As filed with the Securities and Exchange Commission on November 20,
2000
Registration No. 33-56339
811-7237
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 35 / X /
and ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940 ----
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Amendment No. 33 / X /
(Check appropriate box or boxes) ----
PUTNAM INVESTMENT FUNDS
(Exact name of registrant as specified in charter)
One Post Office Square, Boston, Massachusetts 02109
(Address of principal executive offices)
Registrant's Telephone Number, including Area Code
(617) 292-1000
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It is proposed that this filing will become effective
(check appropriate box)
/ / immediately upon filing pursuant to paragraph (b)
/ / on (date) pursuant to paragraph (b)
/ / 60 days after filing pursuant to paragraph (a) (1)
/ / on (date) pursuant to paragraph (a) (1)
/ X / 75 days after filing pursuant to paragraph (a) (2)
/ / on (date) pursuant to paragraph (a) (2) of Rule 485.
If appropriate, check the following box:
/ / this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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JOHN R. VERANI, Vice President
PUTNAM INVESTMENT FUNDS
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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This Amendment relates solely to the Registrant's Putnam International
Blend Fund. Information contained in the Registrant's Registration
Statement relating to any other series of the Registrant is neither
amended nor superseded hereby.
Prospectus
[,2000]
Putnam International Blend Fund
Class A shares
Investment Category: Growth
This prospectus explains what you should know about this mutual fund
before you invest. Please read it carefully.
Putnam Investment Management, Inc. (Putnam Management), which has
managed mutual funds since 1937, manages the fund.
These securities have not been approved or disapproved by the Securities
and Exchange Commission nor has the Commission passed upon the accuracy or
adequacy of this prospectus. Any statement to the contrary is a crime.
CONTENTS
[ ] Fund summary
[ ] Goal
[ ] Main investment strategies
[ ] Main risks
[ ] Fees and expenses
[ ] What are the fund's main investment strategies and related risks?
[ ] Who manages the fund?
[ ] How does the fund price its shares?
[ ] How do I buy fund shares?
[ ] How do I sell fund shares?
[ ] How do I exchange fund shares?
[ ] Fund distributions and taxes
LOGO
Fund summary
GOAL
The fund seeks capital appreciation. Current income is a secondary
objective.
MAIN INVESTMENT STRATEGIES -- INTERNATIONAL STOCKS
We invest mainly in common stocks of companies outside the United
States. We invest in a blend of growth and value stocks. Growth stocks
are those issued by companies that we believe are fast-growing and whose
earnings we believe are likely to increase over time. Growth in
earnings may lead to an increase in the price of the stock. Value stocks
are those we believe are currently undervalued by the market. We look
for companies undergoing positive change. If we are correct and other
investors recognize the value of the company, the price of its stock may
rise. We invest mainly in large companies, although we can invest in
companies of any size.
MAIN RISKS
The main risks that could adversely affect the value of the fund's
shares and the total return on your investment include:
* The risks of investing outside the United States, such as currency
fluctuations, economic or financial instability, lack of timely or
reliable financial information or unfavorable political or legal
developments. These risks are increased for investments in emerging
markets.
* The risk that the stock price of one or more of the companies in the
fund's portfolio will fall, or will fail to rise. Many factors can
adversely affect a stock's performance, including both general financial
market conditions and factors related to a specific company or industry.
This risk is generally greater for small and midsized companies, which
tend to be more vulnerable to adverse developments.
* The risk that movements in financial markets will adversely affect the
price of the fund's investments, regardless of how well the companies in
which we invest perform. The market as a whole may not favor the types
of investments we make.
You can lose money by investing in the fund. The fund may not achieve
its goal, and is not intended as a complete investment program. An
investment in the fund is not a deposit in a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
PERFORMANCE INFORMATION
Performance information will be available after the fund completes a
full calendar year of operation.
FEES AND EXPENSES
This table summarizes the fees and expenses you may pay if you invest in
the fund. Expenses represent estimates for the fund's current fiscal
year which ends on [date].
Shareholder Fees (fees paid directly from your investment)
Class A
Maximum Sales Charge (Load)
Imposed on Purchases (as a percentage of
the offering price) 5.75%
Maximum Deferred Sales Charge (Load)
as a percentage of the original
purchase price or redemption
proceeds, whichever is lower) NONE*
Annual Fund Operating Expenses **
(expenses that are deducted from fund assets)
Total Annual
Management Other Fund Operating [Expense Net
Fees Expenses Expenses Reimbursement Expenses]
Class A % % % % %
* A deferred sales charge of up to 1% may be imposed on certain
redemptions of class A shares bought without an initial sales charge.
** Reflects Putnam Management's contractual obligation to limit fund
expenses through [date].
EXAMPLE
The example translates the expenses shown in the preceding table into
dollar amounts. By doing this, you can more easily compare the cost of
investing in the fund to the cost of investing in other mutual funds.
The example makes certain assumptions. It assumes that you invest
$10,000 in the fund for the time periods shown and then redeem all your
shares at the end of those periods. It also assumes a 5% return on your
investment each year and that the fund's operating expenses remain the
same. The example is hypothetical; your actual costs and returns may be
higher or lower.
1 year 3 years
Class A $ $
What are the fund's main investment strategies and related risks?
Any investment carries with it some level of risk that generally
reflects its potential for reward. We pursue the fund's goal by
investing mainly in stocks issued by companies outside the United
States. Under normal market conditions, we invest at least 65% of the
fund's total assets in the equity securities of companies located in at
least three countries other than the United States. To determine
whether a company is located outside of the United States, we look at
the following factors; where the company's securities trade, where the
company is located or organized, or where the company derives its
revenues or profits. We will consider, among other factors, a company's
financial strength, competitive position in its industry, projected
future earnings, cash flows and dividends when deciding which
investments to buy or sell. A description of the risks associated with
the fund's main investment strategies follows.
* Common stocks. Common stock represents an ownership interest in a
company. The value of a company's stock may fall as a result of factors
directly relating to that company, such as decisions made by its
management or lower demand for the company's products or services. A
stock's value may also fall because of factors affecting not just the
company, but also companies in the same industry or in a number of
different industries, such as increases in production costs. The value
of a company's stock may also be affected by changes in financial
markets that are relatively unrelated to the company or its industry,
such as changes in interest rates or currency exchange rates. In
addition, a company's stock generally pays dividends only after the
company invests in its own business and makes required payments to
holders of its bonds and other debt. For this reason, the value of a
company's stock will usually react more strongly than its bonds and
other debt to actual or perceived changes in the company's financial
condition or prospects. Stocks of smaller companies may be more
vulnerable to adverse developments than those of larger companies.
Stocks of companies we believe are fast-growing may trade at a higher
multiple of current earnings than other stocks. The value of such
stocks may be more sensitive to changes in current or expected earnings
than the values of other stocks. If our assessment of the prospects for
the company's earnings growth is wrong, or if our judgment of how other
investors will value the company's earnings growth is wrong, then the
price of the company's stock may fall or not approach the value that we
have placed on it. Seeking earnings growth may result in significant
investments in the technology sector, which may be subject to greater
volatility than other sectors of the economy.
Companies we believe are undergoing positive change and whose stock we
believe is undervalued by the market may have experienced adverse
business developments or may be subject to special risks that have
caused their stocks to be out of favor. If our assessment of a company's
prospects is wrong, or if other investors do not similarly recognize the
value of the company, then the price of the company's stock may fall or
may not approach the value that we have placed on it.
Foreign investments. Foreign investments involve certain special risks,
including:
* Unfavorable changes in currency exchange rates: Foreign investments are
typically issued and traded in foreign currencies. As a result, their
values may be affected by changes in exchange rates between foreign
currencies and the U.S. dollar.
* Political and economic developments: Foreign investments may be subject
to the risks of seizure by a foreign government, imposition of
restrictions on the exchange or export of foreign currency, and tax
increases.
* Unreliable or untimely information: There may be less information
publicly available about a foreign company than about most U.S.
companies, and foreign companies are usually not subject to accounting,
auditing and financial reporting standards and practices as stringent as
those in the United States.
* Limited legal recourse: Legal remedies for investors may be more limited
than the remedies available in the United States.
* (Limited markets: Certain foreign investments may be less liquid (harder
to buy and sell) and more volatile than most U.S. investments, which
means we may at times be unable to sell these foreign investments at
desirable prices. For the same reason, we may at times find it difficult
to value the fund's foreign investments.
* Trading practices: Brokerage commissions and other fees are generally
higher for foreign investments than for U.S. investments. The procedures
and rules governing foreign transactions and custody may also involve
delays in payment, delivery or recovery of money or investments.
* Lower yield: Common stocks of foreign companies have historically
offered lower dividends than stocks of comparable U.S. companies.
Foreign withholding taxes may further reduce the amount of income
available to distribute to shareholders of the fund.
The risks of foreign investments are typically increased in less
developed countries, which are sometimes referred to as emerging
markets. For example, political and economic structures in these
countries may be changing rapidly, which can cause instability. These
countries are also more likely to experience high levels of inflation,
deflation or currency devaluation, which could hurt their economies and
securities markets. For these and other reasons, investments in emerging
markets are often considered speculative.
Certain of these risks may also apply to some extent to U.S.-traded
investments that are denominated in foreign currencies, investments in
U.S. companies that are traded in foreign markets or investments in U.S.
companies that have significant foreign operations. Special U.S. tyax
considerations may apply to the fund's foreign investments.
* Derivatives. We may engage in a variety of transactions involving
derivatives, such as futures, options, warrants and swap contracts.
Derivatives are financial instruments whose value depends upon, or is
derived from, the value of something else, such as one or more
underlying investments, pools of investments, indexes or currencies. We
may use derivatives both for hedging and non-hedging purposes. However,
we may also choose not to use derivatives, based on our evaluation of
market conditions or the availability of suitable derivatives.
Derivatives involve special risks and may result in losses. The
successful use of derivatives depends on our ability to manage these
sophisticated instruments. The prices of derivatives may move in
unexpected ways due to the use of leverage or other factors, especially
in unusual market conditions, and may result in increased volatility.
The use of derivatives may also increase the amount of taxes payable by
shareholders.
Other risks arise from our potential inability to terminate or sell
derivatives positions. A liquid secondary market may not always exist
for the fund's derivatives positions at any time. In fact, many
over-the-counter instruments (investments not traded on an exchange)
will not be liquid. Over-the-counter instruments also involve the risk
that the other party to the derivative transaction will not meet its
obligations. For further information about the risks of derivatives,
see the statement of additional information (SAI).
* Frequent trading. We may buy and sell investments relatively often,
which involves higher brokerage commissions and other expenses, and may
increase the amount of taxes payable by shareholders.
* Other investments. In addition to the main investment strategies
described above, we may make other investments, such as investments in
preferred stocks, convertible securities and debt securities, which may
be subject to other risks, as described in the SAI.
* Alternative strategies. Under normal market conditions, we keep the
fund's portfolio fully invested, with minimal cash holdings. However,
at times we may judge that market conditions make pursuing the fund's
usual investment strategies inconsistent with the best interests of its
shareholders. We then may temporarily use alternative strategies that
are mainly designed to limit losses, including investing solely in the
United States. We may choose, however, not to use these strategies for a
variety of reasons, even in very volatile market conditions. These
strategies may cause the fund to miss out on investment opportunities,
and may prevent the fund from achieving its goal.
* Changes in policies. The fund's Trustees may change the fund's goal,
investment strategies and other policies without shareholder approval,
except as otherwise indicated.
Who manages the fund?
The fund's Trustees oversee the general conduct of the fund's business.
The Trustees have retained Putnam Management to be the fund's investment
manager, responsible for making investment decisions for the fund and
managing the fund's other affairs and business. The fund pays Putnam
Management a monthly management fee for these services based on the
fund's average net assets, at the annual rate of [management fee].
Putnam Management's address is One Post Office Square, Boston, MA 02109.
In order to limit the fund's expenses, Putnam Management has agreed to limit
its compensation (and, to the extent necessary, bear other expenses of the
fund) through [] to the extent that expenses of the fund (exclusive of
brokerage, interest, taxes and extraordinary expenses, and payments under
the fund's distribution plans) would exceed an annual rate of [%] of the
fund's average net assets. For the purpose of determining any such limitation
on Putnam Management's compensation, expenses of the fund do not reflect
the application of commisions or cash management credits that may reduce
designated fund expenses.
The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the fund's portfolio
since the year shown below. His experience as a portfolio manager or
investment analyst over at least the last five years is also shown.
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Manager Since Experience
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Colin Moore 2000 May 2000 - present Putnam Management
Managing Director Prior to May 2000 Chief Investment Officer
at Rockefeller & Co.,
Inc.
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How does the fund price its shares?
The price of the fund's shares is based on its net asset value (NAV).
The NAV per share of each class equals the total value of its assets,
less its liabilities, divided by the number of its outstanding shares.
Shares are only valued as of the close of regular trading on the New
York Stock Exchange each day the exchange is open.
The fund values its investments for which market quotations are readily
available at market value. It values short-term investments that will
mature within 60 days at amortized cost, which approximates market
value. It values all other investments and assets at their fair value.
The fund translates prices for its investments quoted in foreign
currencies into U.S. dollars at current exchange rates. As a result,
changes in the value of those currencies in relation to the U.S. dollar
may affect the fund's NAV. Because foreign markets may be open at
different times than the New York Stock Exchange, the value of the
fund's shares may change on days when shareholders are not able to buy
or sell them. If events materially affecting the values of the fund's
foreign investments occur between the close of foreign markets and the
close of regular trading on the New York Stock Exchange, these
investments will be valued at their fair value.
How do I buy fund shares?
You can open a fund account with as little as $500 and make additional
investments at any time with as little as $50 ($25 through systematic
investing). The fund sells its shares at the offering price, which is
the NAV plus any applicable sales charge. Your financial advisor or
Putnam Investor Services generally must receive your completed buy order
before the close of regular trading on the New York Stock Exchange for
your shares to be bought at that day's offering price.
You can buy shares:
* Through a financial advisor. Your advisor will be responsible for
furnishing all necessary documents to Putnam Investor Services, and may
charge you for his or her services.
* Through systematic investing. You can make regular investments of $25
or more per month through automatic deductions from your bank checking
or savings account. Application forms are available through your advisor
or Putnam Investor Services at 1-800-225-1581.
You may also complete an order form and write a check for the amount you
wish to invest, payable to the fund. Return the check and completed form
to Putnam Retail Management.
The fund may periodically close to new purchases of shares or refuse any
order to buy shares if the fund determines that doing so would be in the
best interests of the fund and its shareholders.
Initial sales charges for class A shares
Class A sales charge
as a percentage of:
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Amount of purchase Net amount Offering
at offering price ($) invested price*
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Under 50,000 6.10% 5.75%
50,000 but under 100,000 4.71 4.50
100,000 but under 250,000 3.63 3.50
250,000 but under 500,000 2.56 2.50
500,000 but under 1,000,000 2.04 2.00
1,000,000 and above NONE NONE
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* Offering price includes sales charge.
Deferred sales charges for certain class A shares
A deferred sales charge of up to 1% may apply to class A shares
purchased without an initial sales charge if redeemed within two years
of purchase.
Deferred sales charges will be based on the lower of the shares' cost
and current NAV. Shares not subject to any charge will be redeemed
first, followed by shares held longest. You may sell shares acquired by
reinvestment of distributions without a charge at any time.
* You may be eligible for reductions and waivers of sales charges. Sales
charges may be reduced or waived under certain circumstances and for
certain groups. Information about reductions and waivers of sales
charges is included in the SAI. You may consult your financial advisor
or Putnam Retail Management for assistance.
* Distribution (12b-1) plans. The fund has adopted a distribution plan
to pay for the marketing of fund shares and for services provided to
shareholders, although the fund is not currently making any payments
pursuant to the plan. The plan provides for payments at annual rates
(based on average net assets) of up to 0.35%. Should the Trustees decide
in the future to approve payments under the plan, this prospectus will
be revised.
How do I sell fund shares?
You can sell your shares back to the fund any day the New York Stock
Exchange is open, either through your financial advisor or directly to
the fund. Payment for redemption may be delayed until the fund collects
the purchase price of shares, which may be up to 15 calendar days after
the purchase date.
* Selling shares through your financial advisor. Your advisor must
receive your request in proper form before the close of regular trading
on the New York Stock Exchange for you to receive that day's NAV, less
any applicable deferred sales charge. Your advisor will be responsible
for furnishing all necessary documents to Putnam Investor Services on a
timely basis and may charge you for his or her services.
* Selling shares directly to the fund. Putnam Investor Services must
receive your request in proper form before the close of regular trading
on the New York Stock Exchange in order to receive that day's NAV, less
any applicable sales charge.
By mail. Send a letter of instruction signed by all registered owners or
their legal representatives to Putnam Investor Services.
By telephone. You may use Putnam's telephone redemption privilege to
redeem shares valued at less than $100,000 unless you have notified
Putnam Investor Services of an address change within the preceding 15
days, in which case other requirements may apply. Unless you indicate
otherwise on the account application, Putnam Investor Services will be
authorized to accept redemption instructions received by telephone. The
telephone redemption privilege may be modified or terminated without
notice.
* Additional requirements. In certain situations, for example, if you
sell shares with a value of $100,000 or more, the signatures of all
registered owners or their legal representatives must be guaranteed by a
bank, broker-dealer or certain other financial institutions. In
addition, Putnam Investor Services usually requires additional documents
for the sale of shares by a corporation, partnership, agent or
fiduciary, or a surviving joint owner. For more information concerning
Putnam's signature guarantee and documentation requirements, contact
Putnam Investor Services.
* When will the fund pay me? The fund generally sends you payment for
your shares the business day after your request is received. Under
unusual circumstances, the fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal securities
law.
* Redemption by the fund. If you own fewer shares than the minimum set
by the Trustees (presently 20 shares), the fund may redeem your shares
without your permission and send you the proceeds. The fund may also
redeem shares if you own more than a maximum amount set by the Trustees.
There is presently no maximum, but the Trustees could set a maximum that
would apply to both present and future shareholders.
How do I exchange fund shares?
If you want to switch your investment from one Putnam fund to another,
you can exchange your fund shares for shares of the same class of
another Putnam fund at NAV. Not all Putnam funds offer all classes of
shares or are open to new investors. If you exchange shares subject to a
deferred sales charge, the transaction will not be subject to the
deferred sales charge. When you redeem the shares acquired through the
exchange, the redemption may be subject to the deferred sales charge,
depending upon when you originally purchased the shares. The deferred
sales charge will be computed using the schedule of any fund into or
from which you have exchanged your shares that would result in your
paying the highest deferred sales charge applicable to your class of
shares. For purposes of computing the deferred sales charge, the length
of time you have owned your shares will be measured from the date of
original purchase and will not be affected by any subsequent exchanges
among funds.
To exchange your shares, complete an Exchange Authorization Form and
send it to Putnam Investor Services. The form is available from Putnam
Investor Services. A telephone exchange privilege is currently available
for amounts up to $500,000. Ask your financial advisor or Putnam
Investor Services for prospectuses of other Putnam funds. Some Putnam
funds are not available in all states.
The exchange privilege is not intended as a vehicle for short-term
trading. Excessive exchange activity may interfere with portfolio
management and have an adverse effect on all shareholders. In order to
limit excessive exchange activity and otherwise to promote the best
interests of the fund, the fund reserves the right to revise or
terminate the exchange privilege, limit the amount or number of
exchanges or reject any exchange. The fund into which you would like to
exchange may also reject your exchange. These actions may apply to all
shareholders or only to those shareholders whose exchanges Putnam
Management determines are likely to have a negative effect on the fund
or other Putnam funds. Consult Putnam Investor Services before
requesting an exchange.
Fund distributions and taxes
The fund normally distributes any net investment income and any net
realized capital gains annually. You may choose to:
* reinvest all distributions in additional shares;
* receive any distributions from net investment income in cash while
reinvesting capital gains distributions in additional shares; or
* receive all distributions in cash.
If you do not select an option when you open your account, all
distributions will be reinvested. If you do not cash a distribution
check within a specified period or notify Putnam Investor Services to
issue a new check, the distribution will be reinvested in the fund. You
will not receive any interest on uncashed distribution or redemption
checks. Similarly, if any correspondence sent by the fund or Putnam
Investor Services is returned as "undeliverable," fund distributions
will automatically be reinvested in the fund or in another Putnam fund.
For federal income tax purposes, distributions of investment income are
taxable as ordinary income. Taxes on distributions of capital gains are
determined by how long the fund owned the investments that generated
them, rather than how long you have owned your shares. Distributions are
taxable to you even if they are paid from income or gains earned by the
fund before your investment (and thus were included in the price you
paid). Distributions of gains from investments that the fund owned for
more than one year are taxable as capital gains. Distributions of gains
from investments that the fund owned for one year or less are taxable as
ordinary income. Distributions are taxable whether you receive them in
cash or reinvest them in additional shares.
The fund's investments in foreign securities may be subject to foreign
withholding taxes. In that case, the fund's return on those investments
would be decreased. Shareholders may be entitled to claim a credit or
deduction with respect to foreign taxes. In addition, the fund's
investment in foreign securities or foreign currencies may increase the
amount of taxes payable by shareholders.
Any gain resulting from the sale or exchange of your shares will
generally also be subject to tax. You should consult your tax advisor
for more information on your own tax situation, including possible
foreign, state and local taxes.
For more information about Putnam International Blend Fund
The fund's statement of additional information (SAI) includes additional
information about the fund. The SAI is incorporated by reference into
this prospectus, which means it is part of this prospectus for legal
purposes. You may get free copies of these materials, request other
information about any Putnam fund, or make shareholder inquiries, by
contacting your financial advisor, by visiting Putnam's Internet site,
or by calling Putnam toll-free at 1-800-225-1581.
You may review and copy information about a fund, including its SAI, at
the Securities and Exchange Commission's public reference room in
Washington, D.C. You may call the Commission at 1-202-942-8090 for
information about the operation of the public reference room. You may
also access reports and other information about the fund on the EDGAR
Database on the Commission's Internet site at http://www.sec.gov. You
may get copies of this information, with payment of a duplication fee,
by electronic request at the following E-mail address:
[email protected], or by writing the Commission's Public Reference
Section, Washington, D.C. 20549-0102. You may need to refer to the
fund's file number.
PUTNAM INVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
1-800-225-1581
Address correspondence to
Putnam Investor Services
P.O. Box 41203
Providence, Rhode Island 02940-1203
www.putnaminvestments.com
File No. 811 - 7237 xxxxx x/xx
PUTNAM INTERNATIONAL BLEND FUND
A SERIES OF PUTNAM INVESTMENT FUNDS
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
[____,2000]
This SAI is not a prospectus and is only authorized for distribution
when accompanied or preceded by the prospectus of the fund dated ______,
2000, as revised from time to time. This SAI contains information that
may be useful to investors but that is not included in the prospectus.
If the fund has more than one form of current prospectus, each reference
to the prospectus in this SAI shall include all of the fund's
prospectuses, unless otherwise noted. The SAI should be read together
with the applicable prospectus. For a free copy of the fund's
prospectus, call Putnam Investor Services at 1-800-225-1581 or write
Putnam Investor Services, Mailing address: P.O. Box 41203, Providence,
RI 02940-1203.
Part I of this SAI contains specific information about the fund. Part
II includes information about the fund and the other Putnam funds.
TABLE OF CONTENTS
PART I
FUND ORGANIZATION AND CLASSIFICATION I-[]
INVESTMENT RESTRICTIONS I-[]
CHARGES AND EXPENSES I-[]
ADDITIONAL OFFICERS I-[]
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS I-[]
PART II
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1
TAXES II-24
MANAGEMENT II-28
DETERMINATION OF NET ASSET VALUE II-35
HOW TO BUY SHARES II-36
DISTRIBUTION PLANS II-46
INVESTOR SERVICES II-50
SIGNATURE GUARANTEES II-54
SUSPENSION OF REDEMPTIONS II-54
SHAREHOLDER LIABILITY II-55
STANDARD PERFORMANCE MEASURES II-55
COMPARISON OF PORTFOLIO PERFORMANCE II-56
SECURITIES RATINGS II-61
DEFINITIONS II-65
SAI
PART I
FUND ORGANIZATION AND CLASSIFICATION
Putnam International Blend Fund is a diversified series of Putnam
Investment Funds, a Massachusetts business trust organized on October 1,
1994. A copy of the Agreement and Declaration of Trust, which is
governed by Massachusetts law, is on file with the Secretary of State of
The Commonwealth of Massachusetts.
The Trust is an open-end management investment company with an unlimited
number of authorized shares of beneficial interest. The Trustees may,
without shareholder approval, create two or more series of shares
representing separate investment portfolios. Any such series of shares
may be divided without shareholder approval into two or more classes of
shares having such preferences and special or relative rights and
privileges as the Trustees determine. The fund may offer classes of
shares with different sales charges and expenses.
Each share has one vote, with fractional shares voting proportionally.
Shares of all series and classes will vote together as a single class on
all matters except (i) when required by the Investment Company Act of
1940 or (ii) when the Trustees have determined that a matter affects one
or more series or classes materially differently, shares are voted by
individual series or class. When the Trustees determine that such a
matter affects only the interests of a particular series or class, only
shareholders of such series or class shall be entitled to vote thereon.
Shares are freely transferable, are entitled to dividends as declared by
the Trustees, and, if the fund were liquidated, would receive the net
assets of the fund.
The fund may suspend the sale of shares at any time and may refuse any
order to purchase shares. Although the fund is not required to hold
annual meetings of its shareholders, shareholders holding at least 10%
of the outstanding shares entitled to vote have the right to call a
meeting to elect or remove Trustees, or to take other actions as
provided in the Agreement and Declaration of Trust.
The fund is a "diversified" investment company under the Investment
Company Act of 1940. This means that with respect to 75% of its total
assets, the fund may not invest more than 5% of its total assets in the
securities of any one issuer (except U.S. government securities). The
remaining 25% of its total assets is not subject to this restriction.
To the extent the fund invests a significant portion of its assets in
the securities of a particular issuer, it will be subject to an
increased risk of loss if the market value of such issuer's securities
declines.
INVESTMENT RESTRICTIONS
As fundamental investment restrictions, which may not be changed without
a vote of a majority of the outstanding voting securities, the fund may
not and will not:
(1) Borrow money in excess of 33 1/3% of the value of its total assets
(not including the amount borrowed) at the time the borrowing is made.
(2) Underwrite securities issued by other persons except to the extent
that, in connection with the disposition of its portfolio investments,
it may be deemed to be an underwriter under certain federal securities
laws.
(3) Purchase or sell real estate, although it may purchase securities of
issuers which deal in real estate, securities which are secured by
interests in real estate, and securities which represent interests in
real estate, and it may acquire and dispose of real estate or interests
in real estate acquired through the exercise of its rights as a holder
of debt obligations secured by real estate or interests therein.
(4) Purchase or sell commodities or commodity contracts, except that the
fund may purchase and sell financial futures contracts and options and
may enter into foreign exchange contracts and other financial
transactions not involving physical commodities.
(5) Make loans, except by purchase of debt obligations in which the fund
may invest consistent with its investment policies (including without
limitation debt obligations issued by other Putnam funds), by entering
into repurchase agreements or by lending its portfolio securities.
(6) With respect to 75% of its total assets, invest in securities of any
issuer if, immediately after such investment, more than 5% of the total
assets of the fund (taken at current value) would be invested in the
securities of such issuer; provided that this limitation does not apply
to obligations issued or guaranteed as to interest or principal by the
U.S. government or its agencies or instrumentalities.
(7) With respect to 75% of its total assets, acquire more than 10% of
the outstanding voting securities of any issuer.
(8) Purchase securities (other than securities of the U.S. government,
its agencies or instrumentalities) if, as a result of such purchase,
more than 25% of the fund's total assets would be invested in any one
industry.
(9) Issue any class of securities which is senior to the fund's shares
of beneficial interest, except for permitted borrowings.
The Investment Company Act of 1940 provides that a "vote of a majority
of the outstanding voting securities" of the fund means the affirmative
vote of the lesser of (1) more than 50% of the outstanding fund shares,
or (2) 67% or more of the shares present at a meeting if more than 50%
of the outstanding fund shares are represented at the meeting in person
or by proxy.
The following non-fundamental investment policies may be changed by the
Trustees without shareholder approval:
(1) The fund will not invest in (a) securities which are not readily
marketable, (b) securities restricted as to resale (excluding securities
determined by the Trustees of the Trust (or the person designated by the
Trustees of the fund to make such determinations) to be readily
marketable), and (c) repurchase agreements maturing in more than seven
days, if, as a result, more than 15% of the fund's net assets (taken at
current value) would be invested in securities described in (a), (b) and
(c) above.
---------------------------------
All percentage limitations on investments (other than pursuant to the
non-fundamental restriction (1)) will apply at the time of the making of
an investment and shall not be considered violated unless an excess or
deficiency occurs or exists immediately after and as a result of such
investment.
CHARGES AND EXPENSES
Management fees
Under a Management Contract dated [ , 2000] the fund pays a monthly fee
to Putnam Management based on the average net assets of the fund, as
determined at the close of each business day during the month, at the
annual rate of:
____% of the first $500 million of average net assets;
____% of the next $500 million of average net assets;
____% of the next $500 million of average net assets;
____% of the next $5 billion of average net assets;
____% of the next $5 billion of average net assets;
____% of the next $5 billion of average net assets;
____% of the next $5 billion of average net assets;
____% of the next $5 billion of average net assets;
____% of the next $5 billion of average net assets;
____% of the next $5 billion of average net assets;
____% of the next $5 billion of average net assets
____% of the next $5 billion of average net assets;
____% of the next $8.5 billion of average net assets; and
____% of any excess thereafter.
Trustee responsibilities and fees
The Trustees are responsible for generally overseeing the conduct of
fund business. Subject to such policies as the Trustees may determine,
Putnam Management furnishes a continuing investment program for the fund
and makes investment decisions on its behalf. Subject to the control of
the Trustees, Putnam Management also manages the fund's other affairs
and business.
Each Trustee receives a fee for his or her services. Each Trustee also
receives fees for serving as Trustee of other Putnam funds. The
Trustees periodically review their fees to assure that such fees
continue to be appropriate in light of their responsibilities as well as
in relation to fees paid to trustees of other mutual fund complexes.
The Trustees meet monthly over a two-day period, except in August. The
Board Policy and Nominating Committee, which consists solely of Trustees
not affiliated with Putnam Management and is responsible for
recommending Trustee compensation, estimates that Committee and Trustee
meeting time together with the appropriate preparation requires the
equivalent of at least three business days per Trustee meeting. The
following table shows the year each Trustee was first elected a Trustee
of the Putnam funds, the estimated fees to be paid to each Trustee by
the fund for its first full fiscal year and the fees paid to each
Trustee by all of the Putnam funds during calendar year 1999:
<TABLE>
<CAPTION>
COMPENSATION TABLE
Pension
or
retirement Estimated
Estimated benefits annual
aggregate accrued benefits from Total
compensation as part all Putnam compensation
from the fund of fund funds upon from all Putnam
Trustee/Year (1) expenses retirement (2) funds (3)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Jameson A. Baxter/1994(4) $ $ $95,000 $191,000
Hans H. Estin/1972 95,000 190,000
John A. Hill/1985(4)(5) 115,000 239,750
Ronald J. Jackson/1996(4) 95,000 193,500
Paul L. Joskow/1997(4) 95,000 191,000
Elizabeth T. Kennan/1992 95,000 190,000
Lawrence J. Lasser/1992 95,000 189,000
John H. Mullin, III/1997(4) 95,000 196,000
Robert E. Patterson/1984 95,000 190,250
William F. Pounds/1971(5) (6) 115,000 231,000
George Putnam/1957(6) 95,000 190,000
George Putnam, III/1984 95,000 190,000
A.J.C. Smith/1986 95,000 188,000
W. Thomas Stephens/1997(4) 95,000 188,000
W. Nicholas Thorndike/1992 95,000 190,000
</TABLE>
(1) Includes an annual retainer and an attendance fee for each meeting
attended.
