As filed with the Securities and Exchange Commission on March 1, 1995
Securities Act File No. 33-
Investment Company Act File No. 811-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933 [X]
PRE-EFFECTIVE AMENDMENT NO. ___
POST-EFFECTIVE AMENDMENT NO. ___
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 [X]
AMENDMENT NO.
(Check appropriate box or boxes) ___
PUTNAM CONVERTIBLE OPPORTUNITIES AND INCOME TRUST
(Exact Name of Registrant as Specified in Charter)
One Post Office Square, Boston, Massachusetts 02109
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (617) 292-1000
John R. Verani
Putnam Convertible Opportunities and Income Trust
One Post Office Square
Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copies to:
<TABLE>
<S> <C> <C>
Thomas A. Hale, Esq. Louis A. Goodman John W. Gerstmayr, Esq.
Skadden, Arps, Slate, Meagher & Flom Skadden, Arps, Slate, Meagher & Flom Ropes & Gray
333 West Wacker Drive One Beacon Street One International Place
Chicago, Illinois 60606 Boston, Massachusetts 02108 Boston, Massachusetts 02110-2624
</TABLE>
Approximate Date of Proposed Public Offering:
As soon as practicable after this Registration Statement becomes effective.
CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
Being Being Price Per Offering Registration
Registered Registered(1) Unit Price(1) Fee
<S> <C> <C> <C> <C>
Shares of Beneficial Interest .. . . 3,450,000 $20.00 $69,000,000 $23,793
<FN>
(1) Includes 450,000 Shares which may be offered by the Underwriters
pursuant to an option to cover over allotments.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Putnam Convertible Opportunities and Income Trust
Cross Reference Sheet Pursuant to Rule 404(c)
Under the Securities Act of 1933
<TABLE>
<CAPTION>
Parts A and B of Prospectus
Item No. Registration Statement Caption Caption in Prospectus
<S> <C> <C>
1. Outside Front Cover . . . . . . Outside Front Cover
2. Inside Front and Outside Back Cover Page. . Inside Front and Outside Back Cover Page
3. Fee Table and Synopsis. . . . . Prospectus Summary; Expenses Summary
4. Financial Highlights. . . . . . Not Applicable
5. Plan of Distribution. . . . . . Cover Page; Outside Front Cover; Prospectus
Summary; Underwriting
6. Selling Shareholders. . . . . . Not Applicable
7. Use of Proceeds . . . . . . . . Outside Front Cover; Inside Front Cover;
Prospectus Summary; Use of Proceeds;
Investment Objectives and Policies
8. General Description of Registrant Outside Front Cover; Inside Front Cover;
Prospectus Summary; The Fund; Investment
Objectives and Policies; Other Investment
Practices; Special Considerations and Risk
Factors; Investment Restrictions;
Taxation; Portfolio Transactions;
Description of Shares; Determination of Net
Asset Value; Appendix B; Appendix C
9. Management. . . . . . . . . . . Inside Front Cover; Prospectus Summary;
Investment Manager; Trustees and Officers;
Investment Management Contract;
Administrative Services Contract;
Portfolio Transactions; Custodian,
Transfer Agent, Dividend Disbursing Agent,
and Registrar, Statement of Assets and
Liabilities
10. Capital Stock, Long-Term Debt, and
Other Securities. . . . . . . . Prospectus Summary; Dividends and
Distributions; Dividend Reinvestment Plan;
Description of Shares; Taxation;
Repurchase of Shares; Conversion to Open-
End Status
11. Defaults and Arrears on Senior Securities Not Applicable
12. Legal Proceedings . . . . . . . . . . . . Not Applicable
13. Table of Contents of Statement of
Additional Information. . . . . Not Applicable
14. Cover Page. Not Applicable
15. Table of Contents . . . . . . . . . . . . Not Applicable
16. General Information and History . . . . . Not Applicable
17. Investment Objective and Policies . . . . Outside Front Cover; Inside Front Cover;
Prospectus Summary; Investment Objective
and Policies; Other Investment Practices;
Special Consideration and Risk Factors;
Investment Restrictions; Appendix B;
Appendix C
18. Management. . . . . . . . . . . . . . . . Trustees and Officers
19. Control Persons and Principal Holders
of Securities. . . . . . . . . . . . . Description of Shares; Statement of Assets
and Liabilities
20. Investment Advisory and Other Services. . Prospectus Summary; Investment Manager;
Trustees and Officers; Investment
Management Contract; Administrative
Services Contract; Portfolio Transactions;
Statement of Assets and Liabilities
21. Brokerage Allocation and Other Practices. Portfolio Transactions
22. Tax Status. . . . . . . . . . . . . . . . Dividends and Distributions; Dividend
Reinvestment Plan; Taxation
23. Financial Statements. . . . . . . . . . . Experts; Report of Independent Accountants;
Statement of Assets and Liabilities
<FN>
(1) Pursuant to General Instruction H of Form N-2, all information required to be set forth in
Part B: Statement of Information has been included in Part A: The Prospectus.
</FN>
</TABLE>
Part C
The information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED MARCH __, 1995
PROSPECTUS
_________ Shares
PUTNAM CONVERTIBLE OPPORTUNITIES AND INCOME TRUST
Beneficial Interest
Putnam Convertible Opportunities and Income Trust (the "Fund") is a
newly organized, closed-end, diversified management investment company managed
by Putnam Investment Management, Inc. ("Putnam"). The Fund's investment
objectives are capital appreciation and current income. Under normal market
conditions, the Fund will invest substantially all of its assets in a
diversified portfolio of convertible securities ("Convertible Securities") and
nonconvertible, higher risk, high yield income securities ("Nonconvertible High
Yield Securities"). The portion of the Fund's assets invested in Convertible
Securities and in Nonconvertible High Yield Securities will vary from time to
(Continued on following page.)
The Fund expects to invest substantially all of its assets in
securities rated below investment grade and in nonrated securities of comparable
quality as determined by Putnam. Investments of this type are subject to greater
risk of loss of principal and non-payment of interest than higher-rated
investments and are predominantly speculative. The Fund may also invest up to
25% of its total assets in securities principally traded in foreign markets,
including securities denominated in foreign currencies. Investments in foreign
securities involve risks and special considerations not typically associated
with investments in securities of U.S. issuers. Due to the risks inherent in
investing in lower-grade securities and foreign securities, an investment in the
Fund should be considered speculative. The Fund is designed for investors
willing to assume additional risks in return for the potential for capital
appreciation and current income. Purchasers should carefully assess the
risks associated with an investment in the Fund. See "Special Considerations and
Risk Factors" and "Other Investment Practices." The Fund is not intended to be a
complete investment program, and there is no assurance it will achieve its
objectives.
Prior to this offering there has been no market for the Fund's Shares.
Shares of closed-end investment companies have in the past frequently traded at
a discount from their net asset values. The risks associated with this
characteristic of closed-end investment companies may be greater for investors
expecting to sell the shares soon after the completion of an initial public
offering of the company's shares. See "Special Considerations and Risk Factors."
This Prospectus sets forth in concise form information about the Fund that a
prospective investor should know before investing in the Fund. Investors are
advised to read this Prospectus carefully and to retain it for future reference.
Additional information about the Fund has been filed with the Securities and
Exchange Commission and is available upon written or oral request and without
charge.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price to Sales Proceeds to
Public Load(1)(2) Fund(3)
<S> <C> <C> <C>
Per Share $20.00 $0.00 $20.00
Total(4) $_____ $0.00 $_____
</TABLE>
(Footnotes on following page.)
The Shares being offered by the several Underwriters named herein are
subject to prior sale, when, as and if accepted by them and subject to certain
conditions. It is expected that certificates for the Shares offered hereby will
be available for delivery on or about _______ __, 1995, at the office of [ ].
[ ]
The date of this Prospectus is ___________,1995.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR
EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SHARES
OF THE FUND AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
(Continued from previous page.)
time in light of the Fund's investment objectives, changes in interest rates and
economic and other factors, although the Fund will normally invest at least 25%,
but no more than 75%, of its total assets in Convertible Securities and at least
25%, but no more than 75%, of its total assets in Nonconvertible High Yield
Securities. Based upon current market conditions, Putnam expects that initially
approximately 50% of the Fund's assets will be invested in each asset category.
