) of the Internal
Revenue Code of 1954 as in effect before its amendment by the
Deficit Reduction Act of 1984.
The distribution is in accordance with a method of
distribution designated by the Employee whose interest in the
Trust is being distributed or, if the Employee is deceased, by a
Beneficiary of the Employee.
The designation specified in paragraph (b) was in
writing, was signed by the Employee or the Beneficiary, and was
made before January 1, 1984.
The Employee had accrued a benefit under the plan as of
December 31, 1983.
The method of distribution designated by the
Employee or the Beneficiary specifies the time at which
distribution will commence, the period over which distributions
will be made, and in the case of any distribution upon the
Employee's death, the Beneficiaries of the Employee listed in
order of priority.
A distribution upon death will not be covered by this
transitional rule unless the information in the designation
contains the required information described above with respect to
the distributions to be made upon the death of the Employee. For
any distribution which commences before January l, 1984, but
continues after December 31, 1983, the Employee or the
Beneficiary to whom such distribution is being made will be
presumed to have designated the method of distribution under
which the distribution is being made, if the method of
distribution was specified in writing and the distribution
satisfies the requirements in paragraphs (a) and (e).
If a designation is revoked, any subsequent distribution
must satisfy the requirements of Section 401(a)(9) of the Code
and the regulations thereunder. If a designation is revoked
after the date distributions are required to begin, the Trust
must distribute by the end of the calendar year following the
calendar year in which the revocation occurs the total amount not
yet distributed which would have been required to have been
distributed to satisfy Section 401(a)(9) of the Code and the
regulations thereunder, but for the designation described in
paragraphs (b) through (e). For calendar years beginning after
December 31, 1988, such distributions must meet the minimum
distribution incidental benefit requirements in Section
1.401(a)(9)-2 of the Proposed Income Tax Regulations. Any
changes in the designation generally will be considered to be a
revocation of the designation, but the mere substitution or
addition of another beneficiary (one not named in the
designation) under the designation will not be considered to be a
revocation of the designation, so long as the substitution or
addition does not alter the period over which distributions are
to be made under the designation, directly or indirectly (for
example, by altering the relevant measuring life). In the case
of an amount transferred or rolled over from one plan to another
plan, the rules in Q&A J-2 and Q&A J-3 of Section 1.401(a)(9)-1
of the Proposed Income Tax Regulations shall apply.
ARTICLE
Withdrawals and Loans
Withdrawals from Participant Contribution Accounts.
Subject to the requirements of Article 10, a Participant may upon
written notice to the Employer withdraw any amount from his
Participant Contribution Account. A Participant may not make
more than one such withdrawal in any Plan Year, and a withdrawn
amount may not be repaid to the Plan. No forfeiture will occur
solely as a result of an Employee's withdrawal of Participant
contributions.
Withdrawals on Account of Hardship (Profit Sharing
Plans Only). If the Employer has so elected in the Plan
Agreement for a profit sharing plan, upon a Participant's written
request the Plan Administrator may permit a withdrawal of funds
from the vested portion of the Participant's Accounts on account
of the Participant's financial hardship, which must be
demonstrated to the satisfaction of the Plan Administrator. In
considering such requests, the Plan Administrator shall apply
uniform standards that do not discriminate in favor of Highly
Compensated Employees. In a Standard Plan with a CODA, if
hardship withdrawals are permitted from both the Employer
Contribution Account and the Elective Deferral Account, they
shall be made first from a Participant's Employer Contribution
Account and thereafter from a Participant's Elective Deferral
Account, subject to the additional requirements set forth in
Section 5.14. In a Standard Plan, the requirements of Section
5.14(b), (c), (d)(1) and (d)(2) shall also apply to hardship
distributions from a Participant's Employer Contribution Account.
In a Variable Plan with a CODA, if hardship withdrawals are
permitted from more than one of the Elective Deferral Account,
Employer Matching Account, and Employer Contribution Account,
they shall be made first from a Participant's Employer
Contribution Account, and thereafter from the Employer Matching
Account, and finally from the Elective Deferral Account, subject
to the additional requirement of Section 5.14. A withdrawn
amount may not be repaid to the Plan.
Withdrawals after Reaching Age 59 1/2 (Profit Sharing
Plans Only). If so specified by the Employer in the Plan
Agreement, a Participant who has reached age 59 1/2 may upon
written request to the Employer withdraw during his employment
any amount not exceeding the vested balance of his Accounts. A
withdrawn amount may not be repaid to the Plan.
Loans (Variable Plans Only). If the Employer has so
elected in the Plan Agreement, the Employer may direct the
Trustee to make a loan to a Participant or Beneficiary from the
vested portion of his Accounts, subject to the following terms
and conditions:
The Plan Administrator shall administer the loan
program subject to the terms and conditions of this Section 12.4
and to such reasonable additional rules and regulations as the
Plan Administrator may establish for the orderly operation of the
program.
A Participant's or Beneficiary's request for a
loan shall be submitted to the Plan Administrator by means of a
written application on a form supplied by the Plan Administrator.
Applications shall be approved or denied by
the Plan Administrator on the basis of its assessment of the
borrower's ability to collateralize and repay the loan, as
revealed in the loan application.
Loans shall be made to all Participants and
Beneficiaries on a reasonably equivalent basis. Loans shall not
be made available to highly compensated Employees (as defined in
Section 414(q) of the Code) in amounts greater than the amounts
made available to other Employees (relative to the borrower's
Account balance).
Loans must be adequately secured by assignment of
fifty percent (50%) of the Participant's entire right, title and
interest in and to the Trust Fund, evidenced by the Participant's
collateral promissory note for the amount of the loan payable to
the order of the Trustee.
<PAGE>
Loans must bear a reasonable interest rate
comparable to the rate charged by commercial lenders in the
geographical area for similar loans. The Plan Administrator
shall not discriminate among Participants in the matter of
interest rates, but loans may bear different interest rates if,
in the opinion of the Plan Administrator, the difference in rates
is justified by conditions that would customarily be taken into
account by a commercial lender in the Employer's geographical
area.
The period for repayment for any loan shall not
exceed five years, except in the case of a loan used to acquire a
dwelling unit which within a reasonable time is to be used as the
principal residence of the Participant, in which case the
repayment period shall not exceed ten years. The terms of a loan
shall require that it be repaid in level payments of principal
and interest not less frequently then quarterly throughout the
repayment period, except that alternative arrangements for
repayment may apply in the event that the borrower is on unpaid
leave of absence for a period not to exceed one year.
To the extent that a Participant would be required
under Article 10 to obtain the consent of his spouse to a
distribution of an immediately distributable benefit other than a
Qualified Joint and Survivor Annuity, the consent of the
Participant's spouse shall be required for the use of his Account
as security for a loan. The spouse's consent must be obtained no
earlier than the beginning of the 90-day period that ends on the
date on which the loan is to be so secured, and obtained in
accordance with the requirements of Section 10.4(c) for a
Qualified Election. Any such consent shall thereafter be binding
on the consenting spouse and any subsequent spouse of the
Participant. A new consent shall be required for use of the
Account as security for any extension, renewal, renegotiation or
revision of the original loan.
If valid spousal consent has been obtained in
accordance with Section 12.4(g), then notwithstanding any other
provision of the Plan the portion of the Participant's account
balance used as a security interest held by the Plan by reason of
a loan outstanding to the Participant shall be taken into account
for purposes of determining the amount of the account balance
payable at the time of death or distribution, but only if the
reduction is used as repayment of the loan. If less than 100%
of the Participant's vested account balance (determined without
regard to the preceding sentence) is payable to the surviving
spouse, then the account balance shall be adjusted by first
reducing the vested account balance by the amount of the security
used as repayment of the loan, and then determining the benefit
payable to the surviving spouse.
In the event of default on a loan by a Participant
who is an active Employee, foreclosure on the Participant's
Account as security will not occur until the Employer has
reported to the Trustee the occurrence of an event permitting
distribution from the Plan in accordance with Article 9 or
Section 5.13.
No loan shall be made to an Owner-Employee or a
Shareholder-Employee.
No loan to any Participant or Beneficiary can be
made to the extent that the amount of the loan, when added to the
outstanding balance of all other loans to the Participant or
Beneficiary, would exceed the lesser of (a) $50,000 reduced by
the excess (if any) of the highest outstanding balance of loans
during the one year period ending on the day before the loan is
made, over the outstanding balance of loans from the Plan on the
date the loan is made, or (b) one-half the value of the vested
account balance of the Participant. For the purpose of the above
limitation, all loans from all qualified plans of the Affiliated
Employers are aggregated.
Loans shall be considered investments directed by
a Participant pursuant to Section 13.3. The amount loaned shall
be charged solely against the Accounts of the Participant, and
repaid amounts and interest shall be credited solely thereto.
Procedure; Amount Available. Withdrawals and loans
shall be made subject to the terms and conditions applicable to
distributions pursuant to Section 9.4, except that the amount of
any withdrawal or loan shall be determined by reference to the
vested balance of the Participant's Account as of the most recent
Valuation Date preceding the withdrawal or loan, and shall not
exceed the amount of the vested account balance.
ARTICLE
Trust Fund and Investments
Establishment of Trust Fund. The Employer and the
Trustee hereby agree to the establishment of a Trust Fund
consisting of all amounts as shall be contributed or transferred
from time to time to the Trustee pursuant to the Plan, and all
earnings thereon. The Trustee shall hold the assets of the Trust
Fund for the exclusive purpose of providing benefits to
Participants and Beneficiaries and defraying the reasonable
expenses of administering the Plan, and no such assets shall ever
revert to the Employer, except that:
contributions made by the Employer by mistake of fact
may be returned to the Employer within one (1) year of the date
of payment,
contributions that are conditioned on their
deductibility under the Code may be returned to the Employer
within one (1) year of the disallowance of the deduction,
contributions that are conditioned on the initial
qualification of the Plan under the Code may be returned to the
Employer within one (1) year after such qualification is denied
by determination of the Internal Revenue Service, but only if an
application for determination of such qualification is made
within the time prescribed by law for filing the Employer's
federal income tax return for its taxable year in which the Plan
is adopted, or such later date as the Secretary of the Treasury
may prescribe, and
amounts held in a suspense account may be returned to
the Employer on termination of the Plan, to the extent that they
may not then be allocated to any Participant's Account in
accordance with Article 6.
All Employer contributions under the Plan other than those
made pursuant to Section 4.1(f) are hereby expressly conditioned
on the initial qualification of the Plan and their deductibility
under the Code.
Management of Trust Fund. Except to the extent of any
investment in Policies pursuant to Article 14, the assets of the
Trust Fund shall be held in trust by the Trustee and accounted
for in accordance with this Article 13, and shall be invested in
accordance with Section 13.3 in the Investment Products specified
by the Employer in the Plan Agreement and from time to time
thereafter in writing. The Employer shall have the exclusive
authority and discretion to select the Investment Products
available under the Plan. In making that selection, the Employer
shall use the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in a
like capacity and familiar with such matters would use in the
conduct of an enterprise of like character and with like aims.