(2) Assumes that each Trustee retires at the normal retirement date.
Estimated benefits for each Trustee are based on Trustee fee rates in
effect during calendar 1999.
(3) As of December 31, 1999, there were 114 funds in the Putnam family.
(4) Includes compensation deferred pursuant to a Trustee Compensation
Deferral Plan. [The total amounts of deferred compensation payable by the fund
to [Ms. Baxter, Mr. Hill, Mr. Jackson, Mr. Joskow, Mr. Mullin, and Mr.
Stephens] as of [FYE] were [$], [$],[$],[$],[$], and [$], respectively,
including income earned on such amounts.]
(5) Reflects retirement from the Board of Trustees as of June 30, 2000.
(6) Includes additional compensation for service as Vice Chairman of the
Putnam funds. Mr. Hill became Chairman effective July 1, 2000.
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, also available under the Plan,
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 had he or she retired immediately prior to such
termination or amendment.
For additional information concerning the Trustees, see "Management" in
Part II of this SAI.
Share ownership
At [ ] Putnam Investments, Inc., owned of record and beneficially 100%
of the shares of the fund and therefore may be deemed to "control" the fund.
Putnam Investments, Inc. is incorporated in Massachusetts, and its parent
corporation, Marsh & McLennan Companies, Inc., is incorporated in Delaware.
The address of Putnam Investments, Inc. is One Post Office Square, Boston,
MA 02109.
ADDITIONAL OFFICERS
In addition to the persons listed as fund officers in Part II of this
SAI, each of the following persons is also a Vice President of the fund
and certain of the other Putnam funds, the total number of which is
noted parenthetically. Officers of Putnam Management hold the same
offices in Putnam Management's parent company, Putnam Investments, Inc.
Officer Name (Age) (Number of funds)
Deborah Kuenstner (42) (13 funds). Managing Director of Putnam
Management
Colin Moore (42) (____funds). Managing Director of Putnam Management
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
[Firm name and address], are the fund's independent accountants,
providing audit services, tax return review and other tax consulting
services and assistance and consultation in connection with the review
of various Securities and Exchange Commission filings.
<PAGE>
TABLE OF CONTENTS
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS II-1
TAXES II-24
MANAGEMENT II-28
DETERMINATION OF NET ASSET VALUE II-35
HOW TO BUY SHARES II-36
DISTRIBUTION PLANS II-46
INVESTOR SERVICES II-50
SIGNATURE GUARANTEES II-54
SUSPENSION OF REDEMPTIONS II-54
SHAREHOLDER LIABILITY II-55
STANDARD PERFORMANCE MEASURES II-55
COMPARISON OF PORTFOLIO PERFORMANCE II-56
SECURITIES RATINGS II-61
DEFINITIONS II-65
THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
PART II
As noted in the prospectus, in addition to the principal investment
strategies and the principal risks described in the prospectus, the fund
may employ other investment practices and may be subject to other risks,
which are described below. Because the following is a combined description
of investment strategies of all of the Putnam funds, certain matters
described herein may not apply to your fund. Unless a strategy or policy
described below is specifically prohibited by the investment restrictions
explained in the fund's prospectus or Part I of this SAI, or by applicable
law, the fund may engage in each of the practices described below.
Shareholders who purchase shares at net asset value through
employer-sponsored defined contribution plans should also consult their
employer for information about the extent to which the matters described
below apply to them.
MISCELLANEOUS INVESTMENTS, INVESTMENT PRACTICES AND RISKS
Foreign Investments
Foreign securities are normally denominated and traded in foreign
currencies. As a result, the value of the fund's foreign investments and
the value of its shares may be affected favorably or unfavorably by changes
in currency exchange rates relative to the U.S. dollar. There may be less
information publicly available about a foreign issuer than about a U.S.
issuer, and foreign issuers may not be subject to accounting, auditing and
financial reporting standards and practices comparable to those in the
United States. The securities of some foreign issuers are less liquid and
at times more volatile than securities of comparable U.S. issuers. Foreign
brokerage commissions and other fees are also generally higher than in the
United States. Foreign settlement procedures and trade regulations may
involve certain risks (such as delay in payment or delivery of securities
or in the recovery of the fund's assets held abroad) and expenses not
present in the settlement of investments in U.S. markets.
In addition, foreign securities may be subject to the risk of
nationalization or expropriation of assets, imposition of currency exchange
controls, foreign withholding taxes or restrictions on the repatriation of
foreign currency, confiscatory taxation, political or financial instability
and diplomatic developments which could affect the value of the fund's
investments in certain foreign countries. Dividends or interest on, or
proceeds from the sale of, foreign securities may be subject to foreign
withholding taxes, and special U.S. tax considerations may apply.
Legal remedies available to investors in certain foreign countries may be
more limited than those available with respect to investments in the United
States or in other foreign countries. The laws of some foreign countries
may limit the fund's ability to invest in securities of certain issuers
organized under the laws of those foreign countries.
The risks described above, including the risks of nationalization or
expropriation of assets, typically are increased in connection with
investments in "emerging markets." For example, political and economic
structures in these countries may be in their infancy and developing
rapidly, and such countries may lack the social, political and economic
stability characteristic of more developed countries. Certain of these
countries have in the past failed to recognize private property rights and
have at times nationalized and expropriated the assets of private
companies. High rates of inflation or currency devaluations may adversely
affect the economies and securities markets of such countries. Investments
in emerging markets may be considered speculative.
The currencies of certain emerging market countries have experienced
devaluations relative to the U.S. dollar, and future devaluations may
adversely affect the value of assets denominated in such currencies. Many
emerging market countries have experienced substantial, and in some periods
extremely high, rates of inflation or deflation for many years, and future
inflation may adversely affect the economies and securities markets of such
countries.
In addition, unanticipated political or social developments may affect the
value of investments in emerging markets and the availability of additional
investments in these markets. The small size, limited trading volume and
relative inexperience of the securities markets in these countries may make
investments in securities traded in emerging markets illiquid and more
volatile than investments in securities traded in more developed countries,
and the fund may be required to establish special custodial or other
arrangements before making investments in securities traded in emerging
markets. There may be little financial or accounting information available
with respect to issuers of emerging market securities, and it may be
difficult as a result to assess the value of prospects of an investment in
such securities.
Certain of the foregoing risks may also apply to some extent to securities
of U.S. issuers that are denominated in foreign currencies or that are
traded in foreign markets, or securities of U.S. issuers having significant
foreign operations.
Foreign Currency Transactions
To manage its exposure to foreign currencies, the fund may engage without
limit in foreign currency exchange transactions, including purchasing and
selling foreign currency, foreign currency options, foreign currency
forward contracts and foreign currency futures contracts and related
options. In addition, the fund may write covered call and put options on
foreign currencies for the purpose of increasing its current return.
Generally, the fund may engage in both "transaction hedging" and "position
hedging." The fund may also engage in foreign currency transactions for
non-hedging purposes, subject to applicable law. When it engages in
transaction hedging, the fund enters into foreign currency transactions
with respect to specific receivables or payables, generally arising in
connection with the purchase or sale of portfolio securities. The fund
will engage in transaction hedging when it desires to "lock in" the U.S.
dollar price of a security it has agreed to purchase or sell, or the U.S.
dollar equivalent of a dividend or interest payment in a foreign currency.
By transaction hedging the fund will attempt to protect itself against a
possible loss resulting from an adverse change in the relationship between
the U.S. dollar and the applicable foreign currency during the period
between the date on which the security is purchased or sold, or on which
the dividend or interest payment is earned, and the date on which such
payments are made or received.
The fund may purchase or sell a foreign currency on a spot (or cash) basis
at the prevailing spot rate in connection with the settlement of
transactions in portfolio securities denominated in that foreign currency.
If conditions warrant, for transaction hedging purposes the fund may also
enter into contracts to purchase or sell foreign currencies at a future
date ("forward contracts") and purchase and sell foreign currency futures
contracts. A foreign currency forward contract is a negotiated agreement
to exchange currency at a future time at a rate or rates that may be higher
or lower than the spot rate. Foreign currency futures contracts are
standardized exchange-traded contracts and have margin requirements. In
addition, for transaction hedging purposes the fund may also purchase or
sell exchange-listed and over-the-counter call and put options on foreign
currency futures contracts and on foreign currencies.
For transaction hedging purposes the fund may also purchase exchange-listed
and over-the-counter call and put options on foreign currency futures
contracts and on foreign currencies. A put option on a futures contract
gives the fund the right to assume a short position in the futures contract
until the expiration of the option. A put option on a currency gives the
fund the right to sell the currency at an exercise price until the
expiration of the option. A call option on a futures contract gives the
fund the right to assume a long position in the futures contract until the
expiration of the option. A call option on a currency gives the fund the
right to purchase the currency at the exercise price until the expiration
of the option.
The fund may engage in position hedging to protect against a decline in the
value relative to the U.S. dollar of the currencies in which its portfolio
securities are denominated or quoted (or an increase in the value of the
currency in which the securities the fund intends to buy are denominated,
when the fund holds cash or short-term investments). For position hedging
purposes, the fund may purchase or sell, on exchanges or in
over-the-counter markets, foreign currency futures contracts, foreign
currency forward contracts and options on foreign currency futures
contracts and on foreign currencies. In connection with position hedging,
the fund may also purchase or sell foreign currency on a spot basis.
It is impossible to forecast with precision the market value of portfolio
securities at the expiration or maturity of a forward or futures contract.
Accordingly, it may be necessary for the fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase)
if the market value of the security or securities being hedged is less than
the amount of foreign currency the fund is obligated to deliver and a
decision is made to sell the security or securities and make delivery of
the foreign currency. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the sale of the portfolio
security or securities if the market value of such security or securities
exceeds the amount of foreign currency the fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in the
underlying prices of the securities which the fund owns or intends to
purchase or sell. They simply establish a rate of exchange which one can
achieve at some future point in time. Additionally, although these
techniques tend to minimize the risk of loss due to a decline in the value
of the hedged currency, they tend to limit any potential gain which might
result from the increase in value of such currency. See "Risk factors in
options transactions."
The fund may seek to increase its current return or to offset some of the
costs of hedging against fluctuations in current exchange rates by writing
covered call options and covered put options on foreign currencies. The
fund receives a premium from writing a call or put option, which increases
the fund's current return if the option expires unexercised or is closed
out at a net profit. The fund may terminate an option that it has written
prior to its expiration by entering into a closing purchase transaction in
which it purchases an option having the same terms as the option written.
The fund's currency hedging transactions may call for the delivery of one
foreign currency in exchange for another foreign currency and may at times
not involve currencies in which its portfolio securities are then
denominated. Putnam Management will engage in such "cross hedging"
activities when it believes that such transactions provide significant
hedging opportunities for the fund. Cross hedging transactions by the fund
involve the risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in the value
of the currency or other asset or liability which is the subject of the
hedge.
The fund may also engage in non-hedging currency transactions. For
example, Putnam Management may believe that exposure to a currency is in
the fund's best interest but that securities denominated in that currency
are unattractive. In that case the fund may purchase a currency forward
contract or option in order to increase its exposure to the currency. In
accordance with SEC regulations, the fund will segregate liquid assets in
its portfolio to cover forward contracts used for non-hedging purposes.
The value of any currency, including U.S. dollars and foreign currencies,
may be affected by complex political and economic factors applicable to the
issuing country. In addition, the exchange rates of foreign currencies
(and therefore the values of foreign currency options, forward contracts
and futures contracts) may be affected significantly, fixed, or supported
directly or indirectly by U.S. and foreign government actions. Government
intervention may increase risks involved in purchasing or selling foreign
currency options, forward contracts and futures contracts, since exchange
rates may not be free to fluctuate in response to other market forces.
The value of a foreign currency option, forward contract or futures
contract reflects the value of an exchange rate, which in turn reflects
relative values of two currencies, the U.S. dollar and the foreign currency
in question. Because foreign currency transactions occurring in the
interbank market involve substantially larger amounts than those that may
be involved in the exercise of foreign currency options, forward contracts
and futures contracts, investors may be disadvantaged by having to deal in
an odd-lot market for the underlying foreign currencies in connection with
options at prices that are less favorable than for round lots. Foreign
governmental restrictions or taxes could result in adverse changes in the
cost of acquiring or disposing of foreign currencies.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely
basis. Available quotation information is generally representative of very
large round-lot transactions in the interbank market and thus may not
reflect exchange rates for smaller odd-lot transactions (less than $1
million) where rates may be less favorable. The interbank market in foreign
currencies is a global, around-the-clock market. To the extent that
options markets are closed while the markets for the underlying currencies
remain open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options markets.
The decision as to whether and to what extent the fund will engage in
foreign currency exchange transactions will depend on a number of factors,
including prevailing market conditions, the composition of the fund's
portfolio and the availability of suitable transactions. Accordingly, there
can be no assurance that the fund will engage in foreign currency exchange
transactions at any given time or from time to time.
Currency forward and futures contracts. A forward foreign currency
contract involves an obligation to purchase or sell a specific currency at
a future date, which may be any fixed number of days from the date of the
contract as agreed by the parties, at a price set at the time of the
contract. In the case of a cancelable forward contract, the holder has the
unilateral right to cancel the contract at maturity by paying a specified
fee. The contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
commissions are charged at any stage for trades. A foreign currency
futures contract is a standardized contract for the future delivery of a
specified amount of a foreign currency at a price set at the time of the
contract. Foreign currency futures contracts traded in the United States
are designed by and traded on exchanges regulated by the CFTC, such as the
New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign currency
futures contracts in certain respects. For example, the maturity date of a
forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a
given month. Forward contracts may be in any amount agreed upon by the
parties rather than predetermined amounts. Also, forward foreign exchange
contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires no margin
or other deposit.
At the maturity of a forward or futures contract, the fund either may
accept or make delivery of the currency specified in the contract, or at or
prior to maturity enter into a closing transaction involving the purchase
or sale of an offsetting contract. Closing transactions with respect to
forward contracts are usually effected with the currency trader who is a
party to the original forward contract. Closing transactions with respect
to futures contracts are effected on a commodities exchange; a clearing
corporation associated with the exchange assumes responsibility for closing
out such contracts.
Positions in the foreign currency futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market in such
contracts. Although the fund intends to purchase or sell foreign currency
futures contracts only on exchanges or boards of trade where there appears
to be an active secondary market, there is no assurance that a secondary
market on an exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be possible
to close a futures position and, in the event of adverse price movements,
the fund would continue to be required to make daily cash payments of
variation margin.
Foreign currency options. In general, options on foreign currencies
operate similarly to options on securities and are subject to many of the
risks described above. Foreign currency options are traded primarily in
the over-the-counter market, although options on foreign currencies are
also listed on several exchanges. Options are traded not only on the
currencies of individual nations, but also on the euro, the joint currency
of most countries in the European Union.
The fund will only purchase or write foreign currency options when Putnam
Management believes that a liquid secondary market exists for such options.
There can be no assurance that a liquid secondary market will exist for a
particular option at any specific time. Options on foreign currencies are
affected by all of those factors which influence foreign exchange rates and
investments generally.
Settlement procedures. Settlement procedures relating to the fund's
investments in foreign securities and to the fund's foreign currency
exchange transactions may be more complex than settlements with respect to
investments in debt or equity securities of U.S. issuers, and may involve
certain risks not present in the fund's domestic investments. For example,
settlement of transactions involving foreign securities or foreign
currencies may occur within a foreign country, and the fund may be required
to accept or make delivery of the underlying securities or currency in
conformity with any applicable U.S. or foreign restrictions or regulations,
and may be required to pay any fees, taxes or charges associated with such
delivery. Such investments may also involve the risk that an entity
involved in the settlement may not meet its obligations.
Foreign currency conversion. Although foreign exchange dealers do not
charge a fee for currency conversion, they do realize a profit based on the
difference (the "spread") between prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign
currency to the fund at one rate, while offering a lesser rate of exchange
should the fund desire to resell that currency to the dealer.
Options on Securities
Writing covered options. The fund may write covered call options and
covered put options on optionable securities held in its portfolio, when in
the opinion of Putnam Management such transactions are consistent with the
fund's investment objective(s) and policies. Call options written by the
fund give the purchaser the right to buy the underlying securities from the
fund at a stated exercise price; put options give the purchaser the right
to sell the underlying securities to the fund at a stated price.
The fund may write only covered options, which means that, so long as the
fund is obligated as the writer of a call option, it will own the
underlying securities subject to the option (or comparable securities
satisfying the cover requirements of securities exchanges). In the case of
put options, the fund will hold cash and/or high-grade short-term debt
obligations equal to the price to be paid if the option is exercised. In
addition, the fund will be considered to have covered a put or call option
if and to the extent that it holds an option that offsets some or all of
the risk of the option it has written. The fund may write combinations of
covered puts and calls on the same underlying security.
The fund will receive a premium from writing a put or call option, which
increases the fund's return on the underlying security in the event the
option expires unexercised or is closed out at a profit. The amount of the
premium reflects, among other things, the relationship between the exercise
price and the current market value of the underlying security, the
volatility of the underlying security, the amount of time remaining until
expiration, current interest rates, and the effect of supply and demand in
the options market and in the market for the underlying security. By
writing a call option, the fund limits its opportunity to profit from any
increase in the market value of the underlying security above the exercise
price of the option but continues to bear the risk of a decline in the
value of the underlying security. By writing a put option, the fund
assumes the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current market value,
resulting in a potential capital loss unless the security subsequently
appreciates in value.
The fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction, in which it
purchases an offsetting option. The fund realizes a profit or loss from a
closing transaction if the cost of the transaction (option premium plus
transaction costs) is less or more than the premium received from writing
the option. If the fund writes a call option but does not own the
underlying security, and when it writes a put option, the fund may be
required to deposit cash or securities with its broker as "margin," or
collateral, for its obligation to buy or sell the underlying security. As
the value of the underlying security varies, the fund may have to deposit
additional margin with the broker. Margin requirements are complex and are
fixed by individual brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock exchanges and other
self-regulatory organizations.
Purchasing put options. The fund may purchase put options to protect its
portfolio holdings in an underlying security against a decline in market
value. Such protection is provided during the life of the put option since
the fund, as holder of the option, is able to sell the underlying security
at the put exercise price regardless of any decline in the underlying
security's market price. In order for a put option to be profitable, the
market price of the underlying security must decline sufficiently below the
exercise price to cover the premium and transaction costs. By using put
options in this manner, the fund will reduce any profit it might otherwise
have realized from appreciation of the underlying security by the premium
paid for the put option and by transaction costs.
Purchasing call options. The fund may purchase call options to hedge
against an increase in the price of securities that the fund wants
ultimately to buy. Such hedge protection is provided during the life of
the call option since the fund, as holder of the call option, is able to
buy the underlying security at the exercise price regardless of any
increase in the underlying security's market price. In order for a call
option to be profitable, the market price of the underlying security must
rise sufficiently above the exercise price to cover the premium and
transaction costs.
Risk Factors in Options Transactions
The successful use of the fund's options strategies depends on the ability
of Putnam Management to forecast correctly interest rate and market
movements. For example, if the fund were to write a call option based on
Putnam Management's expectation that the price of the underlying security
would fall, but the price were to rise instead, the fund could be required
to sell the security upon exercise at a price below the current market
price. Similarly, if the fund were to write a put option based on Putnam
Management's expectation that the price of the underlying security would
rise, but the price were to fall instead, the fund could be required to
purchase the security upon exercise at a price higher than the current
market price.
When the fund purchases an option, it runs the risk that it will lose its
entire investment in the option in a relatively short period of time,
unless the fund exercises the option or enters into a closing sale
transaction before the option's expiration. If the price of the underlying
security does not rise (in the case of a call) or fall (in the case of a
put) to an extent sufficient to cover the option premium and transaction
costs, the fund will lose part or all of its investment in the option.
This contrasts with an investment by the fund in the underlying security,
since the fund will not realize a loss if the security's price does not
change.
The effective use of options also depends on the fund's ability to
terminate option positions at times when Putnam Management deems it
desirable to do so. There is no assurance that the fund will be able to
effect closing transactions at any particular time or at an acceptable
price.
If a secondary market in options were to become unavailable, the fund could
no longer engage in closing transactions. Lack of investor interest might
adversely affect the liquidity of the market for particular options or
series of options. A market may discontinue trading of a particular option
or options generally. In addition, a market could become temporarily
unavailable if unusual events -- such as volume in excess of trading or
clearing capability -- were to interrupt its normal operations.
A market may at times find it necessary to impose restrictions on
particular types of options transactions, such as opening transactions.
For example, if an underlying security ceases to meet qualifications
imposed by the market or the Options Clearing Corporation, new series of
options on that security will no longer be opened to replace expiring
series, and opening transactions in existing series may be prohibited. If
an options market were to become unavailable, the fund as a holder of an
option would be able to realize profits or limit losses only by exercising
the option, and the fund, as option writer, would remain obligated under
the option until expiration or exercise.
Disruptions in the markets for the securities underlying options purchased
or sold by the fund could result in losses on the options. If trading is
interrupted in an underlying security, the trading of options on that
security is normally halted as well. As a result, the fund as purchaser or
writer of an option will be unable to close out its positions until options
trading resumes, and it may be faced with considerable losses if trading in
the security reopens at a substantially different price. In addition, the
Options Clearing Corporation or other options markets may impose exercise
restrictions. If a prohibition on exercise is imposed at the time when
trading in the option has also been halted, the fund as purchaser or writer
of an option will be locked into its position until one of the two
restrictions has been lifted. If the Options Clearing Corporation were to
determine that the available supply of an underlying security appears
insufficient to permit delivery by the writers of all outstanding calls in
the event of exercise, it may prohibit indefinitely the exercise of put
options. The fund, as holder of such a put option, could lose its entire
investment if the prohibition remained in effect until the put option's
expiration.
Foreign-traded options are subject to many of the same risks presented by
internationally-traded securities. In addition, because of time
differences between the United States and various foreign countries, and
because different holidays are observed in different countries, foreign
options markets may be open for trading during hours or on days when U.S.
markets are closed. As a result, option premiums may not reflect the
current prices of the underlying interest in the United States.
Over-the-counter ("OTC") options purchased by the fund and assets held to
cover OTC options written by the fund may, under certain circumstances, be
considered illiquid securities for purposes of any limitation on the fund's
ability to invest in illiquid securities.
Investments in Miscellaneous Fixed-Income Securities
If the fund may invest in inverse floating obligations, premium securities,
or interest-only or principal-only classes of mortgage-backed securities
(IOs and POs), it may do so without limit. The fund, however, currently
does not intend to invest more than 15% of its assets in inverse floating
obligations or more than 35% of its assets in IOs and POs under normal
market conditions.
Lower-rated Securities
The fund may invest in lower-rated fixed-income securities (commonly known
as "junk bonds"). The lower ratings of certain securities held by the fund
reflect a greater possibility that adverse changes in the financial
condition of the issuer or in general economic conditions, or both, or an
unanticipated rise in interest rates, may impair the ability of the issuer
to make payments of interest and principal. The inability (or perceived
inability) of issuers to make timely payment of interest and principal
would likely make the values of securities held by the fund more volatile
and could limit the fund's ability to sell its securities at prices
approximating the values the fund had placed on such securities. In the
absence of a liquid trading market for securities held by it, the fund at
times may be unable to establish the fair value of such securities.
Securities ratings are based largely on the issuer's historical financial
condition and the rating agencies' analysis at the time of rating.
Consequently, the rating assigned to any particular security is not
necessarily a reflection of the issuer's current financial condition, which
may be better or worse than the rating would indicate. In addition, the
rating assigned to a security by Moody's Investors Service, Inc. or
Standard & Poor's (or by any other nationally recognized securities rating
agency) does not reflect an assessment of the volatility of the security's
market value or the liquidity of an investment in the security. See
"Securities ratings."
Like those of other fixed-income securities, the values of lower-rated
securities fluctuate in response to changes in interest rates. A decrease
in interest rates will generally result in an increase in the value of the
fund's assets. Conversely, during periods of rising interest rates, the
value of the fund's assets will generally decline. The values of
lower-rated securities may often be affected to a greater extent by changes
in general economic conditions and business conditions affecting the
issuers of such securities and their industries. Negative publicity or
investor perceptions may also adversely affect the values of lower-rated
securities. Changes by nationally recognized securities rating agencies
in their ratings of any fixed-income security and changes in the ability of
an issuer to make payments of interest and principal may also affect the
value of these investments. Changes in the value of portfolio securities
generally will not affect income derived from these securities, but will
affect the fund's net asset value. The fund will not necessarily dispose
of a security when its rating is reduced below its rating at the time of
purchase. However, Putnam Management will monitor the investment to
determine whether its retention will assist in meeting the fund's
investment objective(s).
Issuers of lower-rated securities are often highly leveraged, so that their
ability to service their debt obligations during an economic downturn or
during sustained periods of rising interest rates may be impaired. Such
issuers may not have more traditional methods of financing available to
them and may be unable to repay outstanding obligations at maturity by
refinancing. The risk of loss due to default in payment of interest or
repayment of principal by such issuers is significantly greater because
such securities frequently are unsecured and subordinated to the prior
payment of senior indebtedness.
At times, a substantial portion of the fund's assets may be invested in an
issue of which the fund, by itself or together with other funds and
accounts managed by Putnam Management or its affiliates, holds all or a
major portion. Although Putnam Management generally considers such
securities to be liquid because of the availability of an institutional
market for such securities, it is possible that, under adverse market or
economic conditions or in the event of adverse changes in the financial
condition of the issuer, the fund could find it more difficult to sell
these securities when Putnam Management believes it advisable to do so or
may be able to sell the securities only at prices lower than if they were
more widely held. Under these circumstances, it may also be more difficult
to determine the fair value of such securities for purposes of computing
the fund's net asset value. In order to enforce its rights in the event of
a default, the fund may be required to participate in various legal
proceedings or take possession of and manage assets securing the issuer's
obligations on such securities. This could increase the fund's operating
expenses and adversely affect the fund's net asset value. In the case of
tax-exempt funds, any income derived from the fund's ownership or operation
of such assets would not be tax-exempt. The ability of a holder of a
tax-exempt security to enforce the terms of that security in a bankruptcy
proceeding may be more limited than would be the case with respect to
securities of private issuers. In addition, the fund's intention to
qualify as a "regulated investment company" under the Internal Revenue Code
may limit the extent to which the fund may exercise its rights by taking
possession of such assets.
Certain securities held by the fund may permit the issuer at its option to
"call," or redeem, its securities. If an issuer were to redeem securities
held by the fund during a time of declining interest rates, the fund may
not be able to reinvest the proceeds in securities providing the same
investment return as the securities redeemed.
The fund may invest without limit in so-called "zero-coupon" bonds and
"payment-in-kind" bonds. Zero-coupon bonds are issued at a significant
discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer, at its option, to
make current interest payments on the bonds either in cash or in additional
bonds. Because zero-coupon and payment-in-kind bonds do not pay current
interest in cash, their value is subject to greater fluctuation in response
to changes in market interest rates than bonds that pay interest currently.
Both zero-coupon and payment-in-kind bonds allow an issuer to avoid the
need to generate cash to meet current interest payments. Accordingly, such
bonds may involve greater credit risks than bonds paying interest currently
in cash. The fund is required to accrue interest income on such
investments and to distribute such amounts at least annually to
shareholders even though such bonds do not pay current interest in cash.
Thus, it may be necessary at times for the fund to liquidate investments in
order to satisfy its dividend requirements.
To the extent the fund invests in securities in the lower rating
categories, the achievement of the fund's goals is more dependent on Putnam
Management's investment analysis than would be the case if the fund were
investing in securities in the higher rating categories. This also may be
true with respect to tax-exempt securities, as the amount of information
about the financial condition of an issuer of tax-exempt securities may not
be as extensive as that which is made available by corporations whose
securities are publicly traded.
Loan Participations
The fund may invest in "loan participations." By purchasing a loan
participation, the fund acquires some or all of the interest of a bank or
other lending institution in a loan to a particular borrower. Many such
loans are secured, and most impose restrictive covenants which must be met
by the borrower. These loans are typically made by a syndicate of banks,
represented by an agent bank which has negotiated and structured the loan
and which is responsible generally for collecting interest, principal, and
other amounts from the borrower on its own behalf and on behalf of the
other lending institutions in the syndicate, and for enforcing its and
their other rights against the borrower. Each of the lending institutions,
including the agent bank, lends to the borrower a portion of the total
amount of the loan, and retains the corresponding interest in the loan.
The fund's ability to receive payments of principal and interest and other
amounts in connection with loan participations held by it will depend
primarily on the financial condition of the borrower. The failure by the
fund to receive scheduled interest or principal payments on a loan
participation would adversely affect the income of the fund and would
likely reduce the value of its assets, which would be reflected in a
reduction in the fund's net asset value. Banks and other lending
institutions generally perform a credit analysis of the borrower before
originating a loan or participating in a lending syndicate. In selecting
the loan participations in which the fund will invest, however, Putnam
Management will not rely solely on that credit analysis, but will perform
its own investment analysis of the borrowers. Putnam Management's analysis
may include consideration of the borrower's financial strength and
managerial experience, debt coverage, additional borrowing requirements or
debt maturity schedules, changing financial conditions, and responsiveness
to changes in business conditions and interest rates. Putnam Management
will be unable to access non-public information to which other investors
in syndicated loans may have access. Because loan participations in which
the fund may invest are not generally rated by independent credit rating
agencies, a decision by the fund to invest in a particular loan
participation will depend almost exclusively on Putnam Management's, and
the original lending institution's, credit analysis of the borrower.
Investments in loan participations may be of any quality, including
"distressed" loans, and will be subject to the fund's credit quality
policy.
Loan participations may be structured in different forms, including
novations, assignments and participating interests. In a novation, the
fund assumes all of the rights of a lending institution in a loan,
including the right to receive payments of principal and interest and other
amounts directly from the borrower and to enforce its rights as a lender
directly against the borrower. The fund assumes the position of a
co-lender with other syndicate members. As an alternative, the fund may
purchase an assignment of a portion of a lender's interest in a loan. In
this case, the fund may be required generally to rely upon the assigning
bank to demand payment and enforce its rights against the borrower, but
would otherwise be entitled to all of such bank's rights in the loan. The
fund may also purchase a participating interest in a portion of the rights
of a lending institution in a loan. In such case, it will be entitled to
receive payments of principal, interest and premium, if any, but will not
generally be entitled to enforce its rights directly against the agent bank
or the borrower, and must rely for that purpose on the lending institution.
The fund may also acquire a loan participation directly by acting as a
member of the original lending syndicate.
The fund will in many cases be required to rely upon the lending
institution from which it purchases the loan participation to collect and
pass on to the fund such payments and to enforce the fund's rights under
the loan. As a result, an insolvency, bankruptcy or reorganization of the
lending institution may delay or prevent the fund from receiving principal,
interest and other amounts with respect to the underlying loan. When the
fund is required to rely upon a lending institution to pay to the fund
principal, interest and other amounts received by it, Putnam Management
will also evaluate the creditworthiness of the lending institution.
The borrower of a loan in which the fund holds a participation interest
may, either at its own election or pursuant to terms of the loan
documentation, prepay amounts of the loan from time to time. There is no
assurance that the fund will be able to reinvest the proceeds of any loan
prepayment at the same interest rate or on the same terms as those of the
original loan participation.
