As filed with the Securities and Exchange Commission on
June 21 , 1995
Registration No. 33-59065
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-14
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / x /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 1 / X /
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(Check appropriate box or boxes)
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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)
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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)
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Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
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It is proposed that this filing will become effective immediately upon
filing pursuant to Rule 485(b).
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.
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<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 28 .
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. . . . . . . . . . . . . . . . . . . . 1
Notice of Shareholder meeting. . . . . . . . . . . . . . . . . . . 3
Combined Prospectus/Proxy Statement. . . . . . . . . . . . . . . . 4
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 card . We are asking for your vote on the
following matter:
1. APPROVING A MERGER OF THE DIVIDEND GROWTH FUND INTO
PUTNAM GROWTH AND INCOME FUND II (THE "GROWTH AND INCOME
FUND"). IN THIS MERGER, YOUR SHARES OF THE DIVIDEND
GROWTH FUND WOULD, IN EFFECT, BE EXCHANGED AT NET
ASSET VALUE AND ON A TAX-FREE BASIS FOR SHARES OF
THE GROWTH AND INCOME FUND .
The proposed merger will combine two funds with very similar
overall investment strategies .
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.
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.
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
7 , 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 27 .
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 23 , 1995<PAGE>
PROSPECTUS/PROXY STATEMENT
June 5 , 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Risk factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Proposal regarding approval or disapproval of
Agreement and Plan of Reorganization . . . . . . . . . . . . . . 18
Background and reasons for the proposed reorganization . . . . . . 19
Information about the reorganization . . . . . . . . . . . . . . . 22
Voting information . . . . . . . . . . . . . . . . . . . . . . . . 29
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 thereby
liquidating 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.
<PAGE>
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
26 , 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
5 , 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 OR A COPY OF THE DIVIDEND GROWTH
FUND'S ANNUAL REPORT , 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 , followed by the distribution of the Growth and
Income Fund's shares, will result in the complete
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, 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, as of May 16, 1995, the Growth and
Income Fund's current SEC yield (2.02% and 1.38% for
Class A and B shares, respectively) is comparable to the Dividend
Growth Fund's current SEC yield (1.89% and 1.21%
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 neither Fund held
any foreign securities as of March 31, 1995 .
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.
<PAGE>
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 0.65% 1.00% 0.47% 2.12%
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 and
those expenses estimated to be incurred by the combined fund
following the merger . 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 and the proforma combined fund are
based on estimated amounts.
*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."
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 $72 $96 $134 $226
GROWTH AND
INCOME
Class A $70 $96 $124 $204
Class B $71 $94 $130 $218
GROWTH AND
INCOME
(PRO FORMA COMBINED)
Class A $69 $95 $122 $199
Class B $70 $92 $127 $212
<PAGE>
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 $22 $66 $114 $226
GROWTH AND
INCOME
Class A $70 $96 $124 $204
Class B $21 $64 $110 $218
GROWTH AND
INCOME
(PRO FORMA COMBINED)
Class A $69 $95 $122 $199
Class B $20 $62 $107 $212
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.
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 the 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. Reinvestment 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?
If the proposed merger is approved by shareholders, you
will receive a confirmation after the reorganization is
completed, indicating your new account number. If the merger
is not approved, shareholders will be notified, and the results
of the meeting will be provided in the next annual report of the
Dividend Growth Fund.
10 . 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 , in which the Dividend Growth Fund may
not normally invest . 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 up to 35% of its assets
in fixed-income securities, including lower-rated fixed-income
securities (rated below BBB/Baa) 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 lower portion of its assets subject to such
risks because it may invest a lower 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 . 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.
<PAGE>
Other investment practices. 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 for shares of 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. The
Notice of the Meeting, the Proxy and the combined
Prospectus/Proxy Statement and the enclosed form of proxy are
being mailed to shareholders on or about June 23 , 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 5,716,669 shares
of beneficial interest of the Dividend Growth Fund. Only
shareholders of record on June 9 , 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 June 1 , 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
1.24% and 1.99%, respectively, for Class A and Class B shares of
the Growth and Income Fund immediately following the merger
would be lower than the total annual expenses currently borne
by the Dividend Growth Fund's shareholders, which are 1.36% and
2.12% for Class A and Class B shares, respectively . This
decrease in projected total annual expenses following the
merger 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 former 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
net assets of $73.0 million, while the Dividend Growth
Fund, which began operations in March 1990, had net 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 net assets, compared
to its asset level of $59.2 million one year
later , a growth of only $4.6 million in net 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,
a 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, which is
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 such Class A 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 such Class B
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
the Dividend Growth Fund and Class B Merger Shares
being distributed to holders of Class B shares of the
Dividend Growth Fund . 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
of purchase . 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
it 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. The shareholders of the Dividend
Growth Fund are currently subject to this same shareholder
liability. 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 Internal Revenue Code of
1986, as amended (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
April 30 , 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 $56,315 $48,015 $104,293
Class B 51,901 10,892 62,770
Shares outstanding
(000's omitted)
Class A 5,980 4,640 11,073
Class B 5,523 1,060 6,680
Net asset value
per share
Class A 9.42 10.35 9.42
Class B 9.40 10.28 9.40
* 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
AGREEMENT .