The Fund's address is One Post Office Square, Boston, Massachusetts
02109, and its telephone number is (617) 292-1000. The Fund has applied for
listing of its Shares on the New York Stock Exchange under the symbol "_____."
The minimum investment in this offering is 100 Shares ($2,000).
(Footnotes from previous page.)
(1) The Fund and Putnam have agreed to indemnify the Underwriters against
certain liabilities, including certain liabilities under the Securities Act
of 1933. See "Underwriting."
(2) Putnam or an affiliate will pay the Underwriters a commission in the gross
amount of 6% of the initial public offering price per Share in connection
with sales of Shares in this Offering. See "Underwriting."
(3) Before deduction of organization and offering expenses payable by the Fund,
estimated to be $_________ and $_________, respectively. Organizational
expenses will be amortized over a period not to exceed 60 months from the
date the Fund commences investment operations. Offering expenses, which
include up to $___ to be paid to the Underwriters in partial reimbursement
of their expenses, will be deducted from net proceeds upon completion of
the offering. See "Use of Proceeds" and "Statement of Assets and
Liabilities."
(4) The Fund has granted the several Underwriters an option, exercisable within
60 days from the date of this Prospectus, to purchase up to an aggregate of
________ additional Shares solely to cover over-allotments, if any, on the
same terms and conditions as set forth above. If such option is exercised
in full, the total Price to Public will be $_________, the total Sales Load
will be $0.00, and the total Proceeds to the Fund will be $__________. See
"Underwriting."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus. Unless otherwise indicated,
the information in this Prospectus assumes that the Underwriters' over-allotment
option will not be exercised. Investors should carefully consider the
information set forth under the heading "Special Considerations and Risk
Factors."
<TABLE>
<S> <C>
The Fund................... Putnam Convertible Opportunities and Income Trust (the "Fund") is a
newly organized, closed-end, diversified management investment
company. The Fund has no operating history. See "The Fund." The
Fund is managed by Putnam Investment Management, Inc. ("Putnam").
The Offering............... The Fund is offering __________ shares of beneficial interest
(the "Shares") through a group of underwriters (the "Underwriters")
led by __________________, ____________________, ___________________,
and _____________________. The Underwriters have been granted an
option to purchase up to [______] additional Shares solely to cover
over-allotments, if any. The offering may be terminated by the
Underwriters upon the occurrence of certain conditions. The initial
public offering price is $20.00 per Share. The minimum investment in
this offering is 100 Shares ($2,000). See "Underwriting."
No Sales Charges........... The Shares will be sold during the initial public offering without
any sales charges or underwriting discounts. Putnam or an affiliate
will pay the Underwriters from its own assets a commission in
connection with the sale of the Shares in this offering. See
"Underwriting."
Investment
Objectives and
Policies................... The Fund's investment objectives are capital appreciation and current
income. Under normal market conditions, the Fund will invest
substantially all of its assets (and, in any event, normally at least
80% of its total assets) in a diversified portfolio of convertible
securities ("Convertible Securities") and nonconvertible, higher risk,
high income securities ("Nonconvertible High Yield Securities"). The
Fund expects that all or a substantial portion of its assets will be
invested in lower-grade Convertible Securities and Nonconvertible High
Yield Securities rated at the time of purchase Ba, B or Caa by Moody's
Investors Service, Inc. ("Moody's") or BB, B or CCC by Standard &
Poor's Corporation ("Standard & Poor's") or in nonrated Convertible
Securities and Nonconvertible High Yield Securities of comparable
quality as determined by Putnam. Based on current market conditions,
Putnam currently expects that Convertible Securities having
significant conversion value will initially represent a significant
portion of the Fund's investments in Convertible Securities.
The portion of the Fund's assets invested in Convertible Securities
and in Nonconvertible High Yield Securities will vary from time to
time in light of the Fund's investment objectives, changes in interest
rates and economic and other factors, although under normal market
conditions the Fund will invest at least 25%, but no more than 75%, of
its total assets in Convertible Securities and at least 25%, but no
more than 75%, of its total assets in Nonconvertible High Yield
Securities. Based upon current market conditions, Putnam expects that
initially approximately 50% of the Fund's assets will be invested in
each asset category and that Convertible Securities of small
capitalization companies (generally defined as companies with market
capitalizations of less than $1 billion) will initially represent a
significant portion of the Fund's investments in Convertible
Securities. The Fund may also invest in common stocks and may hold a
portion of its assets in cash or money market instruments.
The Fund may implement various temporary "defensive" strategies at
times when Putnam determines that pursuing the Fund's basic investment
strategy is not in the best interests of its shareholders. In
implementing these strategies, the Fund may invest all or any portion
of its assets in investment-grade nonconvertible debt securities,
including U.S. Government securities, or in any other securities which
Putnam believes are consistent with such defensive strategies.
Investments by the Fund in lower-grade securities are subject to
greater risk of loss of principal and non-payment of interest than
higher-rated investments and are predominantly speculative. The Fund
may invest up to 25% of its total assets in securities principally
traded in foreign markets, including securities denominated in foreign
currencies. Investments in foreign securities involve risks and
special considerations not typically associated with investments in
securities of U.S. issuers. Due to the risks inherent in investing in
lower-grade securities and foreign securities, an investment in the
Fund should be considered speculative. The Fund is designed for
investors willing to assume additional risks in return for the
potential for capital appreciation and current income. The Fund is not
intended to be a complete investment program, and there is no
assurance that the Fund will achieve its investment objectives.
Investors should carefully assess the risks associated with an
investment in the Fund. See "Investment Objectives and Policies,"
"Other Investment Practices," "Special Considerations and Risk
Factors" and "Appendix A o Fixed Income Security Ratings."
Convertible
Securities................. Convertible Securities include bonds, debentures, notes, preferred
stocks and other securities that may be converted into or exchanged
for, at a specified 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. Like other income-producing
securities, 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. Convertible Securities also provide the potential for
capital appreciation if the market price of the underlying common
stock increases.
The market value of a Convertible Security is made up of two
components:
(1) a security's "investment value" represents the value of the
security without its conversion feature (i.e., a nonconvertible
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
on 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.
(2) a security's "conversion value" is the value of the conversion or
exchange privilege of the security. The conversion feature may be
viewed as representing a long-term option held by the Fund for the
purchase of the underlying security into which a given security is
convertible. The amount of a security's conversion value is dependent
on, among other things, the market value of the underlying security,
the price at which conversion may be effected, and the length of time
remaining until the conversion privilege either expires or is
terminated.
If, because of a low price of the underlying common stock, the
conversion value is low relative to the investment value, the price of
the convertible security is governed principally by its investment
value. To the extent the market price of the underlying common stock
approaches or exceeds the conversion price, the price of the
convertible security will be increasingly influenced by its conversion
value, and the convertible security may sell at a premium over its
conversion value to the extent investors place value on the right to
acquire the underlying common stock while holding an income-producing
security that ranks senior to the common stock in the issuer's capital
structure.
See "Investment Objectives and Policies" and "Special Considerations
and Risk Factors."
Nonconvertible High
Yield Securities........... Nonconvertible High Yield Securities include bonds, debentures,
notes, and preferred stocks and will generally be unsecured.
Investments by the Fund in Nonconvertible High Yield Securities
entail certain special risks. See "Investment Objectives and
Policies" and "Special Considerations and Risk Factors."
Investment
Considerations............. [To be supplied.]
Investment
Manager and
Administrator.............. Putnam will serve as the investment manager and administrator to the
Fund. Putnam has been a manager of mutual funds since 1937, and serves
as the investment manager for the funds in the Putnam family, with
approximately $67 billion in assets in over three million shareholder
accounts as of December 31, 1994, including $ billion in assets in
closed-end funds. An affiliate, The Putnam Advisory Company, Inc.,
manages domestic and foreign institutional accounts and foreign mutual
funds. Another affiliate, Putnam Fiduciary Trust Company, provides
investment advice to institutional clients under its banking and
fiduciary powers. Putnam and its affiliates managed approximately $95
billion in assets as of December 31, 1994, including approximately $2
billion invested in convertible securities and $9 billion invested in
high yield securities. See "Investment Manager and Administrator."
Management
Fees....................... The Fund will pay Putnam a quarterly investment management fee based
on the average weekly net asset value of the Fund at the annual rate
of [to be supplied]. The combined investment management and
administrative fees are higher than those paid by most other
investment companies. See "Investment Management Contract."
