As filed with the Securities and Exchange Commission on
May 4, 1995
Registration No. 33-59065
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- - - - - - - - - - -
FORM N-14
----
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / x /
----
----
Pre-Effective Amendment No. 1 / X /
----
----
Post-Effective Amendment No. / /
----
(Check appropriate box or boxes)
- - - - - - - - - - - - - - - - -
PUTNAM GROWTH AND INCOME FUND II
(Exact Name of Registrant as Specified in Charter)
One Post Office Square, Boston Massachusetts 02109
(Address of Principal Executive Offices)
617-292-1000
(Area Code and Telephone Number)
- - - - - - - - - - - - - - - -
JOHN R. VERANI, Vice President
PUTNAM GROWTH AND INCOME FUND II
One Post Office Square
Boston, Massachusetts 02109
(Name and address of Agent for Service)
- - - - - - - - - - - - - - - -
Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
- - - - - - - - - - - - - - - -
- - - - - - - - - - - - - - - - -
Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement becomes effective.
It is proposed that this filing will become effective on
June 5, 1995, pursuant to Rule 488.
- - - - - - - - - - - - - - - -
An indefinite amount of the Registrant's securities has been
registered under the Securities Act of 1933 pursuant to Rule 24f-
2 under the Investment Company Act of 1940. In reliance upon
such Rule, no filing fee is being paid at this time. A Rule 24f-
2 notice for the Registrant was filed on October 11, 1994.
- - - - - - - - - - - - - - - -
<PAGE>
PUTNAM GROWTH AND INCOME FUND II
CROSS-REFERENCE SHEET
(as required by Rule 481(a))
Form N-14 Item No.
Part A Caption in Prospectus/Proxy Statement of
Putnam Dividend Growth Fund
1. Cross-Reference Sheet; Front Cover
2. Front Cover
3. Synopsis; Risk factors
4. Introduction; Proposal regarding approval or
disapproval of Agreement and Plan of
Reorganization; Background and reasons for
the proposed reorganization; Information
about the reorganization
5. Front Cover -- Incorporated by reference to
specified documents
6. Front Cover -- Incorporated by reference to
specified documents
7. Introduction; Proposal regarding approval or
disapproval of Agreement and Plan of
Reorganization; Information about the
reorganization; Voting information
8. Not Applicable
9. Not Applicable
Part B Caption in Statement of Additional
Information
10. Cover Page
11. Cover Page
12. Cover Page -- Incorporated by reference to
specified documents
13. Cover Page -- Incorporated by reference to
specified documents
14. Independent Accountants and Financial
Statements
<PAGE>
Part C
The information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this
Registration Statement.
<PAGE>
IMPORTANT INFORMATION
FOR SHAREHOLDERS IN
PUTNAM DIVIDEND GROWTH FUND
The document you hold in your hands contains a combined
prospectus/proxy statement and proxy card. A proxy card is, in
essence, a ballot. When you vote your proxy, it tells us how to
vote on your behalf on important issues relating to your fund.
If you complete and sign the proxy, we'll vote it exactly as you
tell us. If you simply sign the proxy, we'll vote it in
accordance with the Trustees' recommendation on page [ ].
While investors sometimes find these materials intimidating, we
are, in fact, asking for your vote on just one matter. So we
urge you to spend a few minutes with the combined
prospectus/proxy statement, fill out your proxy card, and return
it to us. When shareholders don't return their proxies in
sufficient numbers, we have to incur the expense of additional
follow-up solicitations, which can cost your fund money.
We want to know how you would like to vote and welcome your
comments. Please take a few minutes with these materials and
return your proxy to us.
<PAGE>
Table of Contents
A Message from the Chairman. . . . . . . . . . . . . . . . . . . . . . . .
Notice of Shareholder meeting. . . . . . . . . . . . . . . . . . . . . . .
Combined Prospectus/Proxy Statement. . . . . . . . . . . . . . . . . . . .
Proxy card enclosed
If you have any questions, please contact us at the special toll-
free number we have set up for you (1-800-225-1581) or call your
financial advisor.
<PAGE>
A Message from the Chairman
(photograph of George Putnam appears here)
Dear Shareholder:
I am writing you to ask you for your vote on an important
question that affects your investment in Putnam Dividend Growth
Fund (the "Dividend Growth Fund"). While you are, of course,
welcome to join us at the Dividend Growth Fund's meeting, most
shareholders cast their vote by filling out and signing the
enclosed proxy . We are asking for your vote on the following
matter:
1. Approving a merger of the Dividend Growth Fund in which
your shares of the Dividend Growth Fund's would, in effect,
be exchanged at net asset value and on a tax-free basis for
shares of Putnam Growth and Income Fund II (the "Growth and
Income Fund").
Under the proposed merger, the Dividend Growth Fund will transfer
all of its assets to the Growth and Income Fund in return for
shares of the Growth and Income Fund and the assumption by the
Growth and Income Fund of all of the liabilities of the Dividend
Growth Fund. After the transfer, Class A shares of the Growth
and Income Fund will be distributed to holders of the Dividend
Growth Fund's Class A shares and Class B shares of the Growth and
Income Fund will be distributed to holders of the Dividend Growth
Fund's Class B shares, thereby liquidating the Dividend Growth
Fund. Both funds are managed by Putnam Investment Management,
Inc. ("Putnam Management") and have the same Trustees.
The Dividend Growth Fund seeks current income and capital growth
with equal emphasis, while the Growth and Income Fund II seeks
capital growth as its primary objective, with current income as a
secondary objective.
Putnam Management believes that combining the Dividend Growth
Fund with the Growth and Income Fund offers shareholders of the
Dividend Growth Fund an opportunity to pursue similar investment
objectives with greater economies of scale that will result in a
lower expense ratio and may result in improved investment
performance over the longer-term. In addition, Putnam Management
believes that the merger offers shareholders the option of owning
shares of a mutual fund with a greater opportunity for growth of
assets than the Dividend Growth Fund, which over time may further
lower expenses.
<PAGE>
Your vote is important to us. We appreciate the time and
consideration I am sure you will give this important matter. If
you have questions about the proposal, please call 1-800-225-
1581.
Sincerely yours,
(signature of George Putnam)
George Putnam, Chairman
<PAGE>
Putnam Dividend Growth Fund
Notice of a Meeting of Shareholders
This is the formal agenda for the shareholder meeting. It tells
you what matters will be voted on and the time and place of the
meeting, if you can attend in person:
To the Shareholders of Putnam Dividend Growth Fund:
A Meeting of Shareholders of Putnam Dividend Growth Fund (the
"Fund" or the "Dividend Growth Fund") will be held September 6,
1995 at 2:00 p.m., Boston time, on the eighth floor of One Post
Office Square, Boston, Massachusetts, to consider the following:
1. Approving an Agreement and Plan of Reorganization providing
for the transfer of all of the assets of the Fund to Putnam
Growth and Income Fund II (the "Growth and Income Fund") in
exchange for shares of the Growth and Income Fund and the
assumption by the Growth and Income Fund of all of the
liabilities of the Fund, and the distribution of such shares
to the shareholders of the Fund in liquidation of the Fund.
See page [].
2. Transacting such other business as may properly come before
the meeting.
By the Trustees
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter Robert E. Patterson
Hans H. Estin Donald S. Perkins
John A. Hill George Putnam, III
Elizabeth T. Kennan Eli Shapiro
Lawrence J. Lasser A.J.C. Smith
W. Nicholas Thorndike
WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN
THE POSTAGE-PAID ENVELOPE PROVIDED SO THAT YOU WILL BE
REPRESENTED AT THE MEETING.
June , 1995
<PAGE>
Prospectus/Proxy Statement June , 1995
Acquisition of the assets of
Putnam Dividend Growth Fund
One Post Office Square
Boston, Massachusetts 02109
(617) 292-1000
By and in exchange for shares of
Putnam Growth and Income Fund II
One Post Office Square
Boston, Massachusetts 02109
(617) 292-1000
Table of Contents
Synopsis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proposal regarding approval or disapproval of
Agreement and Plan of Reorganization . . . . . . . . . . . . . . . . .
Background and reasons for the proposed reorganization . . . . . . . . .
Information about the reorganization . . . . . . . . . . . . . . . . . .
Voting information . . . . . . . . . . . . . . . . . . . . . . . . . . .
Agreement and Plan of Reorganization . . . . . . . . . . . . . . .Exhibit A
This document will give you the information you need to vote on
the proposed merger. Much of the information is required under
rules of the Securities and Exchange Commission ("SEC"); some of
it is technical. If there is anything you don't understand,
please contact us at our special toll-free number, 1-800-225-
1581, or call your financial advisor.
This Prospectus/Proxy Statement relates to the proposed merger of
Putnam Dividend Growth Fund (the "Dividend Growth Fund") into
Putnam Growth and Income Fund II (the "Growth and Income Fund")
through the transfer of all assets of the Dividend Growth Fund to
the Growth and Income Fund in exchange for Class A and Class B
shares of beneficial interest of the Growth and Income Fund (the
"Merger Shares") and the assumption by the Growth and Income Fund
of all of the liabilities of the Dividend Growth Fund in
liquidation of the Dividend Growth Fund. (The Growth and Income
Fund and the Dividend Growth Fund are collectively referred to
herein as the "Funds," and each is referred to individually as a
"Fund"). As a result of the proposed transaction, each Class A
and Class B shareholder of the Dividend Growth Fund will receive
a number of full and fractional Class A and Class B Merger
Shares, respectively, equal in value at the date of the exchange
to the aggregate value of the shareholder's Dividend Growth Fund
shares.
This Prospectus/Proxy Statement explains concisely what you
should know before investing in the Growth and Income Fund.
Please read it and kept it for future reference. This
Prospectus/Proxy Statement is accompanied by the Prospectus,
dated January 5, 1995, of the Growth and Income Fund, which
contains information about the Growth and Income Fund and is
incorporated into this Prospectus/Proxy Statement by reference.
The following documents have been filed with the Securities and
Exchange Commission and are also incorporated into this
Prospectus/Proxy Statement by reference:
(i) the current Statement of Additional Information of the
Growth and Income Fund, dated January 5, 1995,
(ii) the current Prospectus and Statement of Additional
Information of the Dividend Growth Fund, each dated May ,
1995,
(iii) the Report of Independent Accountants and financial
statements included in the Dividend Growth Fund's Annual
Report to Shareholders for the fiscal year ended
February 28, 1995, and
(iv) a Statement of Additional Information dated June ,
1995, relating to the transactions described in this
Prospectus/Proxy Statement.
For a free copy of any or all of these Prospectuses or Statements
of Additional Information, please contact us as the special toll-
free number we have set up for you (1-800-225-1581).
Proxy materials, information statements and other information
filed by the Growth and Income Fund can be inspected and copied
at the Public Reference Facilities maintained by the Securities
and Exchange Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such material can also be obtained from
the Public Reference Branch, Office of Consumer Affairs and
Information Services, Securities and Exchange Commission,
Washington, D.C. 20549 at prescribed rates.
THE SECURITIES OFFERED BY THE ACCOMPANYING PROSPECTUS/PROXY
STATEMENT 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
SUCH PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE GROWTH AND INCOME 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.
<PAGE>
Synopsis
The responses to the questions that follow provide an overview of
key points typically of concern to shareholders considering a
proposed merger between funds. These responses are qualified in
their entirety to the remainder of the Prospectus/Proxy
Statement, which contains additional information and further
details regarding the proposed merger.
1. What is being proposed?
The Trustees of the Dividend Growth Fund have approved the merger
of the Dividend Growth Fund into the Growth and Income Fund. The
merger is proposed to be accomplished pursuant to an Agreement
and Plan of Reorganization providing for the transfer of all of
the assets of the Dividend Growth Fund to the Growth and Income
Fund in exchange for shares of the Growth and Income Fund and
for the assumption by the Growth and Income Fund of all of the
liabilities of the Dividend Growth Fund . The completion of these
transactions will result in the liquidation of the Dividend
Growth Fund.
2. What will happen to my shares of the Dividend Growth Fund?
As a result of the proposed transaction, the Dividend Growth Fund
will receive a number of Class A and Class B Shares of the Growth
and Income Fund (the "Merger Shares") equal in value to the value
of the net assets of the Dividend Growth Fund being transferred
that are attributable to the Class A and Class B shares,
respectively, of the Dividend Growth Fund. Following the
transfer, each Class A and Class B shareholder of the Dividend
Growth Fund will receive, which is tax-free for federal income
tax purposes, a number of full and fractional Class A and Class B
Merger Shares, respectively, of the Growth and Income Fund equal
in value at the date of the exchange to the aggregate value of
the shareholder's Dividend Growth Fund shares.
3. Why are the Trustees proposing the merger?
The Trustees of both Funds recommend approval of the merger
because
(i) the merger offers shareholders of the Dividend Growth
Fund an opportunity to pursue similar investment objectives with
economies of scale that will result in lower expenses and may
result in improved investment performance over the longer-term,
and
(ii) the merger offers shareholders the option of owning
shares of a mutual fund with a greater opportunity for growth of
assets, which may over time further lower expenses.
4. How do the investment objectives, policies and restrictions of
the two Funds compare?
The principal difference in the Fund's investment policies is
that the Dividend Growth Fund seeks current income and capital
growth with equal emphasis, while the Growth and Income Fund II
seeks capital growth as its primary objective, with current
income as a secondary objective. Notwithstanding the difference
in investment policies, the Growth and Income Fund's current SEC
yield ( % and % for Class A and B shares, respectively) is
comparable to the Dividend Growth Fund's current SEC yield ( %
and % for Class A and B shares, respectively.)
The Dividend Growth Fund seeks its objective by investing at
least 65% of its assets in common stocks that Putnam Management
believes offer the potential for above-average growth in the
amount of their dividends. The Growth and Income Fund seeks its
objectives by investing primarily in common stocks that offer
potential for capital growth, and may, consistent with its
investment objectives, invest in stocks that offer potential for
current income. The Growth and Income Fund may also invest in
corporate bonds, notes and debentures, preferred stocks,
convertible securities or U.S. government securities if Putnam
Management determines their purchase would help further the
Fund's investment objectives.
Another difference in the Funds' investment policies is that the
Growth and Income Fund may invest in
lower-rated fixed-income
securities,
while
the Dividend Growth Fund may not invest in such
securities. Lower-rated securities made up less than 2% of the
Growth and Income Fund's portfolio as of March 31, 1995.
Further, the Dividend Growth Fund may invest up to 30% of its
assets in securities principally traded in foreign markets,
whereas the Growth and Income Fund may invest not more than 20%
of its assets in such securities although both Funds currently
have less than % invested in foreign securities.
Despite the differences in investment policies, the Fund's follow
similar investment styles. In fact, the portfolio manager of the
Dividend Growth Fund, Anthony I. Kreisel, is co-manager of the
Growth and Income Fund. Given the similarities between the
investment objectives and policies and the management styles of
the Funds, the merger will not materially affect the general
strategy or style in which a shareholder's investment will be
managed.
Both Funds may also hold a portion of their assets in cash or
money market instruments. Both Funds may engage in foreign
currency, stock index futures and options strategies for hedging
purposes and may also engage in options transactions to earn
additional income or increase their current returns, and both
Funds may enter into securities loans, repurchase agreements and
forward commitments.
5. How do the management fees and other expenses of the two Funds
compare, and what are they estimated to be following the merger?
As shown in the tables below, the Funds currently have nearly
identical management fees and the Growth and Income Fund has
lower estimated expenses. In addition, both Funds have adopted
identical Class A and Class B Distribution Plans pursuant to Rule
12b-1 under the 1940 Act, which provide for identical fees.
The following table summarizes expenses (i) that the Dividend
Growth Fund has incurred in its past fiscal year, (ii) that the
Growth and Income Fund expects to incur in its first fiscal year
without giving effect to the proposed merger, and (iii) that the
Growth and Income Fund expects to incur after giving effect to
the proposed merger on a pro forma combined basis as if the
merger had occurred as of March 31, 1995. "Shareholder
Transaction Expenses" are identical for both Funds prior to the
merger and for the Growth and Income Fund after giving effect to
the merger. The Examples show the estimated cumulative expenses
attributable to a hypothetical $1,000 investment over specified
periods.