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 merger . 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 5,716,669 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
TriTech Services, Four Corporate Place, Corporate Park 287,
Piscataway, NJ 08854 , to aid in the solicitation of
instructions for nominee accounts for a fee not to exceed
$10,000 plus reasonable out-of-pocket expenses. The
Dividend Growth Fund has also retained at its expense D.F. King
& Co. Inc., 77 Water Street, New York, NY 10005 , to aid in the
solicitation of instructions for nominee and registered
accounts , for a fee not to exceed $1,500 and $5,000,
respectively, 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 June 1 , 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 Agreement , 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.
<PAGE>
(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,
L.L.P., 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"),
previously 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
Registration Statement, the Prospectus, or 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.
(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 26 , 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 7(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, 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 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 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.
<PAGE>
(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 year
ended February 28, 1995 and for the fiscal period from March
1, 1995 to the Exchange Date (the latter period) 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 March 1 , 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 March 31 , 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 Dividend Growth 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
Dividend Growth Fund upon the transfer of the
Investments the Growth and Income Fund and the
assumption by the Growth and Income Fund of the
liabilities of the Dividend Growth Fund , or upon the
distribution of the Merger Shares by the Dividend Growth Fund
to its shareholders, pursuant to this Agreement, (ii) the basis
of the Merger Shares a Dividend Growth Fund shareholder receives in
connection with the transaction will be the same as the basis of
his or her Dividend Growth Fund shares exchanged therefor, and
(iii) a Dividend Growth Fund shareholder's holding period for his
or her Merger Shares will be determined by including the period for
which he or she held the Dividend Growth Fund shares exchanged
therefor .
(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
/s/ Patricia C. Flaherty
By:___________________________
Senior Vice President
PUTNAM DIVIDEND GROWTH FUND
/s/ Patricia C. Flaherty
By:__________________________
Senior Vice President<PAGE>
PUTNAMINVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
<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 Dividend Growth 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 5 , 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 5 ,
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
26 , 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>
The Proforma Combining Investment Portfolio
of Putnam Dividend Growth Fund and Putnam
Growth and Income Fund II
March 31, 1995 (Unaudited)
Dividend Growth Fund Growth & Income Fund II Pro Forma Combined
<C>
<C> <C> <C> <C> <C> <C>
Number of Number of Number of
Common Stocks (92.0%)* Shares Value Shares Value Shares Value
Aerospace and Defense (0.4%)
Boeing Co. 9,385 505,617 9,385 505,617
Apparel (0.4%)
VF Corp. 10,000 531,250 10,000 531,250
Automotive Parts (2.0%)
CLARCOR, Inc. 15,000 316,875 15,000 316,875
Dana Corporation 15,750 401,625 15,750 401,625
