SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Amendment No. )
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Filed by the Registrant / X /
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Filed by a party other than the Registrant / /
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Check the appropriate box:
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/ / Preliminary Proxy Statement
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/ / Confidential, for Use of the Commission Only (as
- ---- permitted by Rule 14a-6(e) (2))
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/ X / Definitive Proxy Statement
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/ / Definitive Additional Materials
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/ / Soliciting Material Pursuant to Sec. 240.14a-11(e) or
- ---- Sec. 240.14a-12
PUTNAM INVESTMENT FUNDS
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than
Registrant)
Payment of Filing Fee (Check the appropriate box):
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/ x / No fee required
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/ / Fee computed on table below per Exchange Act Rules
- ---- 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which
transaction applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange Act Rule
0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided
- ---- by Exchange Act Rule 0-11(a)(2) and identify the filing
for which the offsetting fee was paid previously.
Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its
filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed: <PAGE>
IMPORTANT INFORMATION
FOR SHAREHOLDERS IN
PUTNAM INVESTMENT FUNDS: PUTNAM RESEARCH FUND
The document you hold in your hands contains your 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'
recommendations on page 3 .
We urge you to spend a couple of minutes with the 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 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 moments with these materials and
return your proxy to us.
<PAGE>
Table of contents
A Message from the Chairman. . . . . . . . . . . . . . . . . . . . . . . .1
Notice of Shareholder Meeting. . . . . . . . . . . . . . . . . . . . . . .2
Trustees' Recommendations. . . . . . . . . . . . . . . . . . . . . 3
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 adviser.
<PAGE>
A Message from the Chairman
Dear Shareholder:
I am writing to you to ask for your vote on important questions
that affect your investment in your fund. While you are, of
course, welcome to join us at your fund's meeting, most
shareholders cast their vote by filling out and signing the
enclosed proxy. We are asking for your vote on the following
matters:
1. Electing Trustees to oversee your fund;
2. Ratifying the selection by the Trustees of the independent
auditors of your fund for its current fiscal year; and
3. Approving a new management contract between your fund and
Putnam Investment Management, Inc.
The new management contract contains a new "fulcrum fee"
structure that will result in an increase or decrease in the
management fee rate paid by the fund, depending on the fund's
performance relative to the change in value in the Standard &
Poor's 500 Composite Stock Price Index. Putnam Management and
the Trustees believe that the new fee structure could provide an
effective means to reward good relative fund performance while
enabling shareholders to realize the benefit of lower expenses
when fund performance has not reached desired levels.
Although we would like very much to have each shareholder attend
their fund's meeting, we realize this is not possible. Whether
or not you plan to be present, we need your vote. We urge you to
complete, sign, and return the enclosed proxy card promptly. A
postage-paid envelope is enclosed.
I'm sure that you, like most people, lead a busy life and are
tempted to put this proxy aside for another day. Please don't.
When shareholders do not return their proxies, their fund may
have to incur the expense of follow-up solicitations. All
shareholders benefit from the speedy return of proxies.
Your vote is important to us. We appreciate the time and
consideration that I am sure you will give this important matter.
If you have questions about the proposals, contact your financial
adviser or call a Putnam customer service representative at
1-800-225-1581.
Sincerely yours,
/s/ George
Putnam
George Putnam, Chairman
<PAGE>
PUTNAM INVESTMENT FUNDS: PUTNAM RESEARCH FUND
Notice of a Meeting of Shareholders
This is the formal agenda for your fund's 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 Research Fund:
A Meeting of Shareholders of your fund will be held on February
6, 1997 at 2:00 p.m., Boston time, on the eighth floor of One
Post Office Square, Boston, Massachusetts, to consider the
following:
1. Electing Trustees. See page 4 .
2. Ratifying the selection by the Trustees of the independent
auditors of your fund for its current fiscal year. See
page 17 .
3. Approving a new management contract between your fund and
Putnam Investment Management, Inc. See page 18 .
4. Transacting other business as may properly come before the
meeting.
By the Trustees
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson A. Baxter Robert E. Patterson
Hans H. Estin Donald S. Perkins
John A. Hill George Putnam, III
Ronald J. Jackson Eli Shapiro
Elizabeth T. Kennan A.J.C. Smith
Lawrence J. Lasser W. Nicholas Thorndike
WE URGE YOU TO MARK, SIGN, DATE, AND MAIL THE ENCLOSED PROXY IN
THE POSTAGE-PAID ENVELOPE PROVIDED SO YOU WILL BE REPRESENTED AT
THE MEETING.
December 24 , 1996
<PAGE>
Proxy Statement
This document will give you the information you need to vote on
the matters listed on the previous pages. Much of the
information in the proxy statement 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 adviser.
Who is asking for my vote?
The enclosed proxy is solicited by the Trustees of Putnam
Investment Funds for use at the Meeting of Shareholders
of the Putnam Research Fund to be held on February 6,
1997, and, if your fund's meeting is adjourned, at any later
meetings, for the purposes stated in the Notice of Meeting (see
previous pages).
How do your fund's Trustees recommend that shareholders vote on
these proposals?
The Trustees recommend that you vote
1. For the election of all nominees;
2. For selecting Price Waterhouse LLP as the independent
auditors of your fund;
3. For approval of the new management contract between your
fund and Putnam Investment Management, Inc.;
Who is eligible to vote?
Shareholders of record at the close of business on December 6,
1996, are entitled to be present and to vote at the meeting or
any adjourned meeting. The Notice of Meeting, the proxy, and the
Proxy Statement have been mailed to shareholders of record on or
about December 30 , 1996.
Each share is entitled to one vote. Shares represented by duly
executed proxies will be voted in accordance with shareholders'
instructions. If you sign the proxy, but don't fill in a vote,
your shares will be voted in accordance with the Trustees'
recommendations. If any other business is brought before the
meeting, your shares will be voted at the Trustees' discretion.
<PAGE>
The Proposals
I. ELECTION OF TRUSTEES
Who are the nominees for Trustees?
The Nominating Committee of the Trustees recommends that the
number of Trustees be fixed at thirteen and that you vote
for the election of the nominees for Trustee described
below (unless otherwise indicated) . Each nominee is
currently a Trustee of your fund and of the other Putnam funds.
The Nominating Committee of the Trustees consists solely of
Trustees who are not "interested persons" (as defined in the
Investment Company Act of 1940) of your fund or of Putnam
Investment Management, Inc., your fund's investment manager
("Putnam Management").
Jameson Adkins Baxter
Ms. Baxter, age 53 , is the President of Baxter Associates,
Inc., a management and financial consulting firm which she
founded in 1986. During that time, she was also a Vice President
and Principal of the Regency Group, Inc., and a Consultant to
First Boston Corporation, both of which are investment banking
firms. From 1965 to 1986, Ms. Baxter held various positions in
investment banking and corporate finance at First Boston.
Ms. Baxter currently also serves as a Director of Banta
Corporation, Avondale Federal Savings Bank, and ASHTA Chemicals,
Inc. She is also the Chairman Emeritus of the Board of Trustees
of Mount Holyoke College, having previously served as Chairman
for five years and as a Board member for thirteen years; an
Honorary Trustee and past President of the Board of Trustees of
the Emma Willard School; and Chair of the Board of Governors of
Good Shepherd Hospital. Ms. Baxter is a graduate of Mount
Holyoke College.
Hans H. Estin
Mr. Estin, age 68, is a Chartered Financial Analyst and the Vice
Chairman of North American Management Corp., a registered
investment adviser serving individual clients and their families.
Mr. Estin currently also serves as a Director of The Boston
Company, Inc., a registered investment adviser which provides
administrative and investment management services to mutual funds
and other institutional investors, and Boston Safe Deposit and
Trust Company; a Corporation Member of Massachusetts General
Hospital; and a Trustee of New England Aquarium. He previously
served as the Chairman of the Board of Trustees of Boston
University and is currently active in various other civic
associations, including the Boys & Girls Clubs of Boston, Inc.
Mr. Estin is a graduate of Harvard College and holds honorary
doctorates from Merrimack College and Boston University.
John A. Hill
Mr. Hill, age 54, is the Chairman and Managing Director of First
Reserve Corporation, a registered investment adviser investing in
companies in the world-wide energy industry on behalf of
institutional investors.