Administrative
Service Fees............... The Fund will pay Putnam a quarterly administrative service fee at
the annual rate of [to be supplied] pursuant to an Administrative
Services Contract between the Fund and Putnam. The combined investment
management and administrative fees are higher than those paid by most
other investment companies. See "Administrative Services Contract."
Listing and
Symbol..................... The Fund has applied for listing of the Shares on the New York Stock
Exchange under the symbol "___." See "Underwriting."
Dividends and
Distributions.............. The Fund intends to pay monthly distributions from net investment
income, and will distribute all net realized capital gain at least
annually. The first distribution to shareholders is expected to be
paid within 90 days after the completion of this offering of the
Fund's Shares. See "Dividends and Distributions," "Taxation" and
"Dividend Reinvestment Plan."
Dividend Reinvestment
Plan....................... The Fund has established a dividend reinvestment plan pursuant to
which shareholders will have all distributions of income and capital
gains automatically reinvested in additional Shares of the Fund,
unless they elect to receive such distributions in cash. Shareholders
whose Shares are held in the name of a broker or nominee which
provides a dividend reinvestment service should consult their broker
or nominee to ensure that an appropriate election is made on their
behalf by such broker or nominee. Shareholders whose Shares are held
by a broker or nominee which does not provide a dividend reinvestment
service may be required to have their Shares registered in their own
names in order to participate in the plan. Because the first
distribution paid by the Fund may be paid before the plan becomes
fully operational, shareholders who are participants in the plan may
receive that distribution in cash. See "Dividend Reinvestment Plan"
and "Taxation."
Repurchase of Shares;
Conversion to
Open-end Status............ The Fund may from time to time repurchase Shares in the open market or
make tender offers for its Shares. This may have the effect of
reducing any market discount. The Fund may by vote of its shareholders
be converted at any time to an open-end investment company, which
would make the Shares redeemable upon demand of shareholders at the
Shares' net asset value. The Fund has no present intention of taking
any such action. See "Description of Shares -- Certain Provisions in
the Agreement and Declaration of Trust" and "Repurchase of Shares;
Conversion to Open-end Status."
Custodian, Transfer
Agent, Dividend
Disbursing Agent
and Registrar.............. Putnam Fiduciary Trust Company serves as the Fund's custodian, and
Putnam Investor Services, a division of Putnam Fiduciary Trust
Company, serves as the transfer agent, dividend disbursing agent and
registrar for the Shares. See "Custodian, Transfer Agent, Dividend
Disbursing Agent, and Registrar."
No Preferred Shares;
Borrowings................. The Fund does not intend to leverage through the issuance of preferred
shares or the borrowing of money in an attempt to enhance the return
of the Shares. The Fund may, however, borrow money for temporary,
extraordinary or emergency purposes. See "Investment Restrictions."
Special
Considerations and
Risk Factors............... No operating history. The Fund is a closed-end investment company
designed primarily as a long-term investment and not as a trading
vehicle. As a newly organized entity, the Fund has no operating
history.
Investments in fixed income securities. The market value of the Fund's
investments in fixed income securities, and thus the net asset value
of the Shares, will change in response to changes in (i) the perceived
creditworthiness of issuers of those securities, (ii) interest rates,
(iii) the relative values of the currencies in which the Fund's
investments in fixed income securities are denominated with respect to
the U.S. dollar and (iv) other factors. Thus, a decrease in interest
rates will generally result in an increase in the value of such
securities. Conversely, during periods of rising interest rates, the
value of such securities will generally decline. Changes in the values
of portfolio securities generally will not affect cash income derived
from such securities, but will affect the Fund's net asset value.
Although Putnam considers security ratings when making investment
decisions, it performs its own investment analysis and does not rely
principally on the ratings assigned by the rating services.
At times, a substantial portion of the Fund's assets may be invested
in securities as to which the Fund, by itself or together with other
accounts managed by Putnam and its affiliates, holds a major portion
or all of such securities. 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 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. In many cases, such
securities may be purchased in private placements and, accordingly,
will be subject to restrictions on resale as a matter of contract or
under the securities laws. 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.
Certain risks associated with investments in lower-grade securities.
Investors should carefully consider their ability to assume the risks
of owning shares of a mutual fund which invests in lower-grade
securities before making an investment in the Fund. Securities rated
Ba or lower by Moody's or BB or lower by Standard & Poor's are below
investment grade and are regarded by Moody's and Standard & Poor's, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. The lowest quality securities in which the Fund will
invest are those rated at the time of purchase Caa by Moody's or CCC
by Standard & Poor's or, if unrated, determined by Putnam to be of
comparable quality. Although securities rated CCC, as well as
securities rated BB and B, may be regarded by Standard & Poor's as
having some quality or protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse
conditions. Securities rated Caa are regarded by Moody's as being of
poor standing. They may be in default or there may be present elements
of danger with respect to principal or interest.
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 value the Fund had placed on
such securities. In the absence of a liquid trading market for
securities held by it, the Fund may find it more difficult at times to
establish the fair market 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 or
Standard & Poor's does not reflect an assessment of the volatility of
the security's market value or of the liquidity of an investment in
the security. The Fund will not necessarily dispose of a security when
its rating is reduced below its rating at the time of purchase,
although Putnam will monitor the investment to determine whether
continued investment in the security will assist in meeting the Fund's
investment objectives. For more information about the rating services'
descriptions of lower-grade securities, see "Appendix A o Fixed Income
Security Ratings."
The values of lower-grade 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 affect
adversely the values of lower-grade securities. In the absence of a
liquid trading market for securities held by it, the Fund may find it
more difficult at times to establish the fair market value of such
securities. Because of the greater number of investment considerations
involved in investing in lower-grade securities, the achievement of
the Fund's objectives depends more on Putnam's analytical abilities
than would be the case if it were investing primarily in securities in
the higher rating categories.
Issuers of lower-grade 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. In addition, such issuers may not have more traditional
methods of financing available to them, and may be unable to repay
debt at maturity by refinancing. The risk of loss due to default in
payment of interest or principal by such issuers is significantly
greater because such securities frequently are unsecured and
subordinated to the prior payment of senior indebtedness.
Investments in securities of small capitalization companies. Based on
current market conditions, Putnam currently expects that Convertible
Securities of small capitalization companies (i.e., a company with a
market capitalization of less than $1 billion) will initially
represent a significant portion of the Fund's investments in
Convertible Securities. These securities may involve certain special
risks. Such companies may have limited product lines, markets, or
financial resources and may be dependent on a limited management
group. Such securities may trade less frequently and in smaller volume
than more widely held securities. The values of these securities may
fluctuate more sharply than other securities, and the Fund may
experience some difficulty in establishing or closing out positions in
these securities at prevailing market prices. There may be less
publicly available information about the issuers of these securities
or less market interest in such securities than in the case of larger
companies, and it may take a longer period of time for the prices of
such securities to reflect the full value of their issuers' underlying
earnings potential or assets.
Zero-coupon and Payment-in-Kind securities. The Fund may invest in
zero-coupon securities of government or private issuers, including
Brady Bonds and other sovereign debt, and payment-in-kind securities.
Because zero-coupon securities do not (and payment-in-kind securities
may not) pay current interest prior to maturity, their value is
generally subject to greater fluctuation in response to changes in
market interest rates than securities which pay interest currently.
Such securities usually are issued and traded at a deep discount from
their face or par value and may involve greater credit risks than
securities paying interest currently. Even though such securities do
not pay current interest in cash, the Fund is nonetheless required to
accrue interest income on such investments and to distribute such
amounts at least annually to shareholders. Thus, the Fund could be
required at times to liquidate other investments in order to satisfy
its dividend requirements. To the extent the Fund is required to
liquidate thinly traded securities, the Fund may not be able to sell
such securities at prices approximating the values the Fund had placed
on such securities.
Redemptions and Premium securities. 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 the time of declining interest rates, the Fund may not be able
to reinvest the proceeds in securities providing the same investment
return as the securities redeemed. If a convertible security held by
the Fund is called for redemption, the Fund will be required to redeem
the security, convert it into the underlying security or sell it to a
third party, and the Fund may lose the value of any premium in the
security's market price attributable to the conversion privilege. If
the securities purchased by the Fund at a premium are called or sold
prior to maturity, the Fund will recognize a capital loss to the
extent the call or sale price is less than the purchase price.