The Employer shall cause the available Investment Products to be
diversified sufficiently to minimize the risk of large losses,
unless under the circumstances it is clearly prudent not to do
so. It is especially intended that the Trustee shall have no
discretionary authority to determine the investment of Trust
assets.
Investment Instructions. Except as Article 14 may
apply, all amounts held in the Trust Fund under the Plan shall be
invested in Investment Products. If the Employer has elected in
the Plan Agreement to make investment decisions for the Plan,
investment instructions as to Employer Contribution Accounts,
Employer Matching Accounts, Qualified Matching Accounts and
Qualified Nonelective Contribution Accounts shall be the
fiduciary responsibility of the Employer, and each of such
Accounts shall have a pro rata interest in all assets of the
Trust (other than life insurance policies under Article 14) to
which the Employer's instructions apply. If the Employer has not
elected to make investment decisions for the Plan, then assets of
the Trust shall be invested solely in accordance with the
instructions of the Participant to whose Accounts they are
allocable, as delivered by the Employer to Putnam. Instructions
shall apply to future contributions, past accumulations, or both,
according to their terms, and shall be communicated by the
Employer to Putnam in accordance with procedures prescribed by
Putnam. Instructions shall be effective prospectively, within a
reasonable time after their receipt in good order by Putnam. An
instruction once received shall remain in effect until it is
changed by the provision of a new instruction. New instructions
shall be accepted by Putnam at any Valuation Date.
Neither the Employer nor the Trustee nor Putnam shall be
responsible for questioning any instructions of a Participant or
for reviewing the investments selected therein, or for any loss
resulting from instructions of a Participant or from the failure
of a Participant to provide or to change instructions. Neither
Putnam nor the Trustee shall have any duty to question any
instructions received from the Employer or to review the
investments selected therein, nor shall Putnam or the Trustee be
responsible for any loss resulting from instructions received
from the Employer or from the failure of the Employer to provide
or to change instructions. In the event that Putnam or the
Trustee receives a contribution under the Plan as to which no
instructions are delivered, or such instructions as are delivered
are unclear to Putnam or the Trustee, such contribution shall be
invested in Putnam Daily Dividend Trust until clear instructions
are received. Neither Putnam nor the Trustee shall have any
discretionary authority or responsibility in the investment of
the assets of the Trust Fund.
Valuation of the Trust Fund. As of each Valuation
Date, the Trustee shall determine the fair market value of the
Trust Fund, and the net earnings or losses and expenses of the
Trust Fund for the period elapsed since the most recent previous
Valuation Date shall be allocated among the Accounts of
Participants. Earnings, losses and expenses which pertain to
investments which are specifically held for a given Participant's
Account shall be allocated solely to that Account. In the event
that an investment is not specifically held for a given
Participant's Account, the earnings, losses and expenses
pertaining to that investment shall be allocated among all
Participants' Accounts in the ratio that each such Account bears
to the total of all Accounts of all Participants. Each
Participant's Accounts shall be adjusted pursuant to this Section
13.4 until such time as they are either fully distributed or
forfeited, regardless of whether the Participant continues to be
an Employee.
Distributions on Investment Company Shares. Subject to
Section 9.3, all dividends and capital gains or other
distributions received on any Investment Company Shares credited
to Participant's Account will (unless received in additional
Investment Company Shares) be reinvested in full and fractional
shares of the same Investment Company at the price determined as
provided in the then current prospectus of the Investment
Company. The shares so received or purchased upon such
reinvestment will be credited to such accounts. If any dividends
or capital gain or other distributions may be received on such
Investment Company Shares at the election of the shareholder in
additional shares or in cash or other property, the Trustee will
elect to receive such dividends or distributions in additional
Investment Company Shares.
Registration and Voting of Investment Company Shares.
All Investment Company Shares shall be registered in the name of
the Trustee or its nominee. Subject to any requirements of
applicable law, the Trustee will transmit to Participants in a
Standard Plan, and to the Employer in a Variable Plan, copies of
any notices of shareholders' meetings, proxies and proxy-
soliciting materials, prospectuses and the annual or other
reports to shareholders, with respect to Investment Company
Shares held in the Trust Fund. The Trustee shall act in
accordance with directions received from such Participants or
Employer, as the case may be, with respect to matters to be voted
upon by the shareholders of the Investment Company. Such
directions must be in writing on a form approved by the Trustee,
signed by the addressee and delivered to the Trustee within the
time prescribed by it. The Trustee will not vote Investment
Company Shares as to which it receives no written directions.
Investment Manager (Variable Plans Only). The
Employer, with the consent of Putnam, may appoint an investment
manager, as defined in Section 3(38) of the Employee Retirement
Income Security Act of 1974, with respect to all or a portion of
the assets of the Trust Fund. The Trustee shall have no
liability in connection with any action or nonaction pursuant to
directions of such an investment manager.
ARTICLE
Insurance Policies
Purchase of Insurance Products. At the time of
establishment of the Plan, the Employer shall purchase for each
Participant such Policy or Policies, if any, as a Participant
shall request and annually thereafter such additional Policies as
a Participant shall request, subject to the limitations of
Section 14.2. All Policies shall have the same day and month of
issue, insofar as reasonably possible. The premiums on all
Policies shall be paid at the same intervals (for example,
annually, semi-annually, quarterly or monthly), but the interval
may be changed with respect to all Policies from time to time.
Limitation on Premiums. The premiums paid for Policies
in respect of any Participants shall be limited so that premiums
paid on any ordinary insurance Policies (that is, Policies with
both nonincreasing premiums and nondecreasing death benefits) on
the life of the Participant shall be 49 percent or less of the
Employer's total contributions for the Participant (and
Forfeitures allocated and amounts reapplied to his Employer
Contribution Account), and premiums paid on term insurance
Policies on the life of the Participant shall be less than 25
percent of such amount; provided that if both ordinary life
insurance Policies and term Policies are purchased for any
Participant, the total premiums on term Policies plus one-half
the premiums on ordinary life Policies shall be less than 25
percent of such amount. If at any time the total premiums to be
paid by the Employer for a Participant shall equal or exceed the
above limitations, then the life insurance coverage of that
Participant shall be reduced so that the total premiums shall not
equal or exceed the limitations. The required reduction shall be
made by changing all or a portion of the life insurance on the
Participant to paid-up life insurance or by cancelling all or a
portion of any term life insurance.
Policy Options. At the election of the Participant
covered hereunder, a Policy may contain a waiver of premium
disability benefit provision or a provision for additional
indemnity in the event of accidental death, or both, if available
on the type of Policy selected and if permitted by the insurer.
Insurability. If any Participant who has elected that
a Policy be purchased is found by the insurer not to be insurable
at standard rates, the Employer shall, if permitted by the rules
of the insurer, purchase a similar Policy which provides a lesser
death benefit and which can be purchased for the same premium.
Dividends on Policies. Dividends payable on any Policy
shall be applied to the purchase of additional benefits under the
Policy unless the Participant requests that they be applied in
reduction of premiums.
Trustee of Policy. The Insurance Trustee shall apply
for and be the owner of each Policy purchased under the terms of
the Plan. Each Policy must provide that proceeds will be payable
to the Insurance Trustee; however, the Insurance Trustee shall be
required to pay over all such proceeds to the Participant's
Designated Beneficiary in accordance with the distribution
provisions of the Plan including, without limitation, Section
10.3. Under no circumstances shall the Trust retain any part of
the proceeds. In the event of any conflict between the terms of
<PAGE>
the Plan and the terms of any Policy purchased hereunder, the
Plan provisions shall control.
Obligations with Respect to Policies. Except as may be
otherwise provided in any conditional or binding receipt issued
by an insurer, there shall be no coverage and no death benefit
payable under any Policy to be purchased from such insurer until
such Policy shall have been delivered and the premium therefor
shall have been paid. The Employer and the Insurance Trustee
shall not have any responsibility as to the effectiveness of any
Policy purchased from an insurer, nor shall either of them have
any liability or obligation to pay any amount to any Participant
or his beneficiary by reason of any failure or refusal by the
insurer to make such payment.
Distribution of Proceeds on Participant's Death. In
the event of the death of a Participant before the conversion
provided for in Section 14.9, there shall be payable to the
beneficiary named in any Policy on his life the benefits provided
by the terms of such Policy.
Conversion of Policies. Except as provided in Section
19.3, if any Policies of a Participant (other than retirement
income, endowment or annuity Policies) are held for his benefit
at the time distribution is to commence, the Policies may be
converted by the Insurance Trustee into cash, paid to the
Trustee, credited to the Employer Contribution Account of the
Participant, invested in accordance with the written instructions
of the Employer (and if no such instructions have been given or
if such instructions are not clear, invested in Investment
Company Shares in the same proportion as the most recent
contributions to the Participant's Accounts) and distributed
pursuant to Article 9, subject to the terms and conditions of
Article 10. Retirement income, endowment or annuity Policies
will be distributed directly to the Participant at the time
distribution is to commence.
Conflict with Policies. In the event of any conflict
between the terms of the Plan and the terms of any Policies
hereunder, the Plan provisions shall control.
Insurance Loans to Owner-Employees. If an Owner-
Employee or Shareholder-Employee receives, either directly or
indirectly, any amount from an Insurer as a loan under a Policy,
the amount so received shall be considered a distribution under
the Plan. Any assignment or pledge (or agreement to assign or
pledge)
by an Owner-Employee or Shareholder-Employee of any interest in
the Plan shall be considered a distribution of such interest.
<PAGE>
ARTICLE
Top-Heavy Plans
Superseding Effect. For any Plan Year beginning after
December 31, 1983, in which Plan is determined to be a Top-Heavy
Plan under Section 15.2(b), the provisions of this Article 15
will supersede any conflicting provisions in the Plan or the Plan
Agreement. These provisions will be deemed applicable to a
Standard Plan at all times, unless the Employer has affirmatively
elected in the Plan Agreement to perform top-heavy testing
annually.
Definitions. For purposes of this Article 13, the
terms below shall be defined as follows:
Key Employee means any Employee or former Employee
(and the Beneficiaries of such Employee) who at any time during
the determination period was: (1) an officer of the Employer
having annual compensation greater than 50 percent of the amount
in effect under Section 415(b)(1)(A) of the Code; (2) an owner
(or considered an owner under Section 318 of the Code) of one of
the ten largest interests in the Employer having annual
compensation exceeding the dollar limitation under Section
415(c)(1)(A) of the Code; (3) a 5-percent owner of the Employer;
or (4) a 1-percent owner of the Employer having annual
compensation of more than $150,000. Annual compensation means
compensation as defined in Section 415(c)(3) of the Code, but
including amounts contributed by the Employer pursuant to a
salary reduction agreement which are excludible from the
Employee's gross income under Section 125, Section 402(a)(8),
Section 402(h) or Section 403(b) of the Code. The determination
period is the Plan Year containing the Determination Date and the
four preceding Plan Years. The determination of who is a key
Employee will be made in accordance with Section 416(i)(1) of the
Code and the Regulations thereunder.
Top-Heavy: the Plan is Top-Heavy for any Plan
Year beginning after December 31, 1983, if any of the following
conditions exists:
If the Top-Heavy Ratio for this Plan exceeds
60 percent and this Plan is not part of any Required Aggregation
Group or Permissive Aggregation Group of plans.