Prior to acquiring First Reserve in 1983, Mr. Hill held executive
positions with several investment advisory firms and held various
positions with the Federal government, including Associate
Director of the Office of Management and Budget and Deputy
Administrator of the Federal Energy Administration.
Mr. Hill currently also serves as a Director of Snyder Oil
Corporation, an exploration and production company which he
founded, Maverick Tube Corporation, a manufacturer of structural
steel, pipe and well casings, PetroCorp Incorporated, an
exploration and production company, Weatherford Enterra, Inc., an
oil field service company, various private companies controlled
by First Reserve Corporation, and various First Reserve Funds.
He is also a Member of the Board of Advisors of Fund Directions.
He is currently active in various business associations,
including the Economic Club of New York, and lectures on energy
issues in the United States and Europe. Mr. Hill is a graduate
of Southern Methodist University.
Ronald J. Jackson
Mr. Jackson, age 53, was Chairman of the Board, President and
Chief Executive Officer of Fisher-Price, Inc., a major toy
manufacturer, from 1990 to 1993. He previously served as
President and Chief Executive Officer of Stride-Rite, Inc., a
manufacturer and distributor of footwear, from 1989 to 1990, and
as President and Chief Executive Officer of Kenner Parker Toys,
Inc., a major toy and game manufacturer, from 1985 to 1987.
Prior to that, he held various financial and marketing positions
at General Mills, Inc. from 1966 to 1985, including Vice
President, Controller and Vice President of Marketing for Parker
Brothers, a toy and game company, and President of Talbots, a
retailer and direct marketer of women's apparel.
Mr. Jackson currently serves as a Director of Safety 1st, Inc. a
company which markets a wide range of childcare and safety
products. He also serves as a Trustee of Salem Hospital and the
Peabody Essex Museum. He previously served as a Director of a
number of public companies including Fisher-Price, Inc., Kenner
Parker Toys, Inc., Stride-Rite, Inc., and Mattel, Inc., a major
toy manufacturer. Mr. Jackson is a graduate of Michigan State
University Business School.
Elizabeth T. Kennan
Ms. Kennan, age 58, is President Emeritus and Professor of Mount
Holyoke College. From 1978 through June 1995, she was President
of Mount Holyoke College. From 1966 to 1978, she was on the
faculty of Catholic University, where she taught history and
published numerous articles.
Ms. Kennan currently also serves as a Director of NYNEX
Corporation, a telecommunications company, Northeast Utilities,
the Kentucky Home Life Insurance Companies, and Talbots. She
also serves as a Member of The Folger Shakespeare Library
Committee. She is currently active in various educational and
civic associations, including the Committee on Economic
Development and the Council on Foreign Relations. Ms. Kennan is
a graduate of Mount Holyoke College, the University of Washington
and St. Hilda College at Oxford University and holds several
honorary doctorates.
Lawrence J. Lasser*
Mr. Lasser, age 54, is the Vice President of your fund and the
other Putnam funds. He has been the President, Chief Executive
Officer and a Director of Putnam Investments, Inc. and Putnam
Management since 1985, having begun his career there in 1969.
Mr. Lasser currently also serves as a Director of Marsh &
McLennan Companies, Inc., the parent company of Putnam
Management, and INROADS/Central New England, Inc., a job market
internship program for minority high school and college students.
He is a Member of the Board of Overseers of the Museum of
Science, the Museum of Fine Arts and the Isabella Stewart Gardner
Museum in Boston. He is also a Trustee of the Beth Israel
Hospital and Buckingham, Browne and Nichols School. Mr. Lasser
is a graduate of Antioch College and Harvard Business School.
Robert E. Patterson
Mr. Patterson, age 51, is the Executive Vice President and
Director of Acquisitions of Cabot Partners Limited Partnership, a
registered investment adviser which manages real estate
investments for institutional investors. Prior to 1990, he was
the Executive Vice President of Cabot, Cabot & Forbes Realty
Advisors, Inc., the predecessor company of Cabot Partners. Prior
to that, he was a Senior Vice President of the Beal Companies, a
real estate management, investment and development company. He
has also worked as an attorney and held various positions in
state government, including the founding Executive Director of
the Massachusetts Industrial Finance Agency.
Mr. Patterson currently also serves as Chairman of the Joslin
Diabetes Center and as a Director of Brandywine Trust Company.
Mr. Patterson is a graduate of Harvard College and Harvard Law
School.
Donald S. Perkins*
Mr. Perkins, age 69, is the retired Chairman of the Board of
Jewel Companies, Inc., a diversified retailer, where among other
roles he served as President, Chief Executive Officer and
Chairman of the Board from 1965 to 1980. He currently also
serves as a Director of various other public corporations,
including AON Corp., an insurance company, Cummins Engine
Company, Inc., an engine and power generator equipment
manufacturer and assembler, Current Assets L.L.C., a corporation
providing financial staffing services, Illinova and Illinois
Power Co., Inland Steel Industries, Inc., LaSalle Street Fund,
Inc., a real estate investment trust, Lucent Technologies Inc.,
Springs Industries, Inc., a textile manufacturer, and Time
Warner, Inc., one of the nation's largest media conglomerates.
He previously served as a Director of several other major public
corporations, including Corning Glass Works, Eastman Kodak
Company, Firestone Tire & Rubber Company and Kmart Corporation.
Mr. Perkins currently also serves as a Trustee and Vice Chairman
of Northwestern University and as a Trustee of the Hospital
Research and Education Trust. He is currently active in various
civic and business associations, including the Business Council
and the Civic Committee of the Commercial Club of Chicago, of
which he is the founding Chairman. Mr. Perkins is a graduate of
Yale University and Harvard Business School and holds an honorary
doctorate from Loyola University of Chicago.
William F. Pounds
Dr. Pounds, age 68, is the Vice Chairman of your fund and of the
other Putnam funds. He has been a Professor of Management at the
Alfred P. Sloan School of Management at the Massachusetts
Institute of Technology since 1961 and served as Dean of that
School from 1966 to 1980. He previously served as Senior Advisor
to the Rockefeller Family and Associates and was a past Chairman
of Rockefeller & Co., Inc., a registered investment adviser which
manages Rockefeller family assets, and Rockefeller Trust Company.
Dr. Pounds currently also serves as a Director of IDEXX
Laboratories, Inc., EG&G, Inc., Perseptive Biosystems, Inc.,
Management Sciences For Health, Inc. and Sun Company, Inc. He is
also a Trustee of the Museum of Fine Arts in Boston; an Overseer
of WGBH Educational Foundation, and a Fellow of The American
Academy of Arts and Sciences. He previously served as a Director
of Fisher-Price, Inc. and General Mills, Inc. Dr. Pounds is a
graduate of Carnegie-Mellon University.
George Putnam*
Mr. Putnam, age 70, is the Chairman and President of your fund
and of the other Putnam funds. He is the Chairman and a Director
of Putnam Management and Putnam Mutual Funds Corp. and a Director
of Marsh & McLennan, their parent company. Mr. Putnam is the son
of the founder of the Putnam funds and Putnam Management and has
been employed in various capacities by Putnam Management since
1951, including Chief Executive Officer from 1961 to 1973. He is
a former Overseer and Treasurer of Harvard University; a past
Chairman of the Harvard Management Company; and a Trustee
Emeritus of Wellesley College and Bradford College.
Mr. Putnam currently also serves as a Director of The Boston
Company, Inc., Boston Safe Deposit and Trust Company, Freeport-
McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan Oil and
Gas, Inc., mining and natural resources companies, General Mills,
Inc., Houghton Mifflin Company, a major publishing company, and
Rockefeller Group, Inc., a real estate manager. He is also a
Trustee of Massachusetts General Hospital, McLean Hospital,
Vincent Memorial Hospital, WGBH Educational Foundation and the
Museum of Fine Arts and the Museum of Science in Boston; the New
England Aquarium; an Overseer of Northeastern University; and a
Fellow of The American Academy of Arts and Sciences. Mr. Putnam
is a graduate of Harvard College and Harvard Business School and
holds honorary doctorates from Bates College and Harvard
University.