General Motors Corp. 21,125 934,781 21,125 934,781
Genuine Parts Co. 11,500 458,562 11,500 458,562
Magna International Inc. Cl. A 13,735 523,647 13,735 523,647
775,437 1,860,053 2,635,490
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
Banks (8.3%)
Banc One Corp. 14,070 400,995 14,070 400,995
BankAmerica Corp. 20,400 984,300 24,080 1,161,860 44,480 2,146,160
Bankers Trust New York Corp. 9,000 470,250 15,910 831,298 24,910 1,301,548
Boatman's Bancshares, Inc. 13,500 408,375 13,500 408,375
CCB Financial Corp. 8,000 308,000 8,000 308,000
Comerica Inc. 16,000 440,000 16,000 440,000
CoreStates Financial Corp. 14,500 464,000 15,010 480,320 29,510 944,320
Firstar Corp. 15,100 445,450 15,100 445,450
Integra Financial Corp. 10,000 430,000 10,000 430,000
Keystone Financial Inc. 14,500 398,750 14,500 398,750
Morgan (J.P) & Co., Inc. 12,500 762,500 22,570 1,376,770 35,070 2,139,270
NationsBank Corp. 8,000 406,000 10,795 547,846 18,795 953,846
Wilmington Trust Corp. 27,500 666,875 27,500 666,875
6,585,495 4,398,094 10,983,589
Basic Industrial Products (0.4%)
Sundstrand Corp. 9,705 488,889 9,705 488,889
Building Materials (0.3%)
Armstrong World Inds. Inc. 7,450 339,906 7,450 339,906
Business Equipment and Services (2.0%)
Dow Jones & Co. Inc. 6,490 245,809 6,490 245,809
IBM Corp. 7,275 595,641 7,275 595,641
Xerox Corp. 4,000 469,500 10,895 1,278,801 14,895 1,748,301
469,500 2,120,251 2,589,751
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
Chemicals (4.4%)
Eastman Chemical Co. 11,250 625,781 11,250 625,781
Grace (W.R.) & Co. 15,260 812,595 15,260 812,595
Lawter International, Inc. 44,700 586,687 44,700 586,687
Witco Chemical Corp. 22,600 663,875 33,710 990,231 56,310 1,654,106
du Pont (E.I.) de Nemours & Co., Ltd23,000 1,391,500 8,860 536,030 31,860 1,927,530
Union Carbide Corp. 8,435 258,322 8,435 258,322
2,642,062 3,222,959 5,865,021
Conglomerates (6.3%)
ITT Corp. 3,000 307,875 9,175 941,584 12,175 1,249,459
Johnson Controls, Inc. 14,050 714,793 7,945 404,202 21,995 1,118,995
Minnesota Mining & Manufacturing Co.17,500 1,017,187 17,500 1,017,187
National Service Industries, Inc. 21,500 580,500 21,500 580,500
TRW, Inc. 17,000 1,170,875 28,120 1,936,765 45,120 3,107,640
Tenneco Inc. 17,895 843,302 17,895 843,302
United Technologies Corp. 6,225 430,303 6,225 430,303
3,791,230 4,556,156 8,347,386
Cosmetics (2.8%)
Avon Products, Inc. 28,300 1,712,150 33,430 2,022,515 61,730 3,734,665
Consumer Non Durables (5.7%)
American Brands Inc. 17,510 687,268 17,510 687,268
Eastman Kodak Co. 10,000 531,250 38,670 2,054,344 48,670 2,585,594
Maytag Corp. 33,395 571,889 33,395 571,889
531,250 3,313,501 3,844,751
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
Consumer Services (0.6%)
CBS Inc. 1,263 80,832 1,263 80,832
McGraw-Hill, Inc. 10,230 734,003 10,230 734,003
814,835 814,835
Electrical Equipment (3.8%)
Eaton Corp. 11,000 596,750 14,345 778,216 25,345 1,374,966
General Electric Co. 26,000 1,407,250 26,000 1,407,250
Hubbell Inc. Class B 19,015 1,022,056 19,015 1,022,056
Honeywell, Inc. 8,435 315,258 8,435 315,258
Polaroid Corp. 11,500 399,625 13,570 471,558 25,070 871,183
3,425,681 1,565,032 4,990,713
Environmental Control (0.8%)
WMX Technologies, Inc. 39,160 1,076,900 39,160 1,076,900
Food and Beverages (1.2%)
Anheuser-Busch Cos,. Inc. 120 7,035 120 7,035
Flowers Industries, Inc. 51,500 927,000 51,500 927,000
Heinz (H,J,) Co. 17,715 682,028 17,715 682,028
927,000 689,063 1,616,063
Forest Products (0.5%)
Weyerhaeuser Co. 18,700 726,963 18,700 726,963
</TABLE> <PAGE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
Health Care (5.7%)
American Home Products Corp. 12,000 855,000 11,110 791,588 23,110 1,646,588
Bristol-Myers Squibb Co. 14,000 882,000 16,630 1,047,690 30,630 1,929,690