Corporate loans in which the fund may purchase a loan participation are
made generally to finance internal growth, mergers, acquisitions, stock
repurchases, leveraged buy-outs and other corporate activities. Under
current market conditions, most of the corporate loan participations
purchased by the fund will represent interests in loans made to finance
highly leveraged corporate acquisitions, known as "leveraged buy-out"
transactions. The highly leveraged capital structure of the borrowers in
such transactions may make such loans especially vulnerable to adverse
changes in economic or market conditions. In addition, loan participations
generally are subject to restrictions on transfer, and only limited
opportunities may exist to sell such participations in secondary markets.
As a result, the fund may be unable to sell loan participations at a time
when it may otherwise be desirable to do so or may be able to sell them
only at a price that is less than their fair market value.
Certain of the loan participations acquired by the fund may involve
revolving credit facilities under which a borrower may from time to time
borrow and repay amounts up to the maximum amount of the facility. In such
cases, the fund would have an obligation to advance its portion of such
additional borrowings upon the terms specified in the loan participation.
To the extent that the fund is committed to make additional loans under
such a participation, it will at all times hold and maintain in a
segregated account liquid assets in an amount sufficient to meet such
commitments. Certain of the loan participations acquired by the fund may
also involve loans made in foreign currencies. The fund's investment in
such participations would involve the risks of currency fluctuations
described above with respect to investments in the foreign securities.
Floating Rate and Variable Rate Demand Notes
Floating rate and variable rate demand notes and bonds may have a stated
maturity in excess of one year, but may have features that permit a holder
to demand payment of principal plus accrued interest upon a specified
number of days notice. Frequently, such obligations are secured by letters
of credit or other credit support arrangements provided by banks. The
issuer has a corresponding right, after a given period, to prepay in its
discretion the outstanding principal of the obligation plus accrued
interest upon a specific number of days notice to the holders. The interest
rate of a floating rate instrument may be based on a known lending rate,
such as a bank's prime rate, and is reset whenever such rate is adjusted.
The interest rate on a variable rate demand note is reset at specified
intervals at a market rate.
Mortgage Related and Asset-backed Securities
Mortgage-backed securities, including collateralized mortgage obligations
("CMOs") and certain stripped mortgage-backed securities represent a
participation in, or are secured by, mortgage loans. Asset-backed
securities are structured like mortgage-backed securities, but instead of
mortgage loans or interests in mortgage loans, the underlying assets may
include such items as motor vehicle installment sales or installment loan
contracts, leases of various types of real and personal property and
receivables from credit card agreements. The ability of an issuer of
asset-backed securities to enforce its security interest in the underlying
assets may be limited.
Mortgage-backed securities have yield and maturity characteristics
corresponding to the underlying assets. Unlike traditional debt
securities, which may pay a fixed rate of interest until maturity, when the
entire principal amount comes due, payments on certain mortgage-backed
securities include both interest and a partial repayment of principal.
Besides the scheduled repayment of principal, repayments of principal may
result from the voluntary prepayment, refinancing or foreclosure of the
underlying mortgage loans. If property owners make unscheduled prepayments
of their mortgage loans, these prepayments will result in early payment of
the applicable mortgage-related securities. In that event the fund may be
unable to invest the proceeds from the early payment of the
mortgage-related securities in an investment that provides as high a yield
as the mortgage-related securities. Consequently, early payment associated
with mortgage-related securities may cause these securities to experience
significantly greater price and yield volatility than that experienced by
traditional fixed-income securities. The occurrence of mortgage
prepayments is affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage and other
social and demographic conditions. During periods of falling interest
rates, the rate of mortgage prepayments tends to increase, thereby tending
to decrease the life of mortgage-related securities. During periods of
rising interest rates, the rate of mortgage prepayments usually decreases,
thereby tending to increase the life of mortgage-related securities. If
the life of a mortgage-related security is inaccurately predicted, the fund
may not be able to realize the rate of return it expected.
Mortgage-backed and asset-backed securities are less effective than other
types of securities as a means of "locking in" attractive long-term
interest rates. One reason is the need to reinvest prepayments of
principal; another is the possibility of significant unscheduled
prepayments resulting from declines in interest rates. These prepayments
would have to be reinvested at lower rates. As a result, these securities
may have less potential for capital appreciation during periods of
declining interest rates than other securities of comparable maturities,
although they may have a similar risk of decline in market value during
periods of rising interest rates. Prepayments may also significantly
shorten the effective maturities of these securities, especially during
periods of declining interest rates. Conversely, during periods of rising
interest rates, a reduction in prepayments may increase the effective
maturities of these securities, subjecting them to a greater risk of
decline in market value in response to rising interest rates than
traditional debt securities, and, therefore, potentially increasing the
volatility of the fund.
Prepayments may cause losses on securities purchased at a premium. At
times, some mortgage-backed and asset-backed securities will have higher
than market interest rates and therefore will be purchased at a premium
above their par value. Unscheduled prepayments, which are made at par, will
cause the fund to experience a loss equal to any unamortized premium.
CMOs may be issued by a U.S. government agency or instrumentality or by a
private issuer. Although payment of the principal of, and interest on, the
underlying collateral securing privately issued CMOs may be guaranteed by
the U.S. government or its agencies or instrumentalities, these CMOs
represent obligations solely of the private issuer and are not insured or
guaranteed by the U.S. government, its agencies or instrumentalities or any
other person or entity.
Prepayments could cause early retirement of CMOs. CMOs are designed to
reduce the risk of prepayment for investors by issuing multiple classes of
securities, each having different maturities, interest rates and payment
schedules, and with the principal and interest on the underlying mortgages
allocated among the several classes in various ways. Payment of interest
or principal on some classes or series of CMOs may be subject to
contingencies or some classes or series may bear some or all of the risk of
default on the underlying mortgages. CMOs of different classes or series
are generally retired in sequence as the underlying mortgage loans in the
mortgage pool are repaid. If enough mortgages are repaid ahead of
schedule, the classes or series of a CMO with the earliest maturities
generally will be retired prior to their maturities. Thus, the early
retirement of particular classes or series of a CMO would have the same
effect as the prepayment of mortgages underlying other mortgage-backed
securities. Conversely, slower than anticipated prepayments can extend the
effective maturities of CMOs, subjecting them to a greater risk of decline
in market value in response to rising interest rates than traditional debt
securities, and, therefore, potentially increasing their volatility.
Prepayments could result in losses on stripped mortgage-backed securities.
Stripped mortgage-backed securities are usually structured with two classes
that receive different portions of the interest and principal distributions
on a pool of mortgage loans. The yield to maturity on an interest only or
"IO" class of stripped mortgage-backed securities is extremely sensitive
not only to changes in prevailing interest rates but also to the rate of
principal payments (including prepayments) on the underlying assets. A
rapid rate of principal prepayments may have a measurable adverse effect on
the fund's yield to maturity to the extent it invests in IOs. If the
assets underlying the IO experience greater than anticipated prepayments of
principal, the fund may fail to recoup fully its initial investment in
these securities. Conversely, principal only or "POs" tend to increase in
value if prepayments are greater than anticipated and decline if
prepayments are slower than anticipated.
The secondary market for stripped mortgage-backed securities may be more
volatile and less liquid than that for other mortgage-backed securities,
potentially limiting the fund's ability to buy or sell those securities at
any particular time.
Structured notes
Structured notes generally are derivative instruments whose value is tied
to an underlying index or other security or asset class. Structured notes
may include, for example, notes that allow the fund to invest indirectly in
certain foreign investments in which the fund would otherwise would not be
able to directly invest, often because of restrictions imposed by local
laws.
Tax-exempt Securities
General description. As used in this SAI, the term "Tax-exempt securities"
includes debt obligations issued by a state, its political subdivisions
(for example, counties, cities, towns, villages, districts and authorities)
and their agencies, instrumentalities or other governmental units, the
interest from which is, in the opinion of bond counsel, exempt from federal
income tax and the corresponding state's personal income tax. Such
obligations are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities, such as
airports, bridges, highways, housing, hospitals, mass transportation,
schools, streets and water and sewer works. Other public purposes for
which Tax-exempt securities may be issued include the refunding of
outstanding obligations or the payment of general operating expenses.
Short-term Tax-exempt securities are generally issued by state and local
governments and public authorities as interim financing in anticipation of
tax collections, revenue receipts or bond sales to finance such public
purposes.
In addition, certain types of "private activity" bonds may be issued by
public authorities to finance projects such as privately operated housing
facilities; certain local facilities for supplying water, gas or
electricity; sewage or solid waste disposal facilities; student loans; or
public or private institutions for the construction of educational,
hospital, housing and other facilities. Such obligations are included
within the term Tax-exempt securities if the interest paid thereon is, in
the opinion of bond counsel, exempt from federal income tax and state
personal income tax (such interest may, however, be subject to federal
alternative minimum tax). Other types of private activity bonds, the
proceeds of which are used for the construction, repair or improvement of,
or to obtain equipment for, privately operated industrial or commercial
facilities, may also constitute Tax-exempt securities, although the current
federal tax laws place substantial limitations on the size of such issues.
Participation interests (Money Market Funds only). The money market funds
may invest in Tax-exempt securities either by purchasing them directly or
by purchasing certificates of accrual or similar instruments evidencing
direct ownership of interest payments or principal payments, or both, on
Tax-exempt securities, provided that, in the opinion of counsel, any
discount accruing on a certificate or instrument that is purchased at a
yield not greater than the coupon rate of interest on the related
Tax-exempt securities will be exempt from federal income tax to the same
extent as interest on the Tax-exempt securities. The money market funds
may also invest in Tax-exempt securities by purchasing from banks
participation interests in all or part of specific holdings of Tax-exempt
securities. These participations may be backed in whole or in part by an
irrevocable letter of credit or guarantee of the selling bank. The selling
bank may receive a fee from the money market funds in connection with the
arrangement. The money market funds will not purchase such participation
interests unless it receives an opinion of counsel or a ruling of the
Internal Revenue Service that interest earned by it on Tax-exempt
securities in which it holds such participation interests is exempt from
federal income tax. No money market fund expects to invest more than 5% of
its assets in participation interests.
Stand-by commitments. When the fund purchases Tax-exempt securities, it
has the authority to acquire stand-by commitments from banks and
broker-dealers with respect to those Tax-exempt securities. A stand-by
commitment may be considered a security independent of the Tax-exempt
security to which it relates. The amount payable by a bank or dealer
during the time a stand-by commitment is exercisable, absent unusual
circumstances, would be substantially the same as the market value of the
underlying Tax-exempt security to a third party at any time. The fund
expects that stand-by commitments generally will be available without the
payment of direct or indirect consideration. The fund does not expect to
assign any value to stand-by commitments.
Yields. The yields on Tax-exempt securities depend on a variety of
factors, including general money market conditions, effective marginal tax
rates, the financial condition of the issuer, general conditions of the
Tax-exempt security market, the size of a particular offering, the maturity
of the obligation and the rating of the issue. The ratings of nationally
recognized securities rating agencies represent their opinions as to the
credit quality of the Tax-exempt securities which they undertake to rate.
It should be emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, Tax-exempt securities with
the same maturity and interest rate but with different ratings may have the
same yield. Yield disparities may occur for reasons not directly related
to the investment quality of particular issues or the general movement of
interest rates and may be due to such factors as changes in the overall
demand or supply of various types of Tax-exempt securities or changes in
the investment objectives of investors. Subsequent to purchase by the
fund, an issue of Tax-exempt securities or other investments may cease to
be rated, or its rating may be reduced below the minimum rating required
for purchase by the fund. Neither event will require the elimination of an
investment from the fund's portfolio, but Putnam Management will consider
such an event in its determination of whether the fund should continue to
hold an investment in its portfolio.
"Moral obligation" bonds. The fund does not currently intend to invest in
so-called "moral obligation" bonds, where repayment is backed by a moral
commitment of an entity other than the issuer, unless the credit of the
issuer itself, without regard to the "moral obligation," meets the
investment criteria established for investments by the fund.
Municipal leases. The fund may acquire participations in lease obligations
or installment purchase contract obligations (collectively, "lease
obligations") of municipal authorities or entities. Lease obligations do
not constitute general obligations of the municipality for which the
municipality's taxing power is pledged. Certain of these lease obligations
contain "non-appropriation" clauses, which provide that the municipality
has no obligation to make lease or installment purchase payments in future
years unless money is appropriated for such purpose on a yearly basis. In
the case of a "non-appropriation" lease, the fund's ability to recover
under the lease in the event of non-appropriation or default will be
limited solely to the repossession of the leased property, and in any
event, foreclosure of that property might prove difficult.
Inverse Floaters have variable interest rates that typically move in the
opposite direction from movements in prevailing short-term interest rate
levels - rising when prevailing short-term interest rate fall, and vice
versa. The prices of inverse floaters can be considerably more volatile
than the prices of bonds with comparable maturities.
Additional risks. Securities in which the fund may invest, including
Tax-exempt securities, are subject to the provisions of bankruptcy,
insolvency and other laws affecting the rights and remedies of creditors,
such as the federal Bankruptcy Code (including special provisions related
to municipalities and other public entities), and laws, if any, that may be
enacted by Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints upon
enforcement of such obligations. There is also the possibility that, as a
result of litigation or other conditions, the power, ability or willingness
of issuers to meet their obligations for the payment of interest and
principal on their Tax-exempt securities may be materially affected.
From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on debt obligations issued by states and their political
subdivisions. Federal tax laws limit the types and amounts of tax-exempt
bonds issuable for certain purposes, especially industrial development
bonds and private activity bonds. Such limits may affect the future supply
and yields of these types of Tax-exempt securities. Further proposals
limiting the issuance of Tax-exempt securities may well be introduced in
the future. If it appeared that the availability of Tax-exempt securities
for investment by the fund and the value of the fund's portfolio could be
materially affected by such changes in law, the Trustees of the fund would
reevaluate its investment objective and policies and consider changes in
the structure of the fund or its dissolution.
Convertible Securities
Convertible securities include bonds, debentures, notes, preferred stocks
and other securities that may be converted into or exchanged for, at a
specific price or formula within a particular period of time, a prescribed
amount of common stock or other equity securities of the same or a
different issuer. Convertible securities entitle the holder to receive
interest paid or accrued on debt or dividends paid or accrued on preferred
stock until the security matures or is redeemed, converted or exchanged.
The market value of a convertible security is a function of its
"investment value" and its "conversion value." A security's "investment
value" represents the value of the security without its conversion feature
(i.e., a nonconvertible fixed income security). The investment value may
be determined by reference to its credit quality and the current value of
its yield to maturity or probable call date. At any given time, investment
value is dependent upon such factors as the general level of interest
rates, the yield of similar nonconvertible securities, the financial
strength of the issuer and the seniority of the security in the issuer's
capital structure. A security's "conversion value" is determined by
multiplying the number of shares the holder is entitled to receive upon
conversion or exchange by the current price of the underlying security.
If the conversion value of a convertible security is significantly below
its investment value, the convertible security will trade like
nonconvertible debt or preferred stock and its market value will not be
influenced greatly by fluctuations in the market price of the underlying
security. Conversely, if the conversion value of a convertible security is
near or above its investment value, the market value of the convertible
security will be more heavily influenced by fluctuations in the market
price of the underlying security.
The fund's investments in convertible securities may at times include
securities that have a mandatory conversion feature, pursuant to which the
securities convert automatically into common stock or other equity
securities at a specified date and a specified conversion ratio, or that
are convertible at the option of the issuer. Because conversion of the
security is not at the option of the holder, the fund may be required to
convert the security into the underlying common stock even at times when
the value of the underlying common stock or other equity security has
declined substantially.
The fund's investments in convertible securities, particularly securities
that are convertible into securities of an issuer other than the issuer of
the convertible security, may be illiquid. The fund may not be able to
dispose of such securities in a timely fashion or for a fair price, which
could result in losses to the fund.
Alternative Investment Strategies
Under normal market conditions, each fund seeks to remain fully invested
and to minimize its cash holdings. However, at times Putnam Management may
judge that market conditions make pursuing a fund's investment strategies
inconsistent with the best interests of its shareholders. Putnam
Management then may temporarily use alternative strategies that are mainly
designed to limit the fund's losses. In implementing these strategies, the
funds may invest primarily in debt securities, preferred stocks, U.S.
Government and agency obligations, cash or money market instruments, or any
other securities Putnam Management considers consistent with such defensive
strategies.
Money market instruments, or short-term debt instruments, consist of
obligations such as commercial paper, bank obligations (i.e., certificates
of deposit and bankers' acceptances), repurchase agreements and various
government obligations, such as Treasury bills. These instruments have a
remaining maturity of one year or less and are generally of high credit
quality. Money market instruments may be structured to be, or may employ a
trust or other form so that they are, eligible investments for money market
funds. For example, put features can be used to modify the maturity of a
security or interest rate adjustment features can be used to enhance price
stability. If a structure fails to function as intended, adverse tax or
investment consequences may result. Neither the Internal Revenue Service
(IRS) nor any other regulatory authority has ruled definitively on certain
legal issues presented by certain structured securities. Future tax or
other regulatory determinations could adversely affect the value,
liquidity, or tax treatment of the income received from these securities or
the nature and timing of distributions made by the funds.
Private Placements and Restricted Securities
The fund may invest in securities that are purchased in private placements
and, accordingly, are subject to restrictions on resale as a matter of
contract or under federal securities laws. Because there may be relatively
few potential purchasers for such investments, especially under adverse
market or economic conditions or in the event of adverse changes in the
financial condition of the issuer, the fund could find it more difficult to
sell such securities when Putnam Management believes it advisable to do so
or may be able to sell such securities only at prices lower than if such
securities were more widely held. At times, it may also be more difficult
to determine the fair value of such securities for purposes of computing
the fund's net asset value.
While such private placements may often offer attractive opportunities for
investment not otherwise available on the open market, the securities so
purchased are often "restricted securities," i.e., securities which
cannot be sold to the public without registration under the Securities Act
of 1933 or the availability of an exemption from registration (such as
Rules 144 or 144A), or which are "not readily marketable" because they are
subject to other legal or contractual delays in or restrictions on resale.
The absence of a trading market can make it difficult to ascertain a market
value for illiquid investments. Disposing of illiquid investments may
involve time-consuming negotiation and legal expenses, and it may be
difficult or impossible for the fund to sell them promptly at an acceptable
price. The fund may have to bear the extra expense of registering such
securities for resale and the risk of substantial delay in effecting such
registration. Also market quotations are less readily available. The
judgment of Putnam Management may at times play a greater role in valuing
these securities than in the case of publicly traded securities.
Generally speaking, restricted securities may be sold only to qualified
institutional buyers, or in a privately negotiated transaction to a limited
number of purchasers, or in limited quantities after they have been held
for a specified period of time and other conditions are met pursuant to an
exemption from registration, or in a public offering for which a
registration statement is in effect under the Securities Act of 1933. The
fund may be deemed to be an "underwriter" for purposes of the Securities
Act of 1933 when selling restricted securities to the public, and in such
event the fund may be liable to purchasers of such securities if the
registration statement prepared by the issuer, or the prospectus forming a
part of it, is materially inaccurate or misleading. The SEC Staff
currently takes the view that any delegation by the Trustees of the
authority to determine that a restricted security is readily marketable (as
described in the investment restrictions of the funds) must be pursuant to
written procedures established by the Trustees and the Trustees have
delegated such authority to Putnam Management.
Futures Contracts and Related Options
Subject to applicable law the fund may invest without limit in futures
contracts and related options for hedging and non-hedging purposes, such as
to manage the effective duration of the fund's portfolio or as a substitute
for direct investment. A financial futures contract sale creates an
obligation by the seller to deliver the type of financial instrument called
for in the contract in a specified delivery month for a stated price. A
financial futures contract purchase creates an obligation by the purchaser
to take delivery of the type of financial instrument called for in the
contract in a specified delivery month at a stated price. The specific
instruments delivered or taken, respectively, at settlement date are not
determined until on or near that date. The determination is made in
accordance with the rules of the exchange on which the futures contract
sale or purchase was made. Futures contracts are traded in the United
States only on commodity exchanges or boards of trade -- known as "contract
markets" -- approved for such trading by the Commodity Futures Trading
Commission (the "CFTC"), and must be executed through a futures commission
merchant or brokerage firm which is a member of the relevant contract
market.
Although futures contracts (other than index futures) by their terms call
for actual delivery or acceptance of commodities or securities, in most
cases the contracts are closed out before the settlement date without the
making or taking of delivery. Closing out a futures contract sale is
effected by purchasing a futures contract for the same aggregate amount of
the specific type of financial instrument or commodity with the same
delivery date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid the
difference and realizes a gain. Conversely, if the price of the offsetting
purchase exceeds the price of the initial sale, the seller realizes a loss.
If the fund is unable to enter into a closing transaction, the amount of
the fund's potential loss is unlimited. The closing out of a futures
contract purchase is effected by the purchaser's entering into a futures
contract sale. If the offsetting sale price exceeds the purchase price,
the purchaser realizes a gain, and if the purchase price exceeds the
offsetting sale price, he realizes a loss. In general, 40% of the gain or
loss arising from the closing out of a futures contract traded on an
exchange approved by the CFTC is treated as short-term gain or loss, and
60% is treated as long-term gain or loss.
Unlike when the fund purchases or sells a security, no price is paid or
received by the fund upon the purchase or sale of a futures contract. Upon
entering into a contract, the fund is required to deposit with its
custodian in a segregated account in the name of the futures broker an
amount of liquid assets. This amount is known as "initial margin." The
nature of initial margin in futures transactions is different from that of
margin in security transactions in that futures contract margin does not
involve the borrowing of funds to finance the transactions. Rather,
initial margin is similar to a performance bond or good faith deposit which
is returned to the fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied. Futures contracts also
involve brokerage costs.
Subsequent payments, called "variation margin" or "maintenance margin," to
and from the broker (or the custodian) are made on a daily basis as the
price of the underlying security or commodity fluctuates, making the long
and short positions in the futures contract more or less valuable, a
process known as "marking to the market." For example, when the fund has
purchased a futures contract on a security and the price of the underlying
security has risen, that position will have increased in value and the fund
will receive from the broker a variation margin payment based on that
increase in value. Conversely, when the fund has purchased a security
futures contract and the price of the underlying security has declined, the
position would be less valuable and the fund would be required to make a
variation margin payment to the broker.
The fund may elect to close some or all of its futures positions at any
time prior to their expiration in order to reduce or eliminate a hedge
position then currently held by the fund. The fund may close its positions
by taking opposite positions which will operate to terminate the fund's
position in the futures contracts. Final determinations of variation
margin are then made, additional cash is required to be paid by or released
to the fund, and the fund realizes a loss or a gain. Such closing
transactions involve additional commission costs.
The fund does not intend to purchase or sell futures or related options for
other than hedging purposes, if, as a result, the sum of the initial margin
deposits on the fund's existing futures and related options positions and
premiums paid for outstanding options on futures contracts would exceed 5%
of the fund's net assets.
Options on futures contracts. The fund may purchase and write call and put
options on futures contracts it may buy or sell and enter into closing
transactions with respect to such options to terminate existing positions.
In return for the premium paid, options on futures contracts give the
purchaser the right to assume a position in a futures contract at the
specified option exercise price at any time during the period of the
option. The fund may use options on futures contracts in lieu of writing
or buying options directly on the underlying securities or purchasing and
selling the underlying futures contracts. For example, to hedge against a
possible decrease in the value of its portfolio securities, the fund may
purchase put options or write call options on futures contracts rather than
selling futures contracts. Similarly, the fund may purchase call options
or write put options on futures contracts as a substitute for the purchase
of futures contracts to hedge against a possible increase in the price of
securities which the fund expects to purchase. Such options generally
operate in the same manner as options purchased or written directly on the
underlying investments.
As with options on securities, the holder or writer of an option may
terminate his position by selling or purchasing an offsetting option.
There is no guarantee that such closing transactions can be effected.
The fund will be required to deposit initial margin and maintenance margin
with respect to put and call options on futures contracts written by it
pursuant to brokers' requirements similar to those described above in
connection with the discussion of futures contracts.
Risks of transactions in futures contracts and related options. Successful
use of futures contracts by the fund is subject to Putnam Management's
ability to predict movements in various factors affecting securities
markets, including interest rates. Compared to the purchase or sale of
futures contracts, the purchase of call or put options on futures contracts
involves less potential risk to the fund because the maximum amount at risk
is the premium paid for the options (plus transaction costs). However,
there may be circumstances when the purchase of a call or put option on a
futures contract would result in a loss to the fund when the purchase or
sale of a futures contract would not, such as when there is no movement in
the prices of the hedged investments. The writing of an option on a
futures contract involves risks similar to those risks relating to the sale
of futures contracts.
The use of options and futures strategies also involves the risk of
imperfect correlation among movements in the prices of the securities
underlying the futures and options purchased and sold by the fund, of the
options and futures contracts themselves, and, in the case of hedging
transactions, of the securities which are the subject of a hedge. The
successful use of these strategies further depends on the ability of Putnam
Management to forecast interest rates and market movements correctly.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain market clearing
facilities inadequate, and thereby result in the institution by exchanges
of special procedures which may interfere with the timely execution of
customer orders.
To reduce or eliminate a position held by the fund, the fund may seek to
close out such position. The ability to establish and close out positions
will be subject to the development and maintenance of a liquid secondary
market. It is not certain that this market will develop or continue to
exist for a particular futures contract or option. Reasons for the absence
of a liquid secondary market on an exchange include the following: (i)
there may be insufficient trading interest in certain contracts or options;
(ii) restrictions may be imposed by an exchange on opening transactions or
closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
contracts or options, or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the
facilities of an exchange or a clearing corporation may not at all times be
adequate to handle current trading volume; or (vi) one or more exchanges
could, for economic or other reasons, decide or be compelled at some future
date to discontinue the trading of contracts or options (or a particular
class or series of contracts or options), in which event the secondary
market on that exchange for such contracts or options (or in the class or
series of contracts or options) would cease to exist, although outstanding
contracts or options on the exchange that had been issued by a clearing
corporation as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
U.S. Treasury security futures contracts and options. U.S. Treasury
security futures contracts require the seller to deliver, or the purchaser
to take delivery of, the type of U.S. Treasury security called for in the
contract at a specified date and price. Options on U.S. Treasury security
futures contracts give the purchaser the right in return for the premium
paid to assume a position in a U.S. Treasury security futures contract at
the specified option exercise price at any time during the period of the
option.
Successful use of U.S. Treasury security futures contracts by the fund is
subject to Putnam Management's ability to predict movements in the
direction of interest rates and other factors affecting markets for debt
securities. For example, if the fund has sold U.S. Treasury security
futures contracts in order to hedge against the possibility of an increase
in interest rates which would adversely affect securities held in its
portfolio, and the prices of the fund's securities increase instead as a
result of a decline in interest rates, the fund will lose part or all of
the benefit of the increased value of its securities which it has hedged
because it will have offsetting losses in its futures positions. In
addition, in such situations, if the fund has insufficient cash, it may
have to sell securities to meet daily maintenance margin requirements at a
time when it may be disadvantageous to do so.
There is also a risk that price movements in U.S. Treasury security futures
contracts and related options will not correlate closely with price
movements in markets for particular securities. For example, if the fund
has hedged against a decline in the values of tax-exempt securities held by
it by selling Treasury security futures and the values of Treasury
securities subsequently increase while the values of its tax-exempt
securities decrease, the fund would incur losses on both the Treasury
security futures contracts written by it and the tax-exempt securities held
in its portfolio.
Index futures contracts. An index futures contract is a contract to buy or
sell units of an index at a specified future date at a price agreed upon
when the contract is made. Entering into a contract to buy units of an
index is commonly referred to as buying or purchasing a contract or holding
a long position in the index. Entering into a contract to sell units of an
index is commonly referred to as selling a contract or holding a short
position. A unit is the current value of the index. The fund may enter
into stock index futures contracts, debt index futures contracts, or other
index futures contracts appropriate to its objective(s). The fund may also
purchase and sell options on index futures contracts.
For example, the Standard & Poor's 500 Composite Stock Price Index ("S&P
500") is composed of 500 selected common stocks, most of which are listed
on the New York Stock Exchange. The S&P 500 assigns relative weightings to
the common stocks included in the Index, and the value fluctuates with
changes in the market values of those common stocks. In the case of the
S&P 500, contracts are to buy or sell 500 units. Thus, if the value of the
S&P 500 were $150, one contract would be worth $75,000 (500 units x $150).
The stock index futures contract specifies that no delivery of the actual
stocks making up the index will take place. Instead, settlement in cash
must occur upon the termination of the contract, with the settlement being
the difference between the contract price and the actual level of the stock
index at the expiration of the contract. For example, if the fund enters
into a futures contract to buy 500 units of the S&P 500 at a specified
future date at a contract price of $150 and the S&P 500 is at $154 on that
future date, the fund will gain $2,000 (500 units x gain of $4). If the
fund enters into a futures contract to sell 500 units of the stock index at
a specified future date at a contract price of $150 and the S&P 500 is at
$152 on that future date, the fund will lose $1,000 (500 units x loss of
$2).
There are several risks in connection with the use by the fund of index
futures. One risk arises because of the imperfect correlation between
movements in the prices of the index futures and movements in the prices of
securities which are the subject of the hedge. Putnam Management will,
however, attempt to reduce this risk by buying or selling, to the extent
possible, futures on indices the movements of which will, in its judgment,
have a significant correlation with movements in the prices of the
securities sought to be hedged.
Successful use of index futures by the fund is also subject to Putnam
Management's ability to predict movements in the direction of the market.
For example, it is possible that, where the fund has sold futures to hedge
its portfolio against a decline in the market, the index on which the
futures are written may advance and the value of securities held in the
fund's portfolio may decline. If this occurred, the fund would lose money
on the futures and also experience a decline in value in its portfolio
securities. It is also possible that, if the fund has hedged against the
possibility of a decline in the market adversely affecting securities held
in its portfolio and securities prices increase instead, the fund will lose
part or all of the benefit of the increased value of those securities it
has hedged because it will have offsetting losses in its futures positions.
In addition, in such situations, if the fund has insufficient cash, it may
have to sell securities to meet daily variation margin requirements at a
time when it is disadvantageous to do so.
In addition to the possibility that there may be an imperfect correlation,
or no correlation at all, between movements in the index futures and the
portion of the portfolio being hedged, the prices of index futures may not
correlate perfectly with movements in the underlying index due to certain
market distortions. First, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through offsetting transactions which could distort the normal
relationship between the index and futures markets. Second, margin
requirements in the futures market are less onerous than margin
requirements in the securities market, and as a result the futures market
may attract more speculators than the securities market does. Increased
participation by speculators in the futures market may also cause temporary
price distortions. Due to the possibility of price distortions in the
futures market and also because of the imperfect correlation between
movements in the index and movements in the prices of index futures, even a
correct forecast of general market trends by Putnam Management may still
not result in a profitable position over a short time period.
Options on stock index futures. Options on index futures are similar to
options on securities except that options on index futures give the
purchaser the right, in return for the premium paid, to assume a position
in an index futures contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise price at any
time during the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to the holder
of the option will be accompanied by delivery of the accumulated balance in
the writer's futures margin account which represents the amount by which
the market price of the index futures contract, at exercise, exceeds (in
the case of a call) or is less than (in the case of a put) the exercise
price of the option on the index future. If an option is exercised on the
last trading day prior to its expiration date, the settlement will be made
entirely in cash equal to the difference between the exercise price of the
option and the closing level of the index on which the future is based on
the expiration date. Purchasers of options who fail to exercise their
options prior to the exercise date suffer a loss of the premium paid.
Options on Indices
As an alternative to purchasing call and put options on index futures, the
fund may purchase and sell call and put options on the underlying indices
themselves. Such options would be used in a manner identical to the use of
options on index futures.