George Putnam, III*
Mr. Putnam, age 45, is the President of New Generation Research,
Inc., a publisher of financial advisory and other research
services relating to bankrupt and distressed companies, and New
Generation Advisers, Inc., a registered investment adviser which
provides advice to private funds specializing in investments in
such companies. Prior to founding New Generation in 1985, Mr.
Putnam was an attorney with the Philadelphia law firm Dechert
Price & Rhoads.
Mr. Putnam currently also serves as a Director of the
Massachusetts Audubon Society. He is also a Trustee of the Sea
Education Association and St. Mark's School and an Overseer of
the New England Medical Center. Mr. Putnam is a graduate of
Harvard College, Harvard Business School and Harvard Law School.
A.J.C. Smith*
Mr. Smith, age 62, is the Chairman and Chief Executive Officer
of Marsh & McLennan Companies, Inc. He has been employed by
Marsh & McLennan and related companies in various capacities
since 1961. Mr. Smith is a Director of the Trident Corp., and he
also serves as a Trustee of the Carnegie Hall Society, the
Central Park Conservancy, The American Institute for Chartered
Property Underwriters, and is a Founder of the Museum of Scotland
Society. He was educated in Scotland and is a Fellow of the
Faculty of Actuaries in Edinburgh, a Fellow of the Canadian
Institute of Actuaries, a Fellow of the Conference of Actuaries
in Public Practice, an Associate of the Society of Actuaries, a
Member of the American Academy of Actuaries, the International
Actuarial Association and the International Association of
Consulting Actuaries.
Eli Shapiro+
Dr. Shapiro, age 80, is the Alfred P. Sloan Professor of
Management, Emeritus at the Alfred P. Sloan School of Management
at the Massachusetts Institute of Technology, having served on
the faculty of the Sloan School for eighteen years. He
previously was also on the faculty of Harvard Business School,
The University of Chicago School of Business and Brooklyn
College. During his academic career, Dr. Shapiro authored
numerous publications concerning finance and related topics. He
previously served as the President and Chief Executive Officer of
the National Bureau of Economic Research and also provided
economic and financial consulting services to various clients.
Dr. Shapiro is a past Director of many companies, including
Nomura Dividend Income Fund, Inc., a privately held registered
investment company managed by Putnam Management, Reece
Corporation, a sewing machine manufacturer, Commonwealth
Mortgage, Dexter Corporation, a manufacturer of plastics and
related products, Avis Corporation, a car rental company,
Connecticut Bank and Trust Company, Connecticut National Gas
Corporation, the Federal Home Loan Bank of Boston, where he
served as Chairman from 1977 to 1989, Travelers' Corporation, an
insurance company, and Norlin Corporation, a musical instrument
manufacturer; and a past Trustee of Mount Holyoke College and the
Putnam funds (from 1984 to 1989).
Dr. Shapiro is a Fellow of The American Academy of Arts and
Sciences and is active in various professional and civic
associations, including the American Economic Association, the
American Finance Association and the Council on Foreign
Relations. Dr. Shapiro is a graduate of Brooklyn College and
Columbia University.
W. Nicholas Thorndike**
Mr. Thorndike, age 63, serves as a Director of various
corporations and charitable organizations, including Data General
Corporation, a computer and high technology company, Bradley Real
Estate, Inc., a real estate investment firm, Providence Journal
Co., a newspaper publisher and owner of television stations, and
Courier Corporation, a book binding and printing company. He is
also a Trustee of Eastern Utilities Associates, Massachusetts
General Hospital, where he previously served as chairman and
president, and Northeastern University.
Prior to December 1988, he was the Chairman of the Board and
Managing Partner of Wellington Management Company/Thorndike,
Doran, Paine & Lewis, a registered investment adviser which
manages mutual funds and institutional assets. He also
previously served as a Trustee of the Wellington Group of Funds
(now The Vanguard Group) and was the Chairman and a Director of
Ivest Fund, Inc. Mr. Thorndike is a graduate of Harvard College.
- ----------------------------
* Nominees who are or may be deemed to be "interested persons"
(as defined in the Investment Company Act of 1940) of your
fund, Putnam Management, and Putnam Mutual Funds Corp.
("Putnam Mutual Funds"), the principal underwriter for all
the open-end Putnam funds and an affiliate of Putnam
Management. Messrs. Putnam, Lasser, and Smith are deemed
"interested persons" by virtue of their positions as
officers or shareholders of your fund, or directors of
Putnam Management, Putnam Mutual Funds, or Marsh & McLennan
Companies, Inc., the parent company of Putnam Management and
Putnam Mutual Funds. Mr. George Putnam, III, Mr. Putnam's
son, is also an "interested person" of your fund, Putnam
Management, and Putnam Mutual Funds. Mr. Perkins may be
deemed to be an "interested person" of your fund because of
his service as a director of a certain publicly held company
that includes registered broker-dealer firms among its
subsidiaries. Neither your fund nor any of the other Putnam
funds currently engages in any transactions with such firms
except that certain of such firms act as dealers in the
retail sale of shares of certain Putnam funds in the
ordinary course of their business. The balance of the
nominees are not "interested persons."
** In February 1994 Mr. Thorndike accepted appointment as a
successor trustee of certain private trusts in which he has
no beneficial interest. At that time he also became
Chairman of the Board of two privately owned corporations
controlled by such trusts, serving in that capacity until
October 1994. These corporations filed voluntary petitions
for relief under Chapter 11 of the U.S. Bankruptcy Code in
August 1994.
+ Dr. Shapiro will be retiring from the Board prior to the
meeting and is not being nominated for re-election.
Except as indicated above, the principal occupations and business
experience of the Trustees for the last five years have
been with the employers indicated, although in some cases they
have held different positions with those employers. Except for
Mr. Jackson, all the Trustees were elected by the
shareholders in January, 1995. Mr. Jackson was
elected by the other Trustees in May 1996 . As
indicated above, Dr. Shapiro also previously served as a Trustee
of the Putnam funds from 1984 to 1989. The 13 nominees
for election as Trustees at the shareholder meeting of your fund
who receive the greatest number of votes will be elected Trustees
of your fund. The Trustees serve until their successors are
elected and qualified. Each of the nominees has agreed to serve
as a Trustee if elected. If any of the nominees is unavailable
for election at the time of the meeting, which is not
anticipated, the Trustees may vote for other nominees at their
discretion, or the Trustees may recommend that the shareholders
fix the number of Trustees at less than 13 for your fund.
What are the Trustees' responsibilities?
Your fund's Trustees are responsible for the general oversight of
your fund's business and for assuring that your fund is managed
in the best interests of its shareholders. The Trustees
periodically review your fund's investment performance as well as
the quality of other services provided to your fund and its
shareholders by Putnam Management and its affiliates, including
administration, custody, distribution and investor servicing. At
least annually, the Trustees review the fees paid to Putnam
Management and its affiliates for these services and the overall
level of your fund's operating expenses. In carrying out these
responsibilities, the Trustees are assisted by an independent
administrative staff and by your fund's auditors and legal
counsel, which are selected by the Trustees and are independent
of Putnam Management and its affiliates.
Do the Trustees have a stake in your fund?
The Trustees believe it is important that each Trustee have a
significant investment in the Putnam funds. The Trustees
allocate their investments among the more than 99 Putnam funds
based on their own investment needs. The Trustees' aggregate
investments in the Putnam funds total over $48 million.
The table below lists each Trustee's current investments in the
fund and in the Putnam funds as a group.<PAGE>
Share Ownership by Trustees
Year first Number of
elected as Number of shares of
Trustee of shares of the all Putnam
the Putnam fund owned funds owned
Trustees funds as of 9/30/96 (1) as of
9/30/96 (2)
- -------------------------------------------------------------------------------
Jameson A. Baxter 1994 280 35,991
Hans H. Estin 1972 200 27,467
John A. Hill 1985 476 127,131
Ronald J. Jackson 1996 1,547 66,402
Elizabeth T. Kennan 1992 105 29,939
Lawrence J. Lasser 1992 100 444,465
Robert E. Patterson 1984 526 59,066
Donald S. Perkins 1982 1,112 164,173
William F. Pounds 1971 105 350,849
George Putnam 1957 10,977(3) 1,652,602
George Putnam, III 1984 500 289,044
Eli Shapiro 1995 (4) -- 88,717
A.J.C. Smith 1986 100 46,915
W. Nicholas Thorndike 1992 2,390 80,855
- ------------------------------------------------------------------------
(1) Each Trustee has sole investment power and sole voting power
with respect to his or her shares of the fund.