Class A Class B
Shares Shares
Shareholder Transaction Expenses
Maximum Sales Charge Imposed
on Purchases (as a percentage
of offering price) 5.75% NONE*
(Not applicable
to Merger Shares)
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 12b-1 Other Total Fund
Fees Fees Expenses Operating Expenses
Dividend
Growth
Class A 0.65% 0.25% 0.46% 1.36%
Class B 0.64% 1.00% 0.49% 2.13%
Growth and
Income
Class A 0.65% 0.25% 0.39% 1.29%
Class B 0.65% 1.00% 0.39% 2.04%
Growth and
Income
(Pro forma combined)
Class A 0.65% 0.25% 0.34% 1.24%
Class B 0.65% 1.00% 0.34% 1.99%
The tables are provided to help you understand an investor's
share of the operating expenses which each Fund incurs. The 12b-1
fees shown in the table for the Growth and Income Fund reflect
the amount to which the Trustees currently limit payments under
the Fund's Class A Distribution Plan and the maximum amount
permitted under the Fund's Class B Distribution Plan. "Other
Expenses" for the Growth and Income Fund are based on estimated
amounts.
Examples
An investment of $1,000 would incur the following expenses,
assuming 5% annual return and redemption at the end of each
period:
1 3 5 10
year years years years
Dividend
Growth
Class A $71 $98 $128 $212
Class B $71 $96 $133 $225
Growth and
Income
Class A $70 $96 - -
Class B $71 $94 - -
Growth and
Income
(Pro forma combined)
Class A $69 $95 - -
Class B $70 $92 - -
An investment of $1,000 would incur the following expenses,
assuming 5% annual return but no redemption:
1 3 5 10
year years years years
Dividend
Growth
Class A $71 $98 $128 $212
Class B $21 $66 $113 $225
Growth and
Income
Class A $70 $96 - -
Class B $21 $64 - -
Growth and
Income
(Pro forma combined)
Class A $69 $95 - -
Class B $20 $62 - -
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 has varied and will vary.
* Class B shares are sold without a front-end sales charge,
but their higher 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.
+ For purposes of determining the contingent deferred sales
charge applicable to Class B Merger Shares, such shares
will be treated as having been acquired as of the dates
originally acquired by the Dividend Growth shareholder. See
"Information about the reorganization - Description of the
Merger Shares."
6. What are the federal income tax consequences of the proposed
merger?
For federal income tax purposes, no gain or loss will be
recognized by the Dividend Growth Fund or its shareholders as a
result of the merger.
7. Do the distribution policies of the two Funds differ?
No. Each of the Funds distributes any net investment income at
least quarterly and any net realized capital gains at least
annually.
The Growth and Income Fund will not permit any Dividend Growth
Fund shareholder holding certificates for Dividend Growth Fund
shares at the time of the merger to receive cash dividends or
other distributions, receive certificates for Merger Shares,
exchange Merger Shares for shares of other investment companies
managed by Putnam Management, or pledge or redeem Merger Shares
until those certificates for Dividend Growth Fund shares have
been surrendered, or, in the case of lost certificates, an
adequate surety bond has been posted.
If a shareholder is not for that reason permitted to receive cash
dividends or other distributions on Merger Shares, the Growth and
Income Fund will pay all such dividends and distributions in
additional shares, notwithstanding any election the shareholder
may have made previously to receive dividends and distributions
on Dividend Growth Fund shares in cash.
8. Do the procedures for purchasing, redeeming and exchanging
shares of the two Funds differ?
No. The procedures for purchasing and redeeming shares of the
Dividend Growth Fund and shares of the Growth and Income Fund,
and for exchanging such shares of each Fund for shares of other
Putnam funds, are identical.
The Dividend Growth Fund currently offers two classes of shares
and the Growth and Income Fund currently offers three classes of
shares. Shares of both Funds may be purchased either through
investment dealers which have sales agreements with Putnam Mutual
Funds Corp. ("Putnam Mutual Funds") or directly through Putnam
Mutual Funds at prices based on net asset value, plus varying
sales charges, depending on the class and number of shares
purchased. Reinvestments of distributions by the Funds are made
at net asset value for all classes of shares.
Shares of both Funds may be redeemed any day the New York Stock
Exchange is open at their net asset value next determined either
directly to a Fund or through an investment dealer.
Shares of both Funds may be exchanged after a ten-day holding
period for shares of the same class of certain other Putnam
Funds.
9. How will I be notified of the outcome of the merger?
Shareholders will receive a confirmation after the reorganization
is completed, indicating your new account number.
11. Will the number of shares I own change?
Yes, but the total value of the shares of the Growth and Income
Fund you receive will be equal in value to the total value of the
shares of the Dividend Growth Fund that you are exchanging. Even
though the net asset value per share of each Fund is different,
the total value of a shareholder's holdings will not change as a
result of the merger.
Risk factors
What are the principal risk factors associated with an investment
in the Growth and Income Fund, and how do they compare with those
for the Dividend Growth Fund?
Because the Funds share similar investment objectives and
policies, the risks of an investment in the Growth and Income
Fund described below are similar to the risks of an investment in
the Dividend Growth Fund, except the risks associated with
investments by the Growth and Income Fund in securities rated
below investment-grade. These risks apply only to lower-rated
fixed-income securities, which made up less than 2% of the Growth
and Income Fund's portfolio as of March 31, 1995. A more
detailed description of certain risks associated with an
investment in the Growth and Income Fund is contained in the
Growth and Income Fund Prospectus.
Investments in fixed-income securities. As stated above, the
Growth and Income Fund may invest a portion of its assets in
fixed-income securities, including lower-rated fixed-income
securities which are commonly known as "junk bonds", without
limitation as to credit rating. Like those of other fixed-income
securities, the values of lower-rated fixed-income 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 such securities. Conversely, during periods of
rising interest rates, the value of the Fund's assets will
generally decline. The values of lower-rated securities
generally fluctuate more than those of higher-rated securities.
Securities in the lower rating categories may, depending on their
rating, have large uncertainties or major risk exposure to
adverse conditions.
Foreign investments. While the risks of investing in foreign
securities is the same for both Funds, the Growth and Income Fund
may have a higher portion of its assets subject to such risks
because it may invest a higher percentage of its assets in such
securities. Some of these risks include the negative effect of
currency exchange rates, lack of public information about foreign
companies, liquidity risks and certain risks associated with
foreign governments. A complete description of the risks
associated with foreign securities is included in the Growth and
Income Fund Prospectus.
Options and futures transactions and other investment practices.
As with the Dividend Growth Fund, the ability of the Growth and
Income Fund to engage in options and futures transactions
involves certain risks, including the risks that the Fund will be
unable at times to close out such positions, that such
transactions may not accomplish their purpose because of
imperfect market correlations, or that Putnam Management may not
forecast market movements correctly.
Finally, to the extent that the Growth and Income Fund exercises
its ability to engage in certain investment practices, such as
repurchase agreements and securities lending, it may be delayed
in recovering or unable to recover its collateral in the event of
default by the other party. In purchasing securities for future
delivery, the Fund runs the risk of a decline in the value of
such securities before the settlement date and the risk that the
other party should default on its obligation.
Introduction
This Prospectus/Proxy Statement is furnished in connection with
the proposed reorganization of the Dividend Growth Fund by the
transfer of all of its assets and liabilities to the Growth and
Income Fund and the solicitation of proxies by and on behalf of
the Trustees of the Dividend Growth Fund for use at the Meeting
of Shareholders. The Meeting is to be held on September 7, 1995
at 2:00 p.m. at One Post Office Square, 8th Floor, Boston,
Massachusetts. This Prospectus/Proxy Statement and the enclosed
form of proxy are being mailed to shareholders on or about June ,
1995.
Any shareholder giving a proxy has the power to revoke it by mail
(addressed to the Dividend Growth Fund's Clerk at the principal
office of the Dividend Growth Fund, One Post Office Square,
Boston, Massachusetts 02109) or in person at the Meeting, by
executing a superseding proxy, or by submitting a notice of
revocation to the Dividend Growth Fund. All properly executed
proxies received in time for the Meeting will be voted as
specified in the proxy, or, if no specification is made, FOR the
proposal (set forth in Proposal 1 of the Notice of Meeting) to
implement the reorganization of the Dividend Growth Fund by the
transfer of all of its assets to the Growth and Income Fund in
exchange for the Merger Shares and the assumption by the Growth
and Income Fund of all of the liabilities of the Dividend Growth
Fund.
At April 30, 1995, there were outstanding [ ] shares of
beneficial interest of the Dividend Growth Fund. Only
shareholders of record on June 6, 1995 will be entitled to notice
of and to vote at the Meeting. Each share is entitled to one
vote, with fractional shares voting proportionally.
The Dividend Growth Fund's Trustees know of no matters other than
those set forth herein to be brought before the Meeting. If,
however, any other matters properly come before the Meeting, it
is the Trustees' intention that proxies will be voted on such
matters in accordance with the judgment of the persons named in
the enclosed form of proxy.
Proposal regarding approval or disapproval of Agreement and Plan
of Reorganization
The shareholders of the Dividend Growth Fund are being asked to
approve or disapprove a merger between the Growth and Income Fund
and the Dividend Growth Fund pursuant to an Agreement and Plan or
Reorganization between the Funds, dated as of May __, 1995 (the
"Agreement"), a copy of which is attached to this Prospectus/Proxy
Statement as Exhibit A.
The Agreement provides, among other things, for the transfer of
all of the assets of the Dividend Growth Fund to the Growth and
Income Fund in exchange for the assumption by the Growth and
Income Fund of all of the liabilities of the Dividend Growth Fund
and for the Class A and Class B Merger Shares, the number of
which will be calculated based on the value of the net assets
attributable to the Class A and Class B shares of the Dividend
Growth Fund acquired by the Growth and Income Fund and the net
asset value per Class A and Class B share of the Growth and
Income Fund, all as more fully described below under "Information
about the reorganization."
After receipt of the Merger Shares, the Dividend Growth Fund will
cause the Class A Merger Shares to be distributed to its Class A
shareholders and the Class B Merger Shares to be distributed to
its Class B shareholders, in complete liquidation of the Dividend
Growth Fund and the legal existence of the Dividend Growth Fund
as a separate business trust under Massachusetts law will be
terminated. Each shareholder of the Dividend Growth Fund will
receive a number of full and fractional Class A or Class B Merger
Shares equal in value at the date of the exchange to the
aggregate value of the shareholder's Dividend Growth Fund shares.
In addition, the Dividend Growth Fund will file an application
for deregistration under Section 8(f) of the Investment Company
Act of 1940.
Prior to the date of the transfer (the "Exchange Date"), the
Dividend Growth Fund will declare a distribution to shareholders
which, together with all previous distributions, will have the
effect of distributing to shareholders all of its investment
company taxable income (computed without regard to the deduction
for dividends paid) and net realized capital gains, if any,
through the Exchange Date.
The Trustees of the Dividend Growth Fund have voted unanimously
to approve the proposed transaction and to recommend that
shareholders also approve the transaction. The affirmative vote
of two-thirds (66 2/3%) of the outstanding shares of beneficial
interest of the Dividend Growth Fund that are entitled to be
voted at the Meeting is necessary for the consummation of the
proposed transaction.
In the event that this proposal is not approved by the
shareholders of the Dividend Growth Fund, the Dividend Growth
Fund will continue to be managed as a separate fund in accordance
with its current investment objectives and policies, and the
Trustees may consider such alternatives as may be in the best
interests of the shareholders.
Background and reasons for the proposed reorganization
The Trustees of each of the Growth and Income Fund and the
Dividend Growth Fund, including all Trustees who are not
"interested persons" of the Funds, have determined that the
reorganization would be in the best interests of each Fund's
shareholders, and that the interests of existing shareholders of
each of the Funds would not be diluted as a result of effecting
the reorganization. The Trustees have unanimously approved the
proposed reorganization and have recommended its approval by
shareholders. The Growth and Income Fund and the Dividend Growth
Fund have the same Trustees.
The principal reasons why the Trustees are recommending the
reorganization are:
Economies of Scale. The proposed merger would achieve economies
of scale for shareholders of the Dividend Growth Fund by
permitting them to invest in a much larger Fund with similar
investment objectives and policies. It is expected that these
economies of scale will result in an immediate positive impact on
Dividend Growth Fund shareholders through a decrease in overall
expenses.
Putnam Management believes that the expenses of the Growth and
Income Fund will be lower than the expenses the Dividend Growth
Fund would likely pay if the merger did not take place. Putnam
Management has advised the Trustees that it expects, based on the
relative sizes of the two Funds as of March 31, 1995, that the
management fees paid by the Growth and Income Fund after the
merger would likely remain stable at 0.65% of average net assets
for both Class A and Class B shares. Putnam Management also
believes that the projected total annual expenses of 1.36% and
2.13% for Class A and Class B shares of the Dividend Growth Fund
would decrease to 1.24% and 1.99%, respectively, for Class A and
Class B shares of the Growth and Income Fund immediately
following the merger. This decrease in projected total annual
expenses is due to the efficiencies associated with operating a
fund the size of the Growth and Income Fund, and is reflected in
a decrease in total other expenses and, thus, the total annual
expenses of the Fund. Over the longer-term, this decrease in the
expenses payable by the Dividend Growth Fund shareholders may
also result in an increase in the total return on their
investment.
Opportunity for Growth. Putnam Management believes that the
proposed merger will enable Dividend Growth Fund shareholders to
own shares of a mutual fund which has an opportunity for a
significant growth of assets, which is unlikely to be the case
with the Dividend Growth Fund. As of March 31, 1995, the Growth
and Income Fund, which began operations in January 1995, had
assets of $73.0 million, while the Dividend Growth Fund, which
began operations in March 1990, had assets of only $59.2 million.
Putnam Management attributes the slow growth of the Dividend
Growth Fund as compared to the growth of the Growth and Income
Fund in part to market conditions currently unfavorable to the
Dividend Growth Fund. Putnam Management believes that dividend
growth funds, like the Dividend Growth Fund, are viewed as part
of the larger growth and income fund group. During the past five
years, the performance of dividend growth funds has not compared
well with funds in the growth and income category, which Putnam
Management believes has negatively impacted investor and broker
perceptions of and investor demand for dividend growth funds.
These unfavorable market conditions and limited investor interest
is evidenced by the relatively slow growth of the Dividend Growth
Fund since it began operations in 1990, despite its above-average
performance relative to other dividend growth funds. In fact,
the growth of the Dividend Growth Fund has largely stagnated for
over a year - at March 31, 1994, the Fund had $54.6 million in
assets, compared to its current asset level of $59.2 million, a
growth of only $4.6 million in assets. Putnam Management
believes the negative perceptions which have contributed to this
slow growth are unlikely to change significantly in the
foreseeable future, which will likely result in the Dividend
Growth Fund's asset level remaining relatively stable.
By comparison, in its first three months of operations, the
Growth and Income Fund has reached $73.0 million in net assets,
an asset level the Dividend Growth Fund has never reached. This
relatively rapid growth may in part be attributed to incentives
offered to dealers who sold shares of the Growth and Income Fund
during its first three months of operations. Putnam Management
believes, based on current market conditions, that the Growth and
Income Fund will continue to significantly outgrow the Dividend
Growth Fund, even though such growth may not continue at its
current high level.
Ability to Exchange an Investment in the Dividend Growth Fund for
an Investment in the Growth and Income Fund Without Recognition
of Gain or Loss for Federal Income Tax Purposes. If a
shareholder in the Dividend Growth Fund were to redeem an
investment in the Dividend Growth Fund in order to invest in the
Growth and Income Fund or another investment product, gain or
loss would be recognized by that shareholder for federal income
tax purposes upon the redemption of those shares. If the
Dividend Growth Fund were liquidated or were reorganized in a
taxable reorganization, the transaction would likely result in a
taxable event for shareholders. By contrast, the proposed merger
will permit the Dividend Growth Fund's shareholders to exchange
their investment in the Dividend Growth Fund for an investment in
the Growth and Income Fund without recognition of gain or loss
for federal income tax purposes. After the merger, shareholders
will be free to redeem any or all of the Growth and Income Fund
shares at net asset value at any time, at which point a taxable
gain or loss would be recognized.