If this Plan is a part of a Required
Aggregation Group of plans but not part of a Permissive
Aggregation Group and the Top-Heavy
Ratio for the group of plans exceeds 60 percent.
<PAGE>
If this Plan is part of a Required
Aggregation Group and part of a Permissive Aggregation Group of
plans and the Top-Heavy Ratio for the Permissive Aggregation
group exceeds 60 percent.
Top-Heavy Ratio means the following:
If the Employer maintains one or more
qualified defined contribution plans (or any simplified employee
pension plan) and the Employer has not maintained any qualified
defined benefit plan which during the 5-year period ending on the
Determination Date(s) has or has had accrued benefits, the Top-
Heavy Ratio for this Plan alone or for the Required or Permissive
Aggregation Group as appropriate is a fraction, the numerator of
which is the sum of the account balances of all Key Employees as
of the Determination Date(s) (including any part of any account
distributed in the 5-year period ending on the Determination
Date(s)), and the denominator of which is the sum of all account
balances (including any part of any account balance distributed
in the 5-year period ending on the Determination Date(s)), both
computed in accordance with Section 416 of the Code and the
regulations thereunder. Both the numerator and denominator of the
Top-Heavy Ratio are increased to reflect any contribution not
actually made as of the Determination Date, but which is required
to be taken into account on that date under Section 416 of the
Code and the regulations thereunder.
If the Employer maintains one or more
qualified defined contribution plans (or any simplified employee
pension plan) and the Employer maintains or has maintained one or
more qualified defined benefit plans which during the 5-year
period ending on the Determination Date(s) has or has had any
accrued benefits, the Top-Heavy Ratio for any Required or
Permissive Aggregation Group as appropriate is a fraction, the
numerator of which is the sum of account balances under the
aggregated qualified defined contribution plan or plans for all
Key Employees, determined in accordance with (1) above, and the
Present Value of accrued benefits under the aggregated qualified
defined benefit plan or plans for all Key Employees as of the
Determination Date(s), and the denominator of which is the sum of
the account balances under the aggregated qualified defined
contributions plan or plans for all Participants, determined in
accordance with (1) above, and the Present Value of accrued
benefits under the qualified defined benefit plan or plans for
all Participants as of the Determination Date(s), all determined
in accordance with Section 416 of the Code and the regulations
thereunder. The accrued benefits under a defined benefit plan in
both the numerator and denominator of the Top-Heavy Ratio are
increased for any distribution of an accrued benefit made in the
5-year period ending on the Determination Date.
For purposes of (1) and (2) above, the value
of account balances and the Present Value of accrued benefits
will be determined as of the most recent Valuation Date that
falls within or ends with the 12-month period ending on the
Determination Date; except as provided in Section 416 of the Code
and the regulations thereunder for the first and second Plan
Years of a defined benefit plan. The account balances and
accrued benefits of a Participant (A) who is not a Key Employee
but who was a Key Employee in a prior Plan Year, or (B) who has
not been credited with at least one Hour of Service for the
Employer during the 5-year period ending on the Determination
Date, will be disregarded. The calculation of the Top-Heavy
Ratio, and the extent to which distributions, rollovers and
transfers are taken into account will be made in accordance with
Section 416 of the Code and the regulations thereunder.
Deductible Employee contributions will not be taken into account
for purposes of computing the Top-Heavy Ratio. When aggregating
plans, the value of account balances and accrued benefits will be
calculated with reference to the Determination Dates that fall
within the same calendar year.
The accrued benefit of a participant other
than a Key Employee shall be determined under (a) the method, if
any, that uniformly applies for accrual purposes under all
defined benefit plans maintained by the Employer, or (b) if there
is no such method, as if such benefit accrued not more rapidly
than the slowest accrual rate permitted under the fractional rule
of Section 411(b)(1)(C) of the Code.
Permissive Aggregation Group means the Required
Aggregation Group of plans plus any other qualified plan or plans
(or simplified employee pension plan) of the Employer which, when
considered as a group with the Required Aggregation Group, would
continue to satisfy the requirements of Sections 401(a)(4) and
410 of the Code.
Required Aggregation Group means: each qualified
plan of the Employer in which at least one Key Employee
participates or participated at any time during the determination
period (regardless of whether the Plan has terminated) and any
other qualified plan of the Employer which enables a plan
described in (i) to meet the requirements of Section 401(a)(4) or
410 of the Code.
Determination Date means, for any Plan Year
subsequent to the first Plan Year, the last day of the preceding
Plan Year. For the first Plan Year of the Plan, the
Determination Date is the last day of that Plan Year.
Valuation Date means the last day of the Plan
Year.
Present Value means present value based only on
the interest and mortality rates specified in any defined benefit
plan maintained by the Employer and set forth in the Plan
Agreement.
Minimum Allocation.
Except as otherwise provided in paragraphs (c) and
(d) below, the Employer contributions and Forfeitures allocated
on behalf of any Participant who is not a Key Employee shall not
be less than the lesser of three percent of such Participant's
Earnings, or in the case where the Employer has no defined
benefit plan which designates this Plan to satisfy Section 401 of
the Code, the largest percentage of Employer contributions and
Forfeitures, as a percentage of the first $200,000 of the Key
Employee's Earnings , allocated on behalf of any Key Employee for
that year. The minimum allocation is determined without regard
to any Social Security contribution. This minimum allocation
shall be made even though, under other Plan provisions, the
Participant would not otherwise be entitled to receive an
allocation, or would have received a lesser allocation of the
Employer's contributions and Forfeitures for the Plan Year
because of the Participant's failure to be credited with at
least 1,000 Hours of Service, or the Participant's failure to
make mandatory Employee contributions to the Plan, or the
Participant's receiving Earnings less than a stated amount.
Neither Elective Deferrals, Employer Matching Contributions nor
Qualified Matching Contributions for non-key employees shall be
taken into account for purposes of satisfying the requirement of
this Section 15.3(a).
For purposes of computing the minimum allocation,
Earnings will mean Earnings as defined in Section 2.13 of the
Plan .
The provision in paragraph (a) above shall not
apply to any Participant who was not employed by the Employer on
the last day of the Plan Year.
The provision in paragraph (a) above shall not
apply to any Participant to the extent he is covered under any
other plan or plans of the Employer, and the Employer has
provided in the Plan Agreement that the minimum allocation
requirement applicable to Top-Heavy Plans will be met in the
other plan or plans.
The minimum allocation required (to the extent
required to be nonforfeitable under Section 416(b) of the Code)
may not be forfeited under Sections 411(a)(3)(B) or (D) of the
Code.
<PAGE>
Earnings Limitation. For any Plan Year in which the
Plan is Top-Heavy, only the first $200,000 (or such larger amount
as may be prescribed by the Secretary of the Treasury or his
delegate) of a Participant's annual Earnings shall be taken into
account for purposes of determining Employer contributions under
the Plan.
Minimum Vesting Schedules (Variable Plans Only). For
any Plan Year in which this Plan is Top-Heavy and any subsequent
Plan Year, a minimum vesting schedule will automatically apply to
the Plan, as follows:
If the Employer has selected in the Plan Agreement
as the Plan's regular vesting schedule the Three Year Cliff, Five
Year Graded or Six Year Graded schedule, then the schedule
selected in the Plan Agreement shall continue to apply for any
Plan Year to which this Section 15.5 applies.
If the Employer has selected in the Plan Agreement
as the Plan's regular vesting schedule the Five Year Cliff
schedule, then the Three Year Cliff schedule shall apply in any
Plan Year to which this Section 15.5 applies.
If the Employer has selected in the Plan Agreement
as the Plan's regular vesting schedule the Seven Year Graded
schedule, then the Six Year Graded schedule shall apply in any
Plan Year to which this Section 15.5 applies.
If the Employer has selected in the Plan Agreement
as the Plan's regular vesting schedule a schedule other than
those described in paragraphs (a), (b) and (c), then the schedule
specified by the Employer in the Plan Agreement for this purpose
shall apply in any Plan Year to which this Section 15.5 applies.
The minimum vesting schedule applies to all benefits within
the meaning of Section 411(a)(7) of the Code except those
attributable to Employee contributions, including benefits
accrued before the effective date of Section 416 of the Code and
benefits accrued before the Plan became Top-Heavy. Further, no
reduction in a Participant's nonforfeitable percentage may occur
in the event the Plan's status as Top-Heavy changes for any Plan
Year. However, the vested portion of the Employer Contribution
Account of any Employee who does not have an Hour of Service
after the Plan has initially become Top-Heavy will be determined
without regard to this Section 15.5.
Adjustment of Fractions. For any Plan Year in which
the Plan is Top-Heavy, the Defined Benefit Fraction and the
Defined Contribution Fraction in Article 6 shall each be computed
using 100 percent of the dollar limitations specified in Sections
415(b)(1)(A) and 415(c)(1)(A) instead of 125 percent. In a
Variable Plan, the foregoing requirement shall not apply if the
Top-Heavy Ratio does not exceed 90 percent and the Employer has
elected in the Plan Agreement to provide increased minimum
allocations or benefits satisfying Section 416(h)(2) of the Code.
ARTICLE
Administration of the Plan
Plan Administrator. The Plan shall be administered by
the Employer, as Plan Administrator and Named Fiduciary within
the meaning of ERISA, under rules of uniform application;
provided, however, that the Plan Administrator's duties and
responsibilities may be delegated to a person appointed by the
Employer or a committee established by the Employer for that
purpose, in which case the committee shall be the Plan
Administrator and Named Fiduciary. The members of such a
committee shall act by majority vote, and may by majority vote
authorize any one or ones of their number to act for the
committee. The person or committee (if any) initially appointed
by the Employer may be named in the Plan Agreement, but the
Employer may remove any such person or committee member by
written notice to him, and any such person or committee may
resign by written notice to the Employer, without the necessity
of amending the Plan Agreement. To the extent permitted under
applicable law, the Plan Administrator shall have the sole
authority to enforce the terms hereof on behalf of any and all
persons having or claiming any interest under the Plan, and shall
be responsible for the operation of the Plan in accordance with
its terms. The Plan Administrator shall have discretionary
authority to determine all questions arising out of the
administration, interpretation and application of the Plan, all
of which
determinations shall be conclusive and binding on all persons.
The Plan Administrator, in carrying out its responsibilities
under the Plan, may rely upon the written opinions of its counsel
and on certificates of physicians. Subject to the provisions of
the Plan and applicable law, the Plan Administrator shall have no
liability to any person as a result of any action taken or
omitted hereunder by the Plan Administrator.
Claims Procedure. Claims for participation in or
distribution under the Plan shall be made in writing to the Plan
Administrator, or an agent designated by the Plan Administrator
whose name shall have been communicated to all Participants and
other persons as required by law. If any claim so made is denied
in whole or in part, the claimant shall be furnished promptly by
the Plan Administrator with a written notice:
setting forth the reason for the denial,
making reference to pertinent Plan provisions,
describing any additional material or information
from the claimant which is necessary and why, and
explaining the claim review procedure set forth
herein.