Index Warrants
The fund may purchase put warrants and call warrants whose values vary
depending on the change in the value of one or more specified securities
indices ("index warrants"). Index warrants are generally issued by banks
or other financial institutions and give the holder the right, at any time
during the term of the warrant, to receive upon exercise of the warrant a
cash payment from the issuer based on the value of the underlying index at
the time of exercise. In general, if the value of the underlying index
rises above the exercise price of the index warrant, the holder of a call
warrant will be entitled to receive a cash payment from the issuer upon
exercise based on the difference between the value of the index and the
exercise price of the warrant; if the value of the underlying index falls,
the holder of a put warrant will be entitled to receive a cash payment from
the issuer upon exercise based on the difference between the exercise price
of the warrant and the value of the index. The holder of a warrant would
not be entitled to any payments from the issuer at any time when, in the
case of a call warrant, the exercise price is greater than the value of the
underlying index, or, in the case of a put warrant, the exercise price is
less than the value of the underlying index. If the fund were not to
exercise an index warrant prior to its expiration, then the fund would lose
the amount of the purchase price paid by it for the warrant.
The fund will normally use index warrants in a manner similar to its use of
options on securities indices. The risks of the fund's use of index
warrants are generally similar to those relating to its use of index
options. Unlike most index options, however, index warrants are issued in
limited amounts and are not obligations of a regulated clearing agency, but
are backed only by the credit of the bank or other institution which issues
the warrant. Also, index warrants generally have longer terms than index
options. Although the fund will normally invest only in exchange-listed
warrants, index warrants are not likely to be as liquid as certain index
options backed by a recognized clearing agency. In addition, the terms of
index warrants may limit the fund's ability to exercise the warrants at
such time, or in such quantities, as the fund would otherwise wish to do.
Short-term Trading
In seeking the fund's objective(s), Putnam Management will buy or sell
portfolio securities whenever Putnam Management believes it appropriate to
do so. From time to time the fund will buy securities intending to seek
short-term trading profits. A change in the securities held by the fund is
known as "portfolio turnover" and generally involves some expense to the
fund. This expense may include brokerage commissions or dealer markups and
other transaction costs on both the sale of securities and the reinvestment
of the proceeds in other securities. If sales of portfolio securities
cause the fund to realize net short-term capital gains, such gains will be
taxable as ordinary income. As a result of the fund's investment policies,
under certain market conditions the fund's portfolio turnover rate may be
higher than that of other mutual funds. Portfolio turnover rate for a
fiscal year is the ratio of the lesser of purchases or sales of portfolio
securities to the monthly average of the value of portfolio securities --
excluding securities whose maturities at acquisition were one year or less.
The fund's portfolio turnover rate is not a limiting factor when Putnam
Management considers a change in the fund's portfolio.
Securities Loans
The fund may make secured loans of its portfolio securities, on either a
short-term or long-term basis, amounting to not more than 25% of its total
assets, thereby realizing additional income. The risks in lending
portfolio securities, as with other extensions of credit, consist of
possible delay in recovery of the securities or possible loss of rights in
the collateral should the borrower fail financially. As a matter of
policy, securities loans are made to broker-dealers pursuant to agreements
requiring that the loans be continuously secured by collateral consisting
of cash or short-term debt obligations at least equal at all times to the
value of the securities on loan, "marked-to-market" daily. The borrower
pays to the fund an amount equal to any dividends or interest received on
securities lent. The fund retains all or a portion of the interest
received on investment of the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to consent, with respect to
the loaned securities may pass to the borrower, the fund retains the right
to call the loans at any time on reasonable notice, and it will do so to
enable the fund to exercise voting rights on any matters materially
affecting the investment. The fund may also call such loans in order to
sell the securities.
Repurchase Agreements
The fund, unless it is a money market fund, may enter into repurchase
agreements, amounting to not more than 25% of its total assets. Money
market funds may invest without limit in repurchase agreements. A
repurchase agreement is a contract under which the fund acquires a security
for a relatively short period (usually not more than one week) subject to
the obligation of the seller to repurchase and the fund to resell such
security at a fixed time and price (representing the fund's cost plus
interest). It is the fund's present intention to enter into repurchase
agreements only with commercial banks and registered broker-dealers and
only with respect to obligations of the U.S. government or its agencies or
instrumentalities. Repurchase agreements may also be viewed as loans made
by the fund which are collateralized by the securities subject to
repurchase. Putnam Management will monitor such transactions to ensure
that the value of the underlying securities will be at least equal at all
times to the total amount of the repurchase obligation, including the
interest factor. If the seller defaults, the fund could realize a loss on
the sale of the underlying security to the extent that the proceeds of the
sale including accrued interest are less than the resale price provided in
the agreement including interest. In addition, if the seller should be
involved in bankruptcy or insolvency proceedings, the fund may incur delay
and costs in selling the underlying security or may suffer a loss of
principal and interest if the fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's estate.
Pursuant to an exemptive order issued by the Securities and Exchange
Commission, the fund may transfer uninvested cash balances into a joint
account, along with cash of other Putnam funds and certain other accounts.
These balances may be invested in one or more repurchase agreements and/or
short-term money market instruments.
Forward Commitments
The fund may enter into contracts to purchase securities for a fixed price
at a future date beyond customary settlement time ("forward commitments")
if the fund sets aside, on the books and records of its custodian, liquid
assets in an amount sufficient to meet the purchase price, or if the fund
enters into offsetting contracts for the forward sale of other securities
it owns. In the case of to-be-announced ("TBA") purchase commitments, the
unit price and the estimated principal amount are established when the fund
enters into a contract, with the actual principal amount being within a
specified range of the estimate. Forward commitments may be considered
securities in themselves, and involve a risk of loss if the value of the
security to be purchased declines prior to the settlement date, which risk
is in addition to the risk of decline in the value of the fund's other
assets. Where such purchases are made through dealers, the fund relies on
the dealer to consummate the sale. The dealer's failure to do so may
result in the loss to the fund of an advantageous yield or price. Although
the fund will generally enter into forward commitments with the intention
of acquiring securities for its portfolio or for delivery pursuant to
options contracts it has entered into, the fund may dispose of a commitment
prior to settlement if Putnam Management deems it appropriate to do so.
The fund may realize short-term profits or losses upon the sale of forward
commitments.
The fund may enter into TBA sale commitments to hedge its portfolio
positions or to sell securities it owns under delayed delivery
arrangements. Proceeds of TBA sale commitments are not received until the
contractual settlement date. During the time a TBA sale commitment is
outstanding, equivalent deliverable securities, or an offsetting TBA
purchase commitment deliverable on or before the sale commitment date, are
held as "cover" for the transaction. Unsettled TBA sale commitments are
valued at current market value of the underlying securities. If the TBA
sale commitment is closed through the acquisition of an offsetting purchase
commitment, the fund realizes a gain or loss on the commitment without
regard to any unrealized gain or loss on the underlying security. If the
fund delivers securities under the commitment, the fund realizes a gain or
loss from the sale of the securities based upon the unit price established
at the date the commitment was entered into.
Swap Agreements
The fund may enter into swap agreements and other types of over-the-counter
transactions with broker-dealers or other financial institutions.
Depending on their structures, swap agreements may increase or decrease the
fund's exposure to long-or short-term interest rates (in the United States
or abroad), foreign currency values, mortgage securities, corporate
borrowing rates, or other factors such as security prices or inflation
rates. The value of the fund's swap positions would increase or decrease
depending on the changes in value of the underlying rates, currency values,
or other indices or measures. The fund's ability to engage in certain swap
transactions may be limited by tax considerations.
The fund's ability to realize a profit from such transactions will depend
on the ability of the financial institutions with which it enters into the
transactions to meet their obligations to the fund. Under certain
circumstances, suitable transactions may not be available to the fund, or
the fund may be unable to close out its position under such transactions at
the same time, or at the same price, as if it had purchased comparable
publicly traded securities.
Securities of Other Investment Companies
Securities of other investment companies, including shares of closed-end
investment companies, unit investment trusts and open-end investment
companies, represent interests in professionally managed portfolios that
may invest in any type of instrument. These types of instruments are often
structured to perform in a similar fashion to a broad based securities
index. Investing in these types of securities involves substantially the
same risks as investing directly in the underlying instruments, but may
involve additional expenses at the investment company-level, such as
portfolio management fees and operating expenses. In addition, these types
of investments involve the risk that they will not perform in exactly the
same fashion, or in response to the same factors, as the index or
underlying instruments. Certain types of investment companies, such as
closed-end investment companies, issue a fixed number of shares that trade
on a stock exchange or over-the-counter at a premium or a discount to their
net asset value. Others are continuously offered at net asset value, but
may also be traded in the secondary market. The extent to which a fund can
invest in securities of other investment companies is limited by federal
securities laws.
Derivatives
Certain of the instruments in which the fund may invest, such as futures
contracts, options and forward contracts, are considered to be
"derivatives." Derivatives are financial instruments whose value depends
upon, or is derived from, the value of an underlying asset, such as a
security or an index. Further information about these instruments and the
risks involved in their use is included elsewhere in the prospectus or in
this SAI. The fund's use of derivatives may cause the fund to recognize
higher amounts of short-term capital gains, generally taxed to shareholders
at ordinary income tax rates.
TAXES
Taxation of the fund. The fund intends to qualify each year as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986,
as amended (the "Code"). In order to qualify for the special tax treatment
accorded regulated investment companies and their shareholders, the fund
must, among other things:
(a) derive at least 90% of its gross income from dividends, interest,
payments with respect to certain securities loans, and gains from the sale
of stock, securities and foreign currencies, or other income (including but
not limited to gains from options, futures, or forward contracts) derived
with respect to its business of investing in such stock, securities, or
currencies;
(b) distribute with respect to each taxable year at least 90% of the sum of
its taxable net investment income, its net tax-exempt income, and the
excess, if any, of net short-term capital gains over net long-term capital
losses for such year; and
(c) diversify its holdings so that, at the end of each fiscal quarter, (i)
at least 50% of the market value of the fund's assets is represented by
cash and cash items, U.S. government securities, securities of other
regulated investment companies, and other securities limited in respect of
any one issuer to a value not greater than 5% of the value of the fund's
total assets and to not more than 10% of the outstanding voting securities
of such issuer, and (ii) not more than 25% of the value of its assets is
invested in the securities (other than those of the U.S. Government or
other regulated investment companies) of any one issuer or of two or more
issuers which the fund controls and which are engaged in the same, similar,
or related trades or businesses.
If the fund qualifies as a regulated investment company that is accorded
special tax treatment, the fund will not be subject to federal income tax
on income paid to its shareholders in the form of dividends (including
capital gain dividends).
If the fund failed to qualify as a regulated investment company accorded
special tax treatment in any taxable year, the fund would be subject to tax
on its taxable income at corporate rates, and all distributions from
earnings and profits, including any distributions of net tax-exempt income
and net long-term capital gains, would be taxable to shareholders as
ordinary income. In addition, the fund could be required to recognize
unrealized gains, pay substantial taxes and interest and make substantial
distributions before requalifying as a regulated investment company that is
accorded special tax treatment.
If the fund fails to distribute in a calendar year substantially all of its
ordinary income for such year and substantially all of its capital gain net
income for the one-year period ending October 31 (or later if the fund is
permitted so to elect and so elects), plus any retained amount from the
prior year, the fund will be subject to a 4% excise tax on the
undistributed amounts. A dividend paid to shareholders by the fund in
January of a year generally is deemed to have been paid by the fund on
December 31 of the preceding year, if the dividend was declared and payable
to shareholders of record on a date in October, November or December of
that preceding year. The fund intends generally to make distributions
sufficient to avoid imposition of the 4% excise tax.
Fund distributions. Distributions from the fund (other than
exempt-interest dividends, as discussed below) will be taxable to
shareholders as ordinary income to the extent derived from the fund's
investment income and net short-term gains. Distributions of net capital
gains (that is, the excess of net gains from capital assets held more than
one year over net losses from capital assets held for not more than one
year) will be taxable to shareholders as such, regardless of how long a
shareholder has held the shares in the fund.
Exempt-interest dividends. The fund will be qualified to pay
exempt-interest dividends to its shareholders only if, at the close of each
quarter of the fund's taxable year, at least 50% of the total value of the
fund's assets consists of obligations the interest on which is exempt from
federal income tax. Distributions that the fund properly designates as
exempt-interest dividends are treated as interest excludable from
shareholders' gross income for federal income tax purposes but may be
taxable for federal alternative minimum tax purposes and for state and
local purposes. If the fund intends to be qualified to pay exempt-interest
dividends, the fund may be limited in its ability to enter into taxable
transactions involving forward commitments, repurchase agreements,
financial futures and options contracts on financial futures, tax-exempt
bond indices and other assets.
Part or all of the interest on indebtedness, if any, incurred or continued
by a shareholder to purchase or carry shares of the fund paying
exempt-interest dividends is not deductible. The portion of interest that
is not deductible is equal to the total interest paid or accrued on the
indebtedness, multiplied by the percentage of the fund's total
distributions (not including distributions from net long-term capital
gains) paid to the shareholder that are exempt-interest dividends. Under
rules used by the Internal Revenue Service to determine when borrowed funds
are considered used for the purpose of purchasing or carrying particular
assets, the purchase of shares may be considered to have been made with
borrowed funds even though such funds are not directly traceable to the
purchase of shares.
In general, exempt-interest dividends, if any, attributable to interest
received on certain private activity obligations and certain industrial
development bonds will not be tax-exempt to any shareholders who are
"substantial users" of the facilities financed by such obligations or bonds
or who are "related persons" of such substantial users.
The fund which is qualified to pay exempt-interest dividends will inform
investors within 60 days of the fund's fiscal year-end of the percentage of
its income distributions designated as tax-exempt. The percentage is
applied uniformly to all distributions made during the year. The
percentage of income designated as tax-exempt for any particular
distribution may be substantially different from the percentage of the
fund's income that was tax-exempt during the period covered by the
distribution.
Hedging transactions. If the fund engages in hedging transactions,
including hedging transactions in options, futures contracts, and
straddles, or other similar transactions, it will be subject to special tax
rules (including constructive sale, mark-to-market, straddle, wash sale,
and short sale rules), the effect of which may be to accelerate income to
the fund, defer losses to the fund, cause adjustments in the holding
periods of the fund's securities, convert long-term capital gains into
short-term capital gains or convert short-term capital losses into
long-term capital losses. These rules could therefore affect the amount,
timing and character of distributions to shareholders. The fund will
endeavor to make any available elections pertaining to such transactions in
a manner believed to be in the best interests of the fund.
Certain of the fund's hedging activities (including its transactions, if
any, in foreign currencies or foreign currency-denominated instruments) are
likely to produce a difference between its book income and its taxable
income. If the fund's book income exceeds its taxable income, the
distribution (if any) of such excess will be treated as (i) a dividend to
the extent of the fund's remaining earnings and profits (including earnings
and profits arising from tax-exempt income), (ii) thereafter as a return of
capital to the extent of the recipient's basis in the shares, and (iii)
thereafter as gain from the sale or exchange of a capital asset. If the
fund's book income is less than its taxable income, the fund could be
required to make distributions exceeding book income to qualify as a
regulated investment company that is accorded special tax treatment.
Return of capital distributions. If the fund makes a distribution to you
in excess of its current and accumulated "earnings and profits" in any
taxable year, the excess distribution will be treated as a return of
capital to the extent of your tax basis in your shares, and thereafter as
capital gain. A return of capital is not taxable, but it reduces your tax
basis in your shares, thus reducing any loss or increasing any gain on a
subsequent taxable disposition by you of your shares.
Dividends and distributions on the fund's shares are generally subject to
federal income tax as described herein to the extent they do not exceed the
fund's realized income and gains, even though such dividends and
distributions may economically represent a return of a particular
shareholder's investment. Such distributions are likely to occur in
respect of shares purchased at a time when the fund's net asset value
reflects gains that are either unrealized, or realized but not distributed.
Securities issued or purchased at a discount. The fund's investment in
securities issued at a discount and certain other obligations will (and
investments in securities purchased at a discount may) require the fund to
accrue and distribute income not yet received. In order to generate
sufficient cash to make the requisite distributions, the fund may be
required to sell securities in its portfolio that it otherwise would have
continued to hold.
Capital loss carryover. Distributions from capital gains are generally
made after applying any available capital loss carryovers. The amounts and
expiration dates of any capital loss carryovers available to the fund are
shown in Note 1 (Federal income taxes) to the financial statements included
in Part I of this SAI or incorporated by reference into this SAI.
Foreign currency-denominated securities and related hedging transactions.
The fund's transactions in foreign currencies, foreign currency-denominated
debt securities and certain foreign currency options, futures contracts and
forward contracts (and similar instruments) may give rise to ordinary
income or loss to the extent such income or loss results from fluctuations
in the value of the foreign currency concerned.
If more than 50% of the fund's assets at year end consists of the
securities of foreign corporations, the fund may elect to permit
shareholders to claim a credit or deduction on their income tax returns for
their pro rata portion of qualified taxes paid by the fund to foreign
countries in respect of foreign securities the fund has held for at least
the minimum period specified in the Code. In such a case, shareholders
will include in gross income from foreign sources their pro rata shares of
such taxes. A shareholder's ability to claim a foreign tax credit or
deduction in respect of foreign taxes paid by the fund may be subject to
certain limitations imposed by the Code, as a result of which a shareholder
may not get a full credit or deduction for the amount of such taxes. In
particular, shareholders must hold their fund shares (without protection
from risk of loss) on the ex-dividend date and for at least 15 additional
days during the 30-day period surrounding the ex-dividend date to be
eligible to claim a foreign tax credit with respect to a given dividend.
Shareholders who do not itemize on their federal income tax returns may
claim a credit (but no deduction) for such foreign taxes.
Investment by the fund in "passive foreign investment companies" could
subject the fund to a U.S. federal income tax or other charge on the
proceeds from the sale of its investment in such a company; however, this
tax can be avoided by making an election to mark such investments to market
annually or to treat the passive foreign investment company as a "qualified
electing fund."
A "passive foreign investment company" is any foreign corporation: (i) 75
percent or more of the income of which for the taxable year is passive
income, or (ii) the average percentage of the assets of which (generally by
value, but by adjusted tax basis in certain cases) that produce or are held
for the production of passive income is at least 50 percent. Generally,
passive income for this purpose means dividends, interest (including income
equivalent to interest), royalties, rents, annuities, the excess of gains
over losses from certain property transactions and commodities
transactions, and foreign currency gains. Passive income for this purpose
does not include rents and royalties received by the foreign corporation
from active business and certain income received from related persons.
Sale or redemption of shares. The sale, exchange or redemption of fund
shares may give rise to a gain or loss. In general, any gain or loss
realized upon a taxable disposition of shares will be treated as long-term
capital gain or loss if the shares have been held for more than 12 months.
Otherwise the gain or loss on the sale, exchange or redemption of fund
shares will be treated as short-term capital gain or loss. However, if a
shareholder sells shares at a loss within six months of purchase, any loss
will be disallowed for Federal income tax purposes to the extent of any
exempt-interest dividends received on such shares. In addition, any loss
(not already disallowed as provided in the preceding sentence) realized
upon a taxable disposition of shares held for six months or less will be
treated as long-term, rather than short-term, to the extent of any
long-term capital gain distributions received by the shareholder with
respect to the shares. All or a portion of any loss realized upon a
taxable disposition of fund shares will be disallowed if other shares of
the same fund are purchased within 30 days before or after the disposition.
In such a case, the basis of the newly purchased shares will be adjusted
to reflect the disallowed loss.
Shares purchased through tax-qualified plans. Special tax rules apply to
investments though defined contribution plans and other tax-qualified
plans. Shareholders should consult their tax adviser to determine the
suitability of shares of a fund as an investment through such plans and the
precise effect of an investment on their particular tax situation.
Backup withholding. The fund generally is required to withhold and remit
to the U.S. Treasury 31% of the taxable dividends and other distributions
paid to any individual shareholder who fails to furnish the fund with a
correct taxpayer identification number (TIN), who has under-reported
dividends or interest income, or who fails to certify to the fund that he
or she is not subject to such withholding.
The Internal Revenue Service recently revised its regulations affecting the
application to foreign investors of the back-up withholding and withholding
tax rules described above. The new regulations will generally be effective
for payments made after December 31, 2000 (although transition rules will
apply). In some circumstances, the new rules will increase the
certification and filing requirements imposed on foreign investors in order
to qualify for exemption from the 31% back-up withholding tax rates under
income tax treaties. Foreign investors in a fund should consult their tax
advisers with respect to the potential application of these new
regulations.
MANAGEMENT
Trustees Name (Age)
John A. Hill (58), Chairman and Trustee. Chairman and Managing Director,
First Reserve Corporation (a registered investment adviser investing in
companies in the world-wide energy industry on behalf of institutional
investors). Director of Snyder Oil Corporation, TransMontaigne Oil Company
and various private companies owned by First Reserve Corporation, and
Member of the Board of Advisors of Fund Directors.
Jameson A. Baxter (56), Trustee. President, Baxter Associates, Inc. (a
management consulting and private investments firm). Director of ASHTA
Chemicals, Inc., Banta Corporation (printing and digital imaging), and
Ryerson Tull, Inc. (America's largest steel service corporation). Chairman
Emeritus of the Board of Trustees, Mount Holyoke College.
+Hans H. Estin (72), Trustee. Chartered Financial Analyst and Vice
Chairman, North American Management Corp. (a registered investment
adviser).
Ronald J. Jackson (56), Trustee. Former Chairman, President and Chief
Executive Officer of Fisher-Price, Inc. (a major toy manufacturer).
*Paul L. Joskow (53), Trustee. Professor of Economics and Management and
Director of the Center for Energy and Environmental Policy Research,
Massachusetts Institute of Technology. Director, New England Electric
System (a public utility holding company), State Farm Indemnity Company (an
automobile insurance company) and the Whitehead Institute for Biomedical
Research (a non-profit research institution). President of the Yale
University Council.
Elizabeth T. Kennan (62), Trustee. President Emeritus and Professor, Mount
Holyoke College. Director, Bell Atlantic (a telecommunications company),
Northeast Utilities, Talbots (a distributor of women's apparel) and
Cambus-Kenneth Bloodstock (a limited liability company involved in
thoroughbred horse breeding and farming).
*Lawrence J. Lasser (57), Trustee and Vice President. President, Chief
Executive Officer and Director of Putnam Investments, Inc. and Putnam
Investment Management, Inc. Director of Marsh & McLennan Companies, Inc.
and the United Way of Massachusetts Bay.
John H. Mullin, III (59), Trustee. Chairman and CEO of Ridgeway Farm.
Director of ACX Technologies, Inc. (a company engaged in the manufacture of
industrial ceramics and packaging products), Alex. Brown Realty, Inc., The
Liberty Corporation (a company engaged in the life insurance and
broadcasting industries) and Carolina Power & Light (a utility company).
+Robert E. Patterson (55), Trustee. President and Trustee of Cabot
Industrial Trust (a publicly traded real estate investment trust).
Director of Brandywine Trust Company.
*George Putnam III (49), President, Principal Executive Officer and
Trustee. President, 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). Director of The Boston Family Office, L.L.C. (a
registered investment advisor).
*A.J.C. Smith (66), Trustee. Director of Marsh & McLennan Companies, Inc.
and Trident Corp. (a limited partnership with over 30 institutional
investors).
W. Thomas Stephens (58), Trustee. President and Chief Executive Officer of
MacMillan Bloedel Ltd. (a major forest products company). Director, Qwest
Communications, New Century Energies (a public utility company), Trans
Canada Pipeliners and Fletcher Challenger Canada.
W. Nicholas Thorndike (67), Trustee. Director of various corporations and
charitable organizations, including Courier Corporation (a book
manufacturer), Bradley Real Estate, Inc. and Providence Journal Co.
Trustee of Cabot Industrial Trust (a publicly traded real estate investment
trust), Eastern Utilities Associates and Northeastern University.
Officers Name (Age)
Charles E. Porter (62), Executive Vice President. Managing Director of
Putnam Investments, Inc. and Putnam Management.
Patricia C. Flaherty (53), Vice President. Senior Vice President of Putnam
Investments, Inc. and Putnam Management.
Gordon H. Silver (53), Vice President. Director and Senior Managing
Director of Putnam Investments, Inc. and Putnam Management.
Brett C. Browchuk (37), Vice President. Managing Director of Putnam
Management.
Ian C. Ferguson (43), Vice President. Senior Managing Director of Putnam
Investments, Inc. and Putnam Management.
Richard A. Monaghan (46), Vice President. Managing Director of Putnam
Investments, Inc., Putnam Management and Putnam Retail Management.
Richard G. Leibovitch (36), Vice President. Managing Director of Putnam
Management. Prior to February 1999, Mr. Leibovitch was a Managing Director
at J.P. Morgan.
John R. Verani (61), Vice President. Senior Vice President of Putnam
Investments, Inc. and Putnam Management.
John D. Hughes (65), Senior Vice President and Treasurer.
*Trustees who are or may be deemed to be "interested persons" (as defined
in the Investment Company Act of 1940) of the fund, Putnam Management or
Putnam Retail Management.
Messrs. Putnam, III, Lasser and Smith are deemed "interested persons" by
virtue of their positions as officers or shareholders of the fund, or
directors of Putnam Management, Putnam Retail Management, or Marsh &
McLennan Companies, Inc., the parent company of Putnam Management and
Putnam Retail Management.
Mr. Joskow is not currently an "interested person" of the fund but could be
deemed by the Securities and Exchange Commission to be an "interested
person" on account of his prior consulting relationship with National
Economic Research Associates, Inc., a wholly-owned subsidiary of Marsh &
McLennan Companies, Inc., which was terminated as of August 31, 1998. The
balance of the Trustees are not "interested persons."
+Members of the Executive Committee of the Trustees. The Executive
Committee meets between regular meetings of the Trustees as may be required
to review investment matters and other affairs of the fund and may exercise
all of the powers of the Trustees.
-----------------
Certain other officers of Putnam Management are officers of the fund. See
"Additional officers" in Part I of this SAI. The mailing address of each
of the officers and Trustees is One Post Office Square, Boston,
Massachusetts 02109.
Except as stated below, the principal occupations of the officers and
Trustees for the last five years have been with the employers as shown
above, although in some cases they have held different positions with such
employers. Prior to May 2000 and November 1999, Mr. Smith was Chairman and
CEO, respectively, of Marsh & McLennan Companies, Inc. Prior to September
1998, Mr. Joskow was a consultant to National Economic Research Associates.
Prior to 1996, Mr. Stephens was Chairman of the Board of Directors,
President and Chief Executive Officer of Johns Manville Corporation. Prior
to April 1996, Mr. Ferguson was CEO at Hong Kong Shanghai Banking
Corporation. Prior to February 1998, Mr. Patterson was Executive Vice
President and Director of Acquisitions of Cabot Partners Limited
Partnership. Prior to November 1998, Mr. Monaghan was Managing Director at
Merrill Lynch.
Each Trustee of the fund receives an annual fee and an additional fee for
each Trustees' meeting attended. Trustees who are not interested persons
of Putnam Management and who serve on committees of the Trustees receive
additional fees for attendance at certain committee meetings and for
special services rendered in that connection. All of the Trustees are
Trustees of all the Putnam funds and each receives fees for his or her
services. For details of Trustees' fees paid by the fund and information
concerning retirement guidelines for the Trustees, see "Charges and
expenses" in Part I of this SAI.
The Agreement and Declaration of Trust of the fund provides that the fund
will indemnify its Trustees and officers against liabilities and expenses
incurred in connection with litigation in which they may be involved
because of their offices with the fund, except if it is determined in the
manner specified in the Agreement and Declaration of Trust that they have
not acted in good faith in the reasonable belief that their actions were in
the best interests of the fund or that such indemnification would relieve
any officer or Trustee of any liability to the fund or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of his or her duties. The fund, at its expense, provides
liability insurance for the benefit of its Trustees and officers.
Putnam Management and its affiliates
Putnam Management is one of America's oldest and largest money management
firms. Putnam Management's staff of experienced portfolio managers and
research analysts selects securities and constantly supervises the fund's
portfolio. By pooling an investor's money with that of other investors, a
greater variety of securities can be purchased than would be the case
individually; the resulting diversification helps reduce investment risk.
Putnam Management has been managing mutual funds since 1937. As of
December 31, 1999, the firm serves as the investment manager for the funds
in the Putnam Family, with over $289 billion in assets in nearly 12 million
shareholder accounts. An affiliate, The Putnam Advisory Company, Inc.,
manages domestic and foreign institutional accounts and mutual funds,
including the accounts of many Fortune 500 companies. Another affiliate,
Putnam Fiduciary Trust Company, provides investment advice to institutional
clients under its banking and fiduciary powers. At December 31, 1999,
Putnam Management and its affiliates managed $391 billion in assets,
including nearly $17 billion in tax-exempt securities and over $99 billion
in retirement plan assets.
Putnam Management, Putnam Retail Management and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., a holding company
which in turn is, except for a minority stake owned by employees, owned by
Marsh & McLennan Companies, Inc., a publicly-owned holding company whose
principal businesses are international insurance and reinsurance brokerage,
employee benefit consulting and investment management.
Trustees and officers of the fund who are also officers of Putnam
Management or its affiliates or who are stockholders of Marsh & McLennan
Companies, Inc. will benefit from the advisory fees, sales commissions,
distribution fees, custodian fees and transfer agency fees paid or allowed
by the fund.
The Management Contract
Under a Management Contract between the fund and Putnam Management, subject
to such policies as the Trustees may determine, Putnam Management, at its
expense, furnishes continuously an investment program for the fund and
makes investment decisions on behalf of the fund. Subject to the control
of the Trustees, Putnam Management also manages, supervises and conducts
the other affairs and business of the fund, furnishes office space and
equipment, provides bookkeeping and clerical services (including
determination of the fund's net asset value, but excluding shareholder
accounting services) and places all orders for the purchase and sale of the
fund's portfolio securities. Putnam Management may place fund portfolio
transactions with broker-dealers that furnish Putnam Management, without
cost to it, certain research, statistical and quotation services of value
to Putnam Management and its affiliates in advising the fund and other
clients. In so doing, Putnam Management may cause the fund to pay greater
brokerage commissions than it might otherwise pay.
For details of Putnam Management's compensation under the Management
Contract, see "Charges and expenses" in Part I of this SAI. Putnam
Management's compensation under the Management Contract may be reduced in
any year if the fund's expenses exceed the limits on investment company
expenses imposed by any statute or regulatory authority of any jurisdiction
in which shares of the fund are qualified for offer or sale. The term
"expenses" is defined in the statutes or regulations of such jurisdictions,
and generally excludes brokerage commissions, taxes, interest,
extraordinary expenses and, if the fund has a distribution plan, payments
made under such plan.
Under the Management Contract, Putnam Management may reduce its
compensation to the extent that the fund's expenses exceed such lower
expense limitation as Putnam Management may, by notice to the fund, declare
to be effective. The expenses subject to this limitation are exclusive of
brokerage commissions, interest, taxes, deferred organizational and
extraordinary expenses and, if the fund has a distribution plan, payments
required under such plan. For the purpose of determining any such
limitation on Putnam Management's compensation, expenses of the fund shall
not reflect the application of commissions or cash management credits that
may reduce designated fund expenses. The terms of any expense limitation
from time to time in effect are described in the prospectus and/or Part I
of this SAI.
In addition to the fee paid to Putnam Management, the fund reimburses
Putnam Management for the compensation and related expenses of certain
officers of the fund and their assistants who provide certain
administrative services for the fund and the other Putnam funds, each of
which bears an allocated share of the foregoing costs. The aggregate
amount of all such payments and reimbursements is determined annually by
the Trustees.
The amount of this reimbursement for the fund's most recent fiscal year is
included in "Charges and Expenses" in Part I of this SAI. Putnam
Management pays all other salaries of officers of the fund. The fund pays
all expenses not assumed by Putnam Management including, without
limitation, auditing, legal, custodial, investor servicing and shareholder
reporting expenses. The fund pays the cost of typesetting for its
prospectuses and the cost of printing and mailing any prospectuses sent to
its shareholders. Putnam Retail Management pays the cost of printing and
distributing all other prospectuses.