Additionally, the Fund will recognize a capital loss if it holds such
securities to maturity.
Foreign investments. Investments in securities principally traded in
foreign markets may involve considerations different from investments
in domestic securities due to limited publicly available information,
lower trading volume and possible consequent illiquidity, greater
volatility in price, the possible imposition of withholding or
confiscatory taxes, expropriation of assets, nationalization, or other
adverse political or economic developments. Foreign companies may not
be subject to auditing and financial reporting standards and
requirements comparable to those which apply to U.S. companies.
Foreign brokerage commissions and other fees are generally higher than
in the United States. It may be more difficult to obtain and enforce a
judgment against a foreign issuer. In addition, to the extent the
Fund's foreign investments are not United States dollar-denominated,
the Fund may be affected favorably or unfavorably by changes in
currency exchange rates or exchange control regulations and may incur
costs in connection with conversion between currencies. The currencies
of certain countries in which the Fund may invest have in the past
experienced substantial devaluation relative to the U.S. dollar. The
risks described above are typically increased to the extent the Fund
invests in under-developed and developing nations, which are sometimes
referred to as "emerging markets." See "Other Investment Practices."
Non-Publicly Traded Securities. The Fund may invest in securities
which are not publicly traded, including securities sold pursuant to
Rule 144A under the Securities Act of 1933, as amended ("Rule 144A
Securities"). The sale of these securities is usually restricted under
Federal securities laws, and market quotations may not be readily
available. As a result, the Fund may not be able to sell these
securities (other than Rule 144A Securities) unless they are
registered or exempt from registration under applicable Federal and
state securities laws, or may have to sell them at less than fair
market value. These securities may also be more difficult to value.
Anti-takeover provisions. The Agreement and Declaration of Trust
includes provisions that could limit the ability of other persons or
entities to acquire control of the Fund or to cause it to engage in
certain transactions or to modify its structure. Such provisions may
have the effect of depriving shareholders of an opportunity to sell
their Shares at a premium over prevailing market prices and may have
the effect of inhibiting the Fund's conversion to open-end status. See
"Description of Shares -- Certain Provisions in the Agreement and
Declaration of Trust" and "Repurchase of Shares; Conversion to
Open-end Status."
Market price of shares. Shares of closed-end investment companies
often trade at a discount to their net asset values, and the Fund's
Shares may likewise trade at a discount. The risks associated with
this characteristic of closed-end investment companies may be greater
for investors expecting to sell shares of a closed-end investment
company soon after the completion of an initial public offering of the
company's shares since the net asset value will be reduced immediately
following the offering as a result of the payment of organizational
and offering expenses. The market price of the Fund's Shares will be
determined by such factors as relative demand for and supply of such
Shares in the market, the Fund's net asset value, general market and
economic conditions and other factors beyond the control of the Fund.
See "Use of Proceeds," "Determination of Net Asset Value" and
"Repurchase of Shares; Conversion to Open-end Status."
</TABLE>
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing in the Fund.
The following table summarizes an investor's transaction costs from investing in
the Fund and expenses which the Fund expects to incur in its first fiscal year.
The Example shows the estimated cumulative expense attributable to a
hypothetical $1,000 investment in the Fund over specified periods.
Shareholder Transaction Expenses
<TABLE>
<S> <C> <C>
Sales Load
(as a percentage of offering price)........................................................ NONE (a)
Dividend Reinvestment Plan Fees.............................................................. NONE
Annual Expenses
(as a percentage of net assets attributable to the Shares)
Management Fees(b)........................................................................... ____%
Other Expenses............................................................................... ____%
Administrative Services Fee(b)............................................... ____%
Other Operating Expenses..................................................... ____%
Total Annual Expenses........................................................................ ____%
</TABLE>
(a) Putnam or an affiliate will pay the Underwriters a commission in the gross
amount of 6% of the initial public offering price per Share in connection
with sales of Shares in this Offering. See "Underwriting."
(b) The combined investment management and administrative fees payable to
Putnam are greater than those paid by most other investment companies.
See "Investment Management Contract" and "Administrative Services Contract"
for additional information.
Example
The following Example demonstrates the projected dollar amount of total
cumulative expense that would be incurred over various periods with respect to a
hypothetical investment in the Fund. These amounts are based upon payment by the
Fund of operating expenses at the levels set forth in the table above.
An investment of $1,000 would result in the following expenses,
assuming (1) a 5% annual return and (2) reinvestment of all distributions at
net asset value:
<TABLE>
<S> <C> <C> <C>
1 year 3 years 5 years 10 years
$----- $----- $----- $-----
</TABLE>
The foregoing table is provided to help an investor understand the costs
and expenses that an investor in the Fund will bear directly or indirectly.
"Other Expenses" shown in the table are based on estimated amounts for the
Fund's first year. The Example is based on estimated operating expenses for the
Fund's first fiscal year and assumes reinvestment of all distributions at net
asset value. Federal regulations require the Example to assume a 5% annual
return. The Example and the information set forth in the table above should not
be considered a representation of the future expenses or rate of return of the
Fund. Actual expenses and annual rate of return may be more or less than those
allowed for purposes of this Example. In addition, while the Example assumes
reinvestment of all dividends and distributions at net asset value, participants
in the Fund's Dividend Reinvestment Plan will under certain circumstances
receive Shares purchased by the Plan Agent at a price which may be at, above or
below net asset value.
<PAGE>
THE FUND
Putnam Convertible Opportunities and Income Trust (the "Fund") is a
closed-end, diversified management investment company registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund is a
Massachusetts business trust organized on February 23, 1995. A copy of the
Agreement and Declaration of Trust (the "Agreement and Declaration of Trust"),
which is governed by Massachusetts law, is on file with the Secretary of State
of The Commonwealth of Massachusetts. As a newly organized entity, the Fund has
no operating history. The Fund's principal office is located at One Post Office
Square, Boston, Massachusetts 02109, and its telephone number is (617) 292-1000.
INVESTMENT MANAGER AND ADMINISTRATOR
The Fund's investment manger and administrator is Putnam Investment
Management, Inc. ("Putnam"), a Massachusetts corporation with offices at One
Post Office Square, Boston, Massachusetts 02109. Putnam is a wholly owned
subsidiary of Putnam Investments, Inc., a holding company which is in turn
wholly owned by Marsh & McLennan Companies, Inc., a publicly-owned holding
company whose principal businesses are international insurance and reinsurance
brokerage, employee benefit consulting and investment management.
Putnam has been managing mutual funds since 1937. The firm serves as
the investment manager for the funds in the Putnam family, with approximately
$67 billion in assets in over three million shareholder accounts as of December
31, 1994, including $_______ billion in assets in 16 closed-end funds, one of
which, Putnam High Income Convertible and Bond Fund, invests primarily in
convertible securities and high yield securities and another of which, Putnam
Managed High Yield Trust, invests primarily in high yield securities. In
addition, four open-end funds in the Putnam family of funds, Putnam Convertible
Income-Growth Trust, Putnam High Yield Advantage Fund, Putnam High Yield Trust
and PCM High Yield Fund, invest primarily in convertible securities or high
yield securities. The Putnam Advisory Company, Inc., an affiliate, manages
domestic and foreign institutional accounts and foreign mutual funds. Another
affiliate, Putnam Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary powers. Putnam and its
affiliates managed approximately $95 billion in assets as of December 31, 1994,
including approximately $2 billion invested in convertible securities and $9
billion invested in high yield securities.
Putnam currently employs [ ] portfolio managers dedicated to the
convertible and high yield securities markets, supported by [ ] investment
analysts and other research personnel. Their investment analysis is supported by
Putnam's computer modeling techniques and issuer database. The [ ] portfolio
managers who are primarily responsible for the day-to-day management of the
Fund's portfolio are identified under "Trustees and Officers" below.
USE OF PROCEEDS
The proceeds of this offering are estimated to be $___________ (or
$___________ if the over-allotment option is exercised by the Underwriters in
full) after deducting organizational and offering expenses of the Fund. The Fund
will not pay any underwriting fees out of the net proceeds of the offering, and
all of such proceeds will be available to the Fund for investment in portfolio
securities. An underwriting fee of $______ per share, for a total of $________
(or $________ if the over-allotment option is exercised in full), will be paid
to the Underwriters by Putnam or an affiliate out of its own funds. See
"Underwriting."