Within 60 days after denial of any claim for participation
or distribution under the Plan, the claimant may request in
writing a review of the denial by the Plan Administrator. Any
claimant seeking review hereunder shall be entitled to examine
all pertinent documents and to submit issues and comments in
writing. The Plan Administrator shall render a decision on review
hereunder; provided, that if the Plan Administrator determines
that a hearing would be appropriate, its decision on review shall
be rendered within 120 days after receipt of the request for
review. The decision on review shall be in writing and shall
state the reason for the decision, referring to the Plan
provisions upon which it is based.
Employer's Responsibilities. The Employer shall be
responsible for:
Keeping records of employment and other matters
containing all relevant data pertaining to any person affected
hereby and his eligibility to participate, allocations to his
Accounts, and his other rights under the Plan;
Periodic, timely filing of all statements, reports
and returns required to be filed by ERISA;
Timely preparation and distribution of disclosure
materials required by ERISA;
Providing notice to interested parties as required by
Section 7476 of the Code;
Retention of records for periods required by law;
and
Seeing that all persons required to be bonded on
account of handling assets of the Plan are bonded.
Recordkeeper. The Recordkeeper is hereby designated as
agent of the Employer under the Plan to perform directly or
through agents certain ministerial duties in connection with the
Plan, in particular:
To keep and regularly furnish to the Employer a
detailed statement of each Participant's Accounts, showing
contributions thereto by the Employer and the Participant,
Investment Products purchased therewith, earnings thereon and
Investment Products purchased therewith, and each redemption or
distribution made for any reason, including fees or benefits; and
To the extent agreed between the Employer and the
Recordkeeper, to prepare for the Employer or to assist the
Employer to prepare such returns, reports or forms as the
Employer shall be required to furnish to Participants and
Beneficiaries or other interested persons and to the Internal
Revenue Service or the Department of Labor;
all as may be more fully set forth in a service agreement
executed by the Employer and the Recordkeeper. If the Employer
does not appoint another person or entity as Recordkeeper, the
Employer itself shall be the Recordkeeper.
Prototype Plan. Putnam is the sponsor of the Putnam
Basic Plan Document, a prototype plan approved as to form by the
Internal Revenue Service. Provided that an Employer's adoption
of the Plan is made known to and accepted by Putnam in accordance
with the Plan Agreement, Putnam will inform the Employer of
amendments to the prototype plan and provide such other services
in connection with the Plan as may be agreed between Putnam and
the Employer. Putnam may impose for its services as sponsor of
the prototype plan such fees as it may establish from time to
time in a fee schedule addressed to the Employer. Such fees
shall, unless paid by the Employer, be paid from the Trust Fund,
and shall in that case be charged pro rata against the Accounts
of all Participants. The Trustee is expressly authorized to
cause Investment Products to be sold or redeemed for the purpose
of paying such fees.
ARTICLE
Trustee and Insurance Trustee
Powers and Duties of the Trustee. The Trustee shall
have the authority, in addition to any authority given by law, to
exercise the following powers in the administration of the Trust:
To invest all or a part of the Trust Fund in
Investment Products in accordance with the investment
instructions delivered by the Employer pursuant to Section 13.3,
without restriction to investments authorized for fiduciaries,
including without limitation any common, collective or commingled
trust fund maintained by the Trustee (or any other such fund,
acceptable to Putnam and the Trustee, that qualifies for
exemption from federal income tax pursuant to Revenue Ruling 81-
100). Any investment in, and any terms and conditions of, any
such common, collective or commingled trust fund available only
to employee trusts which meet the requirements of the Code, or
corresponding provisions of subsequent income tax laws of the
<PAGE>
United States, shall constitute an integral part of this
Agreement;
If this is a Variable Plan and Putnam and the
Trustee have consented thereto in writing, to invest without
limit in stock of the Employer or any affiliated company;
To dispose of all or part of the investments,
securities or other property which may from time to time or at
any time constitute the Trust Fund in accordance with the written
directions furnished by the Employer for the investment of
Participants' separate Accounts or the payment of benefits or
expenses of the Plan, and to make, execute and deliver to the
purchasers thereof good and sufficient deeds of conveyance
therefore, and all assignments, transfers and other legal
instruments, either necessary or convenient for passing the title
and ownership thereto, free and discharged of all trusts and
without liability on the part of such purchasers to see to the
application of the purchase money;
To hold cash uninvested to the extent necessary to
pay benefits or expenses of the Plan;
To follow the directions of an investment manager
appointed pursuant to Section 13.7;
To cause any investment of the Trust Fund to be
registered in the name of the Trustee or the name of its nominee
or nominees or to retain such investment unregistered or in a
form permitting transfer by delivery; provided that the books and
records of the Trustee shall at all times show that all such
investments are part of the Trust Fund;
Upon the written direction of or through the Employer,
to vote in person or by proxy (in accordance with Section 13.6
and, in the case of stock of the Employer, at the direction of
the Employer) with respect to all securities that are part of the
Trust Fund;
To consult and employ any suitable agent to act on
behalf of the Trustee and to contract for legal, accounting,
clerical and other services deemed necessary by the Trustee to
manage and administer the Trust Fund according to the terms of
the Plan;
Upon the written direction of the Employer, to
make loans from the Trust Fund to Participants in amounts and on
terms approved by the Plan Administrator in accordance with the
provisions of the Plan; provided that the Employer shall have the
sole responsibility for computing and collecting all loan
repayments required to be made under the Plan; and
To pay from the Trust Fund all taxes imposed or
levied with respect to the Trust Fund or any part thereof under
existing or future laws, and to contest the validity or amount of
any tax assessment, claim or demand respecting the Trust Fund or
any part thereof.
Limitation of Responsibilities. Except as may
otherwise be required under applicable law, neither the Trustee
nor the Insurance Trustee nor any of their respective agents
shall have any responsibility for:
Determining the correctness of the amount of any
contribution for the sole collection or payment of contributions,
which shall be the sole responsibility of the Employer;
Loss or breach caused by any Participant's
exercise of control over his Accounts, which shall be the sole
responsibility of the Participant;
Loss or breach caused by the Employer's exercise
of control over Accounts pursuant to Section 13.3, which shall be
the sole responsibility of the Employer;
Sums paid to an insurer or the validity of any
Policy or the accuracy of information provided by an insurer,
which shall be the sole responsibility of the insurer;
Performance of any other responsibilities not
specifically allocated to them under the Plan.
Fees and Expenses. The Trustee's fees for performing
its duties hereunder shall be such reasonable amounts as shall be
established by the Trustee from time to time in a fee schedule
addressed to the Employer. Such fees, any taxes of any kind
which may be levied or assessed upon or in respect of the Trust
Fund and any and all expenses reasonably incurred by the Trustee
shall, unless paid by the Employer, be paid from the Trust Fund
and shall, unless allocable to the Accounts of specific
Participants, be charged pro rata against the Accounts of all
Participants. The Trustee is expressly authorized to cause
Investment Products to be sold or redeemed for the purpose of
paying such amounts. Charges and expenses incurred in connection
with a specific Investment Product, unless allocable to the
Accounts of specific Participants, shall be charged pro rata
against the Accounts of all Participants for whose benefit
amounts have been invested in the specific Investment Product.
Reliance on Employer. The Trustee and its agents (and
the Insurance Trustee, if any) shall rely upon any decision of
the Employer, or of any person authorized by the Employer,
purporting to be made pursuant to the terms of the Plan, and upon
any information or statements submitted by the Employer or such
person (including those relating to the entitlement of any
Participant to benefits under the Plan), and shall not inquire as
to the basis of any such decision or information or statements,
and shall incur no obligation or liability for any action taken
or omitted in reliance thereon. The Trustee and its agents shall
be entitled to rely on the latest written instructions received
from the Employer as to the person or persons authorized to act
for the Employer hereunder, and to sign on behalf of the Employer
any directions or instructions, until receipt from the Employer
of written notice that such authority has been revoked.
Action Without Instructions. If the Trustee receives
no instructions from the Employer in response to communications
sent by registered or certified mail to the Employer at its last
known address as shown on the books of the Trustee, then the
Trustee may make such determinations with respect to
administrative matters arising under the Plan as it considers
reasonable, notwithstanding any prior instructions or directions
given by or on behalf of the Employer, but subject to any
instruction or direction given by or on behalf of the
Participants. To the extent permitted by applicable law, any
determination so made will be binding on all persons having or
claiming any interest under the Plan or Trust, and the Trustee
will incur no obligation or responsibility for any such
determination made in good faith or for any action taken pursuant
thereto. In making any such determination the Trustee may
require that it be furnished with such relevant documents as it
reasonably considers necessary.
Advice of Counsel. The Trustee and the Insurance
Trustee may each consult with legal counsel (who may, but need
not be, counsel for the Employer) concerning any questions which
may arise with respect to their respective rights and duties
under the Plan, and the opinion of such counsel shall be full and
complete protection to the extent permitted by applicable law in
the respect of any action taken or omitted by the Trustee or the
Insurance Trustee, as the case may be, hereunder in accordance
with the opinion of such counsel.
Accounts. The Trustee shall keep full accounts of all
receipts and disbursements which pertain to investments in
Investment Products, and the Trustee and the Insurance Trustee
shall each keep accounts of such other transactions as it is
required to perform hereunder. Within a reasonable time
following the close of each Plan Year, or upon its removal or
resignation or upon termination of the Trust and at such other
times as may be appropriate, each shall render to the Employer
and any other persons as may be required by law an account of its
administration of the Plan and Trust during the period since the
last previous such accounting, including such information as may
be required by law. The written approval of any account by the
Employer and all other persons to whom an account is rendered
shall be final and binding as to all matters and transactions
stated or shown therein, upon the Employer and Participants and
all persons who then are or thereafter become interested in the
Trust. The failure of the Employer or any other person to whom
an account is rendered to notify the party rendering the account
within 60 days after the receipt of any account of his or its
objection to the account shall be the equivalent of written
approval. If the Employer or any other person to whom an account
is rendered files any objections within such 60-day period with
respect to any matters or transactions stated or shown in the
account and the Employer or such other person and the party
rendering the account cannot amicably settle the questions raised
by such objections, the party rendering the account and the
Employer or such person shall have the right to have such
questions settled by judicial proceedings, although the Employer
or such other person to whom an account is rendered shall have,
to the extent permitted by applicable law, only 60 days from
filing of written objection to the account to commence legal
proceedings. Nothing herein contained shall be construed so as to
deprive the Trustee or the Insurance Trustee of the right to have
a judicial settlement of its accounts. In any proceeding for a
judicial settlement of any account or for instructions, the only
necessary parties shall be the Trustee, the Insurance Trustee,
the Employer and persons to whom an account is required by law to
be rendered.
Access to Records. The Trustee and the Insurance
Trustee shall give access to their respective records with
respect to the Plan at reasonable times and on reasonable notice
to any person required by law to have access to such records.
Successors. Any corporation into which the Trustee may
merge or with which it may consolidate or any corporation
resulting from any such merger or consolidation shall be the
successor of the Trustee without the execution or filing of any
additional instrument or the performance of any further act.