Lilly (Eli) & Co. 9,175 670,922 9,175 670,922
Merck & Co., Inc. 28,000 1,193,500 28,000 1,193,500
Upjohn Co. 10,825 386,994 10,825 386,994
Warner-Lambert Co. 11,500 899,875 10,300 805,975 21,800 1,705,850
3,830,375 3,703,169 7,533,544
Home Furnishings (0.7%)
Kimball International, Inc. Class B20,000 515,000 20,000 515,000
Knape & Vogt Manufacturing Co. 30,650 459,750 30,650 459,750
974,750 974,750
Household Products (1.5%)
BIC Corp. 13,500 421,875 13,500 421,875
Clorox Co. 6,000 360,000 6,000 360,000
Colgate-Palmolive Co. 7,000 462,000 5,590 368,940 12,590 830,940
Stanhome, Inc. 14,000 400,750 14,000 400,750
1,644,625 368,940 2,013,565
Insurance and Finance (9.9%)
American Express Co. 25,625 893,672 25,625 893,672
Aetna Life & Casualty Co. 6,260 56,820 6,260 356,820
American General Corp. 18,500 596,625 15,455 498,424 33,955 1,095,049
American Heritage Life Investment Corp.30,500 549,000 30,500 549,000
Aon Corp. 4,100 149,650 5,610 204,765 9,710 354,415
Bear Stearns Companies, Inc. 21,090 390,165 21,090 390,165
Beneficial Corp. 14,500 569,125 33,745 1,324,491 48,245 1,893,616
/TABLE
<PAGE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
CIGNA Corp. 11,530 861,868 11,530 861,868
Federal National Mortgage Association10,000 813,750 4,465 363,339 14,465 1,177,089
First Chicago Corp. 10,510 526,814 10,510 526,814
First Fidelity Bancorp. 13,745 680,378 13,745 680,378
Gallagher (Arthur J.) & Co. 8,500 300,687 8,500 300,687
Harleysville Group, Inc. 30,000 731,250 30,000 731,250
Household International Inc. 12,830 558,105 12,830 558,105
Houston Industries Inc. 6,750 257,344 6,750 257,344
Lincoln National Corp. 13,500 543,375 21,235 854,709 34,735 1,398,084
SAFECO Corp. 7,500 410,625 7,500 410,625
St. Paul Cos., Inc. 6,500 325,000 6,500 325,000
Wells Fargo & Co. 2,285 353,317 2,285 353,317
4,989,087 8,124,211 13,113,298
Machinery (0.7%)
Case Corp. 13,360 334,000 13,360 334,000
Keystone International, Inc. 27,500 594,687 27,500 594,687
594,687 334,000 928,687
Medical Equipment and Supplies (2.2%)
ADAC Laboratories 40,000 320,000 40,000 320,000
Baxter International, Inc. 18,500 605,875 42,155 1,380,576 60,655 1,986,451
Landauer, Inc. 30,500 556,625 30,500 556,625
1,482,500 1,380,576 2,863,076
Office Equipment (0.3%)
Pitney Bowes, Inc. 12,500 450,000 12,500 450,000
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C>
Oil and Gas (6.5%)
Atlantic Richfield Co. 3,200 368,000 3,200 368,000
Chevron Corp. 27,000 1,296,000 9,210 442,080 36,210 1,738,080
Enron Corp. 21,585 712,305 21,585 712,305
Exxon Corp. 13,600 907,800 16,060 1,072,005 29,660 1,979,805
Imperial Oil Ltd. 13,360 475,950 13,360 475,950
McDermott International, Inc. 255 6,980 255 6,980
Mobil Corp. 7,500 694,687 7,500 694,687
Phillips Petroleum Co. 16,450 602,481 16,450 602,481
Royal Dutch Petroleum Co. 105 12,600 105 12,600
Sonat, Inc. 11,535 346,050 11,535 346,050
Total Corp. ADS 25,950 778,500 30,675 920,250 56,625 1,698,750
3,676,987 4,958,701 8,635,688
Paper (1.5%)
Glatfelter (P.H.) Co. 23,000 411,125 23,000 411,125
Kimberly-Clark Corp. 13,350 694,200 15,785 820,820 29,135 1,515,020
1,105,325 820,820 1,926,145
Publishing (2.0%)
Dun & Bradstreet Corp. 16,000 842,000 24,570 1,292,996 40,570 2,134,996
Lee Enterprises, Inc. 15,000 530,625 15,000 530,625
1,372,625 1,292,996 2,665,621
Real Estate (0.3%)
Reliance Group Holdings, Inc. 70,305 377,889 70,305 377,889
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C>
REIT (1.3%)
Nationwide Health Properties, Inc. 15,500 571,562 15,500 571,562
ROC Communities, Inc. 14,000 283,500 14,000 283,500
South West Property Trust, Inc. 22,500 270,000 22,500 270,000
South West Property Trust, Inc. Rts.22,500 1,406 22,500 1,406
Weingarten Realty Investors, Inc. 15,900 550,537 15,900 550,537
1,677,005 1,677,005
Restaurants (0.4%)