The Management Contract provides that Putnam Management shall not be
subject to any liability to the fund or to any shareholder of the fund for
any act or omission in the course of or connected with rendering services
to the fund in the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties on the part of Putnam
Management.
The Management Contract may be terminated without penalty by vote of the
Trustees or the shareholders of the fund, or by Putnam Management, on 30
days' written notice. It may be amended only by a vote of the shareholders
of the fund. The Management Contract also terminates without payment of
any penalty in the event of its assignment. The Management Contract
provides that it will continue in effect only so long as such continuance
is approved at least annually by vote of either the Trustees or the
shareholders, and, in either case, by a majority of the Trustees who are
not "interested persons" of Putnam Management or the fund. In each of the
foregoing cases, the vote of the shareholders is the affirmative vote of a
"majority of the outstanding voting securities" as defined in the
Investment Company Act of 1940.
Portfolio Transactions
Investment decisions. Investment decisions for the fund and for the other
investment advisory clients of Putnam Management and its affiliates are
made with a view to achieving their respective investment objectives.
Investment decisions are the product of many factors in addition to basic
suitability for the particular client involved. Thus, a particular
security may be bought or sold for certain clients even though it could
have been bought or sold for other clients at the same time. Likewise, a
particular security may be bought for one or more clients when one or more
other clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens
that two or more clients simultaneously purchase or sell the same security,
in which event each day's transactions in such security are, insofar as
possible, averaged as to price and allocated between such clients in a
manner which in Putnam Management's opinion is equitable to each and in
accordance with the amount being purchased or sold by each. There may be
circumstances when purchases or sales of portfolio securities for one or
more clients will have an adverse effect on other clients.
Brokerage and research services. Transactions on U.S. stock exchanges,
commodities markets and futures markets and other agency transactions
involve the payment by the fund of negotiated brokerage commissions. Such
commissions vary among different brokers. A particular broker may charge
different commissions according to such factors as the difficulty and size
of the transaction. Transactions in foreign investments often involve the
payment of fixed brokerage commissions, which may be higher than those in
the United States. There is generally no stated commission in the case of
securities traded in the over-the-counter markets, but the price paid by
the fund usually includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the fund includes a disclosed,
fixed commission or discount retained by the underwriter or dealer. It is
anticipated that most purchases and sales of securities by funds investing
primarily in tax-exempt securities and certain other fixed-income
securities will be with the issuer or with underwriters of or dealers in
those securities, acting as principal. Accordingly, those funds would not
ordinarily pay significant brokerage commissions with respect to securities
transactions. See "Charges and expenses" in Part I of this SAI for
information concerning commissions paid by the fund.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional
investors to receive brokerage and research services (as defined in the
Securities Exchange Act of 1934, as amended (the "1934 Act")) from
broker-dealers that execute portfolio transactions for the clients of such
advisers and from third parties with which such broker-dealers have
arrangements. Consistent with this practice, Putnam Management receives
brokerage and research services and other similar services from many
broker-dealers with which Putnam Management places the fund's portfolio
transactions and from third parties with which these broker-dealers have
arrangements. These services include such matters as economic analysis,
investment research and database services, industry and company reviews,
evaluations of investments, recommendations as to the purchase and sale of
investments, performance measurement services, subscriptions, pricing
services, quotation services, news services and computer equipment
(investment-related hardware and software) utilized by Putnam Management's
managers and analysts. Where the services referred to above are used by
Putnam Management not exclusively for research purposes, Putnam Management,
based upon its own allocations of expected use, bears that portion of the
cost of these services which directly relates to their non-research use.
Some of these services are of value to Putnam Management and its affiliates
in advising various of their clients (including the fund), although not all
of these services are necessarily useful and of value in managing the fund.
The management fee paid by the fund is not reduced because Putnam
Management and its affiliates receive these services even though Putnam
Management might otherwise be required to purchase some of these services
for cash.
Putnam Management places all orders for the purchase and sale of portfolio
investments for the fund and buys and sells investments for the fund
through a substantial number of brokers and dealers. In so doing, Putnam
Management uses its best efforts to obtain for the fund the most favorable
price and execution available, except to the extent it may be permitted to
pay higher brokerage commissions as described below. In seeking the most
favorable price and execution, Putnam Management, having in mind the fund's
best interests, considers all factors it deems relevant, including, by way
of illustration, price, the size of the transaction, the nature of the
market for the security or other investment, the amount of the commission,
the timing of the transaction taking into account market prices and trends,
the reputation, experience and financial stability of the broker-dealer
involved and the quality of service rendered by the broker-dealer in other
transactions.
As permitted by Section 28(e) of the 1934 Act, and by the Management
Contract, Putnam Management may cause the fund to pay a broker-dealer which
provides "brokerage and research services" (as defined in the 1934 Act) to
Putnam Management an amount of disclosed commission for effecting
securities transactions on stock exchanges and other transactions for the
fund on an agency basis in excess of the commission which another
broker-dealer would have charged for effecting that transaction. Putnam
Management's authority to cause the fund to pay any such greater
commissions is subject to such policies as the Trustees may adopt from time
to time. Putnam Management does not currently intend to cause the fund to
make such payments. It is the position of the staff of the Securities and
Exchange Commission that Section 28(e) does not apply to the payment of
such greater commissions in "principal" transactions. Accordingly Putnam
Management will use its best effort to obtain the most favorable price and
execution available with respect to such transactions, as described above.
The Management Contract provides that commissions, fees, brokerage or
similar payments received by Putnam Management or an affiliate in
connection with the purchase and sale of portfolio investments of the fund,
less any direct expenses approved by the Trustees, shall be recaptured by
the fund through a reduction of the fee payable by the fund under the
Management Contract. Putnam Management seeks to recapture for the fund
soliciting dealer fees on the tender of the fund's portfolio securities in
tender or exchange offers. Any such fees which may be recaptured are
likely to be minor in amount.
Consistent with the Conduct Rules of the National Association of Securities
Dealers, Inc. and subject to seeking the most favorable price and execution
available and such other policies as the Trustees may determine, Putnam
Management may consider sales of shares of the fund (and, if permitted by
law, of the other Putnam funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the fund.
Principal Underwriter
Putnam Retail Management is the principal underwriter of shares of the fund
and the other continuously offered Putnam funds. Putnam Retail Management
is not obligated to sell any specific amount of shares of the fund and will
purchase shares for resale only against orders for shares. See "Charges
and expenses" in Part I of this SAI for information on sales charges and
other payments received by Putnam Retail Management.
Personal Investments by Employees of Putnam Management and Putnam Retail
Management and Officers and Trustees of the Fund
Employees of Putnam Management and Putnam Retail Management and officers
and Trustees of the fund are subject to significant restrictions on
engaging in personal securities transactions. These restrictions are set
forth in the Codes of Ethics adopted by Putnam Management and Putnam Retail
Management (The Putnam Investments' Code of Ethics) and by the fund (the
Putnam Funds' Code of Ethics). The Putnam Investments' Code of Ethics and
the Putnam Funds' Code of Ethics, in accordance with Rule 17j-1 of the
Investment Company Act of 1940, as amended, contain provisions and
requirements designed to identify and address certain conflicts of interest
between personal investment activities and the interests of the fund.
The Putnam Investments' Code of Ethics does not prohibit personnel from
investing in securities that may be purchased or held by the fund. However,
the Putnam Investments' Code, consistent with standards recommended by the
Investment Company Institute's Advisory Group on Personal Investing and
requirements established by Rule 17j-1, among other things, prohibits
personal securities investments without pre-clearance, imposes time periods
during which personal transactions may not be made in certain securities by
employees with access to investment information, and requires the timely
submission of broker confirmations and quarterly reporting of personal
securities transactions. Additional restrictions apply to portfolio
managers, traders, research analysts and others involved in the investment
advisory process.
The Putnam Funds' Code of Ethics incorporates and applies the restrictions
of Putnam Investments' Code of Ethics to officers and Trustees of the fund
who are affiliated with Putnam Investments. The Putnam Funds' Code does not
prohibit unaffiliated officers and Trustees from investing in securities
that may be held by the fund; however, the Putnam Funds' Code regulates the
personal securities transactions of unaffiliated Trustees of the fund,
including limiting the time periods during which they may personally buy
and sell certain securities and requiring them to submit quarterly reports
of personal securities transactions.
The fund's Trustees, in compliance with Rule 17j-1, approved Putnam
Investments' and the Putnam Funds' Codes of Ethics and are required to
approve any material changes to these Codes. The Trustees also provide
continued oversight of personal investment policies and annually evaluate
the implementation and effectiveness of the Codes of Ethics.
Investor Servicing Agent and Custodian
Putnam Investor Services, a division of Putnam Fiduciary Trust Company
("PFTC"), is the fund's investor servicing agent (transfer, plan and
dividend disbursing agent), for which it receives fees that are paid
monthly by the fund as an expense of all its shareholders. The fee paid to
Putnam Investor Services is determined on the basis of the number of
shareholder accounts, the number of transactions and the assets of the
fund. Putnam Investor Services has won the DALBAR Service Award eight
times in the past nine years. In 1997 and 1998, Putnam was the only
company to win all three DALBAR Awards: for service to investors, to
financial advisors, and to variable annuity contract holders. DALBAR, Inc.
an independent research firm, presents the awards to financial services
firms that provide consistently excellent service.
PFTC is the custodian of the fund's assets. In carrying out its duties
under its custodian contract, PFTC may employ one or more subcustodians
whose responsibilities include safeguarding and controlling the fund's cash
and securities, handling the receipt and delivery of securities and
collecting interest and dividends on the fund's investments. PFTC and any
subcustodians employed by it have a lien on the securities of the fund (to
the extent permitted by the fund's investment restrictions) to secure
charges and any advances made by such subcustodians at the end of any day
for the purpose of paying for securities purchased by the fund. The fund
expects that such advances will exist only in unusual circumstances.
Neither PFTC nor any subcustodian determines the investment policies of the
fund or decides which securities the fund will buy or sell. PFTC pays the
fees and other charges of any subcustodians employed by it. The fund may
from time to time pay custodial expenses in full or in part through the
placement by Putnam Management of the fund's portfolio transactions with
the subcustodians or with a third-party broker having an agreement with the
subcustodians. The fund pays PFTC an annual fee based on the fund's
assets, securities transactions and securities holdings and reimburses PFTC
for certain out-of-pocket expenses incurred by it or any subcustodian
employed by it in performing custodial services.
See "Charges and expenses" in Part I of this SAI for information on fees
and reimbursements for investor servicing and custody received by PFTC.
The fees may be reduced by credits allowed by PFTC.
DETERMINATION OF NET ASSET VALUE
The fund determines the net asset value per share of each class of shares
once each day the New York Stock Exchange (the "Exchange") is open.
Currently, the Exchange is closed Saturdays, Sundays and the following
holidays: New Year's Day, Rev. Dr. Martin Luther King, Jr. Day, Presidents'
Day, Good Friday, Memorial Day, the Fourth of July, Labor Day, Thanksgiving
and Christmas. The fund determines net asset value as of the close of
regular trading on the Exchange, currently 4:00 p.m. However, equity
options held by the fund are priced as of the close of trading at 4:10
p.m., and futures contracts on U.S. government and other fixed-income
securities and index options held by the fund are priced as of their close
of trading at 4:15 p.m.
Securities for which market quotations are readily available are valued at
prices which, in the opinion of Putnam Management, most nearly represent
the market values of such securities. Currently, such prices are
determined using the last reported sale price or, if no sales are reported
(as in the case of some securities traded over-the-counter), the last
reported bid price, except that certain securities are valued at the mean
between the last reported bid and asked prices. Short-term investments
having remaining maturities of 60 days or less are valued at amortized
cost, which approximates market value. All other securities and assets are
valued at their fair value following procedures approved by the Trustees.
Liabilities are deducted from the total, and the resulting amount is
divided by the number of shares of the class outstanding.
Reliable market quotations are not considered to be readily available for
long-term corporate bonds and notes, certain preferred stocks, tax-exempt
securities, and certain foreign securities. These investments are valued
at fair value on the basis of valuations furnished by pricing services,
which determine valuations for normal, institutional-size trading units of
such securities using methods based on market transactions for comparable
securities and various relationships between securities which are generally
recognized by institutional traders.
If any securities held by the fund are restricted as to resale, Putnam
Management determines their fair value following procedures approved by the
Trustees. The fair value of such securities is generally determined as the
amount which the fund could reasonably expect to realize from an orderly
disposition of such securities over a reasonable period of time. The
valuation procedures applied in any specific instance are likely to vary
from case to case. However, consideration is generally given to the
financial position of the issuer and other fundamental analytical data
relating to the investment and to the nature of the restrictions on
disposition of the securities (including any registration expenses that
might be borne by the fund in connection with such disposition). In
addition, specific factors are also generally considered, such as the cost
of the investment, the market value of any unrestricted securities of the
same class, the size of the holding, the prices of any recent transactions
or offers with respect to such securities and any available analysts'
reports regarding the issuer.
Generally, trading in certain securities (such as foreign securities) is
substantially completed each day at various times prior to the close of the
Exchange. The values of these securities used in determining the net asset
value of the fund's shares are computed in their local currencies as of
such times. Currency exchange rates are normally determined at the close
of trading in London, England (11:00 a.m., New York time). Also, because
of the amount of time required to collect and process trading information
as to large numbers of securities issues, the values of certain securities
(such as convertible bonds, U.S. government securities and tax-exempt
securities) are determined based on market quotations collected earlier in
the day at the latest practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such securities may occur
between the time of the determination of value and the close of the
Exchange which will not be reflected in the computation of the fund's net
asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their
fair value following procedures approved by the Trustees. In addition,
securities held by some of the funds may be traded in foreign markets that
are open for business on days that the fund is not, and the trading of such
securities on those days may have an impact on the value of a shareholder's
investment at a time when the shareholder cannot buy and sell shares of the
fund.
Money market funds generally value their portfolio securities at amortized
cost according to Rule 2a-7 under the Investment Company Act of 1940.
HOW TO BUY SHARES
Each prospectus describes briefly how investors may buy shares of the fund
and identifies the share classes offered by that prospectus. Because of
these different sales charges and expenses, the investment performance of
the classes will vary. For more information, including your eligibility to
purchase certain classes of shares, contact your investment dealer or
Putnam Retail Management (at 1-800-225-1581).This section of the SAI
contains more information on how to buy shares and the features of all
share classes offered by Putnam funds. These features include the sales
charges and contingent deferred sales charges (CDSCs) payable by investors,
the conditions under which those charges may be reduced, and the sales
charges, commissions and other amounts payable by Putnam Retail Management
to investment dealers. As set forth under the following sub-headings of
this section, some features apply to all classes, while others apply only
to certain classes:
* General Information describes how to buy shares, identifies the classes,
describes ways of reducing sales charges that apply to all classes and
describes certain payments to investment dealers.
* Additional Information about Class A and Class M Shares describes the
allocation of initial sales charges between Putnam Retail Management and
investment dealers, ways of reducing those sales charges, the CDSC payable
by purchasers of $1 million or more of class A shares and the commissions
on those purchases payable by Putnam Retail Management to investment dealers.
* Additional Information about Class B and Class C Shares describes the
commissions payable by Putnam Retail Management to investment dealers.
General Information
The fund is currently making a continuous offering of its shares. The fund
receives the entire net asset value of shares sold. The fund will accept
unconditional orders for shares to be executed at the public offering price
based on the net asset value per share next determined after the order is
placed. In the case of class A shares and class M shares, the public
offering price is the net asset value plus the applicable sales charge, if
any. No sales charge is included in the public offering price of other
classes of shares. In the case of orders for purchase of shares placed
through dealers, the public offering price will be based on the net asset
value determined on the day the order is placed, but only if the dealer
receives the order before the close of regular trading on the Exchange. If
the dealer receives the order after the close of the Exchange, the price
will be based on the net asset value next determined. If funds for the
purchase of shares are sent directly to Putnam Investor Services, they will
be invested at the public offering price based on the net asset value next
determined after receipt. Payment for shares of the fund must be in U.S.
dollars; if made by check, the check must be drawn on a U.S. bank.
Initial and subsequent purchases must satisfy the minimums stated in the
prospectus, except that (i) individual investments under certain employee
benefit plans or Tax Qualified Retirement Plans may be lower, (ii) persons
who are already shareholders may make additional purchases of $50 or more
by sending funds directly to Putnam Investor Services (see "Your investing
account" below), and (iii) for investors participating in systematic
investment plans and military allotment plans, the initial and subsequent
purchases must be $25 or more. Information about these plans is available
from investment dealers or from Putnam Retail Management.
As a convenience to investors, shares may be purchased through a systematic
investment plan. Pre-authorized monthly bank drafts for a fixed amount (at
least $25) are used to purchase fund shares at the applicable public
offering price next determined after Putnam Retail Management receives the
proceeds from the draft. A shareholder may choose any day of the month
and, if a given month (for example, February) does not contain that
particular date, or if the date falls on a weekend or holiday, the draft
will be processed on the next business day. Further information and
application forms are available from investment dealers or from Putnam
Retail Management.
Except for funds that declare a distribution daily, distributions to be
reinvested are reinvested without a sales charge in shares of the same
class as of the ex-dividend date using the net asset value determined on
that date, and are credited to a shareholder's account on the payment date.
Dividends for Putnam money market funds are credited to a shareholder's
account on the payment date. Distributions for all other funds that
declare a distribution daily are reinvested without a sales charge as of
the last day of the period for which distributions are paid using the net
asset value determined on that date, and are credited to a shareholder's
account on the payment date.
Payment in securities. In addition to cash, the fund may accept securities
as payment for fund shares at the applicable net asset value. Generally,
the fund will only consider accepting securities to increase its holdings
in a portfolio security, or if Putnam Management determines that the
offered securities are a suitable investment for the fund and in a
sufficient amount for efficient management.
While no minimum has been established, it is expected that the fund would
not accept securities with a value of less than $100,000 per issue as
payment for shares. The fund may reject in whole or in part any or all
offers to pay for purchases of fund shares with securities, may require
partial payment in cash for such purchases to provide funds for applicable
sales charges, and may discontinue accepting securities as payment for fund
shares at any time without notice. The fund will value accepted securities
in the manner described in the section "Determination of Net Asset Value"
for valuing shares of the fund. The fund will only accept securities which
are delivered in proper form. The fund will not accept options or
restricted securities as payment for shares. The acceptance of securities
by certain funds in exchange for fund shares is subject to additional
requirements. For federal income tax purposes, a purchase of fund shares
with securities will be treated as a sale or exchange of such securities on
which the investor will generally realize a taxable gain or loss. The
processing of a purchase of fund shares with securities involves certain
delays while the fund considers the suitability of such securities and
while other requirements are satisfied. For information regarding
procedures for payment in securities, contact Putnam Retail Management.
Investors should not send securities to the fund except when authorized to
do so and in accordance with specific instructions received from Putnam
Retail Management.
Class A shares and class M shares are generally sold with a sales charge
payable at the time of purchase (except for class A shares and class M
shares of money market funds). As used in this SAI and unless the context
requires otherwise, the term "class A shares" includes shares of funds that
offer only one class of shares. The prospectus contains a table of
applicable sales charges.
Class B shares and class C shares are sold subject to a CDSC payable upon
redemption within a specified period after purchase. The prospectus
contains a table of applicable CDSCs.
Class B shares will automatically convert into class A shares no later than
the end of the month eight years after the purchase date, and may, in the
discretion of the Trustees, convert to class A shares earlier. Class B
shares acquired by exchanging class B shares of another Putnam fund will
convert into class A shares based on the time of the initial purchase.
Class B shares acquired through reinvestment of distributions will convert
into Class A shares based on the date of the initial purchase to which such
shares relate. For this purpose, class B shares acquired through
reinvestment of distributions will be attributed to particular purchases of
class B shares in accordance with such procedures as the Trustees may
determine from time to time. The conversion of class B shares to class A
shares is subject to the condition that such conversions will not
constitute taxable events for Federal tax purposes.
Class Y shares, which are not subject to sales charges or a CDSC, are
available only to certain defined contribution plans and college savings
plans. See the prospectus that offers class Y shares for more information.
Sales without sales charges or contingent deferred sales charges. The fund
may sell shares without a sales charge or CDSC to:
(i) current and retired Trustees of the fund; officers of the fund;
directors and current and retired U.S. full-time employees of Putnam
Management, Putnam Retail Management, their parent corporations and certain
corporate affiliates; family members of and employee benefit plans for the
foregoing; and partnerships, trusts or other entities in which any of the
foregoing has a substantial interest;
(ii) employer-sponsored retirement plans, for the repurchase of shares in
connection with repayment of plan loans made to plan participants (if the
sum loaned was obtained by redeeming shares of a Putnam fund sold with a
sales charge) (not offered by tax-exempt funds);
(iii) clients of administrators of tax-qualified employer-sponsored
retirement plans which have entered into agreements with Putnam Retail
Management (not offered by tax-exempt funds);
(iv) registered representatives and other employees of broker-dealers
having sales agreements with Putnam Retail Management; employees of
financial institutions having sales agreements with Putnam Retail
Management or otherwise having an arrangement with any such broker-dealer
or financial institution with respect to sales of fund shares; and their
spouses and children under age 21 (Putnam Retail Management is regarded as
the dealer of record for all such accounts);
(v) investors meeting certain requirements who sold shares of certain
Putnam closed-end funds pursuant to a tender offer by such closed-end fund;
(vi) a trust department of any financial institution purchasing shares of
the fund in its capacity as trustee of any trust (other than a
tax-qualified retirement plan trust), through an arrangement approved by
Putnam Retail Management, if the value of the shares of the fund and other
Putnam funds purchased or held by all such trusts exceeds $1 million in the
aggregate; and
(vii) "wrap accounts" maintained for clients of broker-dealers, financial
institutions or financial intermediaries who have entered into agreements
with Putnam Retail Management with respect to such accounts, which in all
cases shall be subject to a wrap fee economically comparable to a sales
charge. Fund shares offered pursuant to this waiver may not be advertised
as "no load," or otherwise offered for sale at NAV without a wrap fee.
The fund may issue its shares at net asset value without an initial sales
charge or a CDSC in connection with the acquisition of substantially all of
the securities owned by other investment companies or personal holding
companies. The CDSC will be waived on redemptions to pay premiums for
insurance under Putnam's insured investor program.
Investors who set up an Systematic Withdrawal Plan ("SWP") for a share
account (see "Plans available to shareholders -- Systematic Withdrawal
Plan") may withdraw through the SWP up to 12% of the net asset value of the
account (calculated as set forth below) each year without incurring any
CDSC. Shares not subject to a CDSC (such as shares representing
reinvestment of distributions) will be redeemed first and will count toward
the 12% limitation. If there are insufficient shares not subject to a
CDSC, shares subject to the lowest CDSC liability will be redeemed next
until the 12% limit is reached. The 12% figure is calculated on a pro rata
basis at the time of the first payment made pursuant to an SWP and
recalculated thereafter on a pro rata basis at the time of each SWP
payment. Therefore, shareholders who have chosen an SWP based on a
percentage of the net asset value of their account of up to 12% will be
able to receive SWP payments without incurring a CDSC. However,
shareholders who have chosen a specific dollar amount (for example, $100
per month from the fund that pays income distributions monthly) for their
periodic SWP payment should be aware that the amount of that payment not
subject to a CDSC may vary over time depending on the net asset value of
their account. For example, if the net asset value of the account is
$10,000 at the time of payment, the shareholder will receive $100 free of
the CDSC (12% of $10,000 divided by 12 monthly payments). However, if at
the time of the next payment the net asset value of the account has fallen
to $9,400, the shareholder will receive $94 free of any CDSC (12% of $9,400
divided by 12 monthly payments) and $6 subject to the lowest applicable
CDSC. This SWP privilege may be revised or terminated at any time.
No CDSC is imposed on the redemption of shares of any class subject to a
CDSC to the extent that the shares redeemed (i) are no longer subject to
the holding period therefor, (ii) resulted from reinvestment of
distributions, or (iii) were exchanged for shares of another Putnam fund,
provided that the shares acquired in such exchange or subsequent exchanges
(including shares of a Putnam money market fund) will continue to remain
subject to the CDSC, if applicable, until the applicable holding period
expires. In determining whether the CDSC applies to each redemption,
shares not subject to a CDSC are redeemed first.
The fund will waive any CDSC on redemptions, in the case of individual,
joint or Uniform Transfers to Minors Act accounts, in the event of death or
post-purchase disability of a shareholder, for the purpose of paying
benefits pursuant to tax-qualified retirement plans ("Benefit Payments"),
or, in the case of living trust accounts, in the event of the death or
post-purchase disability of the settlor of the trust. Benefit Payments
currently include, without limitation, (1) distributions from an IRA due to
death or disability, (2) a return of excess contributions to an IRA or
401(k) plan, and (3) distributions from retirement plans qualified under
Section 401(a) of the Code or from a 403(b) plan due to death, disability,
retirement or separation from service. These waivers may be changed at any
time. Additional waivers may apply to IRA accounts opened prior to
February 1, 1994.
Payments to dealers. Putnam Retail Management may, at its expense, pay
concessions in addition to the payments disclosed in the prospectus to
dealers that satisfy certain criteria established from time to time by
Putnam Retail Management relating to increasing net sales of shares of the
Putnam funds over prior periods, and certain other factors.
Additional Information About Class A and Class M Shares
The underwriter's commission is the sales charge shown in the prospectus
less any applicable dealer discount. Putnam Retail Management will give
dealers ten days' notice of any changes in the dealer discount. Putnam
Retail Management retains the entire sales charge on any retail sales made
by it.
Putnam Retail Management offers several plans by which an investor may
obtain reduced sales charges on purchases of class A shares and class M
shares. The variations in sales charges reflect the varying efforts
required to sell shares to separate categories of purchasers. These plans
may be altered or discontinued at any time.
The public offering price of class A and class M shares is the net asset
value plus a sales charge that varies depending on the size of your
purchase. The fund receives the net asset value. The sales charge is
allocated between your investment dealer and Putnam Retail Management as
shown in the following table, except when Putnam Retail Management, in its
discretion, allocates the entire amount to your investment dealer.
For Growth Funds, Growth and Income Funds and Asset Allocation Funds only:
<TABLE>
<CAPTION>
CLASS A CLASS M
Amount of Amount of
Sales charge sales charge Sales charge sales charge
as a reallowed to as a reallowed to
percentage dealers as a percentage dealers as a
Amount of transaction of offering percentage of of offering percentage of
at offering price ($) price offering price price offering price
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Under 50,000 5.75% 5.00% 3.50% 3.00%
50,000 but under 100,000 4.50 3.75 2.50 2.00
100,000 but under 250,000 3.50 2.75 1.50 1.00
250,000 but under 500,000 2.50 2.00 1.00 1.00
500,000 but under 1,000,000 2.00 1.75 NONE NONE
1,000,000 and above NONE NONE NONE NONE
--------------------------------------------------------------------------------------
</TABLE>
For Income Funds only (except for Putnam Intermediate U.S. Government
Income Fund and Putnam Preferred Income Fund):
<TABLE>
<CAPTION>
CLASS A CLASS M
Amount of Amount of
Sales charge sales charge Sales charge sales charge
as a reallowed to as a reallowed to
percentage dealers as a percentage dealers as a
Amount of transaction of offering percentage of of offering percentage of
at offering price ($) price offering price price offering price
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Under 50,000 4.75% 4.25% 3.25% 3.00%
50,000 but under 100,000 4.50 4.00 2.25 2.00
100,000 but under 250,000 3.50 3.00 1.50 1.25
250,000 but under 500,000 2.50 2.25 1.00 1.00
500,000 but under 1,000,000 2.00 1.75 NONE NONE
1,000,000 and above NONE NONE NONE NONE
--------------------------------------------------------------------------------------
</TABLE>
For Putnam Intermediate U.S. Government Income Fund and Putnam Preferred
Income Fund only:
<TABLE>
<CAPTION>
CLASS A CLASS M
Amount of Amount of
Sales charge sales charge Sales charge sales charge
as a reallowed to as a reallowed to
percentage dealers as a percentage dealers as a
Amount of transaction of offering percentage of of offering percentage of
at offering price ($) price offering price price offering price
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Under 100,000 3.25% 3.00% 2.00% 1.80%
100,000 but under 250,000 2.50 2.25 1.50 1.30
250,000 but under 500,000 2.00 1.75 1.00 1.00
500,000 but under 1,000,000 1.50 1.25 NONE NONE
1,000,000 and above NONE NONE NONE NONE
--------------------------------------------------------------------------------------
</TABLE>
For Tax Free Funds only:
<TABLE>
<CAPTION>
CLASS A CLASS M
Amount of Amount of
Sales charge sales charge Sales charge sales charge
as a reallowed to as a reallowed to
percentage dealers as a percentage dealers as a
Amount of transaction of offering percentage of of offering percentage of
at offering price ($) price offering price price offering price
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Under 25,000 4.75% 4.50% 3.25% 3.00%
25,000 but under 50,000 4.50 4.25 3.25 3.00
50,000 but under 100,000 4.50 4.25 2.25 2.00
100,000 but under 250,000 3.75 3.50 1.50 1.25
250,000 but under 500,000 3.00 2.75 1.00 1.00
500,000 but under 1,000,000 2.00 1.85 NONE NONE
1,000,000 and above NONE NONE NONE NONE
--------------------------------------------------------------------------------------
</TABLE>
Combined purchase privilege. The following persons may qualify for the
sales charge reductions or eliminations shown in the prospectus by
combining into a single transaction the purchase of class A shares or class
M shares with other purchases of any class of shares:
(i) an individual, or a "company" as defined in Section 2(a)(8) of the
Investment Company Act of 1940 (which includes corporations which are
corporate affiliates of each other);
(ii) an individual, his or her spouse and their children under twenty-one,
purchasing for his, her or their own account;
(iii) a trustee or other fiduciary purchasing for a single trust estate or
single fiduciary account (including a pension, profit-sharing, or other
employee benefit trust created pursuant to a plan qualified under Section
401 of the Internal Revenue Code of 1986, as amended (the "Code"));
(iv) tax-exempt organizations qualifying under Section 501(c)(3) of the
Internal Revenue Code (not including tax-exempt organizations qualifying
under Section 403(b)(7) (a "403(b) plan") of the Code; and
(v) employee benefit plans of a single employer or of affiliated employers,
other than 403(b) plans.
A combined purchase currently may also include shares of any class of other
continuously offered Putnam funds (other than money market funds) purchased
at the same time through a single investment dealer, if the dealer places
the order for such shares directly with Putnam Retail Management.
Cumulative quantity discount (right of accumulation). A purchaser of class
A shares or class M shares may qualify for a cumulative quantity discount
by combining a current purchase (or combined purchases as described above)
with certain other shares of any class of Putnam funds already owned. The
applicable sales charge is based on the total of:
(i) the investor's current purchase; and
(ii) the maximum public offering price (at the close of business on the
previous day) of:
(a) all shares held by the investor in all of the Putnam funds (except
money market funds); and
(b) any shares of money market funds acquired by exchange from other Putnam
funds; and
(iii) the maximum public offering price of all shares described in
paragraph (ii) owned by another shareholder eligible to participate with
the investor in a "combined purchase" (see above).
To qualify for the combined purchase privilege or to obtain the cumulative
quantity discount on a purchase through an investment dealer, when each
purchase is made the investor or dealer must provide Putnam Retail
Management with sufficient information to verify that the purchase
qualifies for the privilege or discount. The shareholder must furnish this
information to Putnam Investor Services when making direct cash
investments.