Persons Dealing With Trustee or Insurance Trustee. No
person dealing with the Trustee or the Insurance Trustee shall be
bound to see to the application of any money or property paid or
delivered to such party or to inquire into the validity or
propriety of any transactions.
Resignation and Removal; Procedure. The Trustee or the
Insurance Trustee may resign at any time by giving 60 days'
written notice to the Employer and to Putnam. The Employer may
remove the Trustee or the Insurance Trustee at any time by giving
60 days' written notice to the party removed and to Putnam. In
any case of resignation or removal hereunder, the period of
notice may be reduced to such shorter period as is satisfactory
to the Trustee, the Insurance Trustee and the Employer.
Notwithstanding anything to the contrary herein, any resignation
hereunder shall take effect at the time notice thereof is given
if the Employer may no longer participate in the prototype Plan
and is deemed to have an individually designed plan at the time
notice is given.
Action of Trustee Following Resignation or Removal.
When the resignation or removal of the Trustee becomes effective,
the Trustee shall perform all acts necessary to transfer the
Trust Fund to its successor. However, the Trustee may reserve
such portion of the Trust Fund as it may reasonably determine to
be necessary for payment of its fees and any taxes and expenses,
and any balance of such reserve remaining after payment of such
fees, taxes and expenses shall be paid over to its successor.
The Trustee shall have no responsibility for acts or omissions
occurring after its resignation becomes effective.
Action of Insurance Trustee Following Resignation or
Removal. When the Insurance Trustee's resignation or removal
becomes effective, the Insurance Trustee shall perform all acts
necessary to transfer ownership of the Policies to its successor.
If no successor has accepted appointment, the Policies shall be
held and owned by the Employer acting as Insurance Trustee until
a successor is appointed.
Effect of Resignation or Removal. Resignation or
removal of the Trustee or the Insurance Trustee shall not
terminate the Trust. In the event of any vacancy in the position
of Trustee (or, in a Plan having amounts invested in Policies,
the position of Insurance Trustee), whether the vacancy occurs
because of the resignation or removal of the Trustee (or the
Insurance Trustee) the Employer shall appoint a successor to fill
the vacant position. If the Employer does not appoint such a
successor who accepts appointment by the later of 60 days after
notice of resignation or removal is given or by such later date
as the Trustee or the Insurance Trustee, as the case may be, and
Employer may agree in writing to postpone the effective date of
the Trustee or the Insurance Trustee's resignation or removal,
the Trustee or Insurance Trustee may apply to a court of
competent jurisdiction for such appointment of cause the Trust to
be terminated, effective as of the date specified by the Trustee
or Insurance Trustee, as the case may be, in writing delivered to
the Employer. Each successor trustee so appointed and accepting
a trusteeship hereunder shall have all of the rights and powers
and all of the duties and obligations of the original Trustee or
Insurance Trustee, as the case may be, under the provisions
hereof, but shall have no responsibility for acts or omissions
before he becomes a Trustee or Insurance Trustee.
Fiscal Year of Trust. The fiscal year of the Trust
will coincide with the Plan Year.
<PAGE>
Limitation of Liability. Except as may otherwise be
required by law and other provisions of the Plan, no fiduciary of
the Plan, within the meaning of Section 3(21) of ERISA, shall be
liable for any losses incurred with respect to the management of
this Plan nor shall he or it be liable for any acts or omissions
except those caused by his or its own negligence or bad faith in
failing to carry out his or its duties under the terms contained
in the Plan.
Indemnification. Subject to the limitations of
applicable law, the Employer agrees to indemnify and hold
harmless (i) all fiduciaries, within the meaning of ERISA
Sections 3(21) and 404, and (ii) Putnam, for all liability
occasioned by any act, of such party or omission to act, in good
faith and without gross negligence.
ARTICLE
Amendment
General. The Employer reserves the power at any time
or times to amend the provisions of the Plan and the Plan
Agreement to any extent and in any manner that it may deem
advisable. If, however, the Employer makes any amendment
(including an amendment occasioned by a waiver of the minimum
funding requirement under Section 412(d) of the Code) other than
a change in an election made in the Plan
Agreement,
amendments stated in the Plan Agreement which
allow the Plan to satisfy Section 415 and to avoid duplication of
minimums under Section 416 of the Code because of the required
aggregation of multiple plans, or
model amendments published by the Internal Revenue
Service which specifically provide that their adoption will not
cause the Plan to be treated as individually designed,
the Employer shall cease to participate in this prototype Plan
and will be considered to have an individually designed plan.
Any amendment shall be made by delivery to the Trustee (and the
Recordkeeper, if any) of a written instrument executed by the
Employer providing for such amendment. Upon the delivery of such
instrument to the Trustee, such instrument shall become effective
in accordance with its terms as to all Participants and all
persons having or claiming any interest hereunder, provided, that
the Employer shall not have the power:
To amend the Plan in such a manner as would cause or
permit any part of the assets of the Trust to be diverted to
purposes other than the exclusive benefit of Participants or
their Beneficiaries, or as would cause or permit any portion of
such assets to revert to or become the property of the Employer.
To amend the Plan retroactively in such a manner as
would have the effect of decreasing a Participant's accrued
benefit, except that a Participant's Account balance may be
reduced to the extent permitted under Section 412(c)(8) of the
Code. For purposes of this paragraph (2), an amendment shall be
treated as reducing a Participant's accrued benefit if it has the
effect of reducing his Account balance, or of eliminating an
optional form of benefit with respect to amounts attributable to
contributions made performed before the adoption of the
amendment; or
To amend the Plan so as to decrease the portion of a
Participant's Account balance that has become vested, as compared
to the portion that was vested, under the terms of the Plan
without regard to the amendment, as of the later of the date the
amendment is adopted or the date it becomes effective.
To amend the Plan in such a manner as would increase
the duties or liabilities of the Trustee or the Recordkeeper
unless the Trustee or the Recordkeeper consents thereto in
writing.
Delegation of Amendment Power. The Employer and all
sponsoring organizations of the Putnam Basic Plan Document
delegate to Putnam Financial Services, Inc., the power to amend
the Plan (including the power to amend this Section 18.2 to name
a successor to which such power of amendment shall be delegated),
for the purpose of adopting amendments which are certified to
Putnam Financial Services, Inc., by counsel satisfactory to it,
as necessary or appropriate under applicable law, including any
regulation or ruling issued by the United States Treasury
Department or any other federal or state department or agency;
provided that Putnam Financial Services, Inc., or such successor
may amend the Plan only if it has mailed a copy of the proposed
amendment to the Employer at its last known address as shown on
its books by the date on which it delivers a written instrument
providing for such amendment, and only if the same amendment is
made on said date to all plans in this form as to which Putnam
Financial Services, Inc., or such successor has a similar power
of
amendment. If a sponsoring organization does not adopt any
amendment made by Putnam Financial Services, Inc., such
sponsoring organization shall cease to participate in this
prototype Plan and will be considered to have an individually
designed plan.
<PAGE>
ARTICLE
Termination of the Plan and Trust
General. The Employer has established the Plan and the
Trust with the bona fide intention and expectation that
contributions will be continued indefinitely, but the Employer
shall have no obligation or liability whatsoever to maintain the
Plan for any given length of time and may discontinue
contributions under the Plan or terminate the Plan at any time by
written notice delivered to the Trustee and the Insurance
Trustee, without any liability whatsoever for any such
discontinuance or termination.
Events of Termination. The Plan will terminate upon
the happening of any of the following events:
Death of the Employer, if a sole proprietor, or
dissolution or termination of the Employer, unless within 60 days
thereafter provision is made by the successor to the business
with respect to which the Plan was established for the
continuation of the Plan, and such continuation is approved by
the Trustee;
Merger, consolidation or reorganization of the
Employer into one or more corporations or organizations, unless
the surviving corporations or organizations adopt the Plan by an
instrument in writing delivered to the Trustee within 60 days
after such a merger, consolidation and reorganization;
Sale of all or substantially all of the assets of
the Employer, unless the purchaser adopts the Plan by an
instrument in writing delivered to the Trustee within 60 days
after the sale;
The institution of bankruptcy proceedings by or
against the Employer, or a general assignment by the Employer to
or for the benefit of its creditors; or
Delivery of notice as provided in Section 19.1.
Effect of Termination. Notwithstanding any other
provisions of this Plan, other than Section 19.4, upon
termination of the Plan or complete discontinuance of
contributions thereunder, each Participant's Accounts will become
fully vested and nonforfeitable, and upon partial termination of
the Plan, the Accounts of each Participant affected by the
partial termination will become fully vested and nonforfeitable.
The Employer shall notify the Trustee and the Insurance Trustee
in writing of such termination, partial termination or complete
discontinuance of contributions. In the event of the complete
termination of the Plan or discontinuance of contributions, the
Trustee will, after payment of all expenses of the Trust Fund,
make distribution of the Trust assets to the Participants or
other persons entitled thereto, in such form as the Employer may
direct pursuant to Article 10 or, in the absence of such
direction, in a single payment in cash or in kind. Upon
completion of such distributions under this Article, the Trust
will terminate, the Trustee and the Insurance Trustee will be
relieved from their obligations under the Trust, and no
Participant or other person will have any further claim
thereunder.
Approval of Plan. Notwithstanding any other provision
of the Plan, if the Employer fails to obtain or to retain the
approval by the Internal Revenue Service of the Plan as a
qualified plan under Section 401(a) of the Code, then (i) the
Employer shall promptly notify the Trustee, and (ii) the Employer
may no longer participate in the Putnam prototype plan, but will
be deemed to have an individually designed plan. If it is
determined by the Internal Revenue Service that the Plan upon its
initial adoption does not qualify under Section 401(a) of the
Code, all assets then held under the Plan will be returned within
one year of the denial of initial qualification to the
Participants and the Employer to the extent attributable to their
respective contributions and any income earned thereon, but only
if the application for qualification is made by the time
prescribed by law for filing the Employer's federal income tax
return for the taxable year in which the Plan is adopted, or such
later date as the Secretary of the Treasury may prescribe. Upon
such distribution, the Plan will be considered to be rescinded
and to be of no force or effect.
ARTICLE
Transfers From Other Qualified Plans;
Mergers
General. Notwithstanding any other provision hereof,
subject to the approval of the Trustee there may be transferred
to the Trustee all or any of the assets held (whether by a
trustee, custodian or otherwise) in respect of any other plan
which satisfies the applicable requirements of Section 401(a) of
the Code and which is maintained for the benefit of any Employee
(provided, however, that the Employee is not a member of a class
of Employees excluded from eligibility to participate in the
Plan) except that insurance policies held in respect of such
other plan shall be transferred to the Insurance Trustee as
trustee if the Employer so determines. Any such assets so
transferred shall be accompanied by written instructions from the
Employer naming the persons for whose benefit such assets have
been transferred and showing separately the respective
<PAGE>
contributions made by the Employer and by the Participants and
the current value of the assets attributable thereto.
Amounts Transferred. The Employer shall credit any
assets transferred pursuant to Section 20.1 to the appropriate
Accounts of the persons for whose benefit such assets have been
transferred. Any amounts credited as contributions previously
made by an employer or by such persons under such other plan
shall be treated as contributions previously made under the Plan
by the Employer or by such persons, as the case may be.