Information about the reorganization
Agreement and Plan of Reorganization. The proposed Agreement and
Plan of Reorganization provides that the Growth and Income Fund
will acquire all of the assets of the Dividend Growth Fund in
exchange for the assumption by the Growth and Income Fund of all
of the liabilities of the Dividend Growth Fund and for the
issuance of Class A and Class B Merger Shares all as of the
Exchange Date (defined in the Agreement to be the next full
business day following the Valuation Time, defined in the Plan as
4:00 p.m. Boston time on September 10, 1995 or such other date as
may be agreed upon by the parties). The following discussion of
the Agreement is qualified in its entirety by the full text of
the Agreement, which is attached as Exhibit A to this
Prospectus/Proxy Statement.
The Dividend Growth Fund will sell all of its assets to the
Growth and Income Fund, and in exchange, the Growth and Income
Fund will assume all of the liabilities of the Dividend Growth
Fund and deliver to the Dividend Growth Fund (i) a number of full
and fractional Class A Merger Shares having an aggregate net
asset value equal to the value of assets of the Dividend Growth
Fund attributable to its Class A shares, less the value of the
liabilities of the Dividend Growth Fund assumed by the Growth
and Income Fund attributable to the Class A Merger Shares and
(ii) a number of full and fractional Class B Merger Shares having
a net asset value equal to the value of assets of the Dividend
Growth Fund attributable to its Class B shares, less the value of
the liabilities of the Dividend Growth Fund assumed by the Growth
and Income Fund attributable to the Class B Merger Shares,
respectively.
Immediately following the Exchange Date, the Dividend Growth Fund
will distribute pro rata to its shareholders of record as of the
close of business on the Exchange Date the full and fractional
Merger Shares received by the Dividend Growth Fund, with Class A
Merger Shares being distributed to holders of Class A shares of
Dividend Growth and Class B Merger Shares being distributed to
holders of Class B shares of Dividend Growth. As a result of the
proposed transaction, each holder of Class A and Class B shares
of the Dividend Growth Fund will receive a number of Class A and
Class B Merger Shares equal in aggregate value at the Exchange
Date to the value of the Class A and Class B shares,
respectively, of the Dividend Growth Fund held by the
shareholder. This distribution will be accomplished by the
establishment of accounts on the share records of the Growth and
Income Fund in the name of such Dividend Growth Fund
shareholders, each account representing the respective number of
full and fractional Class A or Class B Merger Shares due such
shareholder. New certificates for Merger Shares will be issued
only upon written request.
The Trustees of the Dividend Growth Fund have determined that the
interests of the Dividend Growth Fund's shareholders will not be
diluted as a result of the transactions contemplated by the
reorganization, and the Trustees of both Funds have determined
that the proposed reorganization is in the best interests of each
Fund.
The consummation of the reorganization is subject to the
conditions set forth in the Agreement. The Agreement may be
terminated and the reorganization abandoned at any time, before
or after approval by the shareholders, prior to the Exchange Date
by mutual consent of the Growth and Income Fund and the Dividend
Growth Fund or, if any condition set forth in the Agreement has
not been fulfilled and has not been waived by the party entitled
to its benefits, by such party.
All fees and expenses, including legal and accounting expenses,
portfolio transfer taxes (if any) or other similar expenses
incurred in connection with the consummation of the transactions
contemplated by the Agreement will be allocated ratably between
the two Funds in proportion to their net assets as of the day of
the transfer, except that the costs of proxy materials and proxy
solicitations will be borne by the Dividend Growth Fund. The
estimated fees and expenses for the transaction are $112,000.
However, to the extent that any payment by the Growth and Income
Fund of such fees or expenses would result in the
disqualification of the Growth and Income Fund or the Dividend
Growth Fund as a "regulated investment company" within the
meaning of Section 851 of the Internal Revenue Code of 1986, as
amended (the "Code"), such fees and expenses will be paid
directly by the party incurring them.
Description of the Merger Shares. Full and fractional Merger
Shares will be issued to the Dividend Growth Fund's shareholders
in accordance with the procedure under the Agreement as described
above. The Merger Shares are Class A and Class B shares of the
Growth and Income Fund. Investors purchasing Class A shares pay
a sales charge at the time of purchase, but Divided Growth Fund
shareholders receiving Class A Merger Shares in the merger will
not pay a sales charge on such shares. Class A shares of the
Growth and Income Fund are not subject to redemption fees and
such shares are subject to a 12b-1 fee at the annual rate of
0.25% of the Fund's average daily net assets attributable to
Class A shares. Class B shares of the Growth and Income Fund are
sold without a sales charge, but are subject to a contingent
deferred sales charge of up to 5% if redeemed within six years.
Class B shares are also subject to a 12b-1 fee at the annual rate
of 1.00% of the Fund's average daily net assets attributable to
Class B shares. Class B shares will automatically convert to
Class A shares, based on relative net asset value, approximately
eight years after purchase. For purposes of determining the
contingent deferred sales charge payable on redemption of Class B
Merger Shares received by holders of Class B shares of the
Dividend Growth Fund, as well as the conversion date of such
shares, such shares will be treated as having been acquired as of
the dates such shareholders originally acquired their Class B
shares of the Dividend Growth Fund.
In connection with the sale of Class B shares, Putnam Mutual
Funds pays commissions to broker-dealers from its own assets that
its expects to recover over time through the receipt of
distribution fees in connection with its Class B shares and the
receipt of contingent deferred sales charges on Class B shares.
The total amount of such commissions paid by Putnam Mutual Funds
with respect to the Dividend Growth Fund before the consummation
of the proposed reorganization will likely exceed the amounts
recovered by Putnam Mutual Funds by that time. Such uncovered
amounts do not represent a liability of the Dividend Growth Fund
and, consequently, the Growth and Income Fund will not assume any
such liability in connection with the consummation of the
reorganization. However, to the extent Putnam Mutual Funds has
not fully recovered such commissions before the consummation of
the proposed reorganization, it is anticipated that the Trustees
of the Growth and Income Fund will consider such unrecovered
amounts, among other factors, in determining whether to continue
payments of distribution fees in the future with respect to Class
B shares of the Growth and Income Fund.
Each of the Merger Shares will be fully paid and nonassessable
when issued, will be transferable without restriction, and will
have no preemptive or conversion rights, except that Class B
Merger Shares will have the conversion rights specified above.
Like that of the Dividend Growth Fund, the Growth and Income
Fund's Agreement and Declaration of Trust permits the Fund to
divide its shares, without shareholder approval, into two or more
series of shares representing separate investment portfolios and
to further divide any such series, without shareholder approval,
into two or more classes of shares having such preferences and
special or relative rights and privileges as the Trustees may
determine. The Growth and Income Fund's shares are currently
divided into four classes, three of which, Class A, Class B, and
Class M shares, are currently being offered. Only Class A and
Class B shares of the Growth and Income Fund will be distributed
in connection with the merger. Neither Fund's shares are
presently divided into series.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Growth and Income Fund. However, the Agreement and
Declaration of Trust disclaims shareholder liability for acts or
obligations of the Growth and Income Fund and requires that
notice of such disclaimer be given in each agreement, obligation,
or instrument entered into or executed by the Growth and Income
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 Growth and Income Fund. Thus, the risk of a
shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which the Growth and
Income Fund would be unable to meet its obligations. The
likelihood of such circumstances is remote. The shareholders of
the Dividend Growth Fund are currently subject to this same risk
of shareholder liability.
Federal income tax consequences. As a condition to the Dividend
Growth Fund's obligation to consummate the reorganization, the
Dividend Growth Fund will receive an opinion from Ropes & Gray,
counsel to the Funds, to the effect that, on the basis of the
existing provisions of the current administrative rules and
court decisions, for federal income tax purposes:
(i) under Section 361 of the Code, no gain or loss will be
recognized by the Dividend Growth Fund as a result of the
reorganization,
(ii) under Section 354 of the Code, no gain or loss will be
recognized by shareholders of the Dividend Growth Fund on
the distribution of Merger Shares to them in exchange for
their shares of the Dividend Growth Fund,
(iii) under Section 358 of the Code, the tax basis of the
Merger Shares that the Dividend Growth Fund's shareholders
receive in place of their Dividend Growth Fund shares will
be the same as the basis of the Dividend Growth Fund shares
exchanged, and
(iv) under Section 1223(1) of the Code, a shareholder's
holding period for the Merger Shares received pursuant to
the Agreement will be determined by including the holding
period for the Dividend Growth Fund shares exchanged for the
Merger Shares, provided that the shareholder held the
Dividend Growth Fund shares as a capital asset.
Capitalization. The following tables show the capitalization of
the Growth and Income Fund and the Dividend Growth Fund as of
March 31, 1995 and on a pro forma basis as of that date, giving
effect to the proposed acquisition of assets at net asset value:
(UNAUDITED)
Growth and Dividend Pro Forma
Income Fund Growth Fund Combined*
Net assets
(000's omitted)
Class A 36,937 48,221 85,118
Class B 30,692 10,935 41,608
Shares outstanding
(000's omitted)
Class A 4,019 4,759 9,267
Class B 3,345 1,086 4,536
Net asset value
per share
Class A 9.19 10.13 9.19
Class B 9.17 10.17 9.17
* Pro Forma net assets reflect legal and accounting merger-
related costs.
Unaudited pro forma financial statements of the Funds as of and
for the period ended March 31, 1995 are included in the Statement
of Additional Information. Because the Agreement provides that
the Growth and Income Fund will be the surviving Fund following
the reorganization and because the Growth and Income Fund's
investment objectives and policies will remain unchanged, the pro
forma financial statements reflect the transfer of the assets and
liabilities of the Dividend Growth Fund to the Growth and Income
Fund as contemplated by the Agreement.
THE TRUSTEES OF PUTNAM DIVIDEND GROWTH FUND, INCLUDING THE
INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMEND APPROVAL OF THE PLAN.
Voting information
Required vote. Proxies are being solicited from the Dividend
Growth Fund's shareholders by its Trustees for the Meeting of
Shareholders to be held on September 7, 1995 at 2:00 p.m., at One
Post Office Square, 8th Floor, Boston, Massachusetts, or at such
later time made necessary by adjournment. Unless revoked, all
valid proxies will be voted in accordance with the specification
thereon or, in the absence of specifications, FOR approval of the
Agreement and Plan of Reorganization. The transactions
contemplated by the Agreement and Plan of Reorganization will be
consummated only if approved by the affirmative vote of the
holders of at least two-thirds (66 2/3%) of the outstanding
shares of the Dividend Growth Fund that are entitled to vote
thereon at the Meeting.
Record date, quorum and method of tabulation. Shareholders of
record of the Dividend Growth Fund at the close of business on
June 9, 1995 (the "record date") will be entitled to vote at the
Meeting or any adjournment thereof. The holders of 30% of the
shares of the Dividend Growth Fund outstanding at the close of
business on the record date present in person or represented by
proxy will constitute a quorum for the Meeting; however, as noted
above, the affirmative vote of at least two-thirds (66 2/3%) of
the shares outstanding at the close of business on the record
date is necessary to approve the reorganization. Shareholders
are entitled to one vote for each share held, with fractional
shares voting proportionally.
Votes cast by proxy or in person at the meeting will be counted
by persons appointed by the Dividend Growth Fund as tellers for
the meeting. The tellers will count the total number of votes
cast "for" approval of the proposal for purposes of determining
whether sufficient affirmative votes have been cast. The tellers
will count shares represented by proxies that reflect abstentions
and "broker non-votes" (i.e., shares held by brokers or nominees
as to which (i) instructions have not been received from the
beneficial owners or the persons entitled to vote and (ii) the
broker or nominee does not have the discretionary voting power on
a particular matter) as shares that are present and entitled to
vote on the matter for purposes of determining the presence of a
quorum. Abstentions and broker non-votes have the effect of a
negative vote on the proposal.
As of April 30, 1995 as shown on the books of the Dividend Growth
Fund, there were issued and outstanding [ ] shares of beneficial
interest of the Dividend Growth Fund. As of April 30, 1995, the
officers and Trustees of the Dividend Growth Fund as a group
beneficially owned less than 1% of the outstanding shares of the
Dividend Growth Fund. At April 30, 1995, to the best of the
knowledge of the Dividend Growth Fund, no person owned
beneficially 5% or more of the outstanding shares of the Dividend
Growth Fund.
The votes of the shareholders of the Growth and Income Fund are
not being solicited, since their approval or consent is not
necessary for this transaction. As of April 30, 1995, the
officers and Trustees of the Growth and Income Fund as a group
beneficially owned less than 1% of the outstanding shares of the
Growth and Income Fund. At April 30, 1995, to the best of the
knowledge of the Growth and Income Fund, no person beneficially
owned 5% or more of the outstanding shares of the Growth and
Income Fund.
Solicitation of proxies. In addition to soliciting proxies by
mail, Trustees of the Dividend Growth Fund and employees of
Putnam Management, Putnam Fiduciary Trust Company and Putnam
Mutual Funds may solicit proxies in person or by telephone. The
Dividend Growth Fund may also arrange to have votes recorded by
telephone. The telephonic voting procedure is designed to
authenticate shareholders' identities, to allow shareholders to
authorize the voting of their shares in accordance with their
instructions and to confirm that their instructions have been
properly recorded. The Dividend Growth Fund has been advised by
counsel that these procedures are consistent with the
requirements of applicable law. If these procedures were subject
to a successful legal challenge, such votes would not be counted
at the Meeting. The Dividend Growth Fund is unaware of any such
challenge at this time. Shareholders would be called at the
phone number Putnam Investments has in its records for their
accounts, and would be asked for the Social Security numbers or
other identifying information. The shareholders would then be
given an opportunity to authorize their proxies to vote their
shares in accordance with their instructions. To ensure that the
shareholders' instructions have been recorded correctly, they
will also receive a confirmation of their instructions in the
mail. A special toll-free number will be available in case the
information in the confirmation is correct.
Persons holding shares as nominees will upon request be
reimbursed for their reasonable expenses in soliciting
instructions from their principals. The Dividend Growth Fund has
retained at its expense [name, address], to aid in the
solicitation of instructions for nominee accounts for a fee not
to exceed $[ ] plus reasonable out-of-pocket expenses. The
Dividend Growth Fund has also retained at its expense [name,
address], to aid in the solicitation of instructions for
registered accounts for a fee not to exceed $[ ] plus reasonable
out-of-pocket expenses for mailing and phone costs.
Revocation of proxies. Proxies, including proxies given by
telephone, may be revoked at any time before they are voted by a
written revocation received by the Clerk of the Dividend Growth
Fund, by properly executing a later-dated proxy or by attending
the Meeting and voting in person.
Adjournment. If sufficient votes in favor of the proposal are not
received by the time scheduled for the Meeting, the persons named
as proxies may propose adjournments of the Meeting for a period
or periods of not more than 60 days in the aggregate to permit
further solicitation of proxies. Any adjournment will require
the affirmative vote of a majority of the votes cast on the
question in person or by proxy at the session of the Meeting to
be adjourned. The persons named as proxies will vote in favor of
such adjournment those proxies which they are entitled to vote in
favor of the proposal. They will vote against any such
adjournment those proxies required to be voted against the
proposal. The Dividend Growth Fund pays the costs of any
additional solicitation and of any adjourned session. <PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement")
is made as of May [ ], 1995 in Boston, Massachusetts, by and
between Putnam Growth and Income Fund II, a Massachusetts
business trust (the "Growth and Income Fund"), and Putnam
Dividend Growth Fund, a Massachusetts business trust (the
"Dividend Growth Fund").
PLAN OF REORGANIZATION
(a) The Dividend Growth Fund will sell, assign, convey,
transfer and deliver to the Growth and Income Fund on the
Exchange Date (as defined in Section 6) all of its properties and
assets existing at the Valuation Time (as defined in Section 3(c)
hereof). In consideration therefor, the Growth and Income Fund
shall, on the Exchange Date, assume all of the liabilities of the
Dividend Growth Fund existing at the Valuation Time and deliver
to the Dividend Growth Fund, (i) a number of full and fractional
Class A shares of beneficial interest of the Growth and Income
Fund (the "Class A Merger Shares") having an aggregate net asset
value equal to the value of the assets of the Dividend Growth
Fund attributable to Class A shares of the Dividend Growth Fund
transferred to the Growth and Income Fund on such date less the
value of the liabilities of the Dividend Growth Fund attributable
to Class A shares of the Dividend Growth Fund
assumed
by the
Growth and Income Fund on such date, and (ii) a number of full
and fractional Class B shares of beneficial interest of the
Growth and Income Fund (the "Class B Merger Shares") having an
aggregate net asset value equal to the value of the assets of the
Dividend Growth Fund attributable to Class B shares of the
Dividend Growth Fund transferred to the Growth and Income Fund on
such date less the value of the liabilities of the Dividend
Growth Fund attributable to Class B shares of the Dividend Growth
Fund assumed by the Growth and Income Fund on that date. The
Class A Merger Shares and the Class B Merger Shares shall be
referred to collectively as the "Merger Shares." It is intended
that the reorganization described in this Plan shall be a
reorganization within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code").