Statement of Intention. Investors may also obtain the reduced sales
charges for class A shares or class M shares shown in the prospectus for
investments of a particular amount by means of a written Statement of
Intention, which expresses the investor's intention to invest that amount
(including certain "credits," as described below) within a period of 13
months in shares of any class of the fund or any other continuously offered
Putnam fund (excluding money market funds). Each purchase of class A
shares or class M shares under a Statement of Intention will be made at the
public offering price applicable at the time of such purchase to a single
transaction of the total dollar amount indicated in the Statement of
Intention. A Statement of Intention may include purchases of shares made
not more than 90 days prior to the date that an investor signs a Statement;
however, the 13-month period during which the Statement of Intention is in
effect will begin on the date of the earliest purchase to be included.
An investor may receive a credit toward the amount indicated in the
Statement of Intention equal to the maximum public offering price as of the
close of business on the previous day of all shares he or she owns on the
date of the Statement of Intention which are eligible for purchase under a
Statement of Intention (plus any shares of money market funds acquired by
exchange of such eligible shares). Investors do not receive credit for
shares purchased by the reinvestment of distributions. Investors
qualifying for the "combined purchase privilege" (see above) may purchase
shares under a single Statement of Intention.
The Statement of Intention is not a binding obligation upon the investor to
purchase the full amount indicated. The minimum initial investment under a
Statement of Intention is 5% of such amount, and must be invested
immediately. Class A shares or class M shares purchased with the first 5%
of such amount will be held in escrow to secure payment of the higher sales
charge applicable to the shares actually purchased if the full amount
indicated is not purchased. When the full amount indicated has been
purchased, the escrow will be released. If an investor desires to redeem
escrowed shares before the full amount has been purchased, the shares will
be released from escrow only if the investor pays the sales charge that,
without regard to the Statement of Intention, would apply to the total
investment made to date.
To the extent that an investor purchases more than the dollar amount
indicated on the Statement of Intention and qualifies for a further reduced
sales charge, the sales charge will be adjusted for the entire amount
purchased at the end of the 13-month period, upon recovery from the
investor's dealer of its portion of the sales charge adjustment. Once
received from the dealer, which may take a period of time or may never
occur, the sales charge adjustment will be used to purchase additional
shares at the then current offering price applicable to the actual amount
of the aggregate purchases. These additional shares will not be considered
as part of the total investment for the purpose of determining the
applicable sales charge pursuant to the Statement of Intention. No sales
charge adjustment will be made unless and until the investor's dealer
returns any excess commissions previously received.
To the extent that an investor purchases less than the dollar amount
indicated on the Statement of Intention within the 13-month period, the
sales charge will be adjusted upward for the entire amount purchased at the
end of the 13-month period. This adjustment will be made by redeeming
shares from the account to cover the additional sales charge, the proceeds
of which will be paid to the investor's dealer and Putnam Retail Management
in accordance with the prospectus. If the account exceeds an amount that
would otherwise qualify for a reduced sales charge, that reduced sales
charge will be applied.
Statements of Intention are not available for certain employee benefit
plans.
Statement of Intention forms may be obtained from Putnam Retail Management
or from investment dealers. Interested investors should read the Statement
of Intention carefully.
Group purchases of class A and class M shares. Members of qualified groups
may purchase class A shares of the fund at a group sales charge rate of
4.50% of the public offering price (4.71% of the net amount invested).
The dealer discount on such sales is 3.75% of the offering price.
Members of qualified groups may also purchase class M shares at net asset
value.
To receive the class A or class M group rate, group members must purchase
shares through a single investment dealer designated by the group. The
designated dealer must transmit each member's initial purchase to Putnam
Retail Management, together with payment and completed application forms.
After the initial purchase, a member may send funds for the purchase of
shares directly to Putnam Investor Services. Purchases of shares are made
at the public offering price based on the net asset value next determined
after Putnam Retail Management or Putnam Investor Services receives payment
for the shares. The minimum investment requirements described above apply
to purchases by any group member. Only shares purchased under the class A
group discount are included in calculating the purchased amount for the
purposes of these requirements.
Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or association, or
other organized groups of persons (the members of which may include other
qualified groups) provided that: (i) the group has at least 25 members of
which, with respect to the class A discount only, at least 10 members
participate in the initial purchase; (ii) the group has been in existence
for at least six months; (iii) the group has some purpose in addition to
the purchase of investment company shares at a reduced sales charge; (iv)
the group's sole organizational nexus or connection is not that the members
are credit card holders of a company, policy holders of an insurance
company, customers of a bank or broker-dealer, clients of an investment
adviser or security holders of a company; (v) with respect to the class A
discount only, the group agrees to provide its designated investment dealer
access to the group's membership by means of written communication or
direct presentation to the membership at a meeting on not less frequently
than an annual basis; (vi) the group or its investment dealer will provide
annual certification in form satisfactory to Putnam Investor Services that
the group then has at least 25 members and, with respect to the class A
discount only, that at least ten members participated in group purchases
during the immediately preceding 12 calendar months; and (vii) the group or
its investment dealer will provide periodic certification in form
satisfactory to Putnam Investor Services as to the eligibility of the
purchasing members of the group.
Members of a qualified group include: (i) any group which meets the
requirements stated above and which is a constituent member of a qualified
group; (ii) any individual purchasing for his or her own account who is
carried on the records of the group or on the records of any constituent
member of the group as being a good standing employee, partner, member or
person of like status of the group or constituent member; or (iii) any
fiduciary purchasing shares for the account of a member of a qualified
group or a member's beneficiary. For example, a qualified group could
consist of a trade association which would have as its members individuals,
sole proprietors, partnerships and corporations. The members of the group
would then consist of the individuals, the sole proprietors and their
employees, the members of the partnerships and their employees, and the
corporations and their employees, as well as the trustees of employee
benefit trusts acquiring class A shares for the benefit of any of the
foregoing.
A member of a qualified group may, depending upon the value of class A
shares of the fund owned or proposed to be purchased by the member, be
entitled to purchase class A shares of the fund at non-group sales charge
rates shown in the prospectus which may be lower than the group sales
charge rate, if the member qualifies as a person entitled to reduced
non-group sales charges. Such a group member will be entitled to purchase
at the lower rate if, at the time of purchase, the member or his or her
investment dealer furnishes sufficient information for Putnam Retail
Management or Putnam Investor Services to verify that the purchase
qualifies for the lower rate.
Interested groups should contact their investment dealer or Putnam Retail
Management. The fund reserves the right to revise the terms of or to
suspend or discontinue group sales at any time.
Purchases of $1 million or more of Class A shares. Purchases of class A
shares of $1 million or more are not subject to an initial sales charge,
but may be subject to a CDSC, as described below, unless the dealer of
record has, with Putnam Retail Management's approval, waived its commission
or agreed to refund its commission to Putnam Retail Management if a CDSC
would otherwise apply.
* For a class A qualified benefit plan (any employer-sponsored plan or
arrangement), a CDSC of 0.50% (0.75% for a plan with less than $5 million
in Putnam funds and other investments managed by Putnam Management or its
affiliates) applies if the plan redeems 90% or more of its cumulative
purchases within two years of the plan's initial purchase of class A
shares.
* For any other purchaser, a CDSC of 1.00% or 0.50% applies to redemptions
within the first or second year, respectively, of purchase.
On sales at net asset value to a class A qualified benefit plan, Putnam
Retail Management pays commissions to the dealer of record at the time of
the sale on net monthly purchases up to the following rates: 1.00% of the
first $1 million, 0.75% of the next $1 million and 0.50% thereafter.
On sales at net asset value to other investors, Putnam Retail Management
pays commissions on sales during the one-year period beginning with the
date of the initial purchase at net asset value. Each subsequent one-year
measuring period for these purposes begins with the first net asset value
purchase following the end of the prior period. These commissions are paid
at the rate of 1.00% of the amount under $3 million, 0.50% of the next $47
million and 0.25% thereafter.
Different CDSC and commission rates may apply to shares purchased prior to
April 15, 1997 and to shares purchased by investment-only plans prior to
August 1, 1999.
Additional Information About Class B and Class C Shares
Except as noted below, Putnam Retail Management will pay a 4% commission on
sales of class B shares of the fund only to those financial intermediaries
who have entered into service agreements with Putnam Retail Management.
For tax-exempt funds, this commission includes a 0.20% pre-paid service fee
(except for Putnam Municipal Income Fund, which has a 0.25% pre-paid
service fee). For Putnam Intermediate U.S. Government Income Fund, Putnam
Retail Management will pay a 2.75% commission to financial intermediaries
selling class B shares of the fund. Putnam Management pays financial
intermediaries a 1% commission on sales of class C shares of a fund. Class
B and class C shares of the Money Market Fund may only be purchased as
part of an exchange from class B or class C shares of another Putnam fund,
or by opening a dollar cost averaging account, as described in the Money
Market Fund's prospectus. Class B and class C share purchases for the
Money Market Fund are not subject to a separate CDSC, but a if a
shareholder exchanges class B or class C shares from another fund to the
Money Market Fund and then redeems the class B or class C shares of the
Money Market Fund, that redemption will be subject to the CDSC applicable
to the class B or class C shares of the other fund. Therefore no up-front
commission is paid on sales of class B or class C shares for the Money
Market Fund. Putnam Retail Management will retain any CDSC imposed on
redemptions of class B and class C shares to compensate it for the cost of
paying the up-front commissions paid to financial intermediaries for class
B or class C share sales.
DISTRIBUTION PLANS
If the fund or a class of shares of the fund has adopted a distribution
plan, the prospectus describes the principal features of the plan. This
SAI contains additional information which may be of interest to investors.
Continuance of a plan is subject to annual approval by a vote of the
Trustees, including a majority of the Trustees who are not interested
persons of the fund and who have no direct or indirect interest in the plan
or related arrangements (the "Qualified Trustees"), cast in person at a
meeting called for that purpose. All material amendments to a plan must be
likewise approved by the Trustees and the Qualified Trustees. No plan may
be amended in order to increase materially the costs which the fund may
bear for distribution pursuant to such plan without also being approved by
a majority of the outstanding voting securities of the fund or the relevant
class of the fund, as the case may be. A plan terminates automatically in
the event of its assignment and may be terminated without penalty, at any
time, by a vote of a majority of the Qualified Trustees or by a vote of a
majority of the outstanding voting securities of the fund or the relevant
class of the fund, as the case may be.
Putnam Retail Management compensates qualifying dealers (including, for
this purpose, certain financial institutions) for sales of shares and the
maintenance of shareholder accounts.
Putnam Retail Management may suspend or modify its payments to dealers.
The payments are also subject to the continuation of the relevant
distribution plan, the terms of the service agreements between the dealers
and Putnam Retail Management and any applicable limits imposed by the
National Association of Securities Dealers, Inc.
Financial institutions receiving payments from Putnam Retail Management as
described above may be required to comply with various state and federal
regulatory requirements, including among others those regulating the
activities of securities brokers or dealers.
Except as otherwise agreed between Putnam Retail Management and a dealer,
for purposes of determining the amounts payable to dealers for shareholder
accounts for which such dealers are designated as the dealer of record,
"average net asset value" means the product of (i) the average daily share
balance in such account(s) and (ii) the average daily net asset value of
the relevant class of shares over the quarter.
Class A shares:
Putnam Retail Management makes quarterly payments to dealers at the annual
rates set forth below (as a percentage of the average net asset value of
class A shares for which such dealers are designated the dealer of record)
except that payments to dealers for shares held by class A qualified
benefit plans may be made at other rates, as described below. No payments
are made during the first year after purchase on shares purchased at net
asset value by shareholders that invest at least $1 million or that are
class A qualified benefit plans, unless the shareholder has made
arrangements with Putnam Retail Management and the dealer of record has
waived the sales commission.
<TABLE>
<CAPTION>
Rate Fund
---- ----
<S> <C>
0.25% All funds currently making payments under a
class A distribution plan, except for those
listed below
0.50% for shares purchased on Putnam Diversified Equity Trust
or before 7/1/95; 0.25% for
shares purchased after 7/1/95
0.20% Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund
0.20% for shares purchased on Putnam Balanced Retirement Fund
or before 12/31/89; 0.25% for Putnam Convertible Income-Growth Trust
shares purchased after 12/31/89 The George Putnam Fund of Boston
Putnam Global Growth Fund
Putnam Global Natural Resources Fund
Putnam Health Sciences Trust
The Putnam Fund for Growth and Income
Putnam Investors Fund
Putnam Vista Fund
Putnam Voyager Fund
0.20% for shares purchased on Putnam High Yield Trust
or before 3/31/90; 0.25% for Putnam U.S. Government Income Trust
shares purchased after 3/31/90
0.20% for shares purchased on Putnam Income Fund
or before 3/31/91; 0.25% for
shares purchased after 3/31/91
0.20% for shares purchased on Putnam Municipal Income Fund
or before 5/7/92; 0.25% for
shares purchased after 5/7/92
0.15% for shares purchased on Putnam Michigan Tax Exempt Income Fund
or before 3/6/92; 0.20% for Putnam Minnesota Tax Exempt Income Fund
shares purchased after 3/6/92 Putnam Ohio Tax Exempt Income Fund
0.15% for shares purchased on Putnam Massachusetts Tax Exempt Income Fund
or before 5/11/92; 0.20% for
shares purchased after 5/11/92
0.15% for shares purchased on Putnam New York Tax Exempt Opportunities Fund
or before 7/12/92; 0.20% for
shares purchased after 7/12/92
0.15% for shares purchased on Putnam California Tax Exempt Income Fund
or before 12/31/92; 0.20% for Putnam New Jersey Tax Exempt Income Fund
shares purchased after 12/31/92 Putnam New York Tax Exempt Income Fund
Putnam Tax Exempt Income Fund
0.15% for shares purchased on Putnam Arizona Tax Exempt Income Fund
or before 3/5/93; 0.20% for
shares purchased after 3/5/93
0.15% for shares purchased on Putnam Florida Tax Exempt Income Fund
or before 7/8/93; 0.20% for Putnam Pennsylvania Tax Exempt Income Fund
shares purchased after 7/8/93
0.00% Putnam California Tax Exempt Money Market Fund
Putnam Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Preferred Income Fund
Putnam Tax Exempt Money Market Fund
Putnam Retail Management pays service fees to the dealer of record for
plans at the rate of up to 0.25% of average net assets, depending on the
level of service provided by Putnam Fiduciary Trust Company or its
affiliates, by the dealer of record, and by third parties. Service fees
are paid quarterly to the dealer of record for that quarter.
<CAPTION>
Class B shares:
Putnam Retail Management makes quarterly payments to dealers at the annual
rates set forth below (as a percentage of the average net asset value of
class B shares for which such dealers are designated the dealer of record).
Rate Fund
---- ----
<S> <C>
0.25% All funds currently making payments under a
class B distribution plan, except for those
listed below
0.25%, except that the first Putnam Municipal Income Fund
year's service fees of 0.25%
are prepaid at time of sale
0.25%, except that the first Putnam Arizona Tax Exempt Income Fund
year's service fees of 0.20% Putnam California Tax Exempt Income Fund
are prepaid at time of sale Putnam Florida Tax Exempt Income Fund
Putnam Massachusetts Tax Exempt Income Fund
Putnam Michigan Tax Exempt Income Fund
Putnam Minnesota Tax Exempt Income Fund
Putnam New Jersey Tax Exempt Income Fund
Putnam New York Tax Exempt Income Fund
Putnam New York Tax Exempt Opportunities Fund
Putnam Ohio Tax Exempt Income Fund
Putnam Pennsylvania Tax Exempt Income Fund
Putnam Tax Exempt Income Fund
0.20% for shares purchased on Putnam Tax-Free Insured Fund
or before 3/31/90; 0.25% for Putnam Tax-Free High Yield
shares purchased after 3/31/90;
first year's service fees are prepaid
at time of sale
0.00% Putnam Money Market Fund
<CAPTION>
Class C shares:
Putnam Retail Management makes quarterly payments to dealers at the annual
rates set forth below (as a percentage of the average net asset value of
class C shares for which such dealers are designated the dealer of record).
Rate Fund
---- ----
<S> <C>
1.00% All funds currently making payments under a
class C distribution plan, except the fund
listed below
0.50% Putnam Money Market Fund
<CAPTION>
Class M shares:
Putnam Retail Management makes quarterly payments to dealers at the annual
rates set forth below (as a percentage of the average net asset value of
class M shares for which such dealers are designated the dealer of record).
Rate Fund
---- ----
<S> <C>
0.65% All growth and growth and income funds
currently making payments under a class M
distribution plan
0.40% All income and money market funds currently
making payments under a class M distribution
plan (except for Putnam Preferred Income Fund
and Putnam Money Market Fund)
0.25% Putnam Preferred Income Fund
0.15% Putnam Money Market Fund
</TABLE>
INVESTOR SERVICES
Shareholder Information
Each time shareholders buy or sell shares, they will receive a statement
confirming the transaction and listing their current share balance. (Under
certain investment plans, a statement may only be sent quarterly.)
Shareholders will receive a statement confirming reinvestment of
distributions in additional fund shares (or in shares of other Putnam funds
for Dividends Plus accounts) promptly following the quarter in which the
reinvestment occurs. To help shareholders take full advantage of their
Putnam investment, they will receive a Welcome Kit and a periodic
publication covering many topics of interest to investors. The fund also
sends annual and semiannual reports that keep shareholders informed about
its portfolio and performance, and year-end tax information to simplify
their recordkeeping. Easy-to-read, free booklets on special subjects such
as the Exchange Privilege and IRAs are available from Putnam Investor
Services. Shareholders may call Putnam Investor Services toll-free
weekdays at 1-800-225-1581 between 8:30 a.m. and 8:00 p.m. Boston time for
more information, including account balances. Shareholders can also visit
the Putnam web site at http://www.putnaminvestments.com.
Your Investing Account
The following information provides more detail concerning the operation of
a Putnam Investing Account. For further information or assistance,
investors should consult Putnam Investor Services. Shareholders who
purchase shares through a defined contribution plan should note that not
all of the services or features described below may be available to them,
and they should contact their employer for details.
A shareholder may reinvest a cash distribution without a front-end sales
charge or without the reinvested shares being subject to a CDSC, as the
case may be, by delivering to Putnam Investor Services the uncashed
distribution check, endorsed to the order of the fund. Putnam Investor
Services must receive the properly endorsed check within 1 year after the
date of the check.
The Investing Account also provides a way to accumulate shares of the fund.
In most cases, after an initial investment of $500, a shareholder may send
checks to Putnam Investor Services for $50 or more, made payable to the
fund, to purchase additional shares at the applicable public offering price
next determined after Putnam Investor Services receives the check. Checks
must be drawn on a U.S. bank and must be payable in U.S. dollars.
Putnam Investor Services acts as the shareholder's agent whenever it
receives instructions to carry out a transaction on the shareholder's
account. Upon receipt of instructions that shares are to be purchased for
a shareholder's account, shares will be purchased through the investment
dealer designated by the shareholder. Shareholders may change investment
dealers at any time by written notice to Putnam Investor Services, provided
the new dealer has a sales agreement with Putnam Retail Management.
Shares credited to an account are transferable upon written instructions in
good order to Putnam Investor Services and may be sold to the fund as
described under "How do I sell fund shares?" in the prospectus. Money
market funds and certain other funds will not issue share certificates. A
shareholder may send to Putnam Investor Services any certificates which
have been previously issued for safekeeping at no charge to the
shareholder.
Putnam Retail Management, at its expense, may provide certain additional
reports and administrative material to qualifying institutional investors
with fiduciary responsibilities to assist these investors in discharging
their responsibilities. Institutions seeking further information about
this service should contact Putnam Retail Management, which may modify or
terminate this service at any time.
Putnam Investor Services may make special services available to
shareholders with investments exceeding $1,000,000. Contact Putnam
Investor Services for details.
The fund pays Putnam Investor Services' fees for maintaining Investing
Accounts.
Reinstatement Privilege
An investor who has redeemed shares of the fund may reinvest (within 1
year) the proceeds of such sale in shares of the same class of the fund, or
may be able to reinvest (within 1 year) the proceeds in shares of the same
class of one of the other continuously offered Putnam funds (through the
exchange privilege described in the prospectus), including, in the case of
shares subject to a CDSC, the amount of CDSC charged on the redemption.
Any such reinvestment would be at the net asset value of the shares of the
fund(s) the investor selects, next determined after Putnam Retail
Management receives a Reinstatement Authorization. The time that the
previous investment was held will be included in determining any applicable
CDSC due upon redemptions and, in the case of class B shares, the
eight-year period for conversion to class A shares. Shareholders will
receive from Putnam Retail Management the amount of any CDSC paid at the
time of redemption as part of the reinstated investment, which may be
treated as capital gains to the shareholder for tax purposes. Exercise of
the Reinstatement Privilege does not alter the federal income tax treatment
of any capital gains realized on a sale of fund shares, but to the extent
that any shares are sold at a loss and the proceeds are reinvested in
shares of the fund, some or all of the loss may be disallowed as a
deduction. Consult your tax adviser. Investors who desire to exercise the
Reinstatement Privilege should contact their investment dealer or Putnam
Investor Services.
Exchange Privilege
Except as otherwise set forth in this section, by calling Putnam Investor
Services, investors may exchange shares valued up to $500,000 between
accounts with identical registrations, provided that no certificates are
outstanding for such shares and no address change has been made within the
preceding 15 days. During periods of unusual market changes and
shareholder activity, shareholders may experience delays in contacting
Putnam Investor Services by telephone to exercise the telephone exchange
privilege.
Putnam Investor Services also makes exchanges promptly after receiving a
properly completed Exchange Authorization Form and, if issued, share
certificates. If the shareholder is a corporation, partnership, agent, or
surviving joint owner, Putnam Investor Services will require additional
documentation of a customary nature. Because an exchange of shares
involves the redemption of fund shares and reinvestment of the proceeds in
shares of another Putnam fund, completion of an exchange may be delayed
under unusual circumstances if the fund were to suspend redemptions or
postpone payment for the fund shares being exchanged, in accordance with
federal securities laws. Exchange Authorization Forms and prospectuses of
the other Putnam funds are available from Putnam Retail Management or
investment dealers having sales contracts with Putnam Retail Management.
The prospectus of each fund describes its investment objective(s) and
policies, and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange. Shares of
certain Putnam funds are not available to residents of all states. The
fund reserves the right to change or suspend the exchange privilege at any
time. Shareholders would be notified of any change or suspension.
Additional information is available from Putnam Investor Services.
Shareholders of other Putnam funds may also exchange their shares at net
asset value for shares of the fund, as set forth in the current prospectus
of each fund.
For federal income tax purposes, an exchange is a sale on which the
investor generally will realize a capital gain or loss depending on whether
the net asset value at the time of the exchange is more or less than the
investor's basis. The exchange privilege may be revised or terminated at
any time. Shareholders would be notified of any such change or suspension.
Dividends PLUS
Shareholders may invest the fund's distributions of net investment income
or distributions combining net investment income and short-term capital
gains in shares of the same class of another continuously offered Putnam
fund (the "receiving fund") using the net asset value per share of the
receiving fund determined on the date the fund's distribution is payable.
No sales charge or CDSC will apply to the purchased shares unless the fund
paying the distribution is a money market fund. The prospectus of each
fund describes its investment objective(s) and policies, and shareholders
should obtain a prospectus and consider these objective(s) and policies
carefully before investing their distributions in the receiving fund.
Shares of certain Putnam funds are not available to residents of all
states.
The minimum account size requirement for the receiving fund will not apply
if the current value of your account in the fund paying the distribution is
more than $5,000.
Shareholders of other Putnam funds (except for money market funds, whose
shareholders must pay a sales charge or become subject to a CDSC) may also
use their distributions to purchase shares of the fund at net asset value.
For federal tax purposes, distributions from the fund which are reinvested
in another fund are treated as paid by the fund to the shareholder and
invested by the shareholder in the receiving fund and thus, to the extent
comprised of taxable income and deemed paid to a taxable shareholder, are
taxable.
The Dividends PLUS program may be revised or terminated at any time.
Plans Available To Shareholders
The plans described below are fully voluntary and may be terminated at any
time without the imposition by the fund or Putnam Investor Services of any
penalty. All plans provide for automatic reinvestment of all distributions
in additional shares of the fund at net asset value. The fund, Putnam
Retail Management or Putnam Investor Services may modify or cease offering
these plans at any time.
Systematic Withdrawal Plan ("SWP"). An investor who owns or buys shares of
the fund valued at $10,000 or more at the current public offering price may
open a SWP plan and have a designated sum of money ($50 or more) paid
monthly, quarterly, semi-annually or annually to the investor or another
person. (Payments from the fund can be combined with payments from other
Putnam funds into a single check through a designated payment plan.) Shares
are deposited in a plan account, and all distributions are reinvested in
additional shares of the fund at net asset value (except where the plan is
utilized in connection with a charitable remainder trust). Shares in a
plan account are then redeemed at net asset value to make each withdrawal
payment. Payment will be made to any person the investor designates;
however, if shares are registered in the name of a trustee or other
fiduciary, payment will be made only to the fiduciary, except in the case
of a profit-sharing or pension plan where payment will be made to a
designee. As withdrawal payments may include a return of principal, they
cannot be considered a guaranteed annuity or actual yield of income to the
investor. The redemption of shares in connection with a plan generally
will result in a gain or loss for tax purposes. Some or all of the losses
realized upon redemption may be disallowed pursuant to the so-called wash
sale rules if shares of the same fund from which shares were redeemed are
purchased (including through the reinvestment of fund distributions) within
a period beginning 30 days before, and ending 30 days after, such
redemption. In such a case, the basis of the replacement shares will be
increased to reflect the disallowed loss. Continued withdrawals in excess
of income will reduce and possibly exhaust invested principal, especially
in the event of a market decline. The maintenance of a plan concurrently
with purchases of additional shares of the fund would be disadvantageous to
the investor because of the sales charge payable on such purchases. For
this reason, the minimum investment accepted while a plan is in effect is
$1,000, and an investor may not maintain a plan for the accumulation of
shares of the fund (other than through reinvestment of distributions) and a
plan at the same time. The cost of administering these plans for the
benefit of those shareholders participating in them is borne by the fund as
an expense of all shareholders. The fund, Putnam Retail Management or
Putnam Investor Services may terminate or change the terms of the plan at
any time. A plan will be terminated if communications mailed to the
shareholder are returned as undeliverable.
Investors should consider carefully with their own financial advisers
whether the plan and the specified amounts to be withdrawn are appropriate
in their circumstances. The fund and Putnam Investor Services make no
recommendations or representations in this regard.
Tax Qualified Retirement Plans; 403(b) and SEP Plans. (Not offered by
funds investing primarily in tax-exempt securities.) Investors may purchase
shares of the fund through the following Tax Qualified Retirement Plans,
available to qualified individuals or organizations:
Standard and variable profit-sharing (including 401(k)) and money purchase
pension plans; and
Individual Retirement Account Plans (IRAs).
Each of these Plans has been qualified as a prototype plan by the Internal
Revenue Service. Putnam Investor Services will furnish services under each
plan at a specified annual cost. Putnam Fiduciary Trust Company serves as
trustee under each of these Plans.
Forms and further information on these Plans are available from investment
dealers or from Putnam Retail Management. In addition, specialized
professional plan administration services are available on an optional
basis; contact Putnam Defined Contribution Plan Services at 1-800-225-2465,
extension 8600.
A 403(b) Retirement Plan is available for employees of public school
systems and organizations which meet the requirements of Section 501(c)(3)
of the Internal Revenue Code. Forms and further information on the 403(b)
Plan are also available from investment dealers or from Putnam Retail
Management. Shares of the fund may also be used in simplified employee
pension (SEP) plans. For further information on the Putnam prototype SEP
plan, contact an investment dealer or Putnam Retail Management.
Consultation with a competent financial and tax adviser regarding these
Plans and consideration of the suitability of fund shares as an investment
under the Employee Retirement Income Security Act of 1974, or otherwise, is
recommended.
SIGNATURE GUARANTEES
Requests to redeem shares having a net asset value of $100,000 or more, or
to transfer shares or make redemption proceeds payable to anyone other than
the registered account owners, must be signed by all registered owners or
their legal representatives and must be guaranteed by a bank,
broker/dealer, municipal securities dealer or broker, credit union,
national securities exchange, registered securities association, clearing
agency, savings association or trust company, provided such institution is
authorized and acceptable under and conforms with Putnam Fiduciary Trust
Company's signature guarantee procedures. A copy of such procedures is
available upon request. In certain situations, for example, if you want
your redemption proceeds sent to an address other than your address as it
appears on Putnam's records, you may also need to provide a signature
guarantee. Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation, partnership, agent
or fiduciary, or a surviving joint owner. Contact Putnam Investor Services
for more information on Putnam's signature guarantee and documentation
requirements.
SUSPENSION OF REDEMPTIONS
The fund may not suspend shareholders' right of redemption, or postpone
payment for more than seven days, unless the Exchange is closed for other
than customary weekends or holidays, or if permitted by the rules of the
Securities and Exchange Commission during periods when trading on the
Exchange is restricted or during any emergency which makes it impracticable
for the fund to dispose of its securities or to determine fairly the value
of its net assets, or during any other period permitted by order of the
Commission for protection of investors.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the fund. However, the
Agreement and Declaration of Trust disclaims shareholder liability for acts
or obligations of the fund and requires that notice of such disclaimer be
given in each agreement, obligation, or instrument entered into or executed
by the fund or the Trustees. The Agreement and Declaration of Trust
provides for indemnification out of fund property for all loss and expense
of any shareholder held personally liable for the obligations of the fund.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the fund would
be unable to meet its obligations. The likelihood of such circumstances is
remote.
STANDARD PERFORMANCE MEASURES
Yield and total return data for the fund may from time to time be presented
in Part I of this SAI and in advertisements. In the case of funds with
more than one class of shares, all performance information is calculated
separately for each class. The data is calculated as follows.
Total return for one-, five- and ten-year periods (or for such shorter
periods as the fund has been in operation or shares of the relevant class
have been outstanding) is determined by calculating the actual dollar
amount of investment return on a $1,000 investment in the fund made at the
beginning of the period, at the maximum public offering price for class A
shares and class M shares and net asset value for other classes of shares,
and then calculating the annual compounded rate of return which would
produce that amount. Total return for a period of one year is equal to the
actual return of the fund during that period. Total return calculations
assume deduction of the fund's maximum sales charge or CDSC, if applicable,
and reinvestment of all fund distributions at net asset value on their
respective reinvestment dates.
The fund's yield is presented for a specified thirty-day period (the "base
period"). Yield is based on the amount determined by (i) calculating the
aggregate amount of dividends and interest earned by the fund during the
base period less expenses for that period, and (ii) dividing that amount by
the product of (A) the average daily number of shares of the fund
outstanding during the base period and entitled to receive dividends and
(B) the per share maximum public offering price for class A shares or class
M shares, as appropriate, and net asset value for other classes of shares
on the last day of the base period. The result is annualized on a
compounding basis to determine the yield. For this calculation, interest
earned on debt obligations held by the fund is generally calculated using
the yield to maturity (or first expected call date) of such obligations
based on their market values (or, in the case of receivables-backed
securities such as the Government National Mortgage Association ("GNMAs"),
based on cost). Dividends on equity securities are accrued daily at their
stated dividend rates. The amount of expenses used in determining the
fund's yield includes, in addition to expenses actually accrued by the
fund, an estimate of the amount of expenses that the fund would have
incurred if brokerage commissions had not been used to reduce such
expenses.
If the fund is a money market fund, yield is computed by determining the
percentage net change, excluding capital changes, in the value of an
investment in one share over the seven-day period for which yield is
presented (the "base period"), and multiplying the net change by 365/7 (or
approximately 52 weeks). Effective yield represents a compounding of the
yield by adding 1 to the number representing the percentage change in value
of the investment during the base period, raising that sum to a power equal
to 365/7, and subtracting 1 from the result.