Merger or Consolidation. The Plan shall not be merged
or consolidated with any other plan, nor shall any assets or
liabilities of the Trust Fund be transferred to any other plan,
unless each Participant would receive a benefit immediately after
the transaction, if the Plan then terminated, which is equal to
or greater than the benefit he would have been entitled to
receive immediately before the transaction if the Plan had then
terminated.
ARTICLE
Miscellaneous
Notice of Plan. The Plan shall be communicated to all
Participants by the Employer on or before the last day on which
such communication may be made under applicable law.
No Employment Rights. Neither the establishment of the
Plan and the Trust, nor any amendment thereof, nor the creation
of any fund or account, nor the purchase of Policies, nor the
payment of any benefits shall be construed as giving to any
Participant or any other person any legal or equitable right
against the Employer, the Trustee, or the Insurance Trustee,
except as provided herein or by ERISA; and in no event shall the
terms of employment or service of any Participant be modified or
in any way be affected hereby.
Distributions Exclusively From Plan. Participants and
Beneficiaries shall look solely to the assets held in the Trust
and any Policies purchased pursuant to the Plan for the payment
of any benefits under the Plan.
No Alienation. The benefits provided hereunder shall
not be subject to alienation, assignment, garnishment,
attachment, execution or levy of any kind, and any attempt to
cause such benefits to be so subjected shall not be recognized,
except as provided in Section 12.4 or in accordance with a
qualified domestic relations order within the meaning of Section
414(p) of the Code. The Plan Administrator shall determine
whether a domestic relations order is qualified in accordance
with written procedures adopted by the Plan Administrator.
Provision of Information. The Employer, Trustee and
Insurance Trustee shall furnish to each other such information
relating to the Plan and Trust as may be required under the Code
or ERISA and any regulations issued or forms adopted by the
Treasury Department or the Labor Department or otherwise
thereunder.
No Prohibited Transactions. The Employer, Trustee, and
Insurance Trustee shall, to the extent of their respective powers
and authority under the Plan, prevent the Plan from engaging in
any transaction known by that person to constitute a transaction
prohibited by Section 4975 of the Code and any rules or
regulations with respect thereto.
Governing Law. The Plan shall be construed,
administered, regulated and governed in all respects under and by
the laws of the United States, and to the extent permitted by
such laws, by the laws of the Commonwealth of Massachusetts
Gender. Whenever used herein, a pronoun in the
masculine gender includes the feminine gender unless the context
clearly indicates otherwise.
PUTNAM DIVERSIFIED EQUITY TRUST
CLASS A
DISTRIBUTION PLAN AND AGREEMENT
This Plan and Agreement (the "Plan") constitutes the
Distribution Plan for the Class A shares of Putnam Diversified
Equity Trust, a Massachusetts business trust (the "Trust"),
adopted pursuant to the provisions of Rule 12b-1 under the
Investment Company Act of 1940 (the "Act") and the related
agreement between the Trust and Putnam Mutual Funds Corp.
("PMF"), the principal underwriter of the Trust's shares. During
the effective term of this Plan, the Trust may make payments to
PMF upon the terms and conditions hereinafter set forth:
SECTION 1. The Trust may make payments to PMF, in the form
of fees or reimbursements, to compensate PMF for services
provided and expenses incurred by it for purposes of promoting
the sale of Class A shares of the Fund, reducing redemptions of
shares, or maintaining or improving services provided to
shareholders by PMF and investment dealers. The amount of such
payments and the purposes for which they are made shall be
determined by the Qualified Trustees (as defined below).
Payments under this Plan shall not exceed in any fiscal year the
annual rate of 0.65% of the average net asset value of the Class
A shares of the Trust, as determined at the close of each
business day during the year. A majority of the Qualified
Trustees may, at any time and from time to time, reduce the
amount of such payments, or may suspend the operation of the Plan
for such period or periods of time as they may determine.
SECTION 2. This Plan shall not take effect until:
(a) it has been approved by a vote of a majority of
the outstanding Class A shares of the Trust; and
(b) it has been approved, together with any related
agreements, by votes of the majority (or whatever greater
percentage may, from time to time, be required by Section
12(b) of the Act or the rules and regulations thereunder) of
both (i) the Trustees of the Trust, and (ii) the Qualified
Trustees of the Trust, cast in person at a meeting called
for the purpose of voting on this Plan or such agreement.
SECTION 3. This Plan shall continue in effect for a period
of more than one year after it takes effect only so long as such
continuance is specifically approved at least annually in the
manner provided for approval of this Plan in Section 2(b).
SECTION 4. PMF shall provide to the Trustees of the Trust,
and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 5. This Plan may be terminated at any time by vote
of a majority of the Qualified Trustees, or by vote of a majority
of the outstanding Class A shares of the Trust.
SECTION 6. All agreements with any person relating to
implementation of this Plan shall be in writing, and any
agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time,
without payment of any penalty, by vote of a majority of the
Qualified Trustees or by vote of a majority of the
outstanding Class A shares of the Trust, on not more than 60
days' written notice to any other party to the agreement;
and
(b) that such agreement shall terminate automatically
in the event of its assignment.
SECTION 7. This Plan may not be amended to increase
materially the amount of distribution expenses permitted pursuant
to Section 1 hereof without the approval of a majority of the
outstanding Class A shares of the Trust, and all material
amendments to this Plan shall be approved in the manner provided
for approval of this Plan in Section 2(b).
SECTION 8. As used in this Plan, (a) the term "Qualified
Trustees" shall mean those Trustees of the Trust who are not
interested persons of the Trust, and have no direct or indirect
financial interest in the operation of this Plan or any
agreements related to it, and (b) the terms "assignment",
"interested person" and "vote of a majority of the outstanding
Class A shares" shall have the respective meaning specified in
the Act and the rules and regulations thereunder, subject to such
exemptions as may be granted by the Securities and Exchange
Commission.
SECTION 9. A copy of the Agreement and Declaration of Trust
of the Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts and notice is hereby given that
this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually, and that the obligations
of or arising out of this instrument are not binding upon any of
the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Trust.
Executed as of May 6, 1994.
PUTNAM MUTUAL FUNDS CORP. PUTNAM DIVERSIFIED EQUITY
TRUST
By: /s/ William N. Shiebler By: /s/ Charles E. Porter
------------------------- -----------------------
William N. Shiebler, President Executive Vice President
PUTNAM DIVERSIFIED EQUITY TRUST
CLASS B
DISTRIBUTION PLAN AND AGREEMENT
This Plan and Agreement (the "Plan") constitutes the
Distribution Plan for the Class B shares of Putnam Diversified
Equity Trust, a Massachusetts business trust (the "Trust"),
adopted pursuant to the provisions of Rule 12b-1 under the
Investment Company Act of 1940 (the "Act") and the related
agreement between the Trust and Putnam Mutual Funds Corp.
("PMF"). During the effective term of this Plan, the Trust may
incur expenses primarily intended to result in the sale of its
Class B shares upon the terms and conditions hereinafter set
forth:
SECTION 1. The Trust shall pay to PMF a monthly fee at the
annual rate of 1.00% of the average net asset value of the Class
B shares of the Trust, as determined at the close of each
business day during the month, to compensate PMF for services
provided and expenses incurred by it in connection with the
offering of the Trust's Class B shares, which may include,
without limitation, the payment by PMF to investment dealers of
commissions on the sale of Class B shares, as set forth in the
then current Prospectus or Statement of Additional Information of
the Trust and the payment of a service fee of up to 0.25% of such
net asset value for the purposes of maintaining or improving
services provided to shareholders by PMF and investment dealers.
Such fees shall be payable for each month within 15 days after
the close of such month. A majority of the Qualified Trustees,
as defined below, may, from time to time, reduce the amount of
such payments, or may suspend the operation of the Plan for such
period or periods of time as they may determine.
SECTION 2. This Plan shall not take effect until:
(a) it has been approved by a vote of a majority of
the outstanding Class B shares of the Trust;
(b) it has been approved, together with any related
agreements, by votes of the majority (or whatever
greater percentage may, from time to time, be
required by Section 12(b) of the Act or the rules
and regulations thereunder) of both (i) the
Trustees of the Trust, and (ii) the Qualified
Trustees of the Trust, cast in person at a meeting
called for the purpose of voting on this Plan or
such agreement; and
(c) the Trust has received the proceeds of the initial
public offering of its Class B shares.
SECTION 3. This Plan shall continue in effect for a period
of more than one year after it takes effect only so long as such
continuance is specifically approved at least annually in the
manner provided for approval of this Plan in Section 2(b).
SECTION 4. PMF shall provide to the Trustees of the Trust,
and the Trustees shall review, at least quarterly, a written
report of the amounts so expended and the purposes for which such
expenditures were made.
SECTION 5. This Plan may be terminated at any time by vote
of a majority of the Qualified Trustees or by vote of the
majority of the outstanding Class B shares of the Trust.
SECTION 6. All agreements with any person relating to
implementation of this Plan shall be in writing, and any
agreement related to this Plan shall provide:
(a) that such agreement may be terminated at any time,
without payment of any penalty, by vote of a
majority of the Qualified Trustees or by vote of a
majority of the outstanding Class B shares of the
Trust, on not more than 60 days' written notice to
any other party to the agreement; and
(b) that such agreement shall terminate automatically
in the event of its assignment.
SECTION 7. This Plan may not be amended to increase
materially the amount of distribution expenses permitted pursuant
to Section 1 hereof without the approval of a majority of the
outstanding Class B shares of the Trust and all material
amendments to this Plan shall be approved in the manner provided
for approval of this Plan in Section 2(b).
SECTION 8. As used in this Plan, (a) the term "Qualified
Trustees" shall mean those Trustees of the Trust who are not
interested persons of the Trust, and have no direct or indirect
financial interest in the operation of this Plan or any
agreements related to it, and (b) the term "majority of the
outstanding Class B shares of the Trust" means the affirmative
vote, at a duly called and held meeting of Class B shareholders
of the Trust, (i) of the holders of 67% or more of the Class B
shares of the Trust present (in person or by proxy) and entitled
to vote at such meeting, if the holders of more than 50% of the
outstanding Class B shares of the Trust entitled to vote at such
meeting are present in person or by proxy, or (ii) of the holders
of more than 50% of the outstanding Class B shares of the Trust
entitled to vote at such meeting, whichever is less, and (c) the
terms "assignment" and "interested person" shall have the
respective meanings specified in the Act and the rules and
regulations thereunder, subject to such exemptions as may be
granted by the Securities and Exchange Commission.
SECTION 9. A copy of the Agreement and Declaration of Trust
of the Trust is on file with the Secretary of State of The
Commonwealth of Massachusetts and notice is hereby given that
this instrument is executed on behalf of the Trustees of the
Trust as Trustees and not individually, and that the obligations
of or arising out of this instrument are not binding upon any of
the Trustees, officers or shareholders individually but are
binding only upon the assets and property of the Trust.
Executed as of May 6, 1994.