Luby's Cafeterias, Inc. 23,000 488,750 23,000 488,750
Retail (4.0%)
Blair Corp. 9,000 311,625 9,000 311,625
May Department Stores Co. 24,000 888,000 14,165 524,105 38,165 1,412,105
Melville Corporation 26,365 982,096 26,365 982,096
Penney (J.C.) Co., Inc. 23,000 1,032,125 15,925 714,634 38,925 1,746,759
Sears, Roebuck & Co. 8,435 450,218 8,435 450,218
Woolworth Corp. 21,725 399,197 21,725 399,197
2,231,750 3,070,250 5,302,000
Specialty Consumer Products (1.9%)
Corning Inc. 12,600 453,600 24,485 881,460 37,085 1,335,060
Deluxe Corp. 13,000 370,500 13,000 370,500
Sturm, Ruger & Co., Inc. 10,000 318,750 10,000 318,750
WD-40 Co. 12,600 497,700 12,600 497,700
1,640,550 881,460 2,522,010
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
Steel (0.3%)
Carpenter Technology Corp. 6,500 375,375 6,500 375,375
Tobacco (3.2%)
Philip Morris Cos., Inc. 20,000 1,305,000 25,945 1,692,911 45,945 2,997,911
RJR Nabisco Holdings Corp. 18,600 109,275 24,240 142,410 42,840 251,685
UST, Inc. 9,350 296,862 9,350 296,862
Universal Corp. 35,000 730,625 35,000 730,625
2,441,762 1,835,321 4,277,083
Transportation (3.6%)
Conrail Inc. 4,220 236,848 4,220 236,848
GATX Corp. 10,500 469,876 10,500 469,876
Illinois Central Corp. 9,500 327,751 9,500 327,751
Norfolk Southern Corp. 9,000 601,876 11,250 752,344 20,250 1,354,220
Southern Pacific Rail Corp. 17,150 300,126 20,380 356,650 37,530 656,776
Union Pacific Corp. 13,800 759,002 16,275 895,125 30,075 1,654,127
2,458,631 2,240,967 4,699,598
Utilities (8.8%)
American Telephone & Telegraph Co. 19,930 1,031,378 19,930 1,031,378
American Water Works, Inc. 15,000 435,000 15,000 435,000
Cinergy Corp. 18,455 459,068 18,455 459,068
DQE, Inc. 17,600 578,600 17,600 578,600
Frontier Corp. 19,685 445,373 19,685 445,373
Lincoln Telecommunications Co. 32,000 488,000 32,000 488,000
New Jersey Resources Corp. 25,000 556,250 25,000 556,250
Northeast Utilities
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
31,640 672,350 31,640 672,350
NYNEX Corp. 34,765 1,377,563 34,765 1,377,563
Pacific Gas & Electric Co. 11,565 287,679 11,565 287,679
Public Service Co. of Colorado 21,585 663,739 21,585 663,739
Sprint Corp. 15,000 453,750 43,905 1,328,126 58,905 1,781,876
Texas Utilities Co. 10,004 317,627 10,004 317,627
Union Electric Co. 8,805 311,477 8,805 311,477
United Illuminating Co. 14,100 451,200 14,100 451,200
US WEST, Inc. 28,615 1,144,600 28,615 1,144,600
WICOR, Inc. 24,600 691,875 24,600 691,875
3,654,675 8,038,980 11,001,780
Total Common Stocks 56,480,514 $ 65,129,014 121,609,528
Convertible Bond and Notes (0.2%)*
Principal Principal Principal
Amount Value Amount Value Amount Value
Comcast Corp. cv. notes
1 1/8s, 2007 $570,000 $233,700 $570,000
$233,700
Convertible Preferred Stocks (1.4%)*
Number of Number of Number of
Shares Value Shares Value Shares Value
Automotive
Chrysler Corp. Ser. A, $4.625 dep. shs.
cv. pfd. 144A 4,395 $510,369 4,395
$510,369
Ford Motor Co. Ser. A, $4.20, cv. pfd. 5,485 484,052 5,485
484,052
</TABLE>
<TABLE>
<CAPTION>
<C> <C> <C> <C> <C> <C> <C>
Insurance and Finance
Citicorp Ser. 13, $5.375 ,cv. pfd. 5,730 671,843 5,730
671,843
Business Equipment and Services
Unisys Corp. Ser. A, $3.75, cv. pfd. 4,465 173,577 4,465
173,577
Total Convertible Preferred Stocks $1,839,841
$1,839,841
Short-Term Investments (4.5%)*
Principal Principal Principal
Amount Value Amount Value 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 $6,003,140
$6,003,140
Total Combined Investments
(combined cost $ 125,440,730
(Growth and Income Fund II $71,185,744
and Dividend Growth Fund $54,254,987) $56,480,514 $73,205,695 $129,686,209
</TABLE>
*: Percentages indicated are based on Proforma combined net assets of
$ 132,179,617, which correspond to a
performa combined net aset value per share of $ 9.18.