The net proceeds will be invested in accordance with the Fund's
investment objectives and policies during a period estimated not to exceed three
months from the completion of the offering, depending on market conditions and
the availability of appropriate securities. Pending such investment, the
proceeds will be invested in high-quality, short-term money market instruments,
investment grade debt securities and U.S. Government securities.
INVESTMENT OBJECTIVES AND POLICIES
The Fund's investment objectives are capital appreciation and high
current income. The Fund is designed primarily as a long-term investment and not
as a trading vehicle. It is not intended to be a complete investment program,
and there is no assurance the Fund will achieve its objectives.
Basic Investment Strategy
Under normal market conditions, the Fund will invest substantially
all of its assets (and, in any event, normally at least 80% of its total assets)
in a diversified portfolio of convertible securities ("Convertible
Securities") and nonconvertible, higher risk, high income securities
("Nonconvertible High Yield Securities"). The Fund expects that all
or a substantial portion of its assets will be invested in lower-grade
Convertible Securities and Nonconvertible High Yield Securities rated at the
time of purchase Ba, B or Caa by Moody's Investors Service, Inc. ("Moody's") or
BB, B or CCC by Standard & Poor's Corporation ("Standard & Poor's") or in non
rated Convertible Securities and Nonconvertible High Yield Securities of
comparable quality as determined by Putnam. Putnam believes that by investing in
a combination of Convertible Securities and Nonconvertible High Yield
Securities, the Fund has the potential for both capital appreciation associated
with equity investments and a higher current yield than is normally associated
with investments in common stocks, while at the same time potentially offering
lower principal risk and lower volatility than a portfolio comprised solely of
common stocks of comparable issuers. The portion of the Fund's assets invested
in Convertible Securities and in Nonconvertible High Yield Securities will vary
from time to time in light of the Fund's investment objectives, changes in
interest rates and economic and other factors, although under normal market
conditions the Fund will invest at least 25%, but no more than 75%, of its total
assets in Convertible Securities and at least 25%, but not more than 75%, of its
total assets in Nonconvertible High Yield Securities. Based upon current market
conditions, Putnam expects that initially approximately 50% of the Fund's assets
will be invested in each asset category and that Convertible Securities of small
capitalization companies (generally defined as companies with market
capitalizations of less than $1 billion) will initially represent a significant
portion of the Fund's investments in Convertible Securities. See "Investment
Considerations" and "Special Considerations and Risk Factors" below. The Fund
may also invest in common stocks and may hold a portion of its assets in cash
and money market instruments.
Convertible Securities. Convertible Securities include bonds,
debentures, notes, preferred stocks and other securities that may be converted
into or exchanged for, at a specified 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. Like other income-producing securities,
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.
Putnam believes that convertible securities offer attractive investment
characteristics because (i) they have relatively high yields as compared to
common stocks, (ii) they have defensive characteristics since they provide a
fixed return even if the market price of the underlying common stock declines,
and (iii) they provide the potential for capital appreciation if the market
price of the underlying common stock increases.
Convertible securities rank senior to common stock in a corporation's
capital structure and therefore entail less principal risk (i.e., the risk of
not recovering from an issuer in the event of a corporate reorganization) than
the corporation's common stock, although convertible securities are typically
subordinated to nonconvertible securities of the same issuer. Convertible
securities generally offer income yields that are higher than the dividend yield
on the underlying common stock, but lower than the yield on the nonconvertible
debt securities of the same issuer or issuers of similar investment quality. The
extent to which the principal risk associated with a convertible security is
lower than the principal risk associated with the underlying common stock
depends in large measure upon the degree to which the convertible security sells
above its investment value (as defined below).
The market value of a convertible security is made up of two
components:
(1) A security's "investment value" represents the value of
the security without its conversion feature (i.e., a nonconvertible
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.
(2) A security's "conversion value" is the value of the
conversion or exchange privilege of the security. The conversion
feature may be viewed as representing a long-term option for the
purchase of the underlying security into which a given security is
convertible. A security's conversion value is dependent on, among other
things, the market value of the underlying security, the price at which
conversion may be effected, and the length of time remaining until the
conversion privilege either expires or is terminated.
If, because of a low price of the underlying common stock, the
conversion value is low relative to the investment value, the price of the
convertible security is governed principally by its investment value. To the
extent the market price of the underlying common stock approaches or exceeds the
conversion price, the price of the convertible security will be increasingly
influenced by its conversion value, and the convertible security may sell at a
premium over its conversion value to the extent investors place value on the
right to acquire the underlying common stock while holding an income-producing
security that ranks senior to the common stock in the issuer's capital
structure. If the market price of the underlying common stock declines, the
investment value of the convertible security should limit the effect of the
decline on the price of the convertible security.
Under current market conditions, the Fund expects its investments in
Convertible Securities to be comprised primarily of Convertible Securities that
reflect significant conversion value. Such Convertible Securities offer greater
potential for capital appreciation in the event of an increase in the value of
the underlying common stock or other equity security than do Convertible
Securities having very little conversion value, but also entail greater risk of
capital loss in the event of a decline in the market value of the underlying
common stock or other equity security.
Nonconvertible High Yield Securities. Nonconvertible High Yield
Securities may include bonds, debentures, notes, and preferred stocks and will
generally be unsecured. Most of these securities will bear interest at fixed
rates. The Fund may also invest in securities with floating or variable rates of
interest or which involve equity features, such as contingent interest or
participations based on revenues, sales or profits (i.e., interest or other
payments, often in addition to a fixed rate of return, that are based on the
borrowers' attainment of specified levels of revenues, sales or profits and thus
enable the holder of the security to participate in the issuer's business). At
times, the Fund may acquire warrants and other equity securities in connection
with the purchase of such securities. Investments by the Fund in Nonconvertible
High Yield Securities entail certain special risks. See "Special Considerations
and Risk Factors" below.
Investment Considerations
[To be supplied.]
Defensive Strategies
There may be times when, in Putnam's judgment, conditions in the
securities markets would make pursuing the Fund's basic investment strategy
inconsistent with the best interests of its shareholders. At such times, Putnam
may employ alternative strategies, primarily seeking to reduce fluctuations in
the value of the Fund's assets. In implementing these "defensive" strategies,
the Fund may invest all or any portion of its assets in investment-grade,
nonconvertible debt securities, including obligations of the U.S. Government or
its agencies and instrumentalities, or in any other securities which Putnam
believes are consistent with such defensive strategies. It is impossible to
predict when, or for how long, such alternative strategies will be utilized.
Portfolio Turnover
Putnam will buy and sell securities for the Fund to further its
investment objectives. The investment policies of the Fund may lead to frequent
changes in investments, particularly in periods of rapidly fluctuating interest
rates. The Fund's investments may also be traded to take advantage of perceived
short-term disparities in market values or yields among securities of comparable
quality and maturity. From time to time, consistent with its investment
objectives, the Fund may sell securities in anticipation of a market decline or
buy securities in anticipation of a market rise.
The Fund's portfolio turnover rate may be higher at times than that of
other investment companies. Although it is impossible to predict portfolio
turnover rate, based on its experience in managing similar investments, Putnam
expects that the annual portfolio turnover rate of the Fund will not exceed 100%
after the initial investment of the proceeds of this offering in accordance with
the Fund's investment objectives and policies. Portfolio turnover generally
involves some expense to the Fund, including brokerage commissions or dealer
mark-ups and other transaction costs on the sale of securities and reinvestment
in other securities. Such transactions may result in the realization of taxable
capital gains.
Other Investment Practices
The Fund may engage in the following investment practices, each of
which may involve certain special risks:
Foreign investments. The Fund may invest up to 25% of its total assets
in securities principally traded in foreign markets, including securities
denominated in foreign currencies. The Fund may also purchase Eurodollar
certificates of deposit without regard to this limit. Since foreign securities
are normally denominated and traded in foreign currencies, the value of the
Fund's assets may be affected favorably or unfavorably by currency exchange
rates and exchange control regulations. The currencies of certain countries in
which the Fund may invest have in the past experienced substantial devaluation
relative to the U.S. dollar. Even though a portion of the Fund's investment
income may be received or realized in such foreign currencies, the Fund will be
required to compute and distribute its income in U.S. dollars. Therefore, if the
exchange rate for any such currency declines after the Fund's income has been
earned and translated into U.S. dollars but before conversion into U.S. dollars,
the Fund could be required to liquidate portfolio securities to make such
distributions. The Fund may engage in a variety of foreign currency exchange
transactions in connection with its foreign investments. See Appendix C.