PUTNAM MUTUAL FUNDS CORP. PUTNAM DIVERSIFIED EQUITY
TRUST
/s/ William N. Shiebler /s/ Charles E. Porter
By: -------------------------- By: ------------------------
William N. Shiebler Charles E. Porter
President Executive Vice President
shared\dpclassb.sea
DEALER SERVICE AGREEMENT
Between: and
PUTNAM MUTUAL FUNDS CORP.
General Distributor of
The Putnam Family of Mutual Funds
P.O. Box 2701
Boston, MA 02208
We are pleased to inform you that, pursuant to the terms of this
Dealer Service Agreement, we are authorized to pay you service
fees in connection with the accounts of your customers that hold
shares of certain Putnam funds listed in SCHEDULE 1 that have
adopted distribution plans pursuant to Rule 12b-1 (the "12b-1
Funds"). Payment of the service fees is subject to your initial
and continuing satisfaction of the following terms and conditions
which may be revised by us from time to time:
1. QUALIFICATION REQUIREMENTS
(a) You have entered into a Sales Contract with us with respect
to the Putnam Family of Mutual Funds (the "Putnam Funds").
(b) You are the dealer of record for accounts in Putnam Funds
having an aggregate average net asset value of at least the
minimum amount set forth in SCHEDULE 2 (DEALER FIRM REQUIREMENTS)
during the period for which a service fee is to be paid. Putnam
Fund accounts are accounts in any open-end Putnam Fund, but
excluding any accounts for your firm's own retirement plans.
(c) One or more of your current employees must be the designated
registered representative(s) on accounts in Putnam Funds having
an aggregate average net asset value of at least the minimum
amount set forth in SCHEDULE 2 (REGISTERED REPRESENTATIVE
REQUIREMENTS) during the period for which a service fee is to be
paid.
(d) You will provide the following information and agree that we
will be entitled to rely on the accuracy of such information in
updating our records for determining the levels of service fees
payable to you under the terms of this Agreement. You understand
that such payments will be based solely on Putnam's records.
(i) For each Putnam Fund account registered in the
name of one of your customers, you will advise us,
preferably by electronic means, before the end of the
second month in each calendar quarter, of the Putnam
Fund account number and the registered representative's
identification, social security and branch number.
(ii) For each Putnam Fund account registered in your
name (street name accounts), you will use your best
efforts to advise us, preferably by electronic means,
before the end of the second month in each calendar
quarter, of the Putnam Fund account number, net asset
value of the account, date of valuation, and, for each
registered representative assigned to assets in the
account: the representative's identification number,
social security number, branch number, and the net
asset value of assigned assets in the account.
2. SERVICE FEES
(a) If you meet the qualification requirements set forth above
in Paragraph 1, you will be paid a service fee on assets in the
12b-1 Funds for which you are the dealer of record and which are
serviced by a registered representative of your firm meeting the
Registered Representative Requirements, if any, at the annual
rates specified in SCHEDULE 3 (excluding any accounts for your
firm's own retirement plans).
(b) You understand and agree that:
(i) all service fee payments are subject to the
limitations contained in each 12b-1 Fund's Distribution
Plan, which may be varied or discontinued at any time;
(ii) your failure to provide the services described in
Paragraph 4 below as may be amended by us from time to
time, or otherwise comply with the terms of this
Agreement, will render you ineligible to receive
service fees; and
(iii) failure of an assigned registered representative
to provide services required by this Agreement will
render that representative's accounts ineligible as
accounts on which service fees are paid.
3. PAYMENTS AND COMMUNICATIONS TO REGISTERED REPRESENTATIVES
(a) You will pass through to your registered representatives a
significant share of the service fees paid to you pursuant to
this Agreement.
(b) You will assist us in distributing to your registered
representatives periodic statements which we will have prepared
showing the aggregate average net asset value of shares in Putnam
Funds with which they are credited on our records.
<PAGE>
4. REQUIRED SERVICES
(a) You will assign one of your registered representatives to
each Putnam Fund account on your records and reassign the Putnam
Fund account should that representative leave your firm.
(b) You and your registered representatives will assist us and
our affiliates in providing the following services to
shareholders of the Putnam Funds:
(i) Maintain regular contact with shareholders in
assigned accounts and assist in answering inquiries
concerning the Putnam Funds.
(ii) Assist in distributing sales and service
literature provided by us, particularly to the
beneficial owners of accounts registered in your name
(street name accounts).
(iii) Assist us and our affiliates in the establishment
and maintenance of shareholder accounts and records.
(iv) Assist shareholders in effecting administrative
changes, such as changing dividend options, account
designations, address, automatic investment programs or
systematic investment plans.
(v) Assist in processing purchase and redemption
transactions.
(vi) Provide any other information or services as the
customer or we may reasonably request.
(c) You will support our marketing efforts by granting
reasonable requests for visits to your offices by our wholesalers
and by including all Putnam Funds on your "approved" list.
(d) Your compliance with the service requirements set forth in
this Agreement will be evaluated by us from time to time by
surveying shareholder satisfaction with service, by monitoring
redemption levels of shareholder accounts assigned to you and by
such other methods as we deem appropriate.
(e) The provisions of this Paragraph 4 may be amended by us from
time to time upon notice to you.
5. AMENDMENT
This Agreement, including any Schedule hereto, shall be deemed
amended as provided in any written notice delivered by us to you.
6. EFFECTIVE PERIOD AND TERMINATION
The provisions of this Agreement shall remain in effect for not
more than one year from the date of its execution or adoption and
thereafter for successive annual periods only so long as such
continuance is specifically approved at least annually by the
Trustees of each of the 12b-1 Funds in conformity with Rule 12b-1
under the Investment Company Act of 1940 (the "1940 Act"). This
Agreement shall automatically terminate in the event of its
assignment (as defined by the 1940 Act). In addition, this
Agreement may be terminated at any time, without the payment of
any penalty, by either party upon written notice delivered or
mailed by registered mail, postage prepaid, to the other party,
or, as provided in Rule 12b-1 under the 1940 Act, by the Trustees
of any 12b-1 Fund or by the vote of the holders of the
outstanding voting securities of any 12b-1 Fund.
7. WRITTEN REPORTS
Putnam Mutual Funds Corp. shall provide the Trustees of each of
the 12b-1 Funds, and such Trustees shall review at least
quarterly, a written report of the amounts paid to you under this
Agreement and the purposes for which such expenditures were made.
8. MISCELLANEOUS
(a) All communications mailed to us should be sent to the above
address. Any notice to you shall be duly given if mailed or
delivered to you at the address specified by you below.
(b) The provisions of this Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts.
Very truly yours,
PUTNAM MUTUAL FUNDS CORP.
By: ------------------------------
William N. Shiebler, President
and Chief Executive Officer
<PAGE>
We accept and agree to the foregoing Agreement as of the date set
forth below.
Dealer: -------------------------
By: ----------------------------
Authorized Signature, Title
------------------------------
------------------------------
Address
Dated: -------------------------
Please return the signed Putnam copy of this Agreement to Putnam
Mutual Funds Corp., P.O. Box 2701, Boston, MA 02208.
<PAGE>
SCHEDULE 1: THE 12B-1 FUNDS
CATEGORY A
Putnam Convertible Income-Growth Trust
Putnam Energy-Resources Trust
Putnam Global Growth Fund (Class A)
Putnam Health Sciences Trust
Putnam Investors Fund
Putnam Managed Income Trust
Putnam Strategic Income Trust
Putnam Vista Fund
Putnam Voyager Fund (Class A)
The George Putnam Fund of Boston (Class A)
The Putnam Fund for Growth and Income (Class A)
CATEGORY B
Putnam High Yield Trust
Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund
Putnam U.S. Government Income Trust (Class A)
CATEGORY C
Putnam Income Fund
CATEGORY D
Putnam Municipal Income Fund
CATEGORY E
Putnam Adjustable Rate U.S. Government Fund (Class A and B)
Putnam Diversified Income Trust
Putnam Dividend Growth Fund
Putnam Europe Growth Fund
Putnam Federal Income Trust
The George Putnam Fund of Boston (Class B)
Putnam Global Governmental Income Trust
Putnam Global Growth Fund (Class B)
The Putnam Fund for Growth and Income (Class B)
Putnam High Income Government Trust
Putnam High Yield Advantage Fund
Putnam New Opportunities Fund
Putnam OTC Emerging Growth Fund
Putnam U.S. Government Income Trust (Class B)
Putnam Utilities Growth and Income Fund (Class A and B)
Putnam Voyager Fund (Class B)
<PAGE>
CATEGORY F
Putnam California Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Tax Exempt Money Market Fund
CATEGORY G
Putnam New York Tax Exempt Opportunities Fund
CATEGORY H
Putnam Michigan Tax Exempt Income Fund II
Putnam Minnesota Tax Exempt Income Fund II
Putnam Ohio Tax Exempt Income Fund II
CATEGORY I
Putnam Massachusetts Tax Exempt Income Fund II
CATEGORY J
Putnam Texas Tax Exempt Income Fund
SCHEDULE 2: MINIMUM ASSETS
DEALER FIRM REQUIREMENTS. The minimum aggregate average net
asset value of all accounts in Putnam Funds specified by
Paragraph 1(b) is $250,000. We will review this requirement
prior to the start of each year and inform you of any changes.
REGISTERED REPRESENTATIVE REQUIREMENTS. With respect to
Paragraph 1(c), there is no minimum asset qualification
requirement in the Putnam Funds applicable to each of your
representatives. We will review this requirement prior to the
start of each year and inform you of any changes.
SCHEDULE 3: ANNUAL SERVICE FEE RATES
Category A: 0.20% on shares acquired through December 31, 1989
(including capital appreciation on such shares)
and 0.25% on shares acquired after December 31,
1989 (including shares purchased after December
31, 1989 with reinvested distributions on any
shares).
Category B: 0.20% on shares acquired through March 31, 1990
(including capital appreciation on such shares)
and 0.25% on shares acquired after March 31, 1990
(including shares purchased after March 31, 1990
with reinvested distributions on any shares).
Category C: 0.20% on shares acquired through March 31, 1991
(including capital appreciation on such shares)
and 0.25% on shares acquired after March 31, 1991
(including shares purchased after March 31, 1991
with reinvested distributions on any shares).
Category D: 0.20% on shares held as of May 7, 1992 and 0.25%
on shares acquired after May 7, 1992.
Category E: 0.25% on all shares.
Category F: 0.10% on all shares.
Category G: 0.20% on shares commencing July 13, 1992 and 0.15%
on shares outstanding as of July 13, 1992.
Category H: 0.15% on shares held as of March 9, 1992 and 0.20%
on shares acquired after March 9, 1992.
Category I: 0.15% on shares held as of May 11, 1992 and 0.20%
on shares acquired after May 11, 1992.
Category J: 0.20% on all shares.
NF-76
FINANCIAL INSTITUTION
SERVICE AGREEMENT
Between: and
PUTNAM MUTUAL FUNDS CORP.