(2) These holdings do not include shares of Putnam money market
funds.
(3) Mr. Putnam owns 1.59% of the fund's outstanding shares.
(4) Dr. Shapiro previously served as a Trustee of the Putnam funds
from 1984 to 1989. As stated above, Dr. Shapiro is not a
nominee for re-election.
As of September 30, 1996, the Trustees and officers of the fund owned a total of
81,163 shares of the fund, comprising 11.75% of its outstanding shares on that
date.
What are some of the ways in which the Trustees represent
shareholder interests?
The Trustees believe that, as substantial investors in the Putnam
funds, their interests are closely aligned with those of
individual shareholders. Among other ways, the Trustees seek to
represent shareholder interests:
by carefully reviewing your fund's investment
performance on an individual basis with your fund's
managers;
by also carefully reviewing the quality of the various
other services provided to the funds and their
shareholders by Putnam Management and its affiliates;
by discussing with senior management of Putnam
Management steps being taken to address any performance
deficiencies;
by reviewing the fees paid to Putnam Management to
ensure that such fees remain reasonable and competitive
with those of other mutual funds, while at the same
time providing Putnam Management sufficient resources
to continue to provide high quality services in the
future;
by monitoring potential conflicts between the funds and
Putnam Management and its affiliates to ensure that the
funds continue to be managed in the best interests of
their shareholders;
by also monitoring potential conflicts among funds to
ensure that shareholders continue to realize the
benefits of participation in a large and diverse family
of funds.
How often do the Trustees meet?
The Trustees meet each month (except August) over a two-day
period to review the operations of your fund and of the other
Putnam funds. A portion of these meetings is devoted to meetings
of various Committees of the board which focus on particular
matters. These include: the Contract Committee, which reviews
all contractual arrangements with Putnam Management and its
affiliates; the Communication and Service Committee, which
reviews the quality of services provided by your fund's investor
servicing agent, custodian and distributor; the Pricing,
Brokerage and Special Investments Committee, which reviews
matters relating to valuation of securities, best execution,
brokerage costs and allocations and new investment techniques;
the Audit Committee, which reviews accounting policies and the
adequacy of internal controls and supervises the engagement of
the funds' auditors; the Compensation, Administration and Legal
Affairs Committee, which reviews the compensation of the Trustees
and their administrative staff and supervises the engagement of
the funds' independent counsel; and the Nominating Committee,
which is responsible for selecting nominees for election as
Trustees.
Each Trustee generally attends at least two formal committee
meetings during such monthly meeting of the Trustees. During
1995, the average Trustee participated in approximately 40
committee and board meetings. In addition, the Trustees meet in
small groups with Chief Investment Officers and Portfolio
Managers to review recent performance and the current investment
climate for selected funds. These meetings ensure that each
fund's performance is reviewed in detail at least twice a year.
The Contract Committee typically meets on several additional
occasions during the year to carry out its responsibilities.
Other Committees, including an Executive Committee, may also meet
on special occasions as the need arises.
What are the Trustees paid for their services?
Your fund pays each Trustee a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of the other
Putnam funds. The Trustees periodically review their fees to
assure that such fees continue to be appropriate in light of
their responsibilities as well as in relation to fees paid to
trustees of other mutual fund complexes. The fees paid to each
Trustee by your fund and by all of the Putnam funds are shown
below:COMPENSATION TABLE
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Estimated Pension or Estimated Total
Aggregate retirement annual benefits compensation
compensation benefits accrued from all from all
from the as part of Putnam funds Putnam
Trustees/Year fund(1) fund expenses(2) upon retirement(3) funds(4)
Jameson A. Baxter/1994 $124 $0 $71,676 $150,854
Hans H. Estin/1972 123 0 70,043 150,854
John A. Hill/1985 (5) 122 0 70,043 149,854
Ronald J. Jackson/1996(6) 21 0 70,043 n/a
Elizabeth T. Kennan/1992 123 0 69,709 148,854
Lawrence J. Lasser/1992 121 0 70,043 150,854
Robert E. Patterson/1984 133 0 71,043 152,854
Donald S. Perkins/1982 122 0 69,376 150,854
William F. Pounds/1971 125(7) 0 70,543 149,854
George Putnam/1957 123 0 70,043 150,854
George Putnam, III/1984 123 0 70,043 150,854
Eli Shapiro/1995(8) 134 0 70,043 95,372
A.J.C. Smith/1986 121 0 68,252 149,854
W. Nicholas Thorndike/1992 132 0 71,043 152,854
</TABLE>
<F8>
(1) Includes an annual retainer and an attendance fee for each meeting attended.
(2) The Trustees approved a Retirement Plan for Trustees of the Putnam funds on
October 1, 1996. Prior to that date, voluntary retirement benefits were
paid to certain retired Trustees, and no such benefits were accrued as part
of fund expenses.
(3) Assumes that each Trustee retires after at least five years of service.
Estimated benefits for each Trustee are based on amounts paid to such
Trustee for the three most recent calendar years (or, for Trustees who
have not served as Trustees throughout such three-year period, the average
amount paid to each Trustee for such years).
(4) As of December 31, 1995, there were 99 funds in the Putnam family.
(5) Includes compensation deferred pursuant to a Trustee Compensation Deferral
Plan. The total amount of deferred compensation payable by the
Putnam funds to Mr. Hill as of December 31, 1995 was $51,141. Information
on deferred compensation includes income earned on such amounts.
(6) Elected as a Trustee in May 1996.
(7) Includes additional compensation for service as Vice Chairman of the Putnam
funds.
(8) Elected as a Trustee in April 1995.Under a Retirement Plan
for Trustees of the Putnam funds (the "Plan"), each Trustee who retires with
at least five years of service as a Trustee of the funds is entitled to
receive an annual retirement benefit equal to one-half of the average
annual compensation paid to such Trustee for the last three years of
service prior to retirement. This retirement benefit is payable during a
Trustee's lifetime, beginning the year following retirement, for a number
of years equal to such Trustee's years of service. A death benefit is also
available under the Plan which assures that the Trustee and his or her
beneficiaries will receive benefit payments for the lesser of an aggregate
period of (i) ten years or (ii) such Trustee's total years of service.
The Plan Administrator (a committee comprised of Trustees that
are not "interested persons" of the fund, as defined in the
Investment Company Act of 1940) may terminate or amend the Plan
at any time, but no termination or amendment will result in a
reduction in the amount of benefits (i) currently being paid to a
Trustee at the time of such termination or amendment, or (ii) to
which a current Trustee would have been entitled to receive had
he or she retired immediately prior to such termination or
amendment.
For additional information about your fund, including further
information about its Trustees and officers, please see "Further
Information About Your Fund," on page 23 .
Putnam Investments
Putnam Investment Management, Inc. and its affiliates, Putnam
Mutual Funds, the principal underwriter for shares of your fund
and Putnam Fiduciary Trust Company, your fund's investor
servicing agent and custodian, are wholly owned by Putnam
Investments, Inc., One Post Office Square, Boston, Massachusetts
02109, a holding company that is in turn wholly owned by Marsh &
McLennan Companies, Inc., which has executive offices at 1166
Avenue of the Americas, New York, New York 10036. Marsh &
McLennan Companies, Inc. and its operating subsidiaries are
professional services firms with insurance and reinsurance
brokering, consulting, and investment management businesses.
2. SELECTION OF INDEPENDENT AUDITORS
Price Waterhouse LLP, 160 Federal Street, Boston, Massachusetts,
independent accountants, has been selected by the Trustees as the
auditor of your fund for the current fiscal year. Among the
country's preeminent accounting firms, this firm also serves as
the auditor for approximately half of the other funds in the
Putnam family. It was selected primarily on the basis of its
expertise as auditors of investment companies, the quality of its
audit services, and the competitiveness of the fees charged for
these services.
A majority of the votes on the matter is necessary to ratify the
selection of auditors. A representative of the independent
auditors is expected to be present at the meeting to make
statements and to respond to appropriate questions.