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>
<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 0 0 74,102
Total assets 84,305,593 60,400,531 0 132,178,449
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 $59,155,883 0 $132,178,449
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 (B) 60,364 101,511
Compensation of Trustees 1,447 3,352 (A)(2,299) 2,500
Reports to shareholders 4,548 18,561 (A)(18,561) 4,548
Postage 1,110 (26,396) (C) 27,605 2,319
Auditing 4,099 1,166 485 5,750
Legal 2,893 2,221 (A)(2,221) 2,893
Administrative services 1,207 1,102 (A)(405) 1,904
Distribution fees 37,777 53,885 0 91,662
Amortization of organization fees 196 3077 (A)(3,077) 196
Registration fees 8,679 (653) 653 8,679
Other 2,790 2,952 0 5,742
Total expenses 131,544 167,392 62,544 361,480
Net investment income 148,737 448,817 (62,544) 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 4,371,350 (62,544) 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) Elimination and reduction of duplicative
expenses as a result of the merger.
(B) Increase in investor servicing and custodian
fees are the result of the increase in net assets due to the
merger.
(C) 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.
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
(commencement 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
realized 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 outstanding 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
<PAGE>
*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 5 ,
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 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.
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
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 --
Exhibit 1 .
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 -- Exhibit
2.
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 certifies that it meets all of the requirements for effective-
ness of this Registration Statement pursuant to Rule 485(b) under
the Securities Act of 1933 and 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 21st day of June , 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
June 21, 1995
Ropes & Gray
One International Place
Boston, Massachusetts 02110-2624
June 1, 1995
Putnam Growth and Income Fund II
c/o The Putnam Funds
One Post Office Square
Boston, MA 02109
Putnam Dividend Growth Fund
c/o The Putnam Funds
One Post Office Square
Boston, MA 02109
Ladies and Gentlemen:
We have acted as counsel in connection with the Agreement and Plan
of Reorganization (the "Agreement") dated as of June
1,
1995,
between Putnam Growth and Income Fund II, a Massachusetts business
trust ("Acquiring Fund") and Putnam Dividend Growth Fund, a
Massachusetts business trust ("Target Fund"). The Agreement
describes a proposed transaction (the "Transaction") to occur on a
date to be agreed upon by Acquiring Fund and Target Fund (the
"Exchange Date"), pursuant to which Acquiring Fund will acquire
substantially all of the assets of Target Fund in exchange for
shares of beneficial interest in Acquiring Fund (the "Acquiring
Fund Shares") and the assumption by Acquiring Fund of all of the
liabilities of Target Fund following which the Acquiring Fund
Shares received by Target Fund will be distributed by Target Fund
to its shareholders in liquidation and termination of Target Fund.
This opinion as to certain federal income tax consequences of the
Transaction is furnished to you pursuant to Sections 8(h) and 9(g)
of the Agreement. Capitalized terms not defined herein are defined
in the Agreement.
Target Fund is registered under the Investment Company Act of 1940,
as amended (the "1940 Act") as an open-end management investment
company. Shares of Target Fund are redeemable at net asset value
at each shareholder's option. Target Fund has elected to be a
regulated investment company for federal income tax purposes under
Section 851 of the Internal Revenue Code of 1986, as amended (the
"Code").
Acquiring Fund is registered under the 1940 Act as an open-end
management investment company. Shares of Acquiring Fund are
redeemable at net asset value at each shareholder's option.
Acquiring Fund has elected to be a regulated investment company for
federal income tax purposes under Section 851 of the Code.
For purposes of this opinion, we have considered the Agreement, the
Registration Statement filed with the Securities and Exchange
Commission on May 3, 1995 (including the items incorporated by
reference therein), and such other items as we have deemed
necessary to render this opinion. In addition, you have
represented to us the following facts, occurrences and information
upon which you have indicated we may rely in rendering this opinion
(whether or not contained or reflected in the documents and items
referred to above):
1. Target Fund will transfer to Acquiring Fund all of its
assets, and Acquiring Fund will assume all of the liabilities of
Target Fund as of the Exchange Date.
2. The fair market value of the Acquiring Fund Shares
received by each Target Fund shareholder will be approximately
equal to the fair market value of the Target Fund shares
surrendered in exchange therefor. The Target Fund shareholders
will receive no consideration other than Acquiring Fund Shares
(which may include fractional shares) in exchange for their shares
of beneficial interest in Target Fund (the "Target Fund Shares").