Foreign securities are subject to certain risks not typically
associated with investments in the securities of U.S. issuers, including risks
related to future political and economic developments. There may be less
information publicly available about a foreign issuer than about a U.S. issuer,
and foreign issuers are not generally subject to accounting, auditing,
recordkeeping and financial reporting standards and practices comparable to
those in the United States. Foreign securities markets may have substantially
less volume and be smaller and 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 costs and fees are also generally higher
than in the United States. Foreign settlement procedures and trade regulations
may involve certain risks (such as delay in payment or delivery of securities or
in the recovery of the Fund's assets held abroad) and expenses not present in
the settlement of domestic investments that could adversely affect the Fund's
performance. Dividend and interest income received by the Fund from sources
within foreign countries may be reduced by withholding and other taxes imposed
by such countries. Any such taxes paid by the Fund will reduce its net income
available for distribution to shareholders.
In addition, there may be a possibility of seizure, nationalization or
expropriation of assets, imposition of currency exchange controls, confiscatory
taxation or other foreign governmental laws or restrictions that might adversely
affect the payment of dividends on equity securities and principal of and
interest on debt securities. Additionally, political or financial instability
and diplomatic developments could adversely affect the value of the Fund's
investments in certain foreign countries. Legal remedies available to investors
in certain foreign countries may be more limited than those available with
respect to investments in the United States or in other foreign countries and in
the event of a default on a foreign obligation, it may be difficult for the Fund
to obtain or enforce a judgment against the issuer. The laws of some foreign
countries may limit the Fund's ability to invest in securities of certain
issuers located in those foreign countries. Special tax considerations apply to
foreign securities.
The risks described above are typically increased to the extent that
the Fund invests in issuers located in under-developed and developing nations,
which are sometimes referred to as "emerging markets." Investments in securities
of issuers located in countries with emerging economies or securities markets
are speculative and subject to certain special risks. Political and economic
structures in many of 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 or expropriated the assets of private companies. In addition,
unanticipated political or social developments may affect the values of the
Fund's investments in these countries and the availability to the Fund of
additional investments in these countries. The small size, limited trading
volume and relative inexperience of the securities markets in these countries
may make the Fund's investments in such countries illiquid and more volatile
than investments in more developed countries, and the Fund may be required to
establish special custodial or other arrangements before making investments in
these countries. There may be little financial or accounting information
available with respect to issuers located in these countries, and it may be
difficult as a result to assess the value or prospects of an investment in such
issuers.
The Fund's investments in securities of issuers located in countries
with emerging economies or securities markets may include Brady Bonds. Brady
Bonds are issued by foreign governmental issuers through the exchange of
existing commercial bank loans to such countries for new bonds in connection
with debt restructurings under a debt restructuring plan introduced by former
U.S. Secretary of the Treasury, Nicholas F. Brady. Brady Bonds may have no (or
only limited) collateralization, and the payment of interest and principal may
be dependent on the willingness and the ability of foreign governmental issuer
to make payment in accordance with the terms of the Brady Bond.
Non-Publicly Traded Securities. The Fund may invest in securities which
are not publicly traded, including securities sold pursuant to Rule 144A under
the Securities Act of 1933, as amended ("Rule 144A Securities"). The sale of
these securities is usually restricted under Federal securities laws, and market
quotations may not be readily available. As a result, the Fund may not be able
to sell these securities (other than Rule 144A Securities) unless they are
registered or exempt from registration under applicable Federal and state
securities laws, or may have to sell them at less than fair market value. These
securities may also be more difficult to value. The Fund may invest up to 15% of
its net assets in securities restricted as to resale, excluding securities
determined by the Fund's Trustees (or the person designated by the Fund's
Trustees to make such determinations) to be readily marketable.
Futures and options. The Fund may purchase and sell financial futures
contracts and related options and may purchase and sell options on securities
and securities indices to hedge against changes in the values of securities the
Fund owns or expects to purchase. For example, if Putnam expected the value of
the Fund's portfolio securities to decline as a result of an anticipated general
stock market decline, the Fund might sell futures contracts on the Standard &
Poor's 500 Composite Stock Index. If prices did fall, the value of securities
held by the Fund would decline, but this decline may be offset, in whole or in
part, by an increase in the value of the Fund's position in the index futures
contracts. Conversely, the increased cost of portfolio securities to be acquired
by the Fund caused by a general rise in the stock market may be offset, in whole
or in part, by gains on index futures purchased by the Funds. The Fund could
thus take advantage of the anticipated rise in the values of securities without
actually buying them until the market had stabilized. The Fund may also purchase
and sell put and call options on index futures or on securities indices for
hedging purposes.
The Fund may also, for hedging purposes, purchase and sell futures
contracts and related options with respect to U.S. Government securities,
including U.S. Treasury bills, notes and bonds and may purchase and sell options
directly on U.S. Government securities and other securities eligible for
investment by the Fund. Putnam believes that, under certain market conditions,
price movements in U.S. Government securities futures and related options and in
options on such securities may correlate closely with price movements in other
fixed income securities and may as a result provide hedging opportunities for
the Fund. Such futures and options would be used in a way similar to the Fund's
use of index futures and options. The Fund will only purchase or sell futures or
options when, in the opinion of Putnam, price movements in such futures and
options will correlate closely with price movements in the securities which are
the subject of the hedge.
The successful use of futures and options will usually depend on
Putnam's ability to forecast market movements or interest rates correctly. The
Fund's ability to hedge its portfolio positions through transactions in futures
and options also depends on the degree of correlation between movements in the
prices of such financial futures and options and movements in the prices of the
underlying securities index or U.S. Government securities or of the securities
which are the subject of a hedge. The successful use of futures and options also
depends on the availability of a liquid secondary market to enable the Fund to
close out its positions on a timely basis. There can be no assurance that such a
market will exist at a particular time. In the case of options purchased by the
Fund, the risk of loss is limited to the premium paid, whereas in the case of
options written by the Fund and in the case of futures transactions, the risk of
loss is limited only to the extent that the increases in the value of the Fund's
investments during the period of the futures contract or option may offset
losses on the futures contract or option over the same period. Certain
provisions of the Internal Revenue Code may limit the Fund's ability to engage
in futures and options transactions. See Appendix B for more detailed
information about these practices, including limitations designed to reduce
risks.
Securities loans. The Fund may make secured loans of its portfolio
securities amounting to not more than 25% of its total assets, thereby realizing
additional income. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
As a matter of policy, securities loans are made to broker-dealers pursuant to
agreements requiring that loans be continuously secured by collateral in cash or
short-term debt obligations at least equal at all times to the value of the
securities lent. The Fund retains all or a portion of the interest received on
investment of the cash collateral or receives a fee from the borrower. Although
voting rights, or rights to consent, with respect to the loaned securities pass
to the borrower, the Fund retains the right to call the loans at any time on
reasonable notice, and it will do so in order that the securities may be voted
by the Fund if the holders of such securities are asked to vote upon or consent
to matters materially affecting the investment. The Fund may also call such
loans in order to sell the securities involved.
Forward commitments. The Fund may make contracts to purchase securities
for a fixed price at a future date beyond customary settlement time ("forward
commitments") if it holds, and maintains until the settlement date in a
segregated account, cash or high-grade debt obligations in an amount sufficient
to meet the purchase price, or if it enters into offsetting contracts for the
forward sale of other securities it owns. Forward commitments 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 portfolio securities or for delivery pursuant to options contracts it
has entered into, the Fund may dispose of a commitment prior to settlement if
Putnam deems it appropriate to do so. The Fund may realize short-term capital
gains or losses upon the sale of forward commitments.
Repurchase agreements. The Fund may enter into repurchase agreements
with respect to up to 25% of its total assets (taken at current value). 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 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 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.
SPECIAL CONSIDERATIONS AND RISK FACTORS
No operating history. The Fund is a closed-end investment company
designed primarily as a long-term investment and not as a trading vehicle. As a
newly organized entity, the Fund has no operating history.