(b) Upon
consummation of the transactions described in
paragraph (a) of this Plan, the Dividend Growth Fund shall
distribute in complete liquidation to its Class A and Class B
shareholders of record as of the Exchange Date Class A and Class
B Merger Shares, each shareholder being entitled to receive that
proportion and of such Class A or B Merger Shares which the
number of Class A or Class B shares of beneficial interest of the
Dividend Growth Fund held by such shareholder bears to the number
of such Class A or Class B shares of the Dividend Growth Fund
outstanding on such date. Certificates representing the Merger
Shares will be issued only if the shareholder so requests.
(c) As promptly as practicable after the liquidation of the
Dividend Growth Fund as aforesaid, the Dividend Growth Fund shall
be dissolved pursuant to the provisions of its Agreement and
Declaration of Trust, as amended, and applicable law, and its
legal existence terminated.
AGREEMENT
The
Growth and Income Fund and the Dividend Growth Fund
agree as follows:
1. Representations and Warranties of the Growth and Income
Fund. The Growth and Income Fund represents and warrants to and
agrees with the Dividend Growth Fund that:
(a) The Growth and Income Fund is a business trust duly
established and validly existing under the laws of The
Commonwealth of Massachusetts and has power to own all of its
properties and assets and to carry out its obligations under this
Agreement. The Growth and Income Fund is not required to qualify
as a foreign association in any jurisdiction. The Growth and
Income Fund has all necessary federal, state and local
authorizations to carry on its business as now being conducted
and to carry out this Agreement.
(b) The Growth and Income Fund is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as
an open-end management investment company, and such registration
has not been revoked or rescinded and is in full force and
effect.
(c) A statement of assets and liabilities, statements of
operations, and statements of changes in net assets and schedule
of investments (indicating their market values) of the Growth and
Income Fund for the fiscal period ended March 31, 1995, such
statements and schedule having been audited by Coopers & Lybrand,
independent accountants, have been furnished to the Dividend
Growth Fund. Such statements of assets and liabilities and
schedule fairly present the financial position of the Growth and
Income Fund as of their dates and said statements of operations
and changes in net assets fairly reflect the results of its
operations and changes in net assets for the period covered
thereby in conformity with generally accepted accounting
principles.
(d) The prospectus and statement of additional information
dated January 5, 1995 (the "Growth and Income Fund Prospectus"),
to be furnished to the Dividend Growth Fund, will not of such
date and does not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(e) There are no material legal, administrative or other
proceedings pending or, to the knowledge of the Growth and Income
Fund, threatened against the Growth and Income Fund which assert
liability on the part of the Growth and Income Fund.
(f) The Growth and Income Fund has no known liabilities of
a material nature, contingent or otherwise, other than those
shown as belonging to it on its statement of assets and
liabilities as of March 31, 1995 and those incurred in the
ordinary course of the Growth and Income Fund's business as an
investment company since March 31, 1995.
(g) No consent, approval, authorization or order of any
court or governmental authority is required for the consummation
by the Growth and Income Fund of the transactions contemplated by
this Agreement, except such as may be required under the 1933
Act, the Securities Exchange Act of 1934, as amended (the "1934
Act"), the 1940 Act, state securities or blue sky laws (which
term as used herein shall include the laws of the District of
Columbia and of Puerto Rico) or the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "H-S-R Act").
(h) The registration statement (the "Registration
Statement") filed with the Securities and Exchange Commission
(the "Commission") by the Growth and Income Fund on Form N-14
relating to the Merger Shares issuable hereunder, and the proxy
statement of the Dividend Growth Fund included therein (the
"Proxy Statement"), on the effective date of the Registration
Statement (i) will comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the
rules and regulations thereunder and (ii) will not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; and at the time of the
shareholders' meeting referred to in Section 7(a) and at the
Exchange Date, the prospectus contained in the Registration
Statement of which the Proxy Statement is a part (the
"Prospectus"), as amended or supplemented by any amendments or
supplements filed with the Commission by the Dividend Growth
Fund, will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, however, that none of the representations and
warranties in this subsection shall apply to statements in or
omissions from the Registration Statement, the Prospectus or the
Proxy Statement made in reliance upon and in conformity with
information furnished by the Dividend Growth Fund for use in the
Registration Statement, the Prospectus or the Proxy Statement.
(i) There
are no material contracts outstanding to which
the Growth and Income Fund is a party, other than as will be
disclosed in the Proxy Statement.
(j) All of the issued and outstanding shares of beneficial
interest of the Growth and Income Fund have been offered for sale
and sold in conformity with all applicable federal securities
laws.
(k) The Growth and Income Fund is and will at all times
through the Exchange Date qualify for taxation as a "regulated
investment company" under Sections 851 and 852 of the Code.
(l) The issuance of the Merger Shares pursuant to this
Agreement will be in compliance with all applicable federal
securities laws.
(m) The Merger Shares to be issued to the Dividend Growth
Fund have been duly authorized and, when issued and delivered
pursuant to this Agreement, will be legally and validly issued
and will be fully paid and nonassessable by the Growth and Income
Fund, and no shareholder of the Growth and Income Fund will have
any preemptive right of subscription or purchase in respect
thereof.
2. Representations and Warranties of the Dividend Growth
Fund. The Dividend Growth Fund represents and warrants to and
agrees with the Growth and Income Fund that:
(a) The Dividend Growth Fund is a business trust duly
established and validly existing under the laws of The
Commonwealth of Massachusetts and has power to carry on its
business as it is now being conducted and to carry out this
Agreement. The Dividend Growth Fund is not required to qualify
as a foreign association in any jurisdiction. The Dividend
Growth Fund has all necessary federal, state and local
authorizations to own all of its properties and assets and to
carry on its business as now being conducted and to carry out
this Agreement.
(b) The Dividend Growth Fund is registered under the 1940
Act as an open-end management investment company, and such
registration has not been revoked or rescinded and is in full
force and effect.
<PAGE>
(c) A statement of assets and liabilities, statement of
operations, and statement of changes in net assets and schedule
of investments (indicating their market values) of the Dividend
Growth Fund for the fiscal year ended February 28, 1995, such
statements and schedule having been audited by Coopers & Lybrand
L.L.P., independent accountants, will be furnished to the Growth
and Income Fund. Such statements of assets and liabilities and
schedule fairly present the financial position of the Dividend
Growth Fund as of their dates, and said statements of operations
and changes in net assets fairly reflect the results of its
operations and changes in financial position for the periods
covered thereby in conformity with generally accepted accounting
principles.
(d)
The
prospectus and statement of additional information
dated May __, 1995, previously furnished to the Growth and Income
Fund, did not contain as of their date any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
(e)
There are no material legal, administrative or other
proceedings pending or, to the knowledge of the Dividend Growth
Fund, threatened against the Dividend Growth Fund which assert
liability or may, if successfully prosecuted to their conclusion,
result in liability on the part of the Dividend Growth Fund,
other than as have been disclosed in the Prospectus.
(f) There are no material contracts outstanding to which
the Dividend Growth Fund is a party, other than as will be
disclosed in the Proxy Statement.
(g) The Dividend Growth Fund has no known liabilities of a
material nature, contingent or otherwise, other than those shown
on the Dividend Growth Fund's statement of assets and liabilities
as of February 28, 1995 referred to above and those incurred in
the ordinary course of the business of the Dividend Growth Fund
as an investment company since such date. Prior to the Exchange
Date, the Dividend Growth Fund will advise the Growth and Income
Fund of all material liabilities, contingent or otherwise,
incurred by it subsequent to February 28, 1995, whether or not
incurred in the ordinary course of business.
(h) As used in this Agreement, the term "Investments" shall
mean the Dividend Growth Fund's investments shown on the schedule
of its investments as of February 28, 1995 referred to in Section
2(c) hereof, as supplemented with such changes as the Dividend
Growth Fund shall make, and changes resulting from stock
dividends, stock split-ups, mergers and similar corporate
actions.
(i) The Dividend Growth Fund has filed or will file all
federal and state tax returns which, to the knowledge of the
Dividend Growth Fund's officers, are required to be filed by the
Dividend Growth Fund and has paid or will pay all federal and
state taxes shown to be due on said returns or on any assessments
received by the Dividend Growth Fund. All tax liabilities of the
Dividend Growth Fund have been adequately provided for on its
books, and no tax deficiency or liability of the Dividend Growth
Fund has been asserted, and no question with respect thereto has
been raised, by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already paid.
(j) At both the Valuation Time (as defined in Section 3(c))
and the Exchange Date, the Dividend Growth Fund will have full
right, power and authority to sell, assign, transfer and deliver
the Investments and any other assets and liabilities of the
Dividend Growth Fund to be transferred to the Growth and Income
Fund pursuant to this Agreement. At the Exchange Date, subject
only to the delivery of the Investments and any such other assets
and liabilities as contemplated by this Agreement, the Growth and
Income Fund will acquire the Investments and any such other
assets and liabilities subject to no encumbrances, liens or
security interests whatsoever and without any restrictions upon
the transfer thereof.
(k) No registration under the 1933 Act of any of the
Investments would be required if they were, as of the time of
such transfer, the subject of a public distribution by either of
the Growth and Income Fund or the Dividend Growth Fund, except as
previously disclosed to the Growth and Income Fund by the
Dividend Growth Fund.
(l) No consent, approval, authorization or order of any
court or governmental authority is required for the consummation
by the Dividend Growth Fund of the transactions contemplated by
this Agreement, except such as may be required under the 1933
Act, the 1934 Act, the 1940 Act, state securities or blue sky
laws or the H-S-R Act.
(m) The Registration Statement, the Prospectus and the
Proxy Statement, on the Effective Date of the Registration
Statement and insofar as they do not relate to the Growth and
Income Fund (i) will comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and the
rules and regulations thereunder and (ii) will not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein not misleading; and at the time of the
shareholders' meeting referred to in Section 8(a) below and on
the Exchange Date, the Prospectus, as amended or supplemented by
any amendments or supplements filed with the Commission by the
Growth and Income Fund, insofar as it does not relate to the
Growth and Income Fund, will not contain any untrue statement of
a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading; provided, however, that the representations and
warranties in this subsection shall apply only to statements of
fact relating to the Dividend Growth Fund contained in the
Registration Statement, the Prospectus or the Proxy Statement, or
omissions to state in any thereof a material fact relating to the
Dividend Growth Fund, as such Registration Statement, Prospectus
and Proxy Statement shall be furnished to the Dividend Growth
Fund in definitive form as soon as practicable following
effectiveness of the Registration Statement and before any public
distribution of the Prospectus or Proxy Statement.
(n) The Dividend Growth Fund is and will at all times
through the Exchange Date qualify for taxation as a "regulated
investment company" under Sections 851 and 852 of the Code.
(o) At the Exchange Date, the Dividend Growth Fund will
have sold such of its assets, if any, as necessary to assure
that, after giving effect to the acquisition of the assets of the
Dividend Growth Fund pursuant to this Agreement, the Growth and
Income Fund will remain in compliance with its mandatory
investment restrictions as are set forth in the Growth and Income
Fund Prospectus previously furnished to the Dividend Growth Fund.
3. Reorganization. (a) Subject to the requisite approval
of the shareholders of the Dividend Growth Fund and to the other
terms and conditions contained herein (including the Dividend
Growth Fund's obligation to distribute to its shareholders all of
its investment company taxable income and net capital gain as
described in Section 8(m) hereof), the Dividend Growth Fund
agrees to sell, assign, convey, transfer and deliver to the
Growth and Income Fund, and the Growth and Income Fund agrees to
acquire from the Dividend Growth Fund, on the Exchange Date all
of the Investments and all of the cash and other properties and
assets of the Dividend Growth Fund, whether accrued or contingent
(including cash received by the Dividend Growth Fund upon the
liquidation by the Dividend Growth Fund of any investments
purchased by the Dividend Growth Fund after February 28, 1995 and
designated by the Growth and Income Fund as being unsuitable for
it to acquire), in exchange for that number of Merger Shares
provided for in Section 4 and the assumption by the Growth and
Income Fund of all of the liabilities of the Dividend Growth
Fund, whether accrued or contingent, existing at the Valuation
Time. Pursuant to this Agreement, the Dividend Growth Fund will,
as soon as practicable after the Exchange Date, distribute all of
the Class A and Class B Merger Shares received by it to the Class
A and Class B shareholders, respectively, of the Dividend Growth
Fund in complete liquidation of their shares of beneficial
interest of the Dividend Growth Fund.
(b) The Dividend Growth Fund will pay or cause to be paid
to the Growth and Income Fund any interest, cash or such
dividends, rights and other payments received by it on or after
the Exchange Date with respect to the Investments and other
properties and assets of the Dividend Growth Fund, whether
accrued or contingent, received by it on or after the Exchange
Date. Any such distribution shall be deemed included in the
assets transferred to the Growth and Income Fund at the Exchange
Date and shall not be separately valued unless the securities in
respect of which such distribution is made shall have gone "ex"
such distribution prior to the Valuation Time, in which case any
such distribution which remains unpaid at the Exchange Date shall
be included in the determination of the value of the assets of
the Dividend Growth Fund acquired by the Growth and Income Fund.
(c) The Valuation Time shall be 4:00 p.m. Boston time on
September 10, 1995 or such earlier or later day as may be
mutually agreed upon in writing by the parties hereto (the
"Valuation Time").
4. Exchange Date; Valuation Time. On the Exchange Date,
the Growth and Income Fund will deliver to the Dividend Growth
Fund (i) a number of full and fractional Class A Merger Shares
having an aggregate net asset value equal to the value of assets
of the Dividend Growth Fund attributable to Class A shares of the
Dividend Growth Fund transferred to the Growth and Income Fund on
such date less the value of the liabilities of the Dividend
Growth Fund attributable to the Class A shares of the Dividend
Growth Fund assumed by the Growth and Income Fund on that date,
and (ii) a number of full and fractional Class B Merger Shares
having an aggregate net asset value equal to the value of the
assets of the Dividend Growth Fund attributable to Class B shares
of the Dividend Growth Fund transferred to the Growth and Income
Fund on such date less the value of the liabilities of the
Dividend Growth Fund attributable to Class B shares of the
Dividend Growth Fund assumed by the Growth and Income Fund on
that date, determined as hereafter provided in this Section 4.
(a) The net asset value of the Merger Shares to be
delivered to the Dividend Growth Fund, the value of the assets
attributable to the Class A and Class B shares of the Dividend
Growth Fund and the value of the liabilities attributable to the
Class A and B shares of the Dividend Growth Fund to be assumed by
the Growth and Income Fund shall in each case be determined as of
the Valuation Time.
(b) The net asset value of the Class A and Class B Merger
Shares shall be computed in the manner set forth in the current
Growth and Income Fund Prospectus. The value of the assets and
liabilities of the Class A and Class B shares of the Dividend
Growth Fund shall be determined by the Growth and Income Fund, in
cooperation with the Dividend Growth Fund, pursuant to procedures
which the Growth and Income Fund would use in determining the
fair market value of the Growth and Income Fund's assets and
liabilities.
(c) No adjustment shall be made in the net asset value of
either the Dividend Growth Fund or the Growth and Income Fund to
take into account differences in realized and unrealized gains
and losses.