If the fund is a tax-exempt fund, the tax-equivalent yield during the base
period may be presented for shareholders in one or more stated tax
brackets. Tax-equivalent yield is calculated by adjusting the tax-exempt
yield by a factor designed to show the approximate yield that a taxable
investment would have to earn to produce an after-tax yield equal, for that
shareholder, to the tax-exempt yield. The tax-equivalent yield will differ
for shareholders in other tax brackets.
At times, Putnam Management may reduce its compensation or assume expenses
of the fund in order to reduce the fund's expenses. The per share amount
of any such fee reduction or assumption of expenses during the fund's past
five fiscal years (or for the life of the fund, if shorter) is set forth in
the footnotes to the table in the section entitled "Financial highlights"
in the prospectus. Any such fee reduction or assumption of expenses would
increase the fund's yield and total return for periods including the period
of the fee reduction or assumption of expenses.
All data are based on past performance and do not predict future results.
COMPARISON OF PORTFOLIO PERFORMANCE
Independent statistical agencies measure the fund's investment performance
and publish comparative information showing how the fund, and other
investment companies, performed in specified time periods. Three agencies
whose reports are commonly used for such comparisons are set forth below.
From time to time, the fund may distribute these comparisons to its
shareholders or to potential investors. The agencies listed below measure
performance based on their own criteria rather than on the standardized
performance measures described in the preceding section.
Lipper, Inc. distributes mutual fund rankings monthly. The rankings are
based on total return performance calculated by Lipper, generally
reflecting changes in net asset value adjusted for reinvestment of capital
gains and income dividends. They do not reflect deduction of any sales
charges. Lipper rankings cover a variety of performance periods, including
year-to-date, 1-year, 5-year, and 10-year performance. Lipper classifies
mutual funds by investment objective and asset category.
Morningstar, Inc. distributes mutual fund ratings twice a month. The
ratings are divided into five groups: highest, above average, neutral,
below average and lowest. They represent the fund's historical risk/reward
ratio relative to other funds in its broad investment class as determined
by Morningstar, Inc. Morningstar ratings cover a variety of performance
periods, including 1-year, 3-year, 5-year, 10-year and overall performance.
The performance factor for the overall rating is a weighted-average
assessment of the fund's 1-year, 3-year, 5-year, and 10-year total return
performance (if available) reflecting deduction of expenses and sales
charges. Performance is adjusted using quantitative techniques to reflect
the risk profile of the fund. The ratings are derived from a purely
quantitative system that does not utilize the subjective criteria
customarily employed by rating agencies such as Standard & Poor's and
Moody's Investor Service, Inc.
Wiesenberger a division of Thomson Financial publishes and distributes
mutual fund rankings on a monthly basis. The rankings are based entirely
on total return calculated by Weisenberger for periods such as
year-to-date, 1-year, 3-year, 5-year, 10-year and 15-year. Mutual funds
are ranked in general categories (e.g., international bond, international
equity, municipal bond, and maximum capital gain). Weisenberger rankings
do not reflect deduction of sales charges or certain fees.
Independent publications may also evaluate the fund's performance. The
fund may from time to time refer to results published in various
periodicals, including Barrons, Financial World, Forbes, Fortune,
Investor's Business Daily, Kiplinger's Personal Finance Magazine, Money,
U.S. News and World Report and The Wall Street Journal.
Independent, unmanaged indexes, such as those listed below, may be used to
present a comparative benchmark of fund performance. The performance
figures of an index reflect changes in market prices, reinvestment of all
dividend and interest payments and, where applicable, deduction of foreign
withholding taxes, and do not take into account brokerage commissions or
other costs. Because the fund is a managed portfolio, the securities it
owns will not match those in an index. Securities in an index may change
from time to time.
The Consumer Price Index, prepared by the U.S. Bureau of Labor Statistics,
is a commonly used measure of the rate of inflation. The index shows the
average change in the cost of selected consumer goods and services and does
not represent a return on an investment vehicle.
Credit Suisse First Boston Global High Yield Index is an index of fixed
income, non-convertible, U.S. dollar denominated securities having a rating
of BB and below by Standard & Poor's or Ba by Moody's. The index is
constructed to mirror the U.S. high yield debt market.
The Dow Jones Industrial Average is an index of 30 common stocks frequently
used as a general measure of stock market performance.
The Dow Jones Utilities Average is an index of 15 utility stocks frequently
used as a general measure of stock market performance for the utilities
industry.
The Lehman Brothers Aggregate Bond Index is an index composed of securities
from The Lehman Brothers Government/Corporate Bond Index, The Lehman
Brothers Mortgage-Backed Securities Index and The Lehman Brothers
Asset-Backed Securities Index and is frequently used as a broad market
measure for fixed-income securities.
The Lehman Brothers Asset-Backed Securities Index is an index composed of
credit card, auto, and home equity loans. Included in the index are
pass-through, bullet (noncallable), and controlled amortization structured
debt securities; no subordinated debt is included. All securities have an
average life of at least one year.
The Lehman Brothers Corporate Bond Index is an index of publicly issued,
fixed-rate, non-convertible investment-grade domestic corporate debt
securities frequently used as a general measure of the performance of
fixed-income securities.
The Lehman Brothers Government Bond Index is an index of publicly issued
U.S. Treasury obligations and debt obligations of U.S. government agencies
(including mortgage-backed securities) frequently used as a general gauge
of the market for fixed-income, government securities.
The Lehman Brothers Government/Corporate Bond Index is an index of publicly
issued U.S. Treasury obligations, debt obligations of U.S. government
agencies (excluding mortgage-backed securities), fixed-rate,
non-convertible, investment-grade corporate debt securities and U.S.
dollar-denominated, SEC-registered non-convertible debt issued by foreign
governmental entities or international agencies used as a general measure
of the performance of fixed-income securities.
The Lehman Brothers GNMA Index is an index of GNMA bonds frequently used as
a general gauge of the market for GNMA securities.
The Lehman Brothers Intermediate Government Bond Index is an index of
publicly issued U.S. Treasury obligations and debt obligations of U.S.
government agencies (excluding mortgage-backed securities) with maturities
of up to ten years frequently used as a general gauge of the market for
intermediate-term, fixed-income, government securities.
The Lehman Brothers Intermediate Treasury Bond Index is an index of
publicly issued U.S. Treasury obligations with maturities of up to ten
years and is used as a general gauge of the market for intermediate-term
fixed-income securities.
The Lehman Brothers Long-Term Treasury Bond Index is an index of publicly
issued U.S. Treasury obligations (excluding flower bonds and
foreign-targeted issues) that are U.S. dollar-denominated and have
maturities of 10 years or greater.
The Lehman Brothers Mortgage-Backed Securities Index is an index that
includes 15- and 30-year fixed rate securities backed by mortgage pools of
the Government National Mortgage Association, Federal Home Loan Mortgage
Corporation, and Federal National Mortgage Association.
The Lehman Brothers Municipal Bond Index is an index of long-term,
investment-grade, fixed-rate tax-exempt bonds.
The Lehman Brothers Treasury Bond Index is an index of publicly issued U.S.
Treasury obligations (excluding flower bonds and foreign-targeted issues)
that are U.S. dollar denominated, have a minimum of one year to maturity,
and are issued in amounts over $50 million.
The Lipper Money Market Average is an arithmetic average of the total
return of all money market mutual funds tracked by Lipper, Inc.
The Lipper Natural Resources Average is an arithmetic average of the total
return of all mutual funds tracked by Lipper, Inc. that invest more than
65% of their equity holdings in the natural resources industries.
The Lipper Tax Exempt Money Market Average is an arithmetic average of the
total return of all tax exempt money market mutual funds tracked by Lipper,
Inc.
The Merrill Lynch All-Convertible Index is an index of convertible
securities that is commonly used as a general measure of performance for
the convertible securities market.
The Merrill Lynch 91-Day Treasury Bill Index is an index that measures the
performance of U.S. Treasury bills currently available in the marketplace.
The Merrill Lynch Perpetual Preferred Index is an index of perpetual
preferred securities that is commonly used as a general measure of
performance for the preferred-stock market.
The Morgan Stanley Capital International Emerging Markets Index is an index
of equity securities issued by companies located in emerging markets with
all values expressed in U.S. dollars.
The Morgan Stanley Capital International Emerging Markets Free Index is an
index of equity securities issued by companies located in emerging markets,
available to non-domestic investors, with all values expressed in U.S.
dollars.
The Morgan Stanley Capital International EAFE Index is an index of equity
securities issued by companies located in Europe, Australasia and the Far
East, with all values expressed in U.S. dollars.
The Morgan Stanley Capital International Europe Index is an index of equity
securities issued by companies located in one of the 15 European countries,
with all values expressed in U.S. dollars.
The Morgan Stanley Capital International Pacific Index is an index of
equity securities issued by companies located in one of five Asian
countries and listed on the exchanges of Australia, New Zealand, Japan,
Hong Kong, Singapore/Malaysia, with all values expressed in U.S. dollars.
The Morgan Stanley Capital International World Index is an index of global
equity securities with all values expressed in U.S. dollars.
The Morgan Stanley Capital International World Free Index is an index of
global equity securities, available to non-domestic investors, with all
values expressed in U.S. dollars.
The NASDAQ Industrial Average is an index of stocks traded in The Nasdaq
Stock Market, Inc. National Market System.
The Russell 1000 Index is an index composed of the 1,000 largest companies
in the Russell 3000 Index, representing approximately 89% of the Russell
3000 total market capitalization.
The Russell 1000 Growth Index is an index composed of securities with
greater-than-average growth orientation within the Russell 1000 Index.
Companies in this index tend to exhibit higher price-to-book and
price-earnings ratios, lower dividend yields and higher forecasted growth
values than other companies in the Russell 1000 Index.
The Russell 2000 Index is an index composed of the 2,000 smallest companies
in the Russell 3000 Index, representing approximately 11% of the Russell
3000 total market capitalization.
The Russell 2000 Growth Index is an index composed of securities with
greater-than-average growth orientation within the Russell 2000 Index.
Companies in this index tend to exhibit higher price-to-book and
price-earnings ratios, lower dividend yields and higher forecasted growth
values than other companies in the Russell 2000 Index.
The Russell 3000 Index is an index composed of the 3,000 largest U.S.
companies ranked by total market capitalization, representing approximately
98% of the U.S. investable equity market.
The Russell Midcap Index is an index composed of the 800 smallest companies
in the Russell 1000 Index, representing approximately 26% of the Russell
1000 total market capitalization.
The Russell Midcap Growth Index is an index composed of securities with
greater-than-average growth orientation within the Russell Midcap Index.
Each security's growth orientation is determined by a composite score of
the security's price-to-book ratio and forecasted growth rate. Growth
stocks tend to have higher price-to-book ratios and forecasted growth rates
than value stocks.
The Salomon Brothers Extended Market Index is an index of global equity
securities of smaller companies with all values expressed in U.S. dollars.
The Salomon Brothers Long-Term High-Grade Corporate Bond Index is an index
of publicly traded corporate bonds having a rating of at least AA by
Standard & Poor's or Aa by Moody's and is frequently used as a general
measure of the performance of fixed-income securities.
The Salomon Brothers Long-Term Treasury Index is an index of U.S.
government securities with maturities greater than 10 years.
The Salomon Brothers World Government Bond Index is an index that tracks
the performance of the 18 government bond markets of Australia, Austria,
Belgium, Canada, Denmark, Finland, France, Germany, Italy, Japan,
Netherlands, Ireland, Spain, Sweden, Switzerland, United Kingdom, United
States and Portugal. Country eligibility is determined by market
capitalization and investability criteria.
The Salomon Brothers Non-U.S. World Government Bond Index is an index of
foreign government bonds calculated to provide a measure of performance in
the government bond markets outside of the United States.
Standard & Poor's 500 Composite Stock Price Index is an index of common
stocks frequently used as a general measure of stock market performance.
Standard & Poor's 40 Utilities Index is an index of 40 utility stocks.
Standard & Poor's/Barra Value Index is an index constructed by ranking the
securities in the Standard & Poor's 500 Composite Stock Price Index by
price-to-book ratio and including the securities with the lowest
price-to-book ratios that represent approximately half of the market
capitalization of the Standard & Poor's 500 Composite Stock Price Index.
In addition, Putnam Retail Management may distribute to shareholders or
prospective investors illustrations of the benefits of reinvesting
tax-exempt or tax-deferred distributions over specified time periods, which
may include comparisons to fully taxable distributions. These
illustrations use hypothetical rates of tax-advantaged and taxable returns
and are not intended to indicate the past or future performance of any
fund.
SECURITIES RATINGS
The ratings of securities in which the fund may invest will be measured at
the time of purchase and, to the extent a security is assigned a different
rating by one or more of the various rating agencies, Putnam Management
will use the highest rating assigned by any agency. Putnam Management
will not necessarily sell an investment if its rating is reduced. The
following rating services describe rated securities as follows:
Moody's Investors Service, Inc.
Bonds
Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long-term risk appear somewhat
larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations, (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Notes
MIG 1/VMIG 1 -- This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
Commercial paper
Issuers rated Prime-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by the following characteristics:
-- Leading market positions in well established industries.
-- High rates of return on funds employed.
-- Conservative capitalization structure with moderate reliance on debt
and ample asset protection.
-- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.
-- Well established access to a range of financial markets and assured
sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is
maintained.
Standard & Poor's
Bonds
AAA -- An obligation rated AAA has the highest rating assigned by Standard
& Poor's. The obligor's capacity to meet its financial commitment on the
obligation is extremely strong.
AA -- An obligation rated AA differs from the highest-rated obligations
only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A -- An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity to
meet its financial commitment on the obligation is still strong.
BBB -- An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.
Obligations rated BB, B, CCC, CC and C are regarded as having significant
speculative characteristics. BB indicates the lowest degree of speculation
and C the highest. While such obligations will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major exposures to adverse conditions.
BB -- An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could
lead to the obligor's inadequate capacity to meet its financial commitment
on the obligation.
B -- An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity to meet
its financial commitment on the obligations. Adverse business, financial,
or economic conditions will likely impair the obligor's capacity or
willingness to meet its financial commitment on the obligation.
CCC -- An obligation rated CCC is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In the
event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.
CC -- An obligation rated CC is currently highly vulnerable to nonpayment.
C -- The C rating may be used to cover a situation where a bankruptcy
petition has been filed, or similar action has been taken, but payments on
this obligation are being continued.
D -- An obligation rated D is in payment default. The D rating category is
used when interest payments or principal payments are not made on the date
due even if the applicable grace period has not expired, unless Standard &
Poor's believes that such payments will be made during such grace period.
The D rating also will be used upon the filing of a bankruptcy petition, or
the taking of a similar action if payments on an obligation are
jeopardized.
Notes
SP-1 -- Strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are given a plus
(+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest.
SP-3 -- Speculative capacity to pay principal and interest.
Commercial paper
A-1 -- This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated `A-1'.
A-3 -- Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
Duff & Phelps Corporation
Long-Term Debt
AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- -- High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
A+, A, A- -- Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
BBB+, BBB, BBB- -- Below-average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection factors
fluctuate according to industry conditions or company fortunes. Overall
quality may move up or down frequently within this category.
B+, B, B- -- Below investment grade and possessing risk that obligations
will not be met when due. Financial protection factors will fluctuate
widely according to economic cycles, industry conditions and/or company
fortunes. Potential exists for frequent changes in the rating within this
category or into a higher or lower rating grade.
CCC -- Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred dividends.
Protection factors are narrow and risk can be substantial with unfavorable
economic/industry conditions, and/or with unfavorable company developments.
DD -- Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
Fitch Investors Service, Inc.
AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest
and repay principal, which is unlikely to be affected by reasonably
foreseeable events.
AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated AAA.
A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to
be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than bonds with
higher ratings.
BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is
considered to be adequate. Adverse changes in economic conditions and
circumstances, however, are more likely to have adverse impact on these
bonds, and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher than for
bonds with higher ratings.
BB -- Bonds considered to be speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified
which could assist the obligor in satisfying its debt service requirements.
B -- Bonds are considered highly speculative. Bonds in this class are
lightly protected as to the obligor's ability to pay interest over the life
of the issue and repay principal when due.
CCC -- Bonds have certain characteristics which, with passing of time,
could lead to the possibility of default on either principal or interest
payments.
CC -- Bonds are minimally protected. Default in payment of
interest and/or principal seems probable.
C -- Bonds are in actual or imminent default in payment of interest or
principal.
DDD -- Bonds are in default and in arrears in interest and/or principal
payments. Such bonds are extremely speculative and should be valued only on
the basis of their value in liquidation or reorganization of the obligor.
DEFINITIONS
"Putnam Management" -- Putnam Investment Management, Inc.,
the fund's investment manager.
"Putnam Retail Management" -- Putnam Retail Management, Inc.
(formerly Putnam Mutual Funds), the
fund's principal underwriter.
"Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company,
Company" the fund's custodian.
"Putnam Investor Services" -- Putnam Investor Services, a division
of Putnam Fiduciary Trust Company, the
fund's investor servicing agent.
PUTNAM INVESTMENT FUNDS
Putnam International Blend Fund
FORM N-1A
PART C
OTHER INFORMATION
Item 23. Exhibits
1. Amended Agreement and Declaration of Trust dated January 6, 1995 --
Incorporated by reference to Post-Effective Amendment No. 32 to
Registrant's Registration Statement.
2. By-Laws as amended through July 21, 2000 -- Incorporated by reference
to Post-Effective Amendment No. 33 to Registrant's Registration
Statement.
3a. Portions of Agreement and Declaration of Trust Relating to Shareholders'
Rights -- Incorporated by reference to Pre-Effective Amendment No. 1 to
Registrant's Registration Statement.
3b. Portions of By-Laws Relating to Shareholders' Rights -- Incorporated by
reference to Pre-Effective Amendment No. 1 to Registrant's Registration
Statement.
4. Management Contract dated December 12, 1994, as most recently revised,
2000 -- To be filed by amendment.
5a. Distributor's Contract dated December 2, 1994 -- Incorporated by reference
to Pre-Effective Amendment No. 1 to the Registrant's Registration
Statement.
5b. Form of Dealer Sales Contract - Incorporated by reference to Pre-effective
Amendment No. 1 to the Registrant's Registration Statement.
5c. Form of Financial Institution Sales Contract - Incorporated by reference
to Pre-effective Amendment No. 1 to the Registrant's Registration
Statement.
6. Trustee Retirement Plan dated October 4, 1996 --Incorporated by reference
to Post-Effective Amendment No. 10 to the Registrant's Registration
Statement.
7. 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.
8. 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 Registration Statement.
9. Opinion of Ropes & Gray, including consent -- To be filed by amendment.
10. Not applicable.
11. Not applicable.
12. Investment Letter from Putnam Investments, Inc. to the Registrant --
Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement.
13a. Class A Distribution Plan and Agreement dated April 1, 2000 - Incorporated
by reference to Post-Effective Amendment No. 32 to the Registrant's
Registration Statement.
13b. Class B Distribution Plan and Agreement dated April 1, 2000 - Incorporated
by reference to Post-Effective Amendment No. 32 to the Registrant's
Registration Statement.
13c. Class C Distribution Plan and Agreement dated April 1, 2000 - Incorporated
by reference to Post-Effective Amendment No. 32 to the Registrant's
Registration Statement.
13d. Class M Distribution Plan and Agreement dated April 1, 2000 - Incorporated
by reference to Post-Effective Amendment No. 32 to the Registrant's
Registration Statement.
13e. Form of Specimen Dealer Service Agreement - Incorporated by reference to
Pre-Effective Amendment No. 1 to the Registrant's Registration Statement.
13f. Form of Specimen Financial Institution Service Agreement -- Incorporated
by reference to Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement.
14. Rule 18f-3 Plan -- Incorporated by reference to Post-Effective
Amendment No. 28 to the Registrant's Registration Statement.
15a. The Putnam Funds Code of Ethics -- Incorporated by reference to
Post-Effective Amendment No. 32 to the Registrant's Registration
Statement.
15b. Putnam Investments Code of Ethics -- Incorporated by reference to
Post-Effective Amendment No. 32 to the Registrant's Registration
Statement.
Item 24. Persons Controlled by or under Common Control with Registrant
As of the effectiveness of this Amendment, it is expected Putnam
Investments, Inc. will own 100% of the Fund. As of October 31, 2000,
Putnam Investments, Inc. owned:
Putnam Mid-Cap Value Fund 89.80%
Putnam Growth Fund 86.80%
Putnam International Fund 94.70%
Putnam Latin America Fund 81.60%
Putnam Asia Pacific Fund II 88.70%
Putnam International 2000 91.80%
Putnam U.S. Core Fund 78.80%
Putnam Equity 2000 76.00%
Putnam Worldwide Equity Fund 63.40%
Putnam Equity Fund 98 76.00%
Item 25. 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 Investment Company Act of 1940 (File No. 811-7237).
<PAGE>
Item 26. Business and Other Connections of Investment Adviser
Except as set forth below, the directors and officers of the Registrant's
investment adviser have been engaged during the past two fiscal years in no
business, vocation or employment of a substantial nature other than as
directors or officers of the investment adviser or certain of its corporate
affiliates. Certain officers of the investment adviser serve as officers
of some or all of the Putnam funds. The address of the investment adviser,
its corporate affiliates and the Putnam Funds is one Post Office Square,
Boston, Massachusetts 02109.
<TABLE>
<CAPTION>
Name Non-Putnam business and other connections
---- -----------------------------------------
<S> <C>
Lauren Allansmith Prior to August 1999, Analyst, Loomis Sayles,
Senior Vice President One Financial Center, Boston, MA 02111
Blake Anderson Trustee, Salem Female Charitable Society,
Managing Director Salem MA 01970
Robert R. Beck Director, Charles Bridge Publishing, 85 Main St.,
Senior Vice President Watertown, MA 02172; Board of Overseers, Beth
Israel Deaconess Medical Center, 330 Brookline
Ave., Boston, MA 02215
Stephen A. Balter Prior to March 2000, Vice President and
Vice President Analyst, Pioneer Investment Management, 60
State St., Boston, MA 02109
Rob A. Bloemker Prior to September 1999, Managing Director,
Senior Vice President Lehman Brothers, 555 California St., 30th
floor, San Francisco, CA 94104
Claudio Brocado Prior to August 1999, independent consultant by
Vice President Stires, O'Donnell & Co. 12 East 44th St., New York,
NY 10017; Prior to January 1999, independent
consultant by Coast Partners, 601 California St.,
San Francisco, CA 94108
Anna Bulkovshteyn Prior to July 1999, Quantitative Analyst, Sun Life
Assistant Vice President Investment Management, 200 King Street West,
Toronto, Ontario M5H 3T4 Canada
Mark Chameih Prior to May 1999, Vice President, Chase
Vice President Manhattan, 125 London Wall, London, UK
Sabina M. Ciminero Prior to August 2000, Research Associate,
Assistant Vice President International Graduate School of Management,
Soldiers Field Road, Boston, MA 02163; Prior to
August 1999, Research Associate, Harvard Business
School, Soldiers Field Road, Boston, MA 02163
James Conklin Prior to May 2000, Vice President, Lehman
Vice President Brothers, 3 World Financial Center, New York, NY
10285
C. Beth Cotner Director, The Lyric Stage Theater, 140
Senior Vice President Clarendon St., Boston, MA 02116
Rick Cotton Prior to August 1999, Manager, Andersen
Vice President Consulting, 100 William St., Wellesley, MA 02481
Lindsey L. Curley Prior to June 1999, Portfolio Analyst, Standish,
Assistant Vice President Ayer & Wood, Inc., One Financial Center, Boston,
MA 02110.
John R.S. Cutler Member, Burst Media, L.L.C., 10 New England
Vice President Executive Park, Burlington, MA 01803
Kenneth Daly President, Andover River Rd. TMA, River Road
Managing Director Transportation Management Association, 7 Shattuck
Rd., Andover, MA 01810
Simon Davis Prior to September 2000, Lead Manager,
Senior Vice President Deutsche Asset Management, 1 Appold St., London,
EC2
Ralph C. Derbyshire Board Member, MSPCC, 399 Boylston St.,
Senior Vice President Boston, MA; Board Member, Winchester After
School Program, Skillings Rd., Winchester, MA
Lisa DeConto Prior to June 2000, Associate Partner, Westgate
Senior Vice President Group, 175 Federal St., Boston, MA 02110; Prior
to May 1999, Principal, LAI Worldwide, 99 High St.,
Boston, MA 02110
Stephen P. Dexter Prior to June 1999, Senior Vice President and
Senior Vice President Senior Portfolio Manager, Scudder Kemper, Inc.
One International Place, Boston, MA
Michael G. Dolan Chairman-Finance Council, St. Mary's Parish,
Assistant Vice President 44 Myrtle St., Melrose, MA 02176; Member,
School Advisory Board, St. Mary's School, 44
Myrtle St., Melrose, MA 02176
Stephen D. Driscoll Prior to April 1999, Compliance Analyst, State
Assistant Vice President Street Bank & Trust, 607 Boylston St., Boston, MA
02116
Edward Driscoll Prior to September 1999, Equity Trader, Fidelity
Vice President Research and Management, 82 Devonshire St.,
Boston, MA 02109
Emily Durbin Board of Directors, Family Service, Inc.,
Vice President Lawrence, MA 01840
Karnig H. Durgarian Board Member, EBRI, Suite 600, 2121 K St.,
Managing Director N.W., Washington, DC 20037-1896. Trustee,
American Assembly, 122 C. St., N.W., Suite 350,
Washington, DC 20001
Nathan Eigerman Trustee, Flower Hill Trust, 298 Marlborough St.,
Senior Vice President #4, Boston, MA 02116
Tony H. Elavia Prior to September 1999, Executive Vice
Senior Vice President President, Voyageur Asset Management, 90 S.
7th Street, Minneapolis, MN 55402
Irene M. Esteves Board of Director Member, American Management
Managing Director Association Finance council, 1601 Broadway,
New York, NY; Board of Director Member, First
Night Boston, 20 Park Plaza, Suite 927, Boston,
MA; Board of Director Member, SC Johnson
Commercialmarkets, 8310 16th St., Stutevant, WI
53177; Board of Director Member, Massachusetts
Taxpayers Foundation, 24 Province St., Boston, MA;
Board of Director Member, Mrs. Bairds Bakeries,
515 Jones St., Suite 200, Fort Worth, Texas 76102
James M. Falvey Prior to August 2000, Senior Vice President,
Senior Vice President Dresdner, Kleinwort, Benson, One Boston Place,
Boston, MA 02108
Ian Ferguson Trustee, Park School, 171 Goddard Avenue,
Senior Managing Director Brookline, MA 02146
Peter M. Fleisher Prior to July 1999, Senior Vice President, Fleet
Senior Vice President National Bank, 75 State Street, Boston, MA 02109
Michael J. Fleming Prior to February 2000, Associate Portfolio Manager,
Vice President International Equity, DuPont Capital Management,
1 Righter Parkway, Suite 3200, Wilmington, DE 19803
Christopher W. Fox Prior to May 2000, Senior Consultant, American
Assistant Vice President Management Systems, 7050 Legato Rd., Fairfax, VA
22033
Henrietta Fraser Prior to October 1998, Manager, Fleming Investment
Senior Vice President Management, 25 Copthall Ave., London EC2R 7DR
Jason Fromer Prior to August 2000, Currency/Macro Trader, Soros
Vice President Fund Management, 888 7th Avenue, 33rd Floor,
New York, NY 10106
Reto Gallati Prior to March 2000, Head of Bank Risk Management,
Senior Vice President Director, KPMG LLP, Badenerstrasse 172, 8004
Zurich, Switzerland
Matthew R. Gage Prior to December, 1999, Audit Manager,
Assistant Vice President Ernst & Young LLP, 200 Clarendon St., Boston, MA
02116
Vivek Gandhi Prior to October 1999, Vice President, Alliance
Vice President Capital Management, 1 Findlayson Green, Singapore,
India; Prior to November 1998, Investment Manager,
Aberdeen Asset Management Asia, 21 Church Street,
Squire 2, Singapore, India
John H. Gernon Prior to June 2000, Vice President, Fidelity
Senior Vice President Investments, Inc., 82 Devonshire St., Boston, MA
02109
John T. Golden Prior to June 2000, Second Vice President,
Vice President John Hancock Funds, 101 Huntington Ave.,
Boston, MA 02199
Andrew Graham Prior to October 1999, Fund Manager, Scottish Widows
Senior Vice President Investment Management, Port Hamilton, 67 Morrison
St., Edinburgh, Scotland
J. Peter Grant Trustee, The Dover Church, Dover, MA 02030
Senior Vice President
Matthew D. Griffin Prior to August 2000, Vice President, Harbor
Vice President Capital Management, 125 High Street, Boston, MA
02110; Prior to June 1999, Analyst, Colonial
Management Associates, Inc., One Financial
Center, Boston, MA 02110
Avram Gusman Prior to July 2000, Senior Vice President and
Vice President Managing Director, Fleet Boston Financial, 100
Federal St., Boston, MA 02110
Paul E. Haagensen Director, Haagensen Research Foundation, 630 West
Senior Vice President 168th St., New York, NY 10032
Eric N. Harthun Prior to March 2000, Portfolio Manager, Boston
Vice President Partners Asset Management, One Financial Center,
Boston, MA 02111
Deborah R. Healey Corporator, New England Baptist Hospital, 125 Parker
Senior Vice President Hill Ave., Boston, MA 02120; Director, NEB
Enterprises, 125 Parker Hill Ave., Boston, MA 02120
Karen Herold Prior to May 2000, Research Analyst,
Assistant Vice President PricewaterhouseCoopers LLP, One Post Office
Square, Boston, MA 02109. Prior to February 1999,
Senior Information Specialist, Fidelity Investments,
One Spartan Way, Merrimack, NH 03054
Jospeh Hosler Prior to February 2000, Vice President, Independent
Vice President Investment Associates, 53 State St., Boston, MA 02109
Ronald Hua Prior to August 1999, Quantitative Analyst, Fidelity
Vice President Investments, 82 Devonshire St., Boston, MA 02109
Eric A. Hutcherson Prior to March 2000, Professional Development
Vice President Manager, Lotus Development Corp., 55 Cambridge
Parkway, Cambridge, MA 02142
Hitoshi Inoue Prior to February 1999, General Manager/Mutual Fund
Vice President Sales, Baring Asset Management (Japan) Limited,
11-A1 Imperial Tower, 1-1-1 Uchisaiwai-cho,
Chiyoda-ku, Tokyo, Japan. Prior to December
1998, Assistant General manager/Institutional
Investors Services Department, New Japan Securities
co., Ltd., 3-11 Kanda-Surugadai, Chiyoda-ku, Tokyo,
Japan
Takeshi Itai Prior to March 2000, Vice President and Client
Senior Vice President Portfolio Manager, Chase Trust Bank Tokyo, 5-2-20-
Akasaka, Minato-ku, Tokyo 107-6113
Amrit Kanwal Prior to August 1999, Vice President, Corporate
Managing Director Development and Strategy, Sequa Corporation, 200
Park Avenue, New York, NY 10166
Rikiya Kato Prior to July 2000, Senior Portfolio Manager,
Vice President Daiwa SB Investments, 7-9 Nihonbashi 2-chome,
Chuo-ku, Tokyo, Japan, 103-0027
Charles H. Krahmer Prior to March 2000, Unit Manager and Business
Assistant Vice President Analyst, Brown Brothers Harriman & Co., 40 Water
St., Boston, MA 02109
Jason A. Kritzer Prior to February 1999, Audit Consultant, Digital
Assistant Vice President Equipment Corp., 111 Powder Mill Rd., Maynard,
MA 01754
Leo Kropywiansky Prior to June 2000, Vice President, Primark Decision
Vice President Economics, 1 World Trade Center, New York, NY 10048
Alexander V. Kozhemiakin Prior to May 1999, Emerging Markets Sovereign
Vice President Analyst, Aeltus Investment Management, 242 Trumball
St., Hartford, CT 06103
Deborah F. Kuenstner Director, Board of Pensions, Presbyterian Church, 1001
Managing Director Market St., Philadelphia, PA
Sharon Lane Prior to August 2000, Information Specialist,
Assistant Vice President Arthur D. Little School of Management, 194 Beacon
St., Chestnut Hill, MA 02467; Prior to March 2000,
Senior Information Research Specialist, Bain & Co.,
2 Copley Place, Boston, MA 02117
Lawrence J. Lasser Director, Marsh & McLennan Companies, Inc.,
President, Director and 1221 Avenue of the Americas, New York, NY
Chief Executive 10020; Board of Governors and Executive
Committee, Investment Company Institute, 1401
H. St., N.W. Suite 1200, Washington, DC 20005;
Board of Overseers, Museum of Fine Arts, 465
Huntington, Ave., Boston, MA 02115; Trustee,
Beth Israel Deaconess Medical Center, 330
Brookline Ave., Boston, MA; Member of the Council
on Foreign Relations, 58 East 68th St., New York,
NY 10021; Member of the Board of Directors of the
United Way of Massachusetts Bay, 245 Summer St.,
Suite 1401, Boston, MA 02110; Trustee of the
Vineyard Open Land Foundation, RFD Box 319X,
Vineyard Haven, MA 02568
Gordon R. Lawrence Prior to July 1999, summer associate, J.P. Morgan
Assistant Vice President Investment Management, 522 Fifth Ave., New York,
NY 10009
Maura W. Leddy Prior to October 1998, Bookkeeper, Davol/Taunton
Vice President Printing, 330 Winthrop Street Taunton, MA 02780.