Investments in fixed income securities. The market value of the Fund's
investments in fixed income securities, and thus the net asset value of the
Shares, will change in response to changes in (i) the perceived creditworthiness
of issuers of those securities, (ii) interest rates, (iii) the relative values
of the currencies in which the Fund's investments in fixed income securities are
denominated with respect to the U.S. dollar and (iv) other factors. Thus, a
decrease in interest rates will generally result in an increase in the value of
such securities. Conversely, during periods of rising interest rates, the value
of such securities will generally decline. The extent of the fluctuation will
depend on various other factors, such as the average maturity of the Fund's
investments in fixed income securities. Although the Fund may invest in
securities of any maturity, many of the fixed income securities in which the
Fund will invest will have relatively long maturities. A longer maturity
generally is associated with a greater level of volatility in the market value
of such securities in response to changes in market conditions. In addition,
securities issued at a deep discount are subject to greater fluctuations of
market value in response to changes in interest rates than debt obligations of
comparable maturities that were not issued at a deep discount. Changes by
recognized rating services in their ratings of fixed income securities and in
the ability of an issuer to make payments of interest and principal may also
affect the value of these investments. Changes in the value of portfolio
securities generally will not affect cash income derived from such securities,
but will affect the Fund's net asset value.
Although Putnam considers security ratings when making investment
decisions, it performs its own investment analysis and does not rely principally
on the ratings assigned by the rating services. Putnam's analysis may include
consideration of the issuer's experience and management strength, changing
financial condition, borrowing requirements or debt maturity schedules, and its
responsiveness to changes in business conditions and interest rates. Putnam also
considers relative values based on anticipated cash flow, interest or dividend
coverage, asset coverage, earnings prospects and other factors.
At times, a substantial portion of the Fund's assets may be invested in
securities as to which the Fund, by itself or together with other accounts
managed by Putnam and its affiliates, holds a major portion or all of such
securities. 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 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. In many cases, such securities
may be purchased in private placements and, accordingly, will be subject to
restrictions on resale as a matter of contract or under the securities laws. 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. In addition, in
order to enforce its rights in the event of a default under such securities, the
Fund may be required to take possession of and manage assets securing the
issuer's obligations on such securities, which may increase the Fund's operating
expenses and adversely affect the Fund's net asset value. 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, because as a regulated investment company the Fund is
subject to certain limitations on its investments and on the nature of its
income.
Certain risks associated with investments in lower-grade securities.
The Fund expects to invest substantially all of its assets in lower-grade
securities. Securities rated Ba or lower by Moody's or BB or lower by Standard &
Poor's, commonly known as "junk bonds," are below investment grade and are
regarded by Moody's and Standard & Poor's, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. The lowest quality securities in
which the Fund will invest are those rated at the time of purchase Caa by
Moody's or CCC by Standard & Poor's or, if unrated, determined by Putnam to be
of comparable quality. Securities rated CCC by Standard & Poor's or Caa by
Moody's and nonrated securities of comparable quality involve a high degree of
risk. Although securities rated CCC, as well securities rated BB and B, may be
regarded by Standard & Poor's as having some quality or protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions. Securities rated Caa are regarded by Moody's as
being of poor standing. They may be in default or there may be present elements
of danger with respect to principal or interest.
Investors should carefully consider their ability to assume the risks
of owning shares of a mutual fund which invests in lower-grade securities before
making an investment in the Fund. These securities are considered to be
predominantly speculative with limited protection of interest and principal
payments. 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 value the Fund had placed on
such securities. The values of lower-grade 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 affect adversely the values of
lower-grade securities. In the absence of a liquid trading market for securities
held by it, the Fund may find it more difficult at times to establish the fair
market value of such securities. Because of the greater number of investment
considerations involved in investing in lower-grade securities, the achievement
of the Fund's objectives depends more on Putnam's analytical abilities than
would be the case if it were investing primarily in securities in the higher
rating categories.
Issuers of lower-grade 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.
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 a rating agency does not reflect an assessment of the volatility of
the security's market value or of the liquidity of an investment in the
security. The Fund will not necessarily dispose of a security when its rating is
reduced below its rating at the time of purchase, although Putnam will monitor
the investment to determine whether continued investment in the security will
assist in meeting the Fund's investment objectives. For more information about
the rating services' descriptions of lower-rated securities, see Appendix A to
this Prospectus.
Investments in securities of small capitalization companies. Based on
current market conditions, Putnam currently expects that convertible securities
of small capitalization companies (generally defined as a company with a market
capitalization of less than $1 billion) will initially represent a significant
portion of the Fund's investments in Convertible Securities. These securities
may offer greater opportunities for current income and capital appreciation than
those of larger companies, but may involve certain special risks. Such companies
may have limited product lines, markets, or financial resources and may be
dependent on a limited management group. While the markets in securities of such
companies have grown rapidly in recent years, such securities may trade less
frequently and in smaller volume than more widely held securities. The values of
these securities may fluctuate more sharply than other securities, and the Fund
may experience some difficulty in establishing or closing out positions in these
securities at prevailing market prices. There may be less publicly available
information about the issuers of these securities or less market interest in
such securities than in the case of larger companies, and it may take a longer
period of time for the prices of such securities to reflect the full value of
their issuers' underlying earnings potential or assets.
Zero-coupon and Payment-in-Kind securities. The Fund may invest in
zero-coupon securities of governmental or private issuers, including Brady Bonds
and other sovereign debt, and in payment-in-kind securities. Because zero-coupon
securities do not (and payment-in-kind securities may not) pay current interest
prior to maturity, their value is generally subject to greater fluctuation in
response to changes in market interest rates than securities which pay interest
currently. Both zero-coupon and payment-in-kind securities allow an issuer to
avoid the need to generate cash to meet current interest payments.
Payment-in-kind securities, for instance, allow the issuer to make current
interest payments in additional securities. Accordingly, such securities usually
are issued and traded at a deep discount from their face or par value and may
involve greater credit risks than securities paying interest currently. Even
though such securities do not pay current interest in cash, the Fund is
nonetheless required to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders. Thus, the Fund could
be required at times to liquidate other investments in order to satisfy its
dividend requirements. To the extent the Fund is required to liquidate thinly
traded securities, the Fund may not be able to sell such securities at prices
approximating the values the Fund had placed on such securities.
Redemptions and Premium securities. 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 the time of declining
interest rates, the Fund may not be able to reinvest the proceeds in securities
providing the same investment return as the securities redeemed. If a
Convertible Security held by the Fund is called for redemption, the Fund will be
required to redeem the security, convert it into the underlying security or sell
it to a third party, and the Fund may lose the value of any premium in the
security's market price attributable to the conversion privilege. The Fund may
also invest at times in securities with coupon rates greater than current market
rates. Because the value of such "premium" securities tends to approach the
principal amount as they approach maturity (or call price in the case of
securities approaching their first call date), the purchase of such securities
may increase the Fund's risk of capital loss if such securities are held to
maturity (or first call date). If securities purchased by the Fund at a premium
are called or sold prior to maturity, the Fund will recognize a capital loss to
the extent the call or sale price is less than the purchase price. Additionally,
the Fund will recognize a capital loss if it holds such securities to maturity.
Anti-takeover provisions. The Agreement and Declaration of Trust
includes provisions that could limit the ability of other persons or entities to
acquire control of the Fund or to cause it to engage in certain transactions or
to modify its structure. Such provisions may have the effect of depriving
shareholders of an opportunity to sell their Shares at a premium over prevailing
market prices and may have the effect of inhibiting the Fund's conversion to
open-end status. See "Description of Shares -- Certain Provisions in the
Agreement and Declaration of Trust" and "Repurchase of Shares; Conversion to
Open-end Status."
Market price of shares. Shares of closed-end investment companies often
trade at a discount to their net asset values, and the Fund's Shares may
likewise trade at a discount. The risks associated with this characteristic of
closed-end investment companies may be greater for investors expecting to sell
shares of a closed-end investment company soon after the completion of an
initial public offering of the company's shares. The net asset value per Share
will be reduced immediately following the offering as a result of organizational
and offering expenses. See "Use of Proceeds." The market price of the Fund's
Shares will be determined by such factors as relative demand for and supply of
such Shares in the market, the Fund's net asset value, general market and
economic conditions and other factors beyond the control of the Fund. The Fund
therefore cannot predict whether the Shares will trade at, below or above the
initial offering price. The Shares are designed primarily for long-term
investors, and investors should not view the Fund as a vehicle for trading
purposes. See "Determination of Net Asset Value" and "Repurchase of Shares;
Conversion to Open-end Status."