(d) The Growth and Income Fund shall issue the Merger
Shares to the Dividend Growth Fund in two certificates registered
in the name of the Dividend Growth Fund, one for Class A Merger
Shares and one for Class B Merger Shares (excluding any
fractional shares). The Dividend Growth Fund shall distribute
the Class A Merger Shares to the Class A shareholders of the
Dividend Growth Fund by redelivering such certificates to the
Growth and Income Fund's transfer agent which will as soon as
practicable set up open accounts for each Class A Dividend Growth
Fund shareholder in accordance with written instructions
furnished by the Dividend Growth Fund. The Dividend Growth Fund
shall distribute the Class B Merger Shares to the Class B
shareholders of the Dividend Growth Fund by redelivering such
certificates to the Growth and Income Fund's transfer agent which
will as soon as practicable set up open accounts for each Class B
Dividend Growth Fund shareholder in accordance with written
instructions furnished by the Dividend Growth Fund. With respect
to any Dividend Growth Fund shareholder holding share
certificates as of the Exchange Date, the Growth and Income Fund
will not permit such shareholder to receive dividends and other
distributions on the Merger Shares (although such dividends and
other distributions shall be credited to the account of such
shareholder), receive certificates representing the Merger
Shares, exchange the Merger Shares credited to such shareholder's
account for shares of other investment companies managed by
Putnam Investment Management, Inc. ("Putnam"), or pledge or
redeem such Merger Shares until notified by the Dividend Growth
Fund or the shareholder's agent that such shareholder has
surrendered his or her outstanding Dividend Growth Fund
certificates or, in the event of lost, stolen, or destroyed
certificates, posted adequate bond. In the event that a
shareholder shall not be permitted to receive dividends and other
distributions on the Merger Shares as provided in the preceding
sentence, the Growth and Income Fund shall pay any such dividends
or distributions in additional Merger Shares, notwithstanding any
election such shareholder shall have made previously with respect
to the payment, in cash or otherwise, of dividends and
distributions on shares of the Dividend Growth Fund. The
Dividend Growth Fund will, at its expense, request the
shareholders of the Dividend Growth Fund to surrender their
outstanding Dividend Growth Fund certificates, or post adequate
bond, as the case may be.
(e) The Growth and Income Fund shall assume all liabilities
of the Dividend Growth Fund, whether accrued or contingent, in
connection with the acquisition of assets and subsequent
dissolution of the Dividend Growth Fund or otherwise.
5. Expenses, Fees, etc. (a) All fees and expenses,
including legal and accounting expenses, portfolio transfer taxes
(if any) or other similar expenses incurred in connection with
the consummation by the Dividend Growth Fund and the Growth and
Income Fund of the transactions contemplated by this Agreement
will be allocated ratably between the Growth and Income Fund and
the Dividend Growth Fund in proportion to their net assets as of
the Valuation Time, except that the costs of proxy materials and
proxy solicitation will be borne by the Dividend Growth Fund;
provided, however, that such expenses will in any event be paid
by the party directly incurring such expenses if and to the
extent that the payment by the other party of such expenses would
result in the disqualification of the Growth and Income Fund or
the Dividend Growth Fund, as the case may be, as a "regulated
investment company" within the meaning of Section 851 of the
Code.
(b) In the event the transactions contemplated by this
Agreement are not consummated by reason of the Growth and Income
Fund's being either unwilling or unable to go forward (other than
by reason of the nonfulfillment or failure of any condition to
the Growth and Income Fund's obligations referred to in
Section 7(a) or Section 8 the Growth and Income Fund shall pay
directly all reasonable fees and expenses incurred by the
Dividend Growth Fund in connection with such transactions,
including, without limitation, legal, accounting and filing fees.
(c) In the event the transactions contemplated by this
Agreement are not consummated by reason of the Dividend Growth
Fund's being either unwilling or unable to go forward (other than
by reason of the nonfulfillment or failure of any condition to
the Dividend Growth Fund's obligations referred to in Section
7(a) or Section 9, the Dividend Growth Fund shall pay directly
all reasonable fees and expenses incurred by the Growth and
Income Fund in connection with such transactions, including
without limitation legal, accounting and filing fees.
(d) In the event the transactions contemplated by this
Agreement are not consummated for any reason other than (i) the
Growth and Income Fund's or the Dividend Growth Fund's being
either unwilling or unable to go forward or (ii) the
nonfulfillment or failure of any condition to the Growth and
Income Fund's or the Dividend Growth Fund's obligations referred
to in Section 7(a), Section 8 or Section 9 of this Agreement,
then each of the Growth and Income Fund and the Dividend Growth
Fund shall bear all of its own expenses incurred in connection
with such transactions.
(e) Notwithstanding any other provisions of this Agreement,
if for any reason the transactions contemplated by this Agreement
are not consummated, no party shall be liable to the other party
for any damages resulting therefrom, including without limitation
consequential damages, except as specifically set forth above.
6. Exchange Date. Delivery of the assets of the Dividend
Growth Fund to be transferred, assumption of the liabilities of
the Dividend Growth Fund to be assumed and the delivery of the
Merger Shares to be issued shall be made at the offices of Ropes
& Gray, One International Place, Boston, Massachusetts, at 10:00
A.M. on the next full business day following the Valuation Time,
or at such other time and date agreed to by the Growth and Income
Fund and the Dividend Growth Fund, the date and time upon which
such delivery is to take place being referred to herein as the
"Exchange Date."
7. Meeting of Shareholders; Dissolution. (a) The Dividend
Growth Fund agrees to call a meeting of its shareholders as soon
as is practicable after the effective date of the Registration
Statement for the purpose of considering the sale of all of its
assets to and the assumption of all of its liabilities by the
Growth and Income Fund as herein provided, adopting this
Agreement, and authorizing the liquidation and dissolution of the
Dividend Growth Fund.
(b) The Dividend Growth Fund agrees that the liquidation
and dissolution of the Dividend Growth Fund will be effected in
the manner provided in the Dividend Growth Fund's Agreement and
Declaration of Trust in accordance with applicable law and that
on and after the Exchange Date, the Dividend Growth Fund shall
not conduct any business except in connection with its
liquidation and dissolution.
(c) The Growth and Income Fund has, after the preparation
and delivery to the Growth and Income Fund by the Dividend Growth
Fund of a preliminary version of the Proxy Statement which was
satisfactory to the Growth and Income Fund and to Ropes & Gray
for inclusion in the Registration Statement, filed the
Registration Statement with the Commission. Each of the Dividend
Growth Fund and the Growth and Income Fund will cooperate with
the other, and each will furnish to the other the information
relating to itself required by the 1933 Act, the 1934 Act and the
1940 Act and the rules and regulations thereunder to be set forth
in the Registration Statement, including the Prospectus and the
Proxy Statement.
8. Conditions to the Growth and Income Fund's Obligations.
The obligations of the Growth and Income Fund hereunder shall be
subject to the following conditions:
(a) That this Agreement shall have been adopted and the
transactions contemplated hereby shall have been approved by the
affirmative vote of the holders of at least two-thirds (66 2/3%)
of the outstanding shares of beneficial interest of the Dividend
Growth Fund entitled to vote.
(b) That the Dividend Growth Fund shall have furnished to
the Growth and Income Fund a statement of the Dividend Growth
Fund's assets and liabilities, with values determined as provided
in Section 4 of this Agreement, together with a list of
Investments with their respective tax costs, all as of the
Valuation Time, certified on the Dividend Growth Fund's behalf by
its President (or any Vice President) and Treasurer, and a
certificate of both such officers, dated the Exchange Date, that
there has been no material adverse change in the financial
position of the Dividend Growth Fund since February 28, 1995
other than changes in the Investments and other assets and
properties since that date or changes in the market value of the
Investments and other assets of the Dividend Growth Fund, or
changes due to dividends paid or losses from operations.
(c) That the Dividend Growth Fund shall have furnished to
the Growth and Income Fund a statement, dated the Exchange Date,
signed by the Dividend Growth Fund's President (or any Vice
President) and Treasurer certifying that as of the Valuation Time
and as of the Exchange Date all representations and warranties of
the Dividend Growth Fund made in this Agreement are true and
correct in all material respects as if made at and as of such
dates and the Dividend Growth Fund has complied with all the
agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to such dates.
(d) That the Dividend Growth Fund shall have delivered to
the Growth and Income Fund a letter from Coopers & Lybrand L.L.P.
dated the Exchange Date stating that such firm has employed
certain procedures whereby it has obtained schedules of the tax
provisions and qualifying tests for regulated investment
companies as prepared by Putnam Fiduciary Trust Company ("PFTC")
for the fiscal period February 28, 1995 to the Exchange Date
based on unaudited data) and that, in the course of such
procedures, nothing came to their attention which caused them to
believe that the Dividend Growth Fund would not qualify as a
regulated investment company for federal, state, or local income
tax purposes or for federal excise tax purposes under
Section 4982 of the Code, for the period from February 28, 1995
to the Exchange Date.
(e) That there shall not be any material litigation pending
with respect to the matters contemplated by this Agreement.
(f) That the Growth and Income Fund shall have received an
opinion of Ropes & Gray, in form satisfactory to the Growth and
Income Fund and dated the Exchange Date, to the effect that (i)
the Dividend Growth Fund is a business trust duly established and
validly existing under the laws of The Commonwealth of
Massachusetts, and the Dividend Growth Fund is not, to the
knowledge of such counsel, required to qualify to do business as
a foreign association in any jurisdiction, (ii) this Agreement
has been duly authorized, executed, and delivered by the Dividend
Growth Fund and, assuming that the Registration Statement, the
Prospectus and the Proxy Statement comply with the 1933 Act, the
1934 Act and the 1940 Act and assuming due authorization,
execution and delivery of this Agreement by the Growth and Income
Fund, is a valid and binding obligation of the Dividend Growth
Fund, (iii) the Dividend Growth Fund has power to sell, assign,
convey, transfer and deliver the assets contemplated hereby and,
upon consummation of the transactions contemplated hereby in
accordance with the terms of this Agreement, the Dividend Growth
Fund will have duly sold, assigned, conveyed, transferred and
delivered such assets to the Growth and Income Fund, (iv) the
execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not,
violate the Dividend Growth Fund's Agreement and Declaration of
Trust, as amended, or any provision of any agreement known to
such counsel to which the Dividend Growth Fund is a party or by
which it is bound, and (v) no consent, approval, authorization or
order of any court or governmental authority is required for the
consummation by the Dividend Growth Fund of the transactions
contemplated hereby, except such as have been obtained under the
1933 Act, the 1934 Act and the 1940 Act and such as may be
required under state securities or blue sky laws and the H-S-R
Act, it being understood that with respect to investment
restrictions as contained in the Dividend Growth Fund's Agreement
and Declaration of Trust, Bylaws or then-current Registration
Statement, such counsel may rely upon a certificate of an officer
of the Dividend Growth Fund whose responsibility it is to advise
the Dividend Growth Fund with respect to such matters.
(g) That the Growth and Income Fund shall have received an
opinion of Ropes & Gray, in form satisfactory to the Growth and
Income Fund, with respect to the matters specified in Section
9(f) of this Agreement, and such other matters as the Growth and
Income Fund may reasonably deem necessary or desirable.
(h) That the Growth and Income Fund shall have received an
opinion of Ropes & Gray dated the Exchange Date (which opinion
would be based upon certain factual representations and subject
to certain qualifications), to the effect that, on the basis of
the existing provisions of the Code, current administrative
rules, and court decisions, for federal income tax purposes (i)
no gain or loss will be recognized by the Growth and Income Fund
upon receipt of the Investments transferred to the Growth and
Income Fund pursuant to this Agreement in exchange for the Merger
Shares, (ii) the basis to the Growth and Income Fund of the
Investments will be the same as the basis of the Investments in
the hands of the Dividend Growth Fund immediately prior to such
exchange, and (iii) the Growth and Income Fund s holding periods
with respect to the Investments will include the respective
periods for which the Investments were held by the Dividend
Growth Fund.
(i) That the assets of the Dividend Growth Fund to be
acquired by the Growth and Income Fund will include no assets
which the Growth and Income Fund, by reason of charter
limitations or of investment restrictions disclosed in the Growth
and Income Fund Prospectus in effect on the Exchange Date, may
not properly acquire.
(j) That the Registration Statement shall have become
effective under the 1933 Act, and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge of
the Growth and Income Fund, threatened by the Commission.
(k) That the Growth and Income Fund shall have received
from the Commission, any relevant state securities administrator,
the Federal Trade Commission (the "FTC") and the Department of
Justice (the "Department") such order or orders as Ropes & Gray
deems reasonably necessary or desirable under the 1933 Act, the
1934 Act, the 1940 Act, any applicable state securities or blue
sky laws and the H-S-R Act in connection with the transactions
contemplated hereby, and that all such orders shall be in full
force and effect.
(l) That all proceedings taken by the Dividend Growth Fund
in connection with the transactions contemplated by this
Agreement and all documents incidental thereto shall be
satisfactory in form and substance to the Growth and Income Fund
and Ropes & Gray.
(m) That, prior to the Exchange Date, the Dividend Growth
Fund shall have declared a dividend or dividends which, together
with all previous such dividends, shall have the effect of
distributing to the shareholders of the Dividend Growth Fund all
of the Dividend Growth Fund's investment company taxable income
for its taxable years ending on or after February 28, 1995 and on
or prior to the Exchange Date (computed without regard to any
deduction for dividends paid), and all of its net capital gain
realized in each of its taxable years ending on or after February
28, 1995 and on or prior to the Exchange Date.
(n) That the Dividend Growth Fund shall have furnished to
the Growth and Income Fund a certificate, signed by the President
(or any Vice President) and the Treasurer of the Dividend Growth
Fund, as to the tax cost to the Dividend Growth Fund of the
securities delivered to the Growth and Income Fund pursuant to
this Agreement, together with any such other evidence as to such
tax cost as the Growth and Income Fund may reasonably request.
(o) That the Dividend Growth Fund's custodian shall have
delivered to the Growth and Income Fund a certificate identifying
all of the assets of the Dividend Growth Fund held by such
custodian as of the Valuation Time.
(p) That the Dividend Growth Fund's transfer agent shall
have provided to the Growth and Income Fund (i) the originals or
true copies of all of the records of the Dividend Growth Fund in
the possession of such transfer agent as of the Exchange Date,
(ii) a certificate setting forth the number of shares of the
Dividend Growth Fund outstanding as of the Valuation Time, and
(iii) the name and address of each holder of record of any such
shares and the number of shares held of record by each such
shareholder.
(q) That all of the issued and outstanding shares of
beneficial interest of the Dividend Growth Fund shall have been
offered for sale and sold in conformity with all applicable state
securities or blue sky laws and, to the extent that any audit of
the records of the Dividend Growth Fund or its transfer agent by
the Growth and Income Fund or its agents shall have revealed
otherwise, either (i) the Dividend Growth Fund shall have taken
all actions that in the opinion of the Growth and Income Fund or
its counsel are necessary to remedy any prior failure on the part
of the Dividend Growth Fund to have offered for sale and sold
such shares in conformity with such laws or (ii) the Dividend
Growth Fund shall have furnished (or caused to be furnished)
surety, or deposited (or caused to be deposited) assets in
escrow, for the benefit of the Growth and Income Fund in amounts
sufficient and upon terms satisfactory, in the opinion of the
Growth and Income Fund or its counsel, to indemnify the Growth
and Income Fund against any expense, loss, claim, damage or
liability whatsoever that may be asserted or threatened by reason
of such failure on the part of the Dividend Growth Fund to have
offered and sold such shares in conformity with such laws.
(r) That the Growth and Income Fund shall have received
from Coopers & Lybrand L.L.P. a letter addressed to the Growth
and Income Fund dated as of the Exchange Date satisfactory in
form and substance to the Growth and Income Fund to the effect
that, on the basis of limited procedures agreed upon by the
Growth and Income Fund and described in such letter (but not an
examination in accordance with generally accepted auditing
standards), as of the Valuation Time the value of the assets of
the Dividend Growth Fund to be exchanged for the Merger Shares
has been determined in accordance with the provisions of the
Growth and Income Fund's Agreement and Declaration of Trust,
pursuant to the procedures customarily utilized by the Growth and
Income Fund in valuing its assets and issuing its shares.
9. Conditions to the Dividend Growth Fund's Obligations.
The obligations of the Dividend Growth Fund hereunder shall be
subject to the following conditions:
(a) That this Agreement shall have been adopted and the
transactions contemplated hereby shall have been approved by the
affirmative vote of the holders of at least two-thirds (66 2/3%)
of the outstanding shares of beneficial interest of the Dividend
Growth Fund entitled to vote.