3. None of the compensation received by any shareholder-
employees of Target Fund, if any, will be separate consideration
for, or allocable to, any of their Target Fund Shares; none of the
Acquiring Fund Shares received by any Target Fund shareholder-
employees will be separate consideration for, or allocable to, any
employment; and the compensation paid to any Acquiring Fund or
Target Fund shareholder-employees, if any, will be for services
actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
4. There is no plan or intention by any Target Fund
shareholder who owns 5% or more of the total outstanding Target
Fund Shares, and to the best of the knowledge of the management of
Target Fund, there is no plan or intention on the part of the
remaining Target Fund shareholders to sell, exchange, or otherwise
dispose of a number of Acquiring Fund Shares received in the
Transaction that would reduce Target Fund shareholders' ownership
of Acquiring Fund Shares to a number of Acquiring Fund Shares
having a value, as of the date of the Transaction, of less than 50
percent of the value of all of the formerly outstanding Target Fund
Shares as of the same date. For purposes of this representation,
Acquiring Fund Shares or Target Fund Shares surrendered by Target
Fund shareholders in redemption or otherwise disposed of, where
such dispositions, if any, appear to be initiated by Target Fund
shareholders in connection with or as a result of the Agreement or
the Transaction, will be treated as outstanding Target Fund shares
on the date of the Transaction.
5. Acquiring Fund has no plan or intention to reacquire any
of the Acquiring Fund Shares issued in the Transaction, except for
Acquiring Fund Shares reacquired in the ordinary course of its
business as an open-end investment company.
6. Acquiring Fund will acquire at least 90 percent of the
fair market value of the net assets and at least 70 percent of the
fair market value of the gross assets held by Target Fund
immediately prior to the Transaction. For purposes of this
representation, (a) amounts paid by Target Fund, out of the assets
of Target Fund, to Target Fund shareholders in redemption of Target
Fund Shares, where such redemptions, if any, appear to be initiated
by Target Fund shareholders in connection with or as a result of
the Agreement or the Transaction, (b) amounts used by Target Fund
to pay expenses of the Transaction, and (c) amounts used to effect
all redemptions and distributions (except for regular, normal
dividends declared and paid in order to ensure Target Fund's
continued qualification as a regulated investment company and to
avoid fund-level tax) made by Target Fund immediately preceding the
transfer will be included as assets of Target Fund held immediately
prior to the Transaction. Further, for purposes of this
representation, the amounts, if any, that Acquiring Fund pays after
the Transaction to Acquiring Fund shareholders who are former
Target Fund shareholders in redemption of Acquiring Fund Shares
received in exchange for Target Fund Shares, where such
redemptions, if any, appear to be initiated by such shareholders in
connection with or as a result of the Agreement or the Transaction,
will be considered to be assets of Target Fund that were not
transferred to Acquiring Fund.
7. The fair market value of the assets transferred to
Acquiring Fund by Target Fund will equal or exceed the sum of the
liabilities to be assumed by Acquiring Fund.
8. Following the Transaction, Acquiring Fund will continue to
use a substantial portion (in this case, at least 50%) of the
historic business assets of Target Fund. Specifically, Acquiring
Fund will use such significant portion of Target Fund's historic
business assets in its business by continuing to hold at least such
portion of the total assets transferred to it by Target Fund. In
making this determination, dispositions made in the ordinary course
of Acquiring Fund's business as an open-end investment company
(i.e., dispositions resulting from investment decisions made after
the Transaction on the basis of investment considerations
independent of the Transaction) shall not be taken into account.
9. Acquiring Fund has no plan or intention to sell or
otherwise dispose of any of the assets received from Target Fund
except for dispositions made in the ordinary course of Acquiring
Fund's business as an open-end investment company (i.e.,
dispositions resulting from investment decisions made after the
Transaction on the basis of investment considerations independent
of the Transaction).
10. The liabilities of Target Fund to be assumed by Acquiring
Fund were incurred by Target Fund in the ordinary course of its
business and are associated with the assets transferred to
Acquiring Fund. For purposes of this paragraph, expenses of the
Transaction are not treated as liabilities.
11. All fees and expenses incurred by Target Fund and/or
Acquiring Fund as a direct result of the Agreement or the
Transaction will be allocated ratably between the two funds in
proportion to their net assets as of the Valuation Time, except
that (a) the costs of proxy materials and proxy solicitation will
be borne by Target Fund, and (b) such fees and expenses will be
paid by the party directly incurring such expenses if and to the
extent that payment by the other party would result in the
disqualification of Acquiring Fund or Target Fund, as the case may
be, as a "regulated investment company" within the meaning of
Section 851 of the Code. All such fees and expenses incurred and
borne by either of Acquiring Fund and Target Fund shall be solely
and directly related to the Transaction and shall be paid directly
by Acquiring Fund or Target Fund, as the case may be, to the
relevant providers of services or other payees, in accordance with
the principles set forth in Rev. Rul. 73-54, 1973-1 C.B. 187.