3. APPROVAL OF A NEW MANAGEMENT CONTRACT
The Trustees of your fund recommend that shareholders approve a
new management contract with Putnam Management, which provides
for a change in the management fees payable by the fund to Putnam
Management. The proposed contract, attached as Exhibit A, is
identical in all respects to the existing contracts, except for
the changes to the fee structure discussed below. Further
information about both the current and proposed management
contract, the termination and renewal procedures, the services
provided by Putnam Management and its affiliates, and information
concerning brokerage and related matters can be found under
"Additional Information Relating to Management Contract Approval"
on page 25 .
What do management fees pay for?
Management fees pay Putnam Management for the services it
provides in conducting the day-to-day operations of the fund.
These include providing the personnel, equipment, and office
facilities necessary for the management of the fund's investment
portfolio, determining the fund's daily net asset value,
maintaining the accounts and records of the fund, preparation of
reports to shareholders, compliance with regulatory requirements,
and general administration of the fund's affairs.
What is being proposed?
Following a review of the current management fee structure for
the Putnam funds, Putnam Management and the Trustees agreed to
propose a new performance-based fee structure for the fund
. The proposed fee structure, known as a "fulcrum
fee" structure, would vary automatically based on the investment
performance of the fund compared to changes in the value of an
index. Putnam Management and the Trustees believe that the new
fee structure could provide an effective means to reward good
relative fund performance while enabling shareholders of
the fund to realize the benefit of lower expenses when
fund performance has not reached desired levels.
It is proposed that fund shareholders approve a new management
contract for the fund containing the new fee structure. Under
the new management contract, the management fee payable by the
fund would initially be set at its current rate as set forth
below (as a percentage of average net assets of the fund) (the
"Base Fee"):
First $500 million 0.65%
Next $500 million 0.55%
Next $500 million 0.50%
Next $5 billion 0.45%
Next $5 billion 0.425%
Next $5 billion 0.405%
Next $5 billion 0.39%
Thereafter 0.38%
The actual fee rate payable by the fund under the new contract
depends on the investment performance of the fund compared to the
change in value of the Standard & Poor's 500 Composite
Stock Price Index (the "S&P 500"). The S&P 500, an unmanaged
index of common stocks, was chosen as the benchmark for adjusting
the management fee based on its suitability compared to other
available indexes and the fund's investment strategy and
policies.
The fee rate payable by the fund will be determined
at the beginning of each calendar quarter (beginning with the
first full calendar quarter following shareholder approval). The
fee rate will be calculated by increasing or decreasing the Base
Fee rate by .01% of the fund's average net assets for each
1% that the fund's performance exceeds or falls short of
the change in value of the S&P 500, as the case may be ,
by more than 3%. In all other cases, no adjustment in the
fund's management fee will occur .
The fund's investment performance will be measured over the 36-
month period immediately preceding the start of each calendar
quarter, or for the life of the fund, if shorter. Accordingly,
the fund's performance will be calculated over a different time
period each quarter. Since the fund began operations in October
1995, the fund's investment performance will not cover a
full 36-month period until October 1998.
For purposes of the fee rate calculation, the fund's investment
performance for any relevant period shall equal the change,
expressed as a percentage, in the fund's net asset value per
share, including the value of any distributions of net realized
capital gains or net investment income and capital gains taxes
paid or payable on undistributed realized long-term capital
gains, over such period. This performance will be compared to
the change in value of the S&P 500 for the same period .
The change in value of the S&P 500 will be represented by the
change, expressed as a percentage, in the level of the S&P 500
during such period and the value of cash distributions made by
companies whose securities comprise the S&P 500 accumulated to
the end of such period.
Each quarterly adjustment will be applied to the Base Fee
( not to the fee rate currently being paid by the
fund ) . For example, based on current assets, if, for a
particular measurement period, the fund's total return were 6%
and the S&P 500 increased in value by 1%, the management fee paid
by the fund for the immediately following quarter would be .67%
of the fund's average net assets (reflecting an increase of .02%
for the 2% overperformance of the fund outside of the 3%
range.) Conversely, if, for the following measurement period,
the fund's total return were 1% and the S&P 500 increased in
value by 6%, the management fee paid by the fund for the
following quarter would be .63% of the fund's average net assets
(reflecting a decrease of .02% for the 2% underperformance of
the fund outside of the 3% range.) The maximum aggregate
adjustment to the Base Fee will be .07%, so that the maximum fee
rate payable by the fund for any quarter would be .72%,
and the minimum fee rate payable by the fund would be .58%
(based on current fund asset levels).
In determining the percentage variation of fund performance
compared to the S&P 500, all amounts will be rounded to the
nearest whole percent. This means that a variation of 3.4% will
be rounded to 3%, resulting in no adjustment to the Base Fee
since the variation was within the allowable range.
What is the effect of the new management fee structure?
For its fiscal year ended July 31, 1996, the fund paid no
management fees to Putnam Management as a result of an expense
limitation in effect for the fund through December 31, 1996. In
the absence of this expense limitation, the fund would have paid
management fees of $26,676. Under the proposed new structure,
the amounts paid to Putnam Management for the last calendar
quarter of 1996 in the absence of the expense limitation
would have been the same, since the difference between the
fund's investment performance and the change in value of the
S&P 500 did not reach the level at which an adjustment to the
Base Fee would be made for any of the measurement periods from
inception of the fund through September 30, 1996.
COMPARATIVE FEE TABLE
The following table shows the expenses paid by the fund based on
last fiscal year and pro forma expenses reflecting the range of
expenses the fund might pay under the new fee structure, in each
case based on fund asset levels as of July 31, 1996.
<PAGE>
Annual fund operating expenses
(as a percentage of average net assets)
Current Range of
expenses Pro forma Expenses
-------- ------------------
Management fees 0.65% 0.58% - 0.72%
12b-1 fees --- -------
Other expenses 1.14% 1.14%
Total fund operating 1.79% 1.72% - 1.86%
expenses
The expenses shown above do not reflect the expense limitation
currently in effect for the fund. After giving effect to the
expense limitation, management fees and total fund operating
expenses would be 0.00% and 1.00% at current and pro forma
expense levels. The pro forma expenses show the range of fund
expenses under the new fee structure; the actual rate paid by the
fund for each quarter may vary.
Example
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and, except as indicated, redemption at
the end of each period.
1 3 5 10
year years years years
Current expenses $75 $111 $149 $256
(without expense
limitation)
Range of
Pro forma expenses $74-$75 $109-$113 $145-$152 $249-$263
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 return varies.
What percentage of shareholders' votes are required to pass the
proposal?
Approval of the new management contract will require the "yes"
vote of a "majority of the outstanding voting securities" of the
fund, as provided in the Investment Company Act of 1940. For
this purpose, this means the "yes" vote of the lesser of (1) more
than 50% of the outstanding shares of the fund or (2) 67% or more
of the shares present at the meeting, if more than 50% of the
outstanding shares are present at the meeting in person or by
proxy. If the shareholders do not approve the new contract, the
existing management contract will continue in effect.
The Trustees believe that the proposed new management fee
structure is fair and reasonable and in the best interests
of the shareholders of the fund. Accordingly, the Trustees
recommend that shareholders vote for approval of the proposed new
contract.
Further Information About Voting and the Shareholder Meeting
Quorum and Methods of Tabulation. Thirty percent of the shares
entitled to vote -- present in person or represented by proxy --
constitutes a quorum for the transaction of business with respect
to any proposal at the meeting (unless otherwise noted in the
proxy statement). 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) will be counted as shares that are
present and entitled to vote on the matter for purposes of
determining the presence of a quorum. Votes cast by proxy or in
person at the meeting will be counted by persons appointed by
your fund as tellers for the meeting.
The tellers will count the total number of votes cast "for"
approval of the proposals for purposes of determining whether
sufficient affirmative votes have been cast. With respect to the
election of Trustees and selection of auditors, neither
abstentions nor broker non-votes have any effect on the outcome
of the proposal. With respect to any other proposals,
abstentions and broker non-votes have the effect of a negative
vote on the proposal.
Other business. The Trustees know of no other business to be
brought before the meeting. However, if any other matters
properly come before the meeting, it is their intention that
proxies that do not contain specific restrictions to the contrary
will be voted on such matters in accordance with the judgment of
the persons named as proxies in the enclosed form of proxy.