(b) That the Growth and Income Fund shall have furnished to
the Dividend Growth Fund a statement of the Growth and Income
Fund's net assets, together with a list of portfolio holdings
with values determined as provided in Section 4, all as of the
Valuation Time, certified on the Growth and Income Fund's behalf
by its President (or any Vice President) and Treasurer (or any
Assistant Treasurer), and a certificate of both such officers,
dated the Exchange Date, to the effect that as of the Valuation
Time and as of the Exchange Date there has been no material
adverse change in the financial position of the Growth and Income
Fund since February 28, 1995, other than changes in its portfolio
securities since that date, changes in the market value of its
portfolio securities, changes due to net redemptions, dividends
paid or losses from operations.
(c) That the Growth and Income Fund shall have executed and
delivered to the Dividend Growth Fund an Assumption of
Liabilities dated as of the Exchange Date pursuant to which the
Growth and Income Fund will assume all of the liabilities of the
Dividend Growth Fund existing at the Valuation Time in connection
with the transactions contemplated by this Agreement.
(d) That the Growth and Income Fund shall have furnished to
the Dividend Growth Fund a statement, dated the Exchange Date,
signed by the Growth and Income Fund's President (or any Vice
President) and Treasurer (or any Assistant Treasurer) certifying
that as of the Valuation Time and as of the Exchange Date all
representations and warranties of the Growth and Income Fund made
in this Agreement are true and correct in all material respects
as if made at and as of such dates, and that the Growth and
Income Fund has complied with all of the agreements and satisfied
all of the conditions on its part to be performed or satisfied at
or prior to each of such dates.
(e) That there shall not be any material litigation pending
or threatened with respect to the matters by this Agreement.
(f) That the Dividend Growth Fund shall have received an
opinion of Ropes & Gray, in form satisfactory to the Dividend
Growth Fund and dated the Exchange Date, to the effect that (i)
the Growth and Income Fund is an unincorporated voluntary
association duly established and validly existing in conformity
with the laws of The Commonwealth of Massachusetts, and, to the
knowledge of such counsel, is not required to qualify to do
business as a foreign association in any jurisdiction except as
may be required by state securities or blue sky laws, (ii) the
Merger Shares to be delivered to the Dividend Growth Fund as
provided for by this Agreement are duly authorized and upon such
delivery will be validly issued and will be fully paid and
nonassessable by the Growth and Income Fund and no shareholder of
the Growth and Income Fund has any preemptive right to
subscription or purchase in respect thereof, (iii) this Agreement
has been duly authorized, executed and delivered by the Growth
and Income Fund and, assuming that the Prospectus, the
Registration Statement and the Proxy Statement comply with the
1933 Act, the 1934 Act and the 1940 Act and assuming due
authorization, execution and delivery of this Agreement by the
Dividend Growth Fund, is a valid and binding obligation of the
Growth and Income Fund, (iv) the execution and delivery of this
Agreement did not, and the consummation of the transactions
contemplated hereby will not, violate the Growth and Income
Fund's Agreement and Declaration of Trust, as amended, or By-
laws, or any provision of any agreement known to such counsel to
which the Growth and Income Fund is a party or by which it is
bound, it being understood that with respect to investment
restrictions as contained in the Growth and Income Fund's
Agreement and Declaration of Trust, as amended, By-Laws or
then-current prospectus or statement of additional information,
such counsel may rely upon a certificate of an officer of the
Growth and Income Fund whose responsibility it is to advise the
Growth and Income Fund with respect to such matters, (v) no
consent, approval, authorization or order of any court or
governmental authority is required for the consummation by the
Growth and Income Fund of the transactions contemplated herein,
except such as have been obtained under the 1933 Act, the 1934
Act and the 1940 Act and such as may be required under state
securities or blue sky laws, and (vi) the Registration Statement
has become effective under the 1933 Act, and to the best of the
knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued and
no proceedings for that purpose have been instituted or are
pending or contemplated under the 1933 Act.
(g) That the Growth and Income Fund shall have received an
opinion of Ropes & Gray dated the Exchange Date (which opinion
would be based upon certain factual representations and subject
to certain qualifications), to the effect that, on the basis of
the existing provisions of the Code, current administrative
rules, and court decisions, for federal income tax purposes (i)
no gain or loss will be recognized by the Growth and Income Fund
upon receipt of the Investments transferred to the Growth and
Income Fund pursuant to this Agreement in exchange for the Merger
Shares, (ii) the basis to the Growth and Income Fund of the
Investments will be the same as the basis of the Investments in
the hands of the Dividend Growth Fund immediately prior to such
exchange, and (iii) the Growth and Income Fund's holding periods
with respect to the Investments will include the respective
periods for which the Investments were held by the Dividend
Growth Fund.
(h) That all proceedings taken by the Growth and Income
Fund in connection with the transactions contemplated by this
Agreement and all documents incidental thereto shall be
satisfactory in form and substance to the Dividend Growth Fund
and Ropes & Gray.
(i) That the Registration Statement shall have become
effective under the 1933 Act, and no stop order suspending such
effectiveness shall have been instituted or, to the knowledge of
the Growth and Income Fund, threatened by the Commission.
(j) That the Dividend Growth Fund shall have received from
the Commission, any relevant state securities administrator, the
FTC and the Department such order or orders as Ropes & Gray deems
reasonably necessary or desirable under the 1933 Act, the 1934
Act, the 1940 Act, any applicable state securities or blue sky
laws and the H-S-R Act in connection with the transactions
contemplated hereby, and that all such orders shall be in full
force and effect.
10. Indemnification. (a)
The Dividend Growth Fund will
indemnify and hold harmless, out of the assets of the Dividend
Growth Fund but no other assets, the Growth and Income Fund, its
trustees and its officers (for purposes of this subparagraph, the
"Indemnified Parties") against any and all expenses, losses,
claims, damages and liabilities at any time imposed upon or
reasonably incurred by any one or more of the Indemnified Parties
in connection with, arising out of, or resulting from any claim,
action, suit or proceeding in which any one or more of the
Indemnified Parties may be involved or with which any one or more
of the Indemnified Parties may be threatened by reason of any
untrue statement or alleged untrue statement of a material fact
relating to the Dividend Growth Fund contained in the
Registration Statement, the Prospectus or the Proxy Statement or
any amendment or supplement to any of the foregoing, or arising
out of or based upon the omission or alleged omission to state in
any of the foregoing a material fact relating to the Dividend
Growth Fund required to be stated therein or necessary to make
the statements relating to the Dividend Growth Fund therein not
misleading, including, without limitation, any amounts paid by
any one or more of the Indemnified Parties in a reasonable
compromise or settlement of any such claim, action, suit or
proceeding, or threatened claim, action, suit or proceeding made
with the consent of the Dividend Growth Fund. The Indemnified
Parties will notify the Dividend Growth Fund in writing within
ten days after the receipt by any one or more of the Indemnified
Parties of any notice of legal process or any suit brought
against or claim made against such Indemnified Party as to any
matters covered by this Section 10(a). The Dividend Growth Fund
shall be entitled to participate at its own expense in the
defense of any claim, action, suit or proceeding covered by this
Section 10(a), or, if it so elects, to assume at its expense by
counsel satisfactory to the Indemnified Parties the defense of
any such claim, action, suit or proceeding, and if the Dividend
Growth Fund elects to assume such defense, the Indemnified
Parties shall be entitled to participate in the defense of any
such claim, action, suit or proceeding at their expense. The
Dividend Growth Fund's obligation under this Section 10(a) to
indemnify and hold harmless the Indemnified Parties shall
constitute a guarantee of payment so that the Dividend Growth
Fund will pay in the first instance any expenses, losses, claims,
damages and liabilities required to be paid by it under this
Section 10(a) without the necessity of the Indemnified Parties'
first paying the same.
(b) The Growth and Income Fund will indemnify and hold
harmless, out of the assets of the Growth and Income Fund but no
other assets, the Dividend Growth Fund, its trustees and its
officers (for purposes of this subparagraph, the "Indemnified
Parties") against any and all expenses, losses, claims, damages
and liabilities at any time imposed upon or reasonably incurred
by any one or more of the Indemnified Parties in connection with,
arising out of, or resulting from any claim, action, suit or
proceeding in which any one or more of the Indemnified Parties
may be involved or with which any one or more of the Indemnified
Parties may be threatened by reason of any untrue statement or
alleged untrue statement of a material fact relating to the
Growth and Income Fund contained in the Registration Statement,
the Prospectus or the Proxy Statement, or any amendment or
supplement to any thereof, or arising out of, or based upon, the
omission or alleged omission to state in any of the foregoing a
material fact relating to the Growth and Income Fund required to
be stated therein or necessary to make the statements relating to
the Growth and Income Fund therein not misleading, including
without limitation any amounts paid by any one or more of the
Indemnified Parties in a reasonable compromise or settlement of
any such claim, action, suit or proceeding, or threatened claim,
action, suit or proceeding made with the consent of the Growth
and Income Fund. The Indemnified Parties will notify the Growth
and Income Fund in writing within ten days after the receipt by
any one or more of the Indemnified Parties of any notice of legal
process or any suit brought against or claim made against such
Indemnified Party as to any matters covered by this Section
10(b). The Growth and Income Fund shall be entitled to
participate at its own expense in the defense of any claim,
action, suit or proceeding covered by this Section 10(b), or, if
it so elects, to assume at its expense by counsel satisfactory to
the Indemnified Parties the defense of any such claim, action,
suit or proceeding, and, if the Growth and Income Fund elects to
assume such defense, the Indemnified Parties shall be entitled to
participate in the defense of any such claim, action, suit or
proceeding at their own expense. The Growth and Income Fund's
obligation under this Section 10(b) to indemnify and hold
harmless the Indemnified Parties shall constitute a guarantee of
payment so that the Growth and Income Fund will pay in the first
instance any expenses, losses, claims, damages and liabilities
required to be paid by it under this Section 10(b) without the
necessity of the Indemnified Parties' first paying the same.
11. No Broker, etc. Each of the Dividend Growth Fund and
the Growth and Income Fund represents that there is no person who
has dealt with it who by reason of such dealings is entitled to
any broker's or finder's or other similar fee or commission
arising out of the transactions contemplated by this Agreement.
12. Termination. The Dividend Growth Fund and the Growth
and Income Fund may, by mutual consent of their respective
trustees, terminate this Agreement, and the Dividend Growth Fund
or the Growth and Income Fund, after consultation with counsel
and by consent of their respective trustees or an officer
authorized by such trustees, may waive any condition to their
respective obligations hereunder. If the transactions
contemplated by this Agreement have not been substantially
completed by
December 31, 1995,
this Agreement shall
automatically terminate on that date unless a later date is
agreed to by the Dividend Growth Fund and the Growth and Income
Fund.
13. Rule 145. Pursuant to Rule 145 under the 1933 Act, the
Growth and Income Fund will, in connection with the issuance of
any Merger Shares to any person who at the time of the
transaction contemplated hereby is deemed to be an affiliate of a
party to the transaction pursuant to Rule 145(c), cause to be
affixed upon the certificates issued to such person (if any) a
legend as follows:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD
OR OTHERWISE TRANSFERRED EXCEPT TO PUTNAM GROWTH AND
INCOME FUND II OR ITS PRINCIPAL UNDERWRITER UNLESS
(i) A REGISTRATION STATEMENT WITH RESPECT THERETO IS
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR (ii) IN THE OPINION OF COUNSEL REASONABLY
SATISFACTORY TO PUTNAM DIVIDEND GROWTH FUND SUCH
REGISTRATION IS NOT REQUIRED."
and, further, the Growth and Income Fund will issue stop transfer
instructions to the Growth and Income Fund's transfer agent with
respect to such shares. The Dividend Growth Fund will provide
the Growth and Income Fund on the Exchange Date with the name of
any Dividend Growth Fund shareholder who is to the knowledge of
the Dividend Growth Fund an affiliate of the Dividend Growth Fund
on such date.
14. Covenants, etc. Deemed Material. All covenants,
agreements, representations and warranties made under this
Agreement and any certificates delivered pursuant to this
Agreement shall be deemed to have been material and relied upon
by each of the parties, notwithstanding any investigation made by
them or on their behalf.
15. Sole Agreement; Amendments. This Agreement supersedes
all previous correspondence and oral communications between the
parties regarding the subject matter hereof, constitutes the only
understanding with respect to such subject matter, may not be
changed except by a letter of agreement signed by each party
hereto, and shall be construed in accordance with and governed by
the laws of The Commonwealth of Massachusetts.
16. Agreements and Declarations of Trust. Copies of the
Agreements and Declarations of Trust of the Dividend Growth Fund
and the Growth and Income Fund, respectively, are 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 Dividend Growth Fund and the Growth and
Income Fund, respectively, as trustees and not individually and
that the obligations of this instrument are not binding upon any
of the trustees, officers or shareholders of the Dividend Growth
Fund or the Growth and Income Fund individually but are binding
only upon the assets and property of the Dividend Growth Fund and
the Growth and Income Fund, respectively.
This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered, shall
be deemed to be an original.
PUTNAM GROWTH AND INCOME FUND II
By:___________________________
Executive Vice President
PUTNAM DIVIDEND GROWTH FUND
By:__________________________
Executive Vice President
<PAGE>
PUTNAM INVESTMENTS (LOGO)
This is your PROXY CARD.
Please vote this proxy, sign it below, and return it promptly in
the envelope provided.
Your vote is important.
Please fold at perforation before detaching
- -----------------------------------------------------------------
Proxy for a meeting of shareholders, September
7,
1995, for
Putnam Dividend Growth Fund.
This proxy is solicited on behalf of the Trustees of the fund.
The undersigned shareholder hereby appoints George Putnam, Hans
H. Estin, and William F. Pounds, and each of them separately,
proxies, with power of substitution, and hereby authorizes them
to represent and to vote, as designated below, at the meeting of
shareholders of Putnam Income Fund on September
7,
1995, at
2:00
p.m., Boston time, and at any adjournments thereof, all of the
shares of the fund that the undersigned shareholder would be
entitled to vote if personally present.
PLEASE BE SURE TO SIGN AND DATE
THIS PROXY.
Please sign your name exactly as
it appears on this card. If you
are a joint owner, each of you
should sign. When signing as
executor, administrator, attorney,
trustee, or guardian, or as
custodian for a minor, please give
your full title as such. If you
are signing for a corporation,
please sign the full corporate
name and indicate the signer's
office. If you are a partner,
sign the partnership name.
- ----------------------------------
Shareholder sign here Date
- ----------------------------------
Co-owner sign here Date<PAGE>
HAS YOUR ADDRESS CHANGED?
Please use this form to notify us of any change in address or
telephone number or to provide us with your comments. Detach
this form from the proxy ballot and return it with your signed
proxy in the enclosed envelope.
- -----------------------------------------------------------------
Street
- -----------------------------------------------------------------
City State Zip
- -----------------------------------------------------------------
Telephone
DO YOU HAVE ANY COMMENTS?
- -----------------------------------------------------------------
- -----------------------------------------------------------------
DEAR SHAREHOLDER:
Your vote is important. Please help us to eliminate the expense
of follow-up mailings by signing and returning this proxy as soon
as possible. A postage-paid envelope is enclosed for your
convenience.
THANK YOU!
- -----------------------------------------------------------------
Please fold at perforation before detaching
<PAGE>
If you complete and sign the proxy, we'll vote it exactly as you
tell us. If you simply sign the proxy, it will be voted FOR
Proposal 1. The Proxies will also be authorized to vote upon
such other matters that may come before the meeting.
THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL LISTED BELOW:
Please mark your choices X in blue or black ink.
1. Approval of the Agreement and Plan of Reorganization
providing for the transfer of all of the assets of Putnam
Dividend Growth Fund (the "Fund") to Putnam Growth and
Income Fund II (the "Growth and Income Fund") in exchange
for shares of the Growth and Income Fund and the assumption
by the Growth and Income Fund of all of the liabilities of
the Fund, and the distribution of such shares to the
shareholders of the Fund in liquidation of the Fund.
FOR AGAINST ABSTAIN
[box] [box] [box]
Note: If you have questions on any of the proposals, please call
1-800-225-1581.