Target Fund shareholders will pay their respective expenses,
if any, incurred in connection with the Transaction.
12. For federal income tax purposes, Target Fund qualifies as
a regulated investment company, and the provisions of Sections 851
through 855 of the Code apply to Target Fund for its current
taxable year February 1, 1993 and will continue to apply to it
through the Exchange Date.
In that regard, Target Fund will declare to Target Fund
shareholders of record on or prior to the Exchange Date a dividend
or dividends which together with all previous such dividends shall
have the effect of distributing all of Target Fund's investment
company taxable income (see Code Section 852) for both the taxable
year ending February 28, 1995 and the short taxable year of Target
Fund beginning on March 1, 1995 and ending on the Exchange Date
(computed in each case without regard to any deduction for
dividends paid) and all of the net capital gain realized in Target
Fund's taxable year ending February 28, 1995 and in its short
taxable year beginning on March 1, 1995 and ending on the Exchange
Date (after reduction for any capital loss carryover). Such
dividends will be made to ensure continued qualification of Target
Fund as a regulated investment company for tax purposes and to
eliminate fund-level tax.
13. Not more than 25% of the value of Target Fund's total assets
is invested in the stock
and securities of any one issuer and not more than 50% of the value of Target
Fund's total assets
is invested in the stock and securities of five or fewer issues.
14. For federal income tax purposes, Acquiring Fund qualifies
as a regulated investment company, and the provisions of Sections
851 through 855 of the Code apply to Acquiring Fund for its current
taxable year beginning October 1, 1993 and will continue to apply
to it through the Exchange Date.
15. Not more than 25% of the value of Acquiring Fund's total
assets is invested in the stock and securities of any one issuer
and not more than 50% of the value of Acquiring Fund's total assets
is invested in the stock and securities of five or fewer issues.
16. Acquiring Fund does not own, directly or indirectly, nor
has it owned during the past five years, directly or indirectly,
any Target Fund Shares.
17. There is no intercorporate indebtedness existing between
Target Fund and Acquiring Fund.
18. Target Fund will distribute the Acquiring Fund Shares it
receives in the Transaction to its shareholders as provided in the
Agreement.
19. Target Fund is not under the jurisdiction of a court in
a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
Based on the foregoing representations and our review of the
documents and items referred to above, we are of the opinion that
for federal income tax purposes:
(i) No gain or loss will be recognized by Acquiring Fund upon
the receipt of the assets of Target Fund in exchange for
Acquiring Fund Shares and the assumption by Acquiring
Fund of the liabilities of Target Fund;
(ii) The basis in the hands of Acquiring Fund of the assets of
Target Fund transferred to Acquiring Fund in the
Transaction will be the same as the basis of such assets
in the hands of Target Fund immediately prior to the
transfer;
(iii) The holding periods of the assets of Target Fund in the
hands of Acquiring Fund will include the periods during
which such assets were held by Target Fund;
(iv) No gain or loss will be recognized by Target Fund upon
the transfer of Target Fund's assets to Acquiring Fund in
exchange for Acquiring Fund Shares and the assumption by
Acquiring Fund of the liabilities of Target Fund, or upon
the distribution of Acquiring Fund Shares by Target Fund
to its shareholders in liquidation;
(v) No gain or loss will be recognized by the Target Fund
shareholders upon the exchange of their Target Fund
Shares for Acquiring Fund Shares;
(vi) The basis of Acquiring Fund Shares a Target Fund
shareholder receives in connection with the Transaction
will be the same as the basis of his or her Target Fund
Shares exchanged therefor; and
(vii) A Target Fund shareholder's holding period for his or her
Acquiring Fund Shares will be determined by including the
period for which he or she held the Target Fund Shares
exchanged therefor, provided that he or she held such
Target Fund shares as capital assets.
Very truly yours,
Ropes & Gray
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-
Effective Amendment No. 1 to the Registration Statement of Putnam
Growth and Income Fund II on Form N-14 (File No. 33-59065), of
our report dated April 5, 1995, on our audits of the financial
statements and "Financial highlights" of Putnam Dividend Growth
Fund, which report is included in the Annual Report for Putnam
Dividend Growth Fund for the year ended February 28, 1995, which
is incorporated by reference in the Registration Statement.
We also consent to the reference to our firm under the
caption "Independent Accountants and Financial Statements" in the
Statement of Additional Information.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 20, 1995