Simultaneous meetings. The meeting of shareholders of your fund
is called to be held at the same time as the meetings of
shareholders of certain of the other Putnam funds. It is
anticipated that all meetings will be held simultaneously. If
any shareholder at the meeting objects to the holding of a
simultaneous meeting and moves for an adjournment of the meeting
to a time promptly after the simultaneous meetings, the persons
named as proxies will vote in favor of such adjournment.
Solicitation of proxies. In addition to soliciting proxies by
mail, Trustees of your fund and employees of Putnam Management,
Putnam Fiduciary Trust Company, and Putnam Mutual Funds may
solicit proxies.
Revocation of proxies. Proxies may be revoked at any time before
they are voted by a written revocation received by the Clerk of
your fund, by properly executing a later-dated proxy or by
attending the meeting and voting in person.
Date for receipt of shareholders' proposals for subsequent
meetings of shareholders. Your fund's Agreement and Declaration
of Trust does not provide for annual meetings of shareholders,
and your fund does not currently intend to hold such a meeting in
1997. Shareholder proposals for inclusion in the proxy statement
for any subsequent meeting must be received by your fund within a
reasonable period of time prior to any such meeting.
Adjournment. If sufficient votes in favor of any of the
proposals set forth in the Notice of the Meeting 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 with respect to any of such
proposals. 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 such
proposals. They will vote against such adjournment those proxies
required to be voted against such proposals. Your fund pays the
costs of any additional solicitation and of any adjourned
session. Any proposals for which sufficient favorable votes have
been received by the time of the meeting may be acted upon and
considered final regardless of whether the meeting is adjourned
to permit additional solicitation with respect to any other
proposal.
Financial information. Your fund will furnish, without charge,
to you upon request a copy of the fund's annual report for its
most recent fiscal year, and a copy of its semiannual report for
any subsequent semiannual period. Such requests may be directed
to Putnam Investor Services, P.O. Box 41203, Providence, RI
02940-1203 or 1-800-225-1581.
Further Information About Your Fund
Limitation of Trustee liability. The Agreement and Declaration
of Trust of your fund provides that the fund will indemnify its
Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved
because of their offices with the fund, except if it is
determined in the manner specified in the Agreement and
Declaration of Trust that they have not acted in good faith in
the reasonable belief that their actions were in the best
interests of the fund or that such indemnification would relieve
any officer or Trustee of any liability to the fund or its
shareholders arising by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties.
Your fund, at its expense, provides liability insurance for the
benefit of its Trustees and officers.
Audit and Nominating Committees. The voting members of the Audit
Committee of your fund include only Trustees who are not
"interested persons" of the fund by reason of any affiliation
with Putnam Investments and its affiliates. The Audit Committee
currently consists of Messrs. Estin (Chairman), Perkins (without
vote), Putnam, III (without vote), Shapiro, Smith (without vote),
and Ms. Kennan. The Nominating Committee consists only of
Trustees who are not "interested persons" of your fund or Putnam
Management. The Nominating Committee currently consists of Dr.
Pounds and Ms. Kennan (Co-chairpersons), Ms. Baxter, and Messrs.
Estin, Hill, Jackson, Patterson, Shapiro, and Thorndike.
Officers and other information. In addition to George Putnam and
Lawrence J. Lasser, the officers of your fund are as follows:
Year first
elected to
Name (age) Office office
- -----------------------------------------------------------------
Charles E. Porter (58) Executive Vice President 1996
Patricia C. Flaherty (50) Senior Vice President 1996
John D. Hughes (61) Senior Vice President
& Treasurer 1996
Gordon H. Silver (49) Vice President 1996
Thomas R. Bogan (55)* Vice President 1996
Patrick O'Donnell (51)* Vice President 1996
William N. Shiebler** (54) Vice President 1996
John R. Verani (57) Vice President 1996
Paul M. O'Neil (43) Vice President 1996
Beverly Marcus (52) Clerk 1996
- -----------------------------------------------------------------
* One of the fund's portfolio managers
** President of Putnam Mutual Funds
All of the officers of your fund are employees of Putnam
Management or its affiliates. Because of their positions with
Putnam Management or its affiliates or their ownership of stock
of Marsh & McLennan Companies, Inc., the parent corporation of
Putnam Management and Putnam Mutual Funds, Messrs. Putnam, George
Putnam, III, Lasser and Smith (nominees for Trustees of your
fund), as well as the officers of your fund, will benefit from
the management fees, distribution fees, underwriting commissions,
custodian fees, and investor servicing fees paid or allowed by
the fund.
Additional Information Relating to Management Contract Approval
Further information about Putnam Investment Management, Inc. and
its proposed management contract. Putnam Management and its
affiliates, Putnam Mutual Funds, the principal underwriter for
shares of your fund, and Putnam Fiduciary Trust Company, your
fund's investor servicing agent and custodian, are wholly owned
by Putnam Investments, Inc., One Post Office Square, Boston,
Massachusetts 02109, a holding company that is in turn wholly
owned by Marsh & McLennan Companies, Inc., which has executive
offices at 1166 Avenue of the Americas, New York, New York 10036.
Marsh & McLennan Companies, Inc. and its operating
subsidiaries are professional services firms with insurance and
reinsurance brokering, consulting and investment management
businesses.
The directors of Putnam Management are George Putnam, Lawrence J.
Lasser, and Gordon H. Silver. Mr. Lasser is the principal
executive officer of Putnam Management. The principal
occupations of Messrs. Putnam, Lasser, and Silver are as officers
and directors of Putnam Management and certain of its corporate
affiliates. The address of Putnam Management and the business
address of the directors and officers of Putnam Management is One
Post Office Square, Boston, Massachusetts 02109.
In addition to the services it provides to your fund, Putnam
Management acts as investment adviser or subadviser of other
publicly owned investment companies having differing investment
objectives. For the names of such funds having investment
objectives similar to those of your fund and the current rates of
Putnam Management's annual fees as adviser or subadviser of such
funds, see Exhibit B in this Proxy Statement.
Putnam Management is also affiliated with The Putnam Advisory
Company, Inc., which together with its subsidiaries furnishes
investment advice to domestic and foreign institutional clients
and mutual funds. Another affiliate, Putnam Fiduciary Trust
Company, provides investment advice to institutional clients
under its banking and fiduciary powers. The advisory fees
charged by such firms to their institutional clients are
generally at lower rates than those charged to the Putnam funds.
The services performed and responsibilities assumed by these
firms for such clients are, however, not as extensive as those
performed or assumed by Putnam Management for the Putnam funds.
Some officers and directors of Putnam Management, including some
who are officers of your fund, serve as officers or directors of
some of these affiliates. Putnam Management may also enter into
other businesses.
The Management Contract. Putnam Management serves as investment
manager of your fund pursuant to a Management Contract. The
management fee payable under the Contract is described above in
Proposal 3. The fees paid to Putnam Management in the most
recent fiscal year are shown below.
Under the Contract, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes
continuously an investment program for your fund and makes
investment decisions on behalf of your fund. Subject to the
control of the Trustees, Putnam Management manages, supervises,
and conducts the other affairs and business of your fund,
furnishes office space and equipment, provides bookkeeping and
clerical services (including determination of your fund's net
asset value, but excluding shareholder accounting services) and
places all orders for the purchase and sale of your fund's
portfolio securities. Putnam Management may place fund portfolio
transactions with broker-dealers that furnish Putnam Management,
without cost to it, certain brokerage and research services of
value to Putnam Management and its affiliates in advising your
fund and other clients. In so doing, Putnam Management may cause
your fund to pay greater brokerage commissions than it might
otherwise pay.
Your fund also pays, or reimburses Putnam Management for, the
compensation and related expenses of certain officers of your
fund and their assistants. Currently, your fund reimburses
Putnam Management for a portion of the compensation and related
expenses of certain officers of your fund who provide certain
administrative services to your fund and the other Putnam funds,
each of which bears an allocated share of the costs. The
aggregate amount of all such payments and reimbursements is
determined annually by the Trustees, and the amount paid in the
most recent fiscal year is set forth below. Putnam Management
pays all other salaries of officers of your fund. Your fund pays
all expenses not assumed by Putnam Management including, without
limitation, auditing, legal, custodial, investor servicing agent,
and shareholder reporting expenses.