Richard G. Leibovitch Prior to February 1999, Managing Director, J.P.
Managing Director Morgan, 60 Wall St., New York, NY 10260
Matthew J. Leighton Prior to August 2000, Contractor, Synergistics
Assistant Vice President Tech, Inc., 222 Forbes Road, Braintree, MA 02184;
Prior to September 1999, Assistant Treasurer,
State Street Boston Corporation, P.O. Box ;9280,
Boston, MA 02209
Jesse S. Levitt Prior to August 2000, Financial Analyst, Columbia
Assistant Vice President University Investment Office, 475 Riverside
Drive, Suite 401 New York, NY 10115
Robert Lindenberg Prior to August 2000, Director, Technology, Fleet
Vice President Boston Financial, 100 Federal St., Boston, MA 02110;
Prior to July 1999, Solutions Architect, Cambridge
Technology Partners, 8 Cambridge Center, Cambridge,
MA 02142; Prior to November 1998, Chief Technical
Architect, Platinum Technology, Inc., 8 New England
Executive Park, Burlington, MA 01802
Helen Liu Prior to August 2000, Assistant Vice President
Vice President and Senior Quantitative Analyst, Banc of America
Capital Management, 100 North Broadway, St. Louis,
MO 63102
Angelo M. Lobosco Prior to February 2000, Account Portfolio Analyst,
Vice President Fidelity Investments, 82 Devonshire, Boston, MA
02109
Noboru Machida Prior to October 1998, Senior Analyst, The
Vice President Nikko Research Center Ltd., Nihonbashi Kayabacho,
Chuou-ku Tokyo, Japan 103
Shigeki Makino Prior to August 2000, Director of Research,
Managing Director Fidelity Investments, 82 Devonshire St., Boston,
MA 02109
James Malone Prior to September 2000, Senior Associate, Pioneer
Assistant Vice President Group, Inc., 60 State Street, Boston, MA 02109
Kevin Maloney Institutional Director, Financial Management
Managing Director Association, University of South Florida, College
of Business Administration, Suite 3331, Tampa, FL
33620
Sarah Marshall Prior to August 1999, Associate, McKinsey & Company,
Vice President Inc., 55 E. 52nd St., New York, NY 10010
Erwin W. Martens Prior to October 1999, Global HSAP, Lehman Brothers,
Managing Director 3 World Financial Center, New York, NY 10281
Yumiko Matsubara Prior to August 2000, Senior Consultant, Ernst &
Assistant Vice President Yong Global Financial Services, 223 Uchisaiwai-Cho,
Chiyoda-ku, Tokyo, Japan 100-0011
Nicholas J. Melhuish Prior to August 1999, Assistant Director of
Vice President Schroder Investment Management, 31 Gresham St.,
London, England ECZV8AQ
Peter V. Meyer Prior to July 1999, Conseco Capital Management,
Vice President 11825 N. Pennsylvania Ave., Carmel, IN 46032
James P. Miller Prior to May 2000, Managing Director, Bear Stearns &
Senior Vice President Co., Inc., 245 Park Avenue, New York, NY 10067
Stacy M. Mills Prior to April 1999, Vice President, Manager-Financial
Vice President Accounting and Internal Reporting, State Street
Corporation, 225 Franklin Street, Boston, MA 02110
Ronald L. Mintz Prior to December 1999, Director of Research, Stone &
Vice President Youngberg LLC, 50 California St., San Francisco, CA
94411
Reena Mithal Prior to July 1999, Vice President, Deutsche Bank
Vice President Securities, 31 W. 52nd Street., New York, NY 10019
Jeanne L. Mockard Trustee, The Bryn Mawr School, 109 W. Melrose
Senior Vice President Avenue, Baltimore, MD 21210
Brian J. Monahan Prior to August 2000, Global Emerging Markets
Assitant Vice President Equity Trader, Grantham, Mayo, Van Otterloo, and
Co. LLC, 40 Rowes Wharf, Boston, MA 02110
Colin Moore Prior to June 2000, Chief Investment Officer,
Managing Director Rockefeller & Co., Inc., 30 Rockefeller Plaza,
New York, NY 10112
Dirk Morris Prior to October 1999, Vice President-Global
Managing Director Strategist, Bankers Trust, Chifley Tower, Sydney
NSW 2000 Australia
Kathleen M. Moynihan Prior to August 1999, Attorney, Bell, Boyd &
Assistant Vice President Loyd, 70 W. Madison St., Chicago, IL 60602
Donald E. Mullin Corporate Representative and Board Member,
Senior Vice President Delta Dental Plan of Massachusetts, 10
Presidents Landing, P.O. Box 94104, Medford, MA
02155
Jennifer P. Murphy Prior to September 1999, Managing Director, Morgan
Managing Director Stanley, 1585 Broadway, New York, NY 10036
Kevin F. Murphy Prior to December 1999, Managing Director,
Senior Vice President BankBoston N.A., 210 Berkeley St., Boston, MA 02116
Philip M. Murphy Prior to June 1999, Marketing and Client
Assistant Vice President Relations Association, GE Investments, 3003 Summer
Street, Stamford, CT 06904
Toshio Nagashima Prior to July 1999, General Manager, Product Dept.,
Managing Director Investment Trust Preparation, Sumitomo Bank, 1-3-2-
Marunouchi, Chiyoda-ku, Tokyo 100-0005 Japan
Jonathan M. Nash Prior to April 2000, European Sales Manager, M.F.S.
Vice President International U.K. Ltd., One Angel Court, London,
England EC2R 7HJ
Maria Julia Nisbet Prior to May 1999, Project Manager, Cisalpina
Assistant Vice President Gestioni, Via Boito, 10, Milan, Italy 20121
Craig R. Oliver Prior to August 2000, Principal, Analyst,
Vice President State Street Global Advisors, Two International
Place, Boston, MA 02109
Nancy O'Brien Prior to September 1999, Manager Corporate
Assistant Vice President Disbursements, Fidelity Investments, 82 Devonshire
St., Boston, MA 02129
Teresa O'Day Prior to April 1999, Operations Manager, Compaq
Vice President Computer Corp., 334 South Street, Shrewsbury, MA
01545
Carolyn S. O'Reilly Prior to February 2000, Senior Auditor, Deloitte &
Vice President Touche, 1 Capital Place, P.O. Box 1787 GT, George
Town, Grand Cayman, Cayman Islands, B.W.I. and
prior to December 1998, Senior Auditor, Deloitte &
Touche, 222 Berkeley St., Boston, MA 02116
Dennis E. O'Rourke Prior to March 2000, Analyst, BankBoston N.A.,
Vice President 210 Berkeley St., Boston, MA 02116
Jeffrey F. Peters Prior to June 1999, Principal, McKinsey & Company,
Managing Director 75 Park Plaza, Boston, MA 02116
Keith Plapinger Chairman and Trustee, Advent School, 17
Vice President Brimmer St., Boston, MA 02108
Lisa M. Platia Prior to December 1999, Vice President, Windham
Assistant Vice President Capital Management, 5 Revere St., Cambridge MA 02138
Charles E. Porter Trustee, Anatolia College, 130 Bowdoin St., Suite
Executive Vice President 1201, Boston, MA 02108; Governor, Handel & Hayden
Society, Horticulture Hall, 300 Massachusetts Ave.,
Boston, MA 02115
Quintin R.S. Price Prior to December 1998, Corporate Development
Managing Director Director, The Boots Company PLC, Group Headquarters,
Nottingham NG2 3AA England
Ranjit Ranjamani Prior to June 2000, Director of Finance and
Vice President Business Planning, Xenergy, Inc., 3 Burlington
Woods, Burlington, MA 01803
Nadine McQueen-Reed Prior to March, 1999, Key Account Executive,
Assistant Vice President Fidelity Investments, 130 Tonbridge Road,
Hildenborough, Kent, England, TN11 9DZ
Jakub Rehor Prior to July 2000, Research Associate,
Assistant Vice President Sanford C. Bernstein, 767 Fifth Avenue, New York,
NY 10153
Thomas V. Reilly Trustee, Knox College, 2 East South St.,
Managing Director Galesburg, IL 61401
Brian C. Rose Prior to April 2000, Equity Analyst,
Assistant Vice President Loomis, Sayles & Co. Lp, 1 Financial Center,
Boston, MA 02111
Paul M. Rotell Prior to June 1999, Manager, Kraft Foods,
Assistant Vice President 800 Westchester Ave., Rye Brook, NY 10573
Jeff B. Sacknowitz Prior to November 1999, Investment Associate,
Vice President Independence Investment Associates, 53 State
St., Boston, MA 02109
Robert Salvin Prior to July 2000, Chief Financial Officer,
Senior Vice President Really Easy Internet Inc., 3925 W. Braker Lane,
Austin, TX 78759; Prior to January 2000,
Managing Director, BancBoston Robertson Stephens,
100 Federal St., Boston, MA 02110
Paul D. Scanlon Prior to October 1999, Senior Vice President,
Vice President Olympus Healthcare Group, 775 Trapelo Road,
Waltham, MA 02452
Calvin Schmid Prior to July 2000, Vice President Human
Senior Vice President Resources Leadership Development, J.P. Morgan,
60 Wall St., New York, NY 10005
Justin M. Scott Director, DSI Proprieties (Neja) Ltd., Epping Rd.,
Managing Director Reydon, Essex CM19 5RD
Robert Secor Prior to December 1999, Senior Consultant,
Assistant Vice President Fame Information Services, 148 State Street,
Boston, MA 02110
Anthony R. Sellitto, III Prior to September 2000, Senior Vice President,
Senior Vice President Berger Fund Associates, 210 University Blvd.,
Denver, CO 80206
Jean I. Sievert Prior to October 1998, Vice President, Salomon
Senior Vice President Smith Barney, Seven World Trade Center, New York,
NY 10048
Gordon H. Silver Trustee, Wang Center for the Performing Arts,
Managing Director 270 Tremont St., Boston, MA 02116
David M. Silk Member of Board of Directors, Jobs for Bay
Senior Vice President State Graduates, 451 Andover St., Suite 305,
North Andover, MA 01845
Luke Smith Prior to December 1999, Quantitative Systems
Assistant Vice President Analyst, Colonial Management, One Financial
Center, Boston, MA 02111
Eric H. Sorensen Prior to August 2000, Managing Director,
Managing Director Global Head of Quantitative Research, Salomon
Smith Barney, 7 World Trade Center, New York, NY
10048
Steven Spiegel Director, Ultra Diamond and Gold Outlet,
Senior Managing Director 29 East Madison St., Suite 1800, Chicago, IL
60602; Director, FACES New York University
Medical Center, 550 First Avenue, New York, NY
10016; Trustee, Babson College, One College
Drive, Wellesley, MA 02157
Raman Srivastava Prior to July 1999, Market Risk Analyst,
Assistant Vice President Bank of Nova Scotia, 20 King St., W., Toronto,
ON
Toshifumi Sugimoto Prior to October 1998, Portfolio Manager,
Senior Vice President Deputy General Manager, Nikko Securities
Investment Trust & Management, Fixed Income
Department, 4-3 Nihonbashi, Hakozakicho,
Chuou-ku, Tokyo, Japan, 103-0015
Brendan C. Sullivan Prior to February 2000, Revenue Manager, Boston
Assistant Vice President Financial Data Services, Inc., 2 Heritage Drive,
Quincy, MA 02171
William J. Sullivan Prior to June 1999, Executive Director, SBC
Senior Vice President Warburg Dillion Read, 677 Washington Blvd,
Stamford, CT, 06901
John C. Talanian Member of Board of Directors, the Japan
Managing Director Society of Boston, One Milk Street, Boston, MA
02109
Nicole J. Thorpe Prior to February 1999, President/Owner,
Assistant Vice President Thorpe Resources, P.O. Box 1895, Brockton, MA
02301
Stephen W. Vandermark Prior to March 2000, Vice President, Quantitative
Senior Vice President Analytics, Lehman Brothers, 3 World Financial
Center, New York, NY 10285
John Varenelli Prior to July 2000, Senior Vice President,
Vice President US Trust Bank, 40 Court Street, Boston, MA 02108
Susan Wall Prior to July 2000, Program manager, Liberty
Assistant Vice President Mutual Group, 25 Borthwick Ave., Portsmouth, NH
03801
Christopher C. Watt Prior to July 1999, Finance Manager, Procter &
Vice President Gamble, 1 Procter & Gamble Plaza, Cincinnati, OH
45202
James C. Wiess Prior to April 2000, Portfolio Manager,
Senior Vice President J.P. Morgan, 60 Wall St., New York, NY 10005
Eric Wetlaufer President and Member of Board of Directors,
Managing Director The Boston Security Analysts Society, Inc.,
100 Boylston St., Suite 1050, Boston, MA 02110
Edward F. Whalen Member of the Board of Directors, Hockomock Area
Senior Vice President YMCA, 300 Elmwood St., North Attleboro, MA 02760
Kelly A. Woolbert Prior to November 1999, Investment Analyst, MetLife
Vice President Investment Services, 99 High Street, Boston, MA
02110
Richard P. Wyke Director, Salem YMCA, One Sewall St., Salem,
Senior Vice President MA 01970
Frederick M. Wynn, Jr., Prior to June 2000, Senior Equity Analyst,
Vice President Berger Fund Associates, 210 University Blvd.,
Denver, CO 80206; Prior to March 1999,
Research Analyst, Eagle Asset Management, 880
Carillon Parkway, St. Petersberg, FL 33716
Alex Zinny Prior to June 2000, Proprietary Trader,
Assistant Vice President Leerink Swann, One Financial Center, Boston,
MA 02111; Prior to June 1999, Equity Delivery
Middle Officer, Banque Paribas, 781 7th Avenue,
New York, NY 10019
</TABLE>
Item 27. Principal Underwriter
(a) Putnam Mutual Funds Corp. is the principal underwriter for each of the
following investment companies, including the Registrant:
Putnam American Government Income Fund, Putnam Arizona Tax Exempt Income
Fund, Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds,
Putnam Balanced Retirement Fund, Putnam California Tax Exempt Income Fund,
Putnam California Tax Exempt Money Market Fund, Putnam Capital Appreciation
Fund, Putnam Classic Equity Fund, Putnam Convertible Income-Growth Trust,
Putnam Diversified Income Trust, Putnam Equity Income Fund, Putnam Europe
Growth Fund, Putnam Florida Tax Exempt Income Fund, Putnam Funds Trust, The
George Putnam Fund of Boston, Putnam Global Equity Fund, Putnam Global
Governmental Income Trust, Putnam Global Growth Fund, Putnam Global Natural
Resources Fund, The Putnam Fund for Growth and Income, Putnam Health
Sciences Trust, Putnam High Yield Trust, Putnam High Yield Advantage Fund,
Putnam Income Fund, Putnam Intermediate U.S. Government Income Fund, Putnam
International Growth Fund, Putnam Investment Funds, Putnam Investors Fund,
Putnam Massachusetts Tax Exempt Income Fund, Putnam Michigan Tax Exempt
Income Fund, Putnam Minnesota Tax Exempt Income Fund, Putnam Money Market
Fund, Putnam Municipal Income Fund, Putnam New Jersey Tax Exempt Income
Fund, Putnam New Opportunities Fund, Putnam New York Tax Exempt Income
Fund, Putnam New York Tax Exempt Money Market Fund, Putnam New York Tax
Exempt Opportunities Fund, Putnam Ohio Tax Exempt Income Fund, Putnam OTC &
Emerging Growth Fund, Putnam Pennsylvania Tax Exempt Income Fund, Putnam
Preferred Income Fund, Putnam Strategic Income Fund, Putnam Tax Exempt
Income Fund, Putnam Tax Exempt Money Market Fund, Putnam Tax-Free Income
Trust, Putnam Tax Smart Funds Trust, Putnam U.S. Government Income Trust,
Putnam Utilities Growth and Income Fund, Putnam Variable Trust, Putnam
Vista Fund, Putnam Voyager Fund, Putnam Voyager Fund II.
(b) The directors and officers of the Registrant's principal underwriter
are listed below. None of the officers are officers of the Registrant
except:
Name Position and Offices with Registrant
Richard Monaghan Vice President
Gordon Silver Vice President
The principal business address of each person is One Post Office Square,
Boston, MA 02109:
Position and
Name Offices with Underwriter
-----------------------------------------------------------------------------
Allouise,Donna A. Asst. Vice President
Alpaugh,Christopher S. Senior Vice President
Altomare,Mario P. Vice President
Asher,Steven E. Senior Vice President
Avery,Scott A. Senior Vice President
Aymond,Christian E. Senior Vice President
Aymond,Colin C. Vice President
Babcock III,Warren W. Senior Vice President
Ball,Colleen H. Asst. Vice President
Baltimore,Mark H.W. Vice President
Barlow,Jane Asst. Vice President
Barnett,William E. Asst. Vice President
Barrett,Thomas Vice President
Battit,Suzanne J Senior Vice President
Beatty,Steven M. Senior Vice President
Beringer,Thomas C. Vice President
Bettencourt,Jennifer L. Asst. Vice President
Boester,Eric C. Vice President
Boneparth,John F. Managing Director
Boon,David B. Senior Vice President
Bouchard,Keith R. Senior Vice President
Bradford Jr.,Linwood E. Managing Director
Bresnahan,Leslee R. Managing Director
Brockelman,James D. Senior Vice President
Brookman,Joel S. Vice President
Brown,Timothy K. Senior Vice President
Buckner,Gail D. Senior Vice President
Bunker,Christopher M. Vice President
Burrill,Gregory J. Vice President
Cabana,Susan D. Senior Vice President
Cartwright,Patricia A. Asst. Vice President
Casey,David M. Vice President
Castle Jr.,James R. Senior Vice President
Chapman,Frederick Vice President
Chrostowski,Louis F. Senior Vice President
Church,Daniel J. Vice President
Clark,Richard B. Senior Vice President
Clermont,Mary Vice President
Collette,A. Joseph Asst. Vice President
Collman,Kathleen M. Sr Managing Director
Commane,Karen L. Asst. Vice President
Coneeny,Mark L. Managing Director
Connelly,Donald A. Senior Vice President
Connolly,William T. Managing Director
Corbett,Dennis Vice President
Corvinus,F. Nicholas Senior Vice President
Cote,Marie C. Asst. Vice President
Cotto,Stephen P Asst. Vice President
Cotton,Rick Vice President
Crane III,George H. Senior Vice President
Cristo,Chad H. Senior Vice President
Critchell Jr.,D.Alan Vice President
Curran,Peter J. Senior Vice President
Dahill,Jessica E. Vice President
Daly,Kenneth L. Managing Director
Daylor,Donna M. Vice President
DeConto,Lisa B Senior Vice President
DeFao,Michael E. Asst. Vice President
Deluse,Laura R. Asst. Vice President
DiRe,Lisa M. Asst. Vice President
Diaz,Roger Vice President
Divney,Kevin M. Senior Vice President
Donaldson,Scott M. Senior Vice President
Durbin,Emily J. Vice President
Durkee,Christine Vice President
Edlin,David B. Managing Director
Eidelberg,Kathleen E. Asst. Vice President
Elder,Michael D. Senior Vice President
Emhof,Joseph R. Vice President
English,James M. Senior Vice President
Esposito,Vincent Managing Director
Esteves,Irene M. Sr Managing Director
Favaloro,Beth A. Vice President
Fishman,Mitchell B. Senior Vice President
Flaherty,Patricia C. Senior Vice President
Fleisher,Kate Vice President
Fleming,Ellen E. Asst. Vice President
Foley,Timothy P. Vice President
Foran,Carey L. Vice President
Franjul,Sayuri J. Asst. Vice President
Gernon,John H. Senior Vice President
Gibbs,Stephen C. Vice President
Goodfellow,Mark D. Vice President
Goodman,Robert Managing Director
Grace,Linda K. Vice President
Grant,Mitchell T. Managing Director
Graviere,Patrice Senior Vice President
Grey,Eric M. Vice President
Grillo,Tracy E. Asst. Vice President
Guerin,Donnalee Vice President
Hachey,Andrew J Asst. Vice President
Hadley,Christopher Asst. Vice President
Halloran,James E. Vice President
Halloran,Thomas W. Senior Vice President
Harring,Linda Senior Vice President
Harrington,Shannon W. Vice President
Hartig,Robert Vice President
Hasunuma,Sakiko Vice President
Hayes-Castro,Deanna R. Vice President
Heller,Kim G. Asst. Vice President
Hoey,Thomas J. Senior Vice President
Holland,Julie E. Asst. Vice President
Holmes,Maureen A. Vice President
Hotchkiss,Michael F. Senior Vice President
Howes,Douglas E. Vice President
Hutcherson,Eric A. Vice President
Hutchins,Robert B. Vice President
Inoue,Hitoshi Vice President
Itai,Takeshi Senior Vice President
Jackman,Sean R. Asst. Vice President
Jacobsen,Dwight D. Managing Director
Jones,Thomas A. Senior Vice President
Kaminsky,Gregory C. Vice President
Kanwal,Amrit Managing Director
Kapinos,Peter J. Vice President
Keith,Pamela J. Asst. Vice President
Keleher,Kevin J. Vice President
Kelley,Brian J. Senior Vice President
Kelly,David Senior Vice President
Kennedy,Alicia C. Vice President
Kinsman,Anne Senior Vice President
Kircher,Richard T. Asst. Vice President
Kirk,Deborah H. Senior Vice President
Koontz,Jill A. Senior Vice President
Kringdon,Joseph D. Senior Vice President
LaPierre,Christopher W Asst. Vice President
Landers,Bruce M. Vice President
Lane,Linda L. Asst. Vice President
Lathrop,James D. Senior Vice President
Lawlor,Stephanie T. Vice President
Leary,Joan M. Vice President
Leipsitz,Margaret Vice President
Lemire,Kevin Senior Vice President
Levy,Eric S. Senior Vice President
Levy,Norman S. Vice President
Lewandowski,Edward V. Senior Vice President
Li,Mei Asst. Vice President
Lieberman,Samuel L. Senior Vice President
Lilien,David R. Vice President
Linquata,Louis K. Asst. Vice President
Loew,Christopher R. Asst. Vice President
Lord,Caroline F. Asst. Vice President
Lucey,Robert F. Director
Lucey,Thomas J. Director
MacDonald,Richard A. Senior Vice President
Maloof,Renee L. Asst. Vice President
Mancini,Jane M. Managing Director
Mann,Ellen M. Asst. Vice President
Martens,Erwin W. Managing Director
Martino,Michael Managing Director
Mata,Michael A. Senior Vice President
McAvoy,Bridget Vice President
McCarthy,Anne B. Asst. Vice President
McConville,Paul D. Senior Vice President
McCracken,Brian Vice President
McCutcheon,Bruce A Senior Vice President
McDermott,Robert J. Vice President
McNamee,Mary G. Vice President
Meagher,Dorothy B. Vice President
Michejda,Marek A. Vice President
Miller,Gregory T. Vice President
Miller,Jeffrey M. Managing Director
Mills,Stacy M. Vice President
Minsk,Judith Vice President
Monaghan,Richard A. Director
Monahan,Kimberly A. Vice President
Moody,Paul R. Senior Vice President
Moret,Mitchell L. Senior Vice President
Morey,John P. Senior Vice President
Mosher,Barry L. Vice President
Moynihan,Kathleen M. Asst. Vice President
Mullen,Donald E. Senior Vice President
Mullen,Patricia M. Asst. Vice President
Munson,Brian D. Vice President
Murphy Jr.,Kenneth W. Vice President
Murray,Brendan R. Senior Vice President
Nadherny,Robert Senior Vice President
Nagashima,Toshio Managing Director
Nash,Jonathan M. Vice President
Natale,Lisa A. Asst. Vice President
Neary,Ellen R. Vice President
Newell,Amy Jane Vice President
Nickodemus,John P. Senior Vice President
Nicolazzo,Jon C. Vice President
Nisbet,M. Julia Asst. Vice President
O'Brien,Lois C. Senior Vice President
O'Brien,Nancy M. Asst. Vice President
O'Brien,Wendy R. Asst. Vice President
O'Connell,Gayle M. Vice President
O'Connor,Brian P. Vice President
O'Connor,Matthew P. Vice President
O'Day,Teresa S. Vice President
O'Reilly,Carolyn S. Vice President
Orr,Kevin Vice President
Palmer,Patrick J. Vice President
Pampliega,Carlos Senior Vice President
Panek,Raymond S. Asst. Vice President
Parker,Michael T. Asst. Vice President
Parr,Cynthia O. Senior Vice President
Perkins,Erin M. Asst. Vice President
Peters,Jeffrey F. Managing Director
Petitti,Joseph P. Vice President
Petralia,Randolph S. Senior Vice President
Phoenix,John G. Senior Vice President
Phoenix,Joseph Managing Director
Pickard,Gregory L. Asst. Vice President
Plapinger,Keith Senior Vice President
Puddle,David G. Senior Vice President
Pulkrabek,Scott M. Vice President
Putnam,George Director
Quinn,Patrick J. Asst. Vice President
Reed,Frank C. Vice President
Reed,Nadine McQueen Asst. Vice President
Rodts,Jennifer M. Asst. Vice President
Rogers,Deborah A. Vice President
Rotell,Paul M. Asst. Vice President
Rowe,Robert B. Vice President
Rusko,Steven N. Asst. Vice President
Ryan,William M. Vice President
Saccocia,Cynthia M Asst. Vice President
Saunders,Catherine A. Senior Vice President
Sawyer,Matthew A. Vice President
Scales,Matthew B. Asst. Vice President
Scanlon,Michael M. Senior Vice President
Schepp-Dries,Peter Senior Vice President
Schlosberg,Alan R. Asst. Vice President
Schmid,Calvin E. Senior Vice President
Schofield,Shannon D. Senior Vice President
Schultz,Mitchell D. Managing Director
Schwister,Sara M. Asst. Vice President
Scordato,Christine A. Senior Vice President
Selden,Denise D. Senior Vice President
Shamburg,John B. Vice President
Shanahan,Christopher W. Vice President
Shelby,Robert Vice President
Short,Jonathan D. Senior Vice President
Siebold,Mark J. Asst. Vice President
Siemon Jr.,Frank E. Asst. Vice President
Silva,J. Paul Vice President
Silver,Gordon H. Sr Managing Director
Skistimas Jr,John J. Vice President
Solan,Meenakshi S. Asst. Vice President
Soule,Scott W. Asst. Vice President
Spiegel,Steven Sr Managing Director
Sprague,David L. Vice President
Starishevsky,Daniel Vice President
Starr,Loren M. Managing Director
Statuta,Jason M. Vice President
Stickney,Paul R. Senior Vice President
Sugimoto,Toshifumi Senior Vice President
Sullivan,Brendan C. Asst. Vice President
Sullivan,Brian L. Senior Vice President
Sullivan,Deborah H. Asst. Vice President
Sullivan,Elaine M. Senior Vice President
Sullivan,Maryann Asst. Vice President
Suzuki,Toshimi Senior Vice President
Sweeney,Janet C. Senior Vice President
Talanian,John C. Managing Director
Tanaka,Toshiaki Vice President
Tavares,April M. Vice President
Telling,John R. Senior Vice President
Tibbetts,Richard B. Managing Director
Troped Blacker,Bonnie Senior Vice President
Upham,Scott E. Vice President
Veale,David B. Vice President
Velazquez,Joel Asst. Vice President
Vierra,Scott G. Vice President
Walsh,Stephen M. Vice President
Warde,Elizabeth A. Asst. Vice President
Washburn,Andrew O. Senior Vice President
Waters,Mitchell J. Vice President
Watt,Christopher C. Vice President
Welch III,William A. Asst. Vice President
Whalen,Brian Vice President
Whalen,Edward F. Senior Vice President
Whitaker,J. Greg Senior Vice President
White,Patrick J. Asst. Vice President
Woodlock,Ronald J. Vice President
Woolverton,William H. Managing Director
Wright Jr.,Edmund F. Vice President
Yan,Yanfang Vice President
Young,Jason P. Vice President
Zografos,Laura J. Senior Vice President
Zukowski,Virginia A. Senior Vice President
deMont,Lisa M. Senior Vice President
Item 28. Location of Accounts and Records
Persons maintaining physical possession of accounts, books and other
documents required to be maintained by Section 31(a) of the Investment
Company Act of 1940 and the Rules promulgated thereunder are
Registrant's Associate Clerk, Judith Cohen; Registrant's investment
adviser, Putnam Investment Management, Inc.; Registrant's principal
underwriter, Putnam Retail Management, Inc.; Registrant's custodian,
Putnam Fiduciary Trust Company ("PFTC"); and Registrant's transfer and
dividend disbursing agent, Putnam Investor Services, a division of PFTC.
The address of the Associate Clerk, investment adviser, principal
underwriter, custodian and transfer and dividend disbursing agent is One
Post Office Square, Boston, Massachusetts 02109.
Item 29. Management Services
None.
Item 30. Undertakings
None.
NOTICE
A copy of the Agreement and Declaration of Trust of Putnam Investment
Funds is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is
executed on behalf of the Registrant by an officer of the Registrant as
an officer and not individually and the obligations of or arising out of
this instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and
property of the Registrant.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the fund has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Boston, and The
Commonwealth of Massachusetts, on the November 20, 2000.
Putnam Investment Funds
By: Gordon H. Silver, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to the Registration Statement of Putnam Investment Funds has
been signed below by the following persons in the capacities and on the
dates indicated:
Signature Title
John A. Hill Chairman of the Board; Trustee
George Putnam, III President; Principal Executive Officer; Trustee
John D. Hughes Senior Vice President; Treasurer; Principal
Financial Officer
Paul G. Bucuvalas Assistant Treasurer; Principal Accounting Officer
Jameson A. Baxter Trustee
Hans H. Estin Trustee
Ronald J. Jackson Trustee
Paul L. Joskow Trustee
Elizabeth T. Kennan Trustee
Lawrence J. Lasser Trustee
John H. Mullin, III Trustee
Robert E. Patterson Trustee
A.J.C. Smith Trustee
W. Thomas Stephens Trustee
W. Nicholas Thorndike Trustee
By: Gordon H. Silver,
as Attorney-in-Fact
November 20, 2000