<PAGE>
PUTNAM GROWTH AND INCOME FUND II
FORM N-14
PART B
STATEMENT OF ADDITIONAL INFORMATION
June , 1995
This Statement of Additional Information contains material which
may be of interest to investors but which is not included in the
Prospectus/Proxy Statement (the "Prospectus") of Putnam Growth
and Income Fund II (the "Growth and Income Fund") dated June ,
1995 relating to the sale of all or substantially all of the
assets of Putnam Dividend Growth Fund (the "Dividend Growth
Fund") to the Growth and Income Fund. The Growth and Income
Fund's Statement of Additional Information dated January 5, 1995
and the Dividend Growth Fund's Statement of Additional
Information dated May , 1995 have been filed with the Securities
and Exchange Commission and are incorporated herein by reference.
This Statement is not a Prospectus and is authorized for
distribution only when it accompanies or follows delivery of the
Prospectus. This Statement should be read in conjunction with
the Prospectus. Investors may obtain a free copy of the
Prospectus or either or both of the Statements of Additional
Information by writing Putnam Investor Services, One Post Office
Square, Boston, MA 02109 or by calling 1-800-225-1581.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Coopers & Lybrand L.L.P. are the independent accountants for the
Dividend Growth Fund and the Growth and Income Fund, 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 for
the Funds. The Report of Independent Accountants and financial
statements included in the Dividend Growth Fund's Annual Report
for the fiscal year ended February 28, 1995, filed electronically
on May 1, 1995 (811-4523), are incorporated by reference into
this Statement of Additional Information. Unaudited Financial
highlights and financial statements for the Growth and Income
Fund for the fiscal period January 5, 1995 to March 31, 1995 are
included in this Statement of Additional Information. The
financial statements incorporated by reference into the
Prospectus/Proxy Statement and this Statement of Additional
Information have been so included and incorporated in reliance
upon the reports of Coopers & Lybrand L.L.P., given on their
authority as experts in auditing and accounting.
<PAGE>
Table of Contents
Unaudited Pro Forma combined Financial Statements of the Growth
and Income Fund and the Dividend Growth Fund . . . . . . . . . . . . . . .
Unaudited Financial Statements of the Growth and Income Fund . . . . . . . <PAGE>
Growth and Income Fund II
and
Dividend Growth Fund
Proforma Combining Financial Statements
(Unaudited)
The accompanying unaudited proforma combining investment
portfolio and statement of assets and liabilities assumes
that the exchange described in the next paragraph occurred
as of March 31, 1995 and the unaudited proforma combining
statement of operations for the three months ended March 31,
1995 presents the results of operations of Putnam Growth and
Income Fund II as if the combination with Putnam Dividend
Growth Fund had been consummated at the beginning of the
three months ended March 31, 1995. The proforma results of
operations are not necessarily indicative of future
operations or the actual results that would have occurred
had the combination been consummated at the beginning of the
period ended March 31, 1995. These statements have been
derived from Growth and Income Fund II s and Dividend
Growth Fund s books and records utilized in calculating
daily net asset value at March 31, 1995, and for the three
month period then ended.
The proforma statements give effect to the proposed
transfer of all of the assets of Dividend Growth Fund to
Growth and Income Fund II in exchange for the assumption by
Growth and Income Fund II of all of the liabilities of
Dividend Growth Fund and for a number of Growth and Income
Fund II s shares equal in value to the value of the net
assets of Dividend Growth Fund transferred to Growth and
Income Fund II. Under generally accepted accounting
principles, the historical cost of investment securities
will be carried forward to the surviving entity and the
results of operations of Growth and Income Fund II for pre-
combination periods will not be restated. The proforma
statements do not reflect the expenses of either fund in
carrying out its obligations under the Agreement and Plan of
Reorganization.
The unaudited proforma combining statements should be read
in conjunction with the separate financial statements of
Growth and Income Fund II and Dividend Growth Fund included
elsewhere in this statement of additional information.<PAGE>
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND II (Unaudited)
Pro Forma Combining
Statement of
Assets and Liabilities
March 31, 1995
Assets
Growth and Dividend Growth Pro Forma Pro Forma
Income Fund II Fund Adjustments Combined
<S> <C> <C> <C> <C>
Investments in securities,at value
(combined cost,$125,440,730) $73,205,695 $56,480,514 0$129,686,209
Cash 2,028,783 1,830,605 0 3,859,388
Dividends and Interest Receivable 173,392 201,815 0 375,207
Receivable for shares of the fund sold 6,346,549 101,046 0 6,447,595
Receivable for securities sold 2,477,072 1,786,551 0 4,263,623
Unamortized organization expenses 74,102 1,168 (A)(1,168) 74,102
Receivable from Manager 0 0 (A)1,168 1,168
Total assets 84,305,593 60,401,699 0 132,179,617
Liabilities
Payable for securities purchased $11,072,058 $855,460 0 11,927,518
Payable for shares of the fund repurchased22,342 265,203 0 287,545
Payable for compensation of Manager 42,029 32,383 0 74,412
Payable for distribution fees 30,586 38,065 0 68,651
Payable for administrative services 1,206 1,655 0 2,861
Payable for compensation of Trustees 1,446 468 0 1,914
Payable for investor
servicing and custodian fees 23,647 27,353 0 51,000
Payable for organization expenses 74,298 0 0 74,298
Other accrued expenses 15,415 24,061 0 39,476
Total Liabilities 11,283,027 1,244,648 0 12,527,675
Net assets $73,022,566 $59,157,051 0$132,179,617
Shares outstanding 7,951,544 5,846,206 0
Net asset value per share $9.18 $10.12 0 $9.18
/TABLE
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND INCOME FUND II
(UNAUDITED)
Pro Forma Combining
Statement of Operations
Three months ended March 31, 1995
Growth and Income Dividend Growth Pro Forma Pro Forma
Fund II Fund Adjustments Combined
<S> <C> <C> <C> <C>
Investment income:
Dividend $244,695 $615,904 0 $860,599
Interest 35,586 305 0 35,891
Total investment income $280,281 616,209 0 $896,490
Expenses:
Compensation of Manager 42,029 91,747 0 133,776
Investor servicing and custodian fees 24,769 16,378 (C) 60,364 101,511
Compensation of Trustees 1,447 3,352 (B)(2,299) 2,500
Reports to shareholders 4,548 18,561 (B)(18,561) 4,548
Postage 1,110 (26,396) (D) 27,605 2,319
Auditing 4,099 1,166 485 5,750
Legal 2,893 2,221 (B)(2,221) 2,893
Administrative services 1,207 1,102 (B)(405) 1,904
Distribution fees 37,777 53,885 0 91,662
Amortization of organization fees 196 1,909 (A)(1,909) 196
Registration fees 8,679 (653) 653 8,679
Other 2,790 2,952 0 5,742
Total expenses 131,544 166,224 63,712 361,480
Net investment income 148,737 449,985 (63,712) 535,010
Net realized gain on investments 158,288 1,044,313 0 1,202,601
Net unrealized appreciation of investments
during the period 2,019,951 2,878,220 0 4,898,171
Net gain on investments 2,178,239 3,922,533 0 6,100,772
Net increase in net assets resulting from
operations 2,326,976 4,372,518 (63,712) 6,635,782
/TABLE
<PAGE>
Growth and Income Fund II
Notes to Proforma Combining Statements
(Unaudited)
March 31, 1995
The proforma adjustments to these proforma financial
statements are comprised of the following:
(A) Rembursement of the unamortized organizational
costs of Dividend Growth by the management company as a
result of its merger into Growth and Income Fund II.
(B) Elimination and reduction of duplicative expenses
as a result of the merger.
(C) Increase in investor servicing and custodian fees
are the result of the increase in net assets due to the
merger.
(D) Adjustment to postage fee is to bring proforma
combined amount down to reasonable level. There were large,
one time, expenses due to proxy mailings included in
Dividend Growths amounts.
<PAGE>
Portfolio of investments owned
March 31, 1995 (Unaudited)
Pro Forma
Combined
Number of
Common Stocks (89.2%)* Shares Value
Aerospace and Defense (0.7%)
Boeing Co. 9,385 505,617
Automotive Parts (2.5%)
Dana Corporation 15,750 401,625
General Motors Corp. 21,125 934,781
Magna International Inc. Cl. A 13,735 523,647
1,860,053
Banks (6.0%)
BankAmerica Corp. 24,080 1,161,860
Bankers Trust New York Corp. 15,910 831,298
CoreStates Financial Corp. 15,010 480,320
Morgan (J.P) & Co., Inc. 22,570 1,376,770
NationsBank Corp. 10,795 547,846
4,398,094
Basic Industrial Products (0.7%)
Sundstrand Corp. 9,705 488,889
Building Materials (0.5%)
Armstrong World Inds. Inc. 7,450 339,906
Business Equipment and Services (2.9%)
Dow Jones & Co. Inc. 6,490 245,809
IBM Corp. 7,275 595,641
Xerox Corp. 10,895 1,278,801
2,120,251
Chemicals (4.4%)
Eastman Chemical Co. 11,250 625,781
Grace (W.R.) & Co. 15,260 812,595
Witco Chemical Corp. 33,710 990,231
du Pont (E.I.) de Nemours & Co., Ltd 8,860 536,030
Union Carbide Corp. 8,435 258,322
3,222,959
Conglomerates (6.3%)
ITT Corp. 9,175 941,584
Johnson Controls, Inc. 7,945 404,202
TRW, Inc. 28,120 1,936,765
Tenneco Inc. 17,895 843,302
United Technologies Corp. 6,225 430,303
4,556,156
Cosmetics (2.8%)
Avon Products, Inc. 33,430 2,022,515
Consumer Non Durables (4.5%)
American Brands Inc. 17,510 687,268
Eastman Kodak Co. 38,670 2,054,344
Maytag Corp. 33,395 571,889
3,313,501
Consumer Services (1.1%)
CBS Inc. 1,263 80,832
McGraw-Hill, Inc. 10,230 734,003
814,835
Electrical Equipment (2.1%)
Eaton Corp. 14,345 778,216
Honeywell, Inc. 8,435 315,258
Polaroid Corp. 13,570 471,558
1,565,032
Environmental Control (1.5%)
WMX Technologies, Inc. 39,160 1,076,900
Food and Beverages (1.0%)
Anheuser-Busch Cos,. Inc. 120 7,035
Heinz (H,J,) Co. 17,715 682,028
689,063
Forest Products (1.0%)
Weyerhaeuser Co. 18,700 726,963
Health Care (5.1%)
American Home Products Corp. 11,110 791,588
Bristol-Myers Squibb Co. 16,630 1,047,690
Lilly (Eli) & Co. 9,175 670,922
Upjohn Co. 10,825 386,994
Warner-Lambert Co. 10,300 805,975
3,703,169
Household Products (0.5%)
Colgate-Palmolive Co. 5,590 368,940
Insurance and Finance (11.1%)
American Express Co. 25,625 893,672
Aetna Life & Casualty Co. 6,260 356,820
American General Corp. 15,455 498,424
Aon Corp. 5,610 204,765
Bear Stearns Companies, Inc. 21,090 390,165
Beneficial Corp. 33,745 1,324,491
CIGNA Corp. 11,530 861,868
Federal National Mortgage Association 4,465 363,339
First Chicago Corp. 10,510 526,814
First Fidelity Bancorp. 13,745 680,378
Household International Inc. 12,830 558,105
Houston Industries Inc. 6,750 257,344
Lincoln National Corp. 21,235 854,709
Wells Fargo & Co. 2,285 353,317
8,124,211
Machinery (0.5%)
Case Corp. 13,360 334,000
Medical Equipment and Supplies (1.9%)
Baxter International, Inc. 42,155 1,380,576
Oil and Gas (6.8%)
Atlantic Richfield Co. 3,200 368,000
Chevron Corp. 9,210 442,080
Enron Corp. 21,585 712,305
Exxon Corp. 16,060 1,072,005
Imperial Oil Ltd. 13,360 475,950
McDermott International, Inc. 255 6,980
Phillips Petroleum Co. 16,450 602,481
Royal Dutch Petroleum Co. 105 12,600
Sonat, Inc. 11,535 346,050
Total Corp. ADS 30,675 920,250
4,958,701
Paper (1.1%)
Kimberly-Clark Corp. 15,785 820,820<PAGE>
Publishing (1.8%)
Dun & Bradstreet Corp. 24,570 1,292,996
Real Estate (0.5%)
Reliance Group Holdings, Inc. 70,305 377,889
Retail (4.2%)
Blair Corp.
May Department Stores Co. 14,165 524,105
Melville Corporation 26,365 982,096
Penney (J.C.) Co., Inc. 15,925 714,634
Sears, Roebuck & Co. 8,435 450,218
Woolworth Corp. 21,725 399,197
3,070,250
Specialty Consumer Products (1.2%)
Corning Inc. 24,485 881,460
Tobacco (2.5%)
Philip Morris Cos., Inc. 25,945 1,692,911
RJR Nabisco Holdings Corp. 24,240 142,410
1,835,321
Transportation (3.0%)
Conrail Inc. 4,220 236,848
Norfolk Southern Corp. 11,250 752,344
Southern Pacific Rail Corp. 20,380 356,650
Union Pacific Corp. 16,275 895,125
2,240,967
Utilities (11.0%)
American Telephone & Telegraph Co. 19,930 1,031,378
Cinergy Corp. 18,455 459,068
Frontier Corp. 19,685 445,373
Northeast Utilities 31,640 672,350
NYNEX Corp. 34,765 1,377,563
Pacific Gas & Electric Co. 11,565 287,679
Public Service Co. of Colorado 21,585 663,739
Sprint Corp. 43,905 1,328,126
Texas Utilities Co. 10,004 317,627
Union Electric Co. 8,805 311,477
US WEST, Inc. 28,615 1,144,600
8,038,980
Total Common Stocks
(Cost $63,100,864) $ 65,129,014
Convertible Bond and Notes (0.3%)*
(Cost $236,263) Principal
Amount Value
Comcast Corp. cv. notes
1 1/8s, 2007 $ 570,000$ 233,700
Convertible Preferred Stocks (2.5%)*
Number of
Shares Value
Automotive
Chrysler Corp. Ser. A, $4.625 dep. shs.
cv. pfd. 144A 4,395$ 510,369
Ford Motor Co. Ser. A, $4.20, cv. pfd. 5,485 484,052
Insurance and Finance
Citicorp Ser. 13, $5.375 ,cv. pfd. 5,730 671,843
Business Equipment and Services
Unisys Corp. Ser. A, $3.75, cv. pfd. 4,465 173,577
Total Convertible Preferred Stocks
(Cost $1,845,477) $ 1,839,841
Short-Term Investments (8.2%)*
(Cost $6,003,140) Principal
Amount Value
Interest in joint repurchase dated
March 31, 1995 with Goldman Sachs,
due April 3, 1995 with respect to various
U.S. Treasury Obligations - maturity value
of $6,003,140 for an effective yield of 6.28%
$6,003,140 $6,003,140
Total Investments
( cost $ 71,185,744) $ 73,205,695
* Percentages indicated are based on total net assets of $
73,022,566, which correspond to a net aset value for class
A ,class B and class M of $9.19 , $9.18 and $9.19 per
share,respectively .
ADR or ADS after the name of a foreign holding stands for
American Depository Receipt or American Depository Shares,
respectively, representing ownership of foreign securities
on deposit with a domestic custodian bank.
144A after the name of a security represents those exempt
from registration under Rule 144A of the Securities Act of
1933.
These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.<PAGE>
Putnam Growth and Income Fund II
Financial Highlights
(For a share outstanding throughout the period)
January 5, 1995 January 5, 1995 January 5, 1995
(commencment of (commencement of(commencement of
operations) to operations) to operations) to
March 31 March 31 March 31
1995 * 1995* 1995*
Class A** Class B** Class M**
Net asset value,
beginning of period $8.50 $8.50 $8.50
Investment operations
Net investment income 09 06 05
Net realized and
nrealized gain on
investments 60 62 64
Total from investment
operations 69 68 69
Net asset value,
end of period $9.19 $9.18 $9.19
Total investment return at
net asset value (%) (a)8.12(b) 8.00(b) 8.12(b)
Net asset value, end of
period (in thousands) $36,937 $30,692 $5,393
Ratio of expenses to
average net assets (%) .38(b) .55(b) .65(b)
Ratio of net investment
income to average
net assets (%) .59(b) .45(b) .33(b)
Portfolio turnover (%) 29.11(b) 29.11(b) 29.11(b)
* Unaudited
** Per share net investment income has been determined on the basis of
weighted average number of shares oustanding during the period.