The Contract provides that Putnam Management shall not be subject
to any liability to your fund or to any shareholder of your fund
for any act or omission in the course of or connected with
rendering services thereunder in the absence of willful
misfeasance, bad faith, gross negligence, or reckless disregard
of its obligations and duties.
The Contract may be terminated without penalty upon 30 days'
written notice by Putnam Management, by the Trustees, or by the
affirmative vote of the holders of a "majority of the outstanding
voting securities" of the fund (as defined in the Investment
Company Act of 1940). It may be amended only by an affirmative
vote of the holders of a majority of the outstanding voting
securities of your fund and by a majority of the Trustees who are
not "interested persons" of your fund or Putnam Management.
The Contract will terminate automatically if it is assigned, or
unless its continuance is approved at least annually by either
the Trustees or shareholders of the fund and in either case by a
majority of the Trustees who are not "interested persons" of
Putnam Management or your fund.
Payments to affiliates of Putnam Management. Putnam Mutual Funds
is the principal underwriter of shares of your fund and of the
other continuously offered Putnam funds. Putnam Fiduciary Trust
Company is your fund's investor servicing agent and custodian.
The amount of sales charges retained by Putnam Mutual Funds and
the investor servicing fees and custodian fees paid to Putnam
Fiduciary Trust Company in your fund's most recent fiscal year
are set forth below.
Under its Distribution Plan, your fund may make payments to
Putnam Mutual Funds at the annual rate of up to 0.35% of the
average net assets of the fund attributable to shares. At
present, the fund is not making payments pursuant to the Plan.
Payments under the plan compensate Putnam Mutual Funds for
services provided and expenses incurred by it in promoting the
sale of shares of your fund, reducing redemptions or maintaining
or improving services provided to shareholders by Putnam Mutual
Funds or by dealers. A substantial portion of payments made to
Putnam Mutual Funds under the plan is used to pay or reimburse
Putnam Mutual Funds for payment of service fees paid to
investment dealers for their ongoing services to shareholders.
For the Fiscal Year Ended July 31, 1996
Management Contract
- --------------------------------------------------------------
The management contract dated
December 2, 1994, was approved by the
Trustees on December 2, 1994 and
was last approved by the Trustees on
December 1, 1995.
Management fee
paid to Putnam Management $0
Reimbursement paid by your fund to
Putnam Management for compensation and
related expenses including employee
benefit plan contributions for your
<PAGE>
fund's Executive Vice President
(Charles E. Porter), Senior Vice
President (Patricia C. Flaherty),
Clerk (Beverly Marcus), and their
assistants $56
Payments to affiliates
- --------------------------------------------------------------
-
Sales charges on sales of shares
retained by Putnam Mutual Funds
after payments to selling broker-dealers NONE
Payments under Distribution Plan
to Putnam Mutual Funds NONE
Investor servicing and custodian fees
paid to Putnam Fiduciary Trust Company
(before application of credits, if any) $19,647
Assets and shares outstanding of your fund
as of October 31, 1996
--------------------------------------------------------------
- -
Net assets $7,432,840
Shares outstanding
and authorized to vote 691,298 shares
5% beneficial ownership of your fund as of October 31, 1996
Persons beneficially owning more than 5%
of the fund's shares
Putnam Investments, Inc. 534,920 shares or 77.20%
One Post Office Square
Boston, MA 02109
Thomas R. Bogan
One Devonshire Place
Boston, MA 02109 53,138 shares or 7.60%
<PAGE>
EXHIBIT A
This exhibit provides the proposed management contract.
PUTNAM RESEARCH FUND
MANAGEMENT CONTRACT
Management Contract dated as of February , 1997 between
PUTNAM INVESTMENT FUNDS (the "Trust"), a Massachusetts business
trust, on behalf of its Putnam Research Fund series (the "Fund"),
and PUTNAM INVESTMENT MANAGEMENT, INC., a Massachusetts
corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously
an investment program for the Fund, will determine what
investments shall be purchased, held, sold or exchanged by the
Fund and what portion, if any, of the assets of the Fund shall be
held uninvested and shall, on behalf of the Fund, make changes in
the Fund's investments. Subject always to the control of the
Trustees of the Trust and except for the functions carried out by
the officers and personnel referred to in Section 1(d), the
Manager will also manage, supervise and conduct the other affairs
and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the
provisions of the Agreement and Declaration of Trust and By-Laws
of the Trust and the stated investment objectives, policies and
restrictions of the Fund, and will use its best efforts to
safeguard and promote the welfare of the Fund and to comply with
other policies which the Trustees may from time to time determine
and shall exercise the same care and diligence expected of the
Trustees.
(b) The Manager, at its expense, except as such expense is
paid by the Fund as provided in Section 1(d), will furnish (1)
all necessary investment and management facilities, including
salaries of personnel, required for it to execute its duties
faithfully; (2) suitable office space for the Fund; and (3)
administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of
the affairs of the Fund, including determination of the net asset
value of the Fund, but excluding shareholder accounting services.
Except as otherwise provided in Section 1(d), the Manager will
pay the compensation, if any, of the officers of the Fund.
A-1
(c) The Manager, at its expense, shall place all orders for
the purchase and sale of portfolio investments for the Fund's
account with brokers or dealers selected by the Manager. In the
selection of such brokers or dealers and the placing of such
orders, the Manager shall use its best efforts to obtain
for the Fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described
below. In using its best efforts to obtain for the Fund the most
favorable price and execution available, the Manager, bearing in
mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration,
price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker
or dealer in other transactions. Subject to such policies as the
Trustees of the Fund may determine, the Manager shall not be
deemed to have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer that provides
brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in
excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Manager
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of
the Manager as to which the Manager exercises investment
discretion. The Manager agrees that in connection with purchases
or sales of portfolio investments for the Fund's account, neither
the Manager nor any officer, director, employee or agent of the
Manager shall act as a principal or receive any commission other
than as provided in Section 3.
(d) The Fund will pay or reimburse the Manager for the
compensation in whole or in part of such officers of the Fund and
persons assisting them as may be determined from time to time by
the Trustees of the
Trust.
The Fund will also pay or reimburse
the Manager for all or part of the cost of suitable office space,
utilities, support services and equipment attributable to such
officers and persons, as may be determined in each case by the
Trustees of the Trust. The Trust will pay the fees, if any, of
the Trustees of the Trust.
(e) The Manager shall pay all expenses incurred in
connection with the organization of the Fund and the initial
public offering and sale of its shares of beneficial interest,
provided that upon the issuance and sale of such shares to the
public pursuant to the offering, and only in such event, the Fund
A-2<PAGE>
shall become liable for, and to the extent requested reimburse
the Manager for, registration fees payable to the Securities
and Exchange Commission and for an additional amount not
exceeding $125,000 as its agreed share of such expenses.
(f) The Manager shall not be obligated to pay any expenses
of or for the Fund not expressly assumed by the Manager pursuant
to this Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees,
officers and employees of the Trust may be a shareholder,
director, officer or employee of, or be otherwise interested in,
the Manager, and in any person controlled by or under common
control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have
an interest in the Fund. It is also understood that the Manager
and any person controlled by or under common control with the
Manager have and may have advisory, management, service or other
contracts with other organizations and persons, and may have
other interests and business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the
Manager's services rendered, for the facilities furnished and for
the expenses borne by the Manager pursuant to paragraphs (a),
(b), (c) and (e) of Section 1, a base fee, computed and paid
quarterly at the following annual rates:
(a) 0.65% of the first $500 million of the average net
asset value of the Fund;
(b) 0.55% of the next $500 million of such average net
asset value;
(c) 0.50% of the next $500 million of such average net
asset value;
(d) 0.45% of the next $5 billion of such average net asset
value;
(e) 0.425% of the next $5 billion of such average net asset
value;
(f) 0.405% of the next $5 billion of such average net asset
value;
(g) 0.39% of the next $5 billion of such average net asset
value; and
(h) 0.38% of any excess thereafter.