General Distributor of
The Putnam Family of Mutual Funds
P.O. Box 2701
Boston, MA 02208
We are pleased to inform you that, pursuant to the terms of this
FINANCIAL INSTITUTION SERVICE AGREEMENT, we are authorized to pay
you service fees in connection with the accounts of your
customers that hold shares of certain Putnam funds listed in
SCHEDULE 1 that have adopted distribution plans pursuant to Rule
12b-1 (the "12b-1 Funds"). Payment of the service fees is
subject to your initial and continuing satisfaction of the
following terms and conditions which may be revised by us from
time to time:
1. QUALIFICATION REQUIREMENTS
(a) You have entered into a Financial Institution Sales Contract
with us with respect to the Putnam Family of Mutual Funds (the
"Putnam Funds"), whose shares you have agreed to make available
to your customers on an agency basis.
(b) You are the financial institution of record for accounts in
Putnam Funds having an aggregate average net asset value of at
least the minimum amount set forth in SCHEDULE 2 (FINANCIAL
INSTITUTION REQUIREMENTS) during the period for which a service
fee is to be paid. Putnam Fund accounts are accounts in any
open-end Putnam Fund but excluding any accounts for your
organization's own retirement plans.
(c) One or more of your current employees must be the designated
registered representative(s) in the case of a bank affiliated
dealer, or agent representative(s) in the case of a bank (both
referred to as "representatives"), on accounts in Putnam Funds
having an aggregate average net asset value of at least the
minimum amount set forth in SCHEDULE 2 (REPRESENTATIVE
REQUIREMENTS) during the period for which a service fee is to be
paid.
(d) You will provide the following information and agree that we
will be entitled to rely on the accuracy of such information in
updating our records for determining the levels of service fees
payable to you under the terms of this Agreement. You understand
that such payments will be based solely on Putnam's records:
<PAGE>
(i) For each Putnam Fund account registered in the name of
one of your customers, you will advise us, preferably by
electronic means, before the end of the second month in each
calendar quarter, of the Putnam Fund account number and the
representative's identification number, social security
number and branch number.
(ii) For each Putnam Fund account registered in your name
(nominee name accounts), you will use your best efforts to
advise us, preferably by electronic means, before the end of
the second month in each calendar quarter, of the Putnam
Fund account number, net asset value of the account, date of
valuation, and, for each representative assigned to assets
in the account: the representative's identification number,
social security number, branch number, and net asset value
of assigned assets in the account.
2. SERVICE FEES
(a) If you meet the qualification requirements set forth above in
Paragraph 1, you will be paid, at the end of each calendar
quarter, a service fee on assets of your customers in the 12b-1
Funds for which you are the financial institution of record and
which are serviced by a representative of your organization
meeting the Representative Requirements, if any, at the annual
rates specified in SCHEDULE 3 (excluding any accounts for your
organization's own retirement plans), provided that you have
evaluated such service fees and have concluded that it is
consistent with applicable laws, rules, regulations and
regulatory interpretations for you to receive such service fees.
(b) You understand and agree that:
(i) all service fee payments are subject to the limitations
contained in each 12b-1 Fund's Distribution Plan, which may
be varied or discontinued at any time;
(ii) your failure to provide the services described in
Paragraph 4 below as may be amended by us from time to time,
or otherwise comply with the terms of this Agreement, will
render you ineligible to receive service fees; and
(iii) failure of an assigned representative to provide
services required by this Agreement will render that
representative's accounts ineligible as accounts on which
service fees are paid.
3. PAYMENTS AND COMMUNICATIONS TO REPRESENTATIVES
(a) Where consistent with applicable laws, rules, regulations and
regulatory interpretations, you will pass through to your
representatives a significant share of the service fees paid to
you pursuant to this Agreement, or you will otherwise use the
payments of service fees to advance the objective of providing
and improving service to shareholders of the Putnam Funds in a
manner specifically approved by Putnam Financial Services (for
example, via training courses for representatives or shareholder
seminars).
(b) You will assist us in distributing to your representatives
periodic statements which we will have prepared showing the
aggregate average net asset value of shares in Putnam Funds with
which they are credited on our records.
4. REQUIRED SERVICES
(a) You will assign one of your representatives to each Putnam
Fund account on your records and reassign the Putnam Fund account
should that representative leave your organization.
(b) You and your representatives will assist us and our
affiliates in providing the following services to shareholders of
the Putnam Funds:
(i) Maintain regular contact with shareholders in assigned
accounts and assist in answering inquiries concerning the
Putnam Funds.
(ii) Assist in distributing sales and service literature
provided by us, particularly to the beneficial owners of
accounts registered in your name (nominee name accounts).
(iii) Assist us and our affiliates in the establishment and
maintenance of shareholder accounts and records.
(iv) Assist shareholders in effecting administrative
changes, such as changing dividend options, account
designations, address, automatic investment programs or
systematic investment plans.
(v) Assist in processing purchase and redemption
transactions.
(vi) Provide any other information or services as the
customer or we may reasonably request.
(c) You will grant reasonable requests for visits to your offices
by our wholesalers and include all Putnam Funds on your menu or
list of investments made available by you to your customers.
(d) Your compliance with the service requirements set forth in
this Agreement will be evaluated by us from time to time by
surveying shareholder satisfaction with service, by monitoring
redemption levels of shareholder accounts assigned to you and by
such other methods as we deem appropriate.
(e) The provisions of this Paragraph 4 may be amended by us from
time to time upon notice to you.
5. AMENDMENT
This Agreement, including any Schedule hereto, shall be deemed
amended as provided in any written notice delivered by us to you.
6. EFFECTIVE PERIOD AND TERMINATION
The provisions of this Agreement shall remain in effect for one
year from the date of its execution or adoption and thereafter
for successive annual periods only so long as such continuance is
specifically approved at least annually by the Trustees of each
of the 12b-1 Funds in conformity with Rule 12b-1 under the
Investment Company Act of 1940 (the "1940 Act"). This Agreement
shall automatically terminate in the event of its assignment (as
defined by the 1940 Act). In addition, this Agreement may be
terminated at any time, without the payment of any penalty, by
either party upon written notice to the other party, or, as
provided in Rule 12b-1 under the 1940 Act, by the Trustees of any
12b-1 Fund or by the vote of the holders of the outstanding
voting securities of any 12b-1 Fund.
7. WRITTEN REPORTS
Putnam Mutual Funds Corp. shall provide the Trustees of each of
the 12b-1 Funds, and such Trustees shall review at least
quarterly, a written report of the amounts paid to you under this
Agreement and the purposes for which such expenditures were made.
8. COMPLIANCE WITH LAWS
With respect to the receipt of service fees under the terms of
this Agreement, you will comply with all applicable federal and
state laws and rules, and all applicable regulations and
interpretations of regulatory agencies or authorities, which may
affect your business practices, including any requirement of
written authorization or consent by your customers to your
receipt of service fees, and any requirement to provide
disclosure to your customers of such service fees.
9. MISCELLANEOUS
(a) All communications mailed to us should be sent to the above
address. Any notice to you shall be duly given if mailed or
delivered to you at the address specified by you below.
<PAGE>
(b) The provisions of this Agreement shall be governed by and
construed in accordance with the laws of The Commonwealth of
Massachusetts.
Very truly yours,
PUTNAM MUTUAL FUNDS CORP.
By: --------------------------
William N. Shiebler,
President and
Chief Executive Officer
We accept and agree to the foregoing Agreement as of the date set
forth below.
Financial Institution: --------------------------
By: --------------------------
Authorized Signature, Title
--------------------------
--------------------------
Address
Dated: --------------------------
Please return the signed Putnam copy of this Agreement to Putnam
Mutual Funds Corp., P.O. Box 2701, Boston, MA 02208.
<PAGE>
SCHEDULE 1: THE 12B-1 FUNDS
CATEGORY A
Putnam Convertible Income-Growth Trust
Putnam Energy-Resources Trust
Putnam Global Growth Fund (Class A)
Putnam Health Sciences Trust
Putnam Investors Fund
Putnam Managed Income Trust
Putnam Strategic Income Trust
Putnam Vista Fund
Putnam Voyager Fund (Class A)
The George Putnam Fund of Boston (Class A)
The Putnam Fund for Growth and Income (Class A)
CATEGORY B
Putnam High Yield Trust
Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund
Putnam U.S. Government Income Trust (Class A)
CATEGORY C
Putnam Income Fund
CATEGORY D
Putnam Municipal Income Fund
CATEGORY E
Putnam Adjustable Rate U.S. Government Fund (Class A and B)
Putnam Diversified Income Trust
Putnam Dividend Growth Fund
Putnam Europe Growth Fund
Putnam Federal Income Trust
The George Putnam Fund of Boston (Class B)
Putnam Global Governmental Income Trust
Putnam Global Growth Fund (Class B)
The Putnam Fund for Growth and Income (Class B)
Putnam High Income Government Trust
Putnam High Yield Advantage Fund
Putnam New Opportunities Fund
Putnam OTC Emerging Growth Fund
Putnam U.S. Government Income Trust (Class B)
Putnam Utilities Growth and Income Fund (Class A and B)
Putnam Voyager Fund (Class B)
<PAGE>
CATEGORY F
Putnam California Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Tax Exempt Money Market Fund
CATEGORY G
Putnam New York Tax Exempt Opportunities Fund
CATEGORY H
Putnam Michigan Tax Exempt Income Fund II
Putnam Minnesota Tax Exempt Income Fund II
Putnam Ohio Tax Exempt Income Fund II
CATEGORY I
Putnam Massachusetts Tax Exempt Income Fund II
CATEGORY J
Putnam Texas Tax Exempt Income Fund
SCHEDULE 2: MINIMUM ASSETS
FINANCIAL INSTITUTION REQUIREMENTS. The minimum aggregate
average net asset value of all accounts in Putnam Funds specified
by Paragraph 1(b) is $250,000. We will review this requirement
prior to the start of each year and inform you of any changes.
REPRESENTATIVE REQUIREMENTS. With respect to Paragraph
1(c), there is no minimum asset qualification requirement in the
Putnam Funds applicable to each of your representatives. We will
review this requirement prior to the start of each year and
inform you of any changes. We reserve the right to set a minimum
at any time.
SCHEDULE 3: ANNUAL SERVICE FEE RATES
Category A: 0.20% on shares acquired through December 31, 1989
(including capital appreciation on such shares)
and 0.25% on shares acquired after December 31,
1989 (including shares purchased after December
31, 1989 with reinvested distributions on any
shares).
Category B: 0.20% on shares acquired through March 31, 1990
(including capital appreciation on such shares)
and 0.25% on shares acquired after March 31, 1990
(including shares purchased after March 31, 1990
with reinvested distributions on any shares).
Category C: 0.20% on shares acquired through March 31, 1991
(including capital appreciation on such shares)
and 0.25% on shares acquired after March 31, 1991
(including shares purchased after March 31, 1991
with reinvested distributions on any shares).
Category D: 0.20% on shares held as of May 7, 1992 and 0.25%
on shares acquired after May 7, 1992.
Category E: 0.25% on all shares.
Category F: 0.10% on all shares.
Category G: 0.20% on shares commencing July 13, 1992 and 0.15%
on shares outstanding as of July 13, 1992.
Category H: 0.15% on shares held as of March 9, 1992 and 0.20%
on shares acquired after March 9, 1992.
Category I: 0.15% on shares held as of May 11, 1992 and 0.20%
on shares acquired after May 11, 1992.
Category J: 0.20% on all shares.
NF-77