(a) Total investment return assumes dividend reinvestment and does
not reflect the effect of sales charges.
(b) Not annualized.
<PAGE>
Putnam Growth and Income Fund II
Statement of
assets and liabilities
March 31, 1995 (Unaudited)
Assets
Investments in securities, at value
(identified cost$71,185,744) (Note 1) $73,205,695
Cash 2,028,783
Dividends and Interest receivable 173,392
Receivable for shares of the fund sold 6,346,549
Receivable for securities sold 2,477,072
Unamortized organization expenses (Note 1) 74,102
Total assets $84,305,593
Liabilities
Payable for securities purchased 11,072,058
Payable for shares of the fund repurchased 22,342
Payable for compensation of Manager (Note 2) 42,029
Payable for compensation of Trustees(Note 2) 1,446
Payable for investor servicing
and custodian fees (Note 2) 23,647
Payable for administrative services (Note 2) 1,206
Payable for distribution fees (Note 2) 30,586
Payable for organization expense (Note 1) 74,298
Other accrued expenses 15,415
Total liabilities 11,283,027
Net assets $73,022,566
Represented by
Paid-in capital (Notes 1and 4) $70,695,590
Undistributed net investment income (Note 1) 148,737
Accumulated net realized gain on investment
transactions (Note 1) 158,288
Net unrealized appreciation of investments 2,019,951
Total Representing net assets applicable to capital
shares outstanding $73,022,566
Computation of net asset value and offering price
Net asset value and redemption price of class A shares
($36,937,116 divided by 4,019,420 shares) $9.19
Offering price per share (100/94.25 of $9.19)* $9.75
Net asset value and offering price of class B shares
($30,691,993 divided by 3,344,935 shares) $9.18
Net asset value and redemption price of class M shares
($5,393,457 divided by 587,188 shares) $9.19
Offering price per share (100/96.50 of $9.19) $9.52
*On single retail sales of less than $50,000. On sales of $50,000 or
more and on group sales the offering price is reduced.
Redemption price per share is equal to net asset value less any
applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements. <PAGE>
Putnam Growth and Income Fund II
Statement
of operations
For the period
January 5, 1995
(commencement of
operations) to
March 31, 1995
(Unaudited)
Investment income:
Dividends (net of foreign tax $862) $243,833
Interest 35,586
Total investment income 279,419
Expenses:
Compensation of Manager (Note 2) 42,029
Investor servicing and custodian fees (Note 2) 24,769
Compensation of Trustees (Note 2) 1,447
Reports to shareholders 4,548
Auditing 4,099
Legal 2,893
Postage 1,110
Distribution fees class A (Note 2) 8,590
Distribution fees class B (Note 2) 25,815
Distribution fees class M (Note 2) 3,372
Registration 8,679
Administrative services (Note 2) 1,207
Amortization of organization expenses (Note 1) 196
Other expenses 1,928
Total expenses 130,682
Net investment income 148,737
Net realized gain on investments (Notes 1 and 4) 158,288
Net unrealized appreciation
of investments during the year 2,019,951
Net gain on investment transactions 2,178,239
Net increase in net assets resulting from operations $2,326,976
The accompanying notes are an integral part of these financial
statements. <PAGE>
Putnam Growth and Income Fund II
Statement of
changes in net assets (Unaudited)
For the period January 2,
1995 (commencement of
operations) to March 31
1995 *
Increase in net assets
Operations:
Net investment income $148,737
Net realized gain on investments 158,288
Net unrealized appreciation of investments 2,019,951
Net increase in net assets resulting from operations 2,326,976
Increase from capital share transactions (Note 4) 70,595,590
Total increase in net assets 72,922,566
Net assets
Beginning of period 100,000
End of period (including undistributed net investment
income of $148,737) $73,022,566
* See Note 2
The accompanying notes are an integral part of these financial
statements. <PAGE>
Putnam Growth and Income Fund II
Notes to
financial statements
March 31, 1995 (Unaudited)
Note 1
Significant
accounting
policies
The Fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
fund seeks capital growth and current income by investing primarily in
common stocks that offer the potential capital growth, current income
or both.
The fund offers class A, class B and class M shares. Class A shares
are sold with a maximum front-end sales charge of 5.75%. Class B
shares do not pay a front-end sales charge, but pay a higher ongoing
distribution fee than class A shares, and may be subject to a
contingent deferred sales charge if those shares are redeemed within
six years of purchase. Class M shares are sold with a maximum
front-end sales charge of 3.50% and pay ongoing distribution fees
that are higher than class A shares. Expenses of the fund are borne
pro-rata by the shareholders of each class of shares, except that each
class bears expenses unique to that class (including the distribution
fees applicable to such class). Each class votes as a class only
with respect to its own distribution plan or other matters on which a
class vote is required by law or determined by the Trustees. Shares
of each class would receive their pro-rata share of the net assets of
the fund, if the fund were liquidated. In addition, the Trustees
declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted
accounting principles.
A) Security valuation Investments for which market quotations are
readily available are stated at market value, which is 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 obligations
are stated at the mean between the bid and asked prices. Short-term
investments having remaining maturities of 60 days or less are stated
at amortized cost which approximates market, and other investments are
stated at fair value following procedures approved by the Trustees.
B) Joint trading account Pursuant to an exemptive order issued by the
Securities and Exchange Commission, the Fund may transfer uninvested
cash balances into a joint trading account, along with the cash and
certain other accounts of other registered investment companies
managed by Putnam Investment Management Inc., (Putnam Management) the
Fund s Manager, a wholly-owned subsidiary of Putnam Investments, Inc.
These balances may be invested in one or more repurchase agreements
and/or short-term money market instruments.
C) Repurchase agreements The Fund, through its custodian, receives
delivery of the underlying securities, the market value of which at
the time of purchase is required to be in an amount at least equal to
the resale price, including accrued interest. The Fund s Manager is
responsible for determining that the value of these underlying
securities is at all times at least equal to the resale price,
including accrued interest.
D) Security transactions and related investment income Security
transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual
basis and dividend income is recorded on the ex-dividend date, except
that certain dividends from foreign securities are recorded as soon as
the Fund is informed of the ex-dividend date.
E) Federal taxes It is the policy of the Fund to distribute all of its
income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the Fund to
distribute an amount sufficient to avoid imposition of any excise tax
under Section 4982 of the Internal Revenue Code of 1986. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation of securities held and excise tax on income
and capital gains.
F) Distributions to shareholders Distributions to shareholders are
recorded by the Fund on the ex-dividend date.
G) Unamortized organization expenses Expenses incurred by the Fund in
connection with its organization, its registration with the Securities
and Exchange Commission and with various states, and the initial
public offering of its shares aggregated $74,298. These expenses are
being amortized on a straight-line basis over a five-year period.
Note 2
Initial capitalization and offering of shares
The fund was established as a Massachusetts business trust under the
laws of Massachusetts on October 5, 1994.
During the period October 5, 1994 to December 30, 1994, the fund had
no operations other than those related to organizational matters,
including the initial capital contribution of $100,000 and the
issuance of 3,922 class A, 3,922 class B and 3,922 class M shares,
respectively, to Putnam Mutual Funds Corp., a wholly-owned subsidiary
of Putnam Investments, Inc. ( Putnam Mutual Funds) on November 28,
1994. Regular investment operations
commenced on January 5, 1995.
Note 3
Management fee,
administrative
services, and
other transactions
Compensation of Putnam Management, for management and investment
advisory services is paid quarterly based on the average net assets of
the fund for the quarter. Such fee is based on the following annual
rates: 0.65% of the first $500 million of average net assets, 0.55% of
the next $500 million, 0.50% of the next $500 million, 0.45% of the
next $5 billion, 0.425% of the next $5 billion, 0.405% of the next $5
billion, 0.39% of the next $5 billion and 0.38% of any excess
thereafter.
The Fund also reimburses the Manager for the compensation and related
expenses of certain officers of the Fund and their staff who provide
administrative services to the Fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the Fund receive an annual Trustee s fee of $530 and an
additional fee for each Trustees meeting attended. Trustees who are
not interested persons of the Manager and who serve on committees of
the Trustees receive additional fees for attendance at certain
committee meetings.
Custodial functions for the Fund s domestic assets are provided by The
Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
Investor servicing and custodian fees reported in the Statement of
operations for the three months ended March 31, 1995 have been reduced
by credits allowed by PFTC.
The fund has adopted distributions plans (the Plans ) pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the
Plans is to compensate Putnam Mutual Funds Corp., a wholly-owned
subsidiary of Putnam Investments Inc., for services provided and
expenses incurred by it in distributing shares of the fund. The
Trustees have approved payment by the fund at an annual rate of 0.25%,
1.00% and 0.75% of the average net assets attributable to class A,
class B and class M shares, respectively.
<PAGE>
During the period from January 5, 1995 through March 31, 1995, Putnam
Mutual Funds Corp., acting as underwriter, received net commissions
of $188,703 and $14,479 from the sale of class A and class M shares,
respectively. A deferred sales charge of up to 1.00% is assessed on
certain redemptions of class A shares purchased as part of an
investment of $1 million or more. For the period from January 5, 1995
to March 31, 1995, Putnam Mutual Funds Corp., acting as underwriter,
received no such charge on class A redemptions. Putnam Mutual Funds
Corp. received $2,816 in contingent deferred sales charges from
redemptions of class B shares.<PAGE>
Note 4
Purchases
and sales
of securities
During the period ended March 31, 1995, purchases and sales of
investment securities other than U.S. government obligations and
short-term investments aggregated $73,166,350 and $8,097,522,
respectively. There were no purchases and sales of U.S. government
obligations during the year. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
Note 5
Capital shares
At March 31, 1995, there was an unlimited number of shares of
beneficial interest authorized divided into three classes, class A
,class B and class M capital shares. Transactions in capital shares
were as follows:
For the period
January 5, 1995 (Commencement of
operations) to March 31 1995
Class A Shares Amount
Shares sold 4,136,096 $36,732,137
Shares issued in connection with
reinvestment of distributions -- --
4,136,096 36,732,137
Shares repurchased
(120,598) (1,077,197)
Net increase 4,015,498 $35,654,940
For the period
January 5, 1995 (Commencement of
operations) to March 31, 1995
Class B Shares Amount
Shares sold 3,449,662 $30,705,865
Shares issued in connection with
reinvestment of distributions -- --
3,449,662 30,705,865
Shares repurchased (108,649) (967,870)
Net increase 3,341,013 $29,737,995
<PAGE>
For the period
January 5, 1995 (Commencement of
operations) to March 31, 1995
Class M Shares Amount
Shares sold 586,639 $5,232,827
Shares issued in connection with
reinvestment of distributions -- --
586,639 5,232,827
Shares repurchased (3,373) (30,172)
Net increase 583,266 $5,202,655
<PAGE>
PUTNAM GROWTH AND INCOME FUND II
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification
The information required by this item is incorporated herein by
reference to the Registrant's Initial Registration Statement on
Form N-1A under the Securities Act of 1933 (File No. 33-55979)
and the Investment Company Act of 1940 (File No. 811-07223).
Item 16. Exhibits
1. Agreement and Declaration of Trust -- Incorporated
by reference to the Registrant's Initial
Registration Statement on Form N-1A.
2. By-Laws -- Incorporated by reference to the
Registrant's Initial Registration Statement on
Form N-1A.
3a. Copy of Class A specimen share certificate --
Incorporated by reference to Pre-Effective
Amendment No. 1 to the Registrant's Registration
Statement on Form N-1A.
3b. Copy of Class B specimen share certificate --
Incorporated by reference to Pre-Effective
Amendment No. 1 to the Registrant's Registration
Statement on Form N-1A.
4. Agreement and Plan of Reorganization --constitutes
Exhibit A included in Part A hereof.
5a. Portions of Agreement and Declaration of Trust
Relating to Shareholders' Rights -- Incorporated
by reference to the Registrant's Initial
Registration Statement on Form N-1A.
5b. Portions of By-Laws Relating to Shareholders'
Rights -- Incorporated by reference to the
Registrant's Initial Registration Statement on
Form N-1A.
6. Copy of Management Contract dated October 7, 1994
-- Incorporated by reference to the Registrant's
Initial Registration Statement on Form N-1A.
<PAGE>
7a. Copy of Distributor's Contract for Class A, Class
B and Class M shares dated October 7, 1994 --
Incorporated by reference to the Registrant's
Initial Registration Statement on Form N-1A.
7b. Copy of Specimen Dealer Sales Contract --
Incorporated by reference to Pre-Effective
Amendment No. 1 to the Registrant's Registration
Statement on Form N-1A.
7c. Copy of Specimen Financial Institution Sales
Contract -- Incorporated by reference to Pre-
Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A.
8. Not applicable.
9. Copy of Custodian Agreement with Putnam Fiduciary
Trust Company dated May 3, 1991, as amended
July 13, 1992 -- Incorporated by reference to Pre-
Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A.
10a. Copy of Class A Distribution Plan and Agreement
dated October 7, 1994 -- Incorporated by reference
to the Registrant's Initial Registration
Statement on Form N-1A.
10b. Copy of Class B Distribution Plan and Agreement
dated October 7, 1994 -- Incorporated by reference
to the Registrant's Initial Registration Statement
on Form N-14.
10c. Copy of Class M Distribution Plan and Agreement
dated October 7, 1994 -- Incorporated by reference
to the Registrant's Initial Registration Statement
on Form N-14.
11. Opinion of Ropes & Gray, including consent --
Incorporated by reference to the Registrant's
Initial Registration Statement on Form N-14.
12. Opinion of Ropes & Gray as to Tax Matters -- to be
filed by Pre-Effective Amendment to Registrant's
Registration Statement on Form N-14.
13. Copy of Investor Servicing Agreement dated June 3,
1991 with Putnam Fiduciary Trust Company --
Incorporated by reference to Pre-Effective
Amendment No. 1 to the Registrant's Initial
Registration Statement on Form N-1A.
14. Consent of Independent Accountants --
Incorporated by reference to the Registrant's
Initial Registration Statement on Form N-14.
15. Not applicable
16. Power of Attorney -- Incorporated by reference
to the Registrant's Initial Registration Statement
on Form N-14.
17. Copy of Registrant's Declaration under Rule 24f-2
-- Incorporated by reference to the Registrant's
Initial Registration Statement on Form N-1A.
Item 17. Undertakings
(a) The undersigned Registrant agrees that prior to any public
reoffering of the securities registered through the use of a
prospectus which is a part of this Registration Statement by
any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) under the Act, the
reoffering prospectus will contain the information called
for by the applicable registration form for reofferings by
persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable
form.
(b) The undersigned Registrant agrees that every prospectus that
is filed under paragraph (a) above will be filed as a part
of an amendment to this Registration Statement and will not
be used until the amendment is effective, and that, in
determining any liability under the Act, each post-effective
amendment shall be deemed to be a new Registration Statement
for the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial
bona fide offering of them.
- - - - - - - - - - - - - - - - - - - -
NOTICE
A copy of the Agreement and Declaration of Trust, as amended, of
Putnam Growth and Income Fund II, is on file with the Secretary
of State of The Commonwealth of Massachusetts, and notice is
hereby given that this Registration Statement has been 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 Registration Statement are not binding upon any of
the Trustees, officers, or shareholders of the Registrant
individually, but are binding only upon the assets and property
of the Registrant.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, 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 4th<R/> day of May, 1995.
PUTNAM GROWTH AND INCOME FUND II
By: Gordon H. Silver, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title
George Putnam President and Chairman of the Trustees;
Principal Executive Officer; Trustee
William F. Pounds Vice Chairman and Trustee
John D. Hughes Principal Financial Officer; Vice President;
Treasurer
Paul G. Bucuvalas Principal Accounting Officer; Assistant
Treasurer
Jameson Adkins 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
Eli Shapiro Trustee
A.J.C. Smith Trustee
W. Nicholas Thorndike Trustee
By: Gordon H. Silver, as
Attorney-in-Fact
May
4, 1995