A-3
The applicable base fee will be increased or decreased for
each calendar quarter by 0.01% of average net asset value of
the Fund for each full 1% increment in excess of 3% (with
fractional amounts rounded to the nearest whole number) by which
the Fund's cumulative return (calculated in accordance with
regulations of the Securities and Exchange Commission)
over the 36-month period immediately preceding such calendar
quarter (or the life of the Fund, if shorter) exceeds or is exceeded by,
respectively,the cumulative change in value (expressed as a percentage) of the
Standard & Poor's 500 Composite Stock Price Index (with dividends
reinvested) over the same period, provided that the maximum
increase or decrease to the base fee shall not exceed in the
aggregate 0.07% of average net asset value of the Fund. For
purposes of calculating the rate payable by the Fund, the Fund's
cumulative return for any relevant period shall equal the
change, expressed as a percentage, in the Fund's net asset value
per share, including the value of any distributions of net
realized capital gains or net investment income and capital gains
taxes paid or payable on undistributed realized long-term capital
gains, over such period.
Such average net asset value shall be determined by taking
an average of all of the determinations of such net asset value
during such quarter at the close of business on each business day
during such quarter while this Contract is in effect. Such fee
shall be payable for each calendar quarter within 30 days after
the close of such quarter and shall commence accruing as of the
date of the initial issuance of shares of the Fund to the public.
The fees payable by the Fund to the Manager pursuant to this
Section 3 shall be reduced by any commissions, fees, brokerage or
similar payments received by the Manager or any affiliated person
of the Manager in connection with the purchase and sale of
portfolio investments of the Fund, less any direct expenses
approved by the Trustees incurred by the Manager or any
affiliated person of the Manager in connection with obtaining
such payments.
In the event that expenses of the Fund or any series of the
Fund for any fiscal year should exceed the expense limitation on
investment company expenses imposed by any statute or regulatory
authority of any jurisdiction in which shares of the Fund or such
series are qualified for offer or sale, the compensation due the
Manager for such fiscal year shall be reduced by the amount of
excess by a reduction or refund thereof. In the event that the
expenses of the Fund or any series of the Fund exceed any expense
limitation which the Manager may, by written notice to the Fund,
voluntarily declare to be effective subject to such terms and
conditions as the Manager may prescribe in such notice, the
compensation due the Manager shall be reduced, and, if necessary,
the Manager shall assume expenses of the Fund or such series to
the extent required by the terms and conditions of such expense
limitation.
A-4<PAGE>
If the Manager shall serve for less than the whole of a
quarter, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT.
This Contract shall automatically terminate, without the
payment of any penalty, in the event of its assignment;
and this Contract shall not be amended as to any series of the
Fund unless such amendment be approved at a meeting by the
affirmative vote of a majority of the outstanding shares of such
series, and by the vote, cast in person at a meeting called for
the purpose of voting on such approval, of a majority of the
Trustees of the Fund who are not interested persons of the Fund
or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and
shall remain in full force and effect continuously thereafter
(unless terminated automatically as set forth in Section 4) until
terminated as follows:
(a) Either party hereto may at any time terminate this
Contract as to any series by not more than sixty days' nor less
than thirty days' written notice delivered or mailed by
registered mail, postage prepaid, to the other party, or
(b) If (i) the Trustees of the Trust or the shareholders by
the affirmative vote of a majority of the outstanding shares of
such series, and (ii) a majority of the Trustees of the Trust who
are not interested persons of the Fund or of the Manager, by vote
cast in person at a meeting called for the purpose of voting on
such approval, do not specifically approve at least annually the
continuance of this Contract, then this Contract shall
automatically terminate at the close of business on the second
anniversary of its execution, or upon the expiration of one year
from the effective date of the last such continuance, whichever
is later.
Action by the Fund under (a) above may be taken either (i)
by vote of a majority of its Trustees, or (ii) by the affirmative
vote of a majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will
be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of
a majority of the outstanding shares" of the Fund means the
affirmative vote, at a duly called and held meeting of
A-5<PAGE>
shareholders of the Fund, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than
50% of the outstanding shares of the Fund entitled to vote at
such meeting are present in person or by proxy, or (b) of the
holders of more than 50% of the outstanding shares of the Fund
entitled to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated
person", "control", "interested person" and "assignment" shall
have their respective meanings defined in the Investment
Company Act of 1940 and the Rules and Regulations thereunder (the
"1940 Act"), subject, however, to such exemptions as may be
granted by the Securities and Exchange Commission under said Act;
the term "specifically approve at least annually" shall be
construed in a manner consistent with the 1940 Act, and the Rules
and Regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the Securities Exchange
Act of 1934 and the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be
subject to any liability to the Fund or to any shareholder of the
Fund, for any act or omission in the course of, or connected
with, rendering services hereunder.
8. LIMITATION OF LIABILITY OF THE TRUSTEES, OFFICERS, AND
SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the
Trust is on file with the Secretary of State of The Commonwealth
of Massachusetts, and notice is hereby given that this instrument
is executed on behalf of the Trustees of the Trust as Trustees
and not individually and that the obligations of or arising out
of this instrument are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon
the assets and property of the Fund.
A-6
IN WITNESS WHEREOF, PUTNAM INVESTMENT FUNDS and PUTNAM
INVESTMENT MANAGEMENT, INC. have each caused this instrument to
be signed in duplicate in its behalf by its President or a Vice
President thereunto duly authorized, all as of the day and year
first above written.
PUTNAM INVESTMENT FUNDS
on behalf of Putnam Research Fund series
By: --------------------------------
PUTNAM INVESTMENT MANAGEMENT, INC.
By: --------------------------------
A-7
EXHIBIT B
MANAGEMENT FEE RATE NAME OF FUND
(based on average net assets) (net assets as of November 1,
1996)
0.65% of the first $500 million Putnam Capital Appreciation
of average net assets, 0.55% of Fund
the next $500 million, 0.50% ($434,493,184)
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%, thereafter
0.65% of the first $500 million Putnam Investors Fund
of average net assets, 0.55% of ($1,411,902,988)
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%, thereafter
0.65% of the first $500 million Putnam Vista Fund
of average net assets, 0.55% of ($2,340,151,593)
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%, thereafter
B-1<PAGE>
PUTNAMINVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581<PAGE>
PUTNAMINVESTMENTS
Proxy for a meeting of shareholders on February 6, 1997, for
Putnam Investment Funds: Putnam Research Fund.
This proxy is solicited on behalf of the Trustees of the fund.
The undersigned shareholder hereby appoints George Putnam, Hans
H. Estin, and Robert E. Patterson, 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 Investment Funds: Putnam Research Fund on
February 6, 1997, 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.
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
electing Trustees as set forth in Proposal 1 and FOR Proposals 2
and 3 . In their discretion, the Proxies will also be
authorized to vote upon such other matters that may properly come
before the meeting.
Note: If you have questions on any of the proposals, please call
1-800-225-1581.
PLEASE BE SURE TO SIGN AND DATE THIS PROXY ON THE REVERSE
SIDE.
<PAGE>
THE TRUSTEES RECOMMEND A VOTE FOR ELECTING ALL OF THE NOMINEES
FOR TRUSTEES AND FOR THE OTHER PROPOSALS LISTED BELOW.
1. Proposal to elect Trustees
The nominees for Trustees are: J.A. Baxter, H.H. Estin, J.A.
Hill, R.J. Jackson, E.T. Kennan, L.J. Lasser, R.E.
Patterson, D.S. Perkins, W.F. Pounds, G. Putnam, G. Putnam,
III, A.J.C. Smith and W.N. Thorndike.
/ / FOR electing all the nominees
(except as marked to the contrary below)
/ / WITHHOLD authority to vote for all nominees
To withhold authority to vote for one or more of the nominees,
write those nominees' names below:
- -------------------------------------------------------------
PROPOSAL TO:
2. Ratify the selection FOR AGAINST ABSTAIN
of Price Waterhouse
LLP as the independent / / / /
/ /
auditors of your fund.
3. Approve the new manage-
ment contract between
your fund and Putnam
Investment Management,
Inc. / / / / / /
Please sign your name exactly as it appears on this card. If
you are a joint owner, each owner 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 in the partnership name.
- -----------------------------------------------------------------
Shareholder sign here Date
- -----------------------------------------------------------------
Co-owner sign here Date