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions which may
not be changed without the affirmative vote of a "majority of the outstanding
voting securities" of the Fund, which is defined in the 1940 Act to mean the
affirmative vote of the lesser of (1) more than 50% of the outstanding Shares or
(2) 67% or more of the Shares present at a meeting if more than 50% of the
outstanding Shares are represented at the meeting in person or by proxy. The
Fund may not:
1. Issue senior securities, as defined in the 1940 Act, other than
shares of beneficial interest with preference rights, except to the extent such
issuance might be involved with respect to borrowings described under
restriction 2 below or with respect to transactions involving financial futures,
options, and other financial instruments.
2. Borrow money in excess of 10% of the value (taken at the lower of
cost or current value) of its total assets (not including the amount borrowed)
at the time the borrowing is made, and then only from banks as a temporary
measure (not for leverage) in situations which might otherwise require the
untimely disposition of portfolio investments or for extraordinary or emergency
purposes. Such borrowings will be repaid before any additional investments are
purchased.
3. Pledge, hypothecate, mortgage, or otherwise encumber its assets in
excess of 15% of its total assets (taken at the lower of cost and current value)
in connection with borrowings permitted by restriction 2 above.
4. Purchase securities on margin, except such short-term credits as may
be necessary for the clearance of purchases and sales of securities, and except
that it may make margin payments in connection with transactions in futures
contracts, options, and other financial instruments.
5. Make short sales of securities or maintain a short position for the
account of the Fund unless at all times when a short position is open it owns an
equal amount of such securities or owns securities which, without payment of any
further consideration, are convertible into or exchangeable for securities of
the same issue as, and in equal amount to, the securities sold short.
6. 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 the federal securities laws.
7. 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 representing 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.
8. Purchase or sell commodities or commodity contracts, except that it
may purchase or sell financial futures contracts or options.
9. Make loans, except by purchase of debt obligations in which the Fund
may invest consistent with its investment policies, by entering into repurchase
agreements with respect to not more than 25% of its total assets (taken at
current value), or through the lending of its portfolio securities with respect
to not more than 25% of its total assets.
10. Invest in securities of any issuer, if, to the knowledge of the
Fund, officers and Trustees of the Fund and officers and directors of Putnam who
beneficially own more than 0.5% of the securities of that issuer together own
more than 5% of such securities.
11. 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 securities of
the U.S. Government or its agencies or instrumentalities.
12. Acquire more than 10% of the voting securities of any issuer.
13. Invest more than 25% of the value of its total assets in securities
of issuers in any one industry. (Securities of the U.S. Government, its
agencies, or instrumentalities, and securities backed by the credit of a
governmental entity are not considered to represent industries.)
14. Invest in the securities of registered open-end investment
companies, except as they may be acquired as part of a merger or consolidation
or acquisition of assets.
15. Buy or sell oil, gas, or other mineral leases, rights, or royalty
contracts, although it may purchase securities of issuers which deal in,
represent interests in, or are secured by interests in such leases, rights, or
contracts, and it may acquire or dispose of such leases, rights, or contracts
acquired through the exercise of its rights as a holder of debt obligations
secured thereby.
16. Make investments for the purpose of gaining control of a company's
management.
All percentage limitations on investments will apply at the time of
investment and shall not be considered violated unless an excess or deficiency
occurs or exists immediately after and as a result of such investment. Except
for the investment restrictions listed above, the other investment policies
described in this Prospectus are not fundamental and may be changed by approval
of the Trustees. As a matter of policy, the Trustees would not materially change
the Fund's investment objectives without shareholder approval.
TRUSTEES AND OFFICERS
The Trustees of the Fund are responsible for the general oversight of
the Fund's business. The initial Trustees and executive officers of the Fund and
their principal occupations during the last five years are set forth below. The
mailing address of each of the officers and Trustees is One Post Office Square,
Boston, Massachusetts 02109.
Trustees
George Putnam, Chairman and President. Chairman and Director of Putnam
Investment Management, Inc., and Putnam Mutual Funds Corp. Director of American
Public Broadcasting, Inc., The Boston Company, Inc., Boston Safe Deposit and
Trust Company, Freeport McMoRan, Inc., General Mills, Inc., Houghton Mifflin
Company, Marsh & McLennan Companies, Inc., and Rockefeller Group, Inc.(a)(b)
- - - --------
a Trustee who is an "interested person" (as defined in the 1940 Act) of
the Fund, Putnam, and/or Putnam Mutual Funds Corp.
b Trustees who, during the offering of the Shares, may be deemed to be
"interested persons" of the Fund and of one or more of the principal
underwriters for the Fund by reason of owning, beneficially or in a
fiduciary capacity, publicly traded securities issued by such an
underwriter or by a company controlling such an underwriter.
Officers
Charles E. Porter, Executive Vice President. Managing Director of
Putnam Investments, Inc. and Putnam Investment Management, Inc. Executive Vice
President of the Putnam funds.
Patricia C. Flaherty, Senior Vice President. Senior Vice President of
the Putnam funds.
Gordon H. Silver, Vice President. Director and Senior Managing Director
of Putnam Investment Management, Inc. and Putnam Investments, Inc. Vice
President of the Putnam funds.
William N. Shiebler, Vice President. Director and Senior Managing
Director of Putnam Investments, Inc. President and Director of Putnam Mutual
Funds Corp. Vice President of the Putnam funds.
John R. Verani, Vice President. Senior Vice President of Putnam
Investment Management, Inc. and Putnam Investments, Inc. Vice President of the
Putnam funds.
Robert F. Lucey, Vice President. President and Director of Putnam
Fiduciary Trust Company. Senior Managing Director of Putnam Investments, Inc.
Vice President of the Putnam funds.
Gary N. Coburn, Vice President. Senior Managing Director of Putnam
Investment Management, Inc. and Putnam Investments, Inc. Vice President of
certain of the Putnam funds.
Thomas V. Reilly, Vice President. Managing Director of Putnam
Investment Management, Inc. Vice President of certain of the Putnam funds.
Edward H. D'Alelio, Vice President. Managing Director of Putnam
Investment Management, Inc. Vice President of certain of the Putnam funds.
Paul M. O'Neil, Vice President. Vice President of Putnam Investments,
Inc. and Putnam Investment Management, Inc. Vice President of the Putnam funds.
Jin W. Ho, Vice President. Managing Director of Putnam Investment
Management, Inc. Vice President of certain of the Putnam funds.
Hugh H. Mullin, Vice President. Senior Vice President of Putnam
Investment Management, Inc. Vice President of certain of the Putnam funds.
John D. Hughes, Treasurer. Treasurer of the Putnam funds.
Paul G. Bucuvalas, Assistant Treasurer. Assistant Treasurer of the
Putnam funds.
Beverly Marcus, Clerk. Clerk of the Putnam funds.
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 November, 1990, Mr. Shiebler was President and Chief Operating Officer
of the InterCapital Division of Dean Witter Reynolds.
Mr. Ho and Mr. Mullin are primarily responsible for the day-to-day
management of the Fund's portfolio. Mr. Ho has been employed by Putnam
Investment Management, Inc. since 1983 and Mr. Mullin has been employed by
Putnam Investment Management, Inc. since 1986.
The Fund pays each Trustee 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 Compensation Committee, which consists
solely of Trustees not affiliated with Putnam and is responsible for
recommending Trustee compensation, estimates that Committee and Trustee meeting
time together with appropriate preparation requires the equivalent of at least
three business days per Trustee meeting. The fees paid to each Trustee by the
Fund and by all of the Putnam funds are shown below:
<TABLE>
<CAPTION>
Year first
elected as Estimated Retirement Total
a Trustee of aggregate benefits accrued compensation
the Putnam compensation as part of from all
Trustee funds from the Fund* Fund's expenses Putnam funds**
<S> <C> <C> <C>
George Putnam 1957 0 $141,850
</TABLE>
* Reflects estimated amounts to be paid by the Fund for its fiscal year
ended _____, 19__ (approximately __ months). Includes an annual retainer and an
attendance fee for each meeting attended.
** Reflects total payments received from all Putnam funds in the most
recent calendar year. As of December 31, 1994, there were ___ funds in the
Putnam family.
The Fund's Trustees have approved Retirement Guidelines for Trustees of
the Putnam funds. These guidelines provide generally that a Trustee who retires
after reaching age 72 and who has at least 10 years of continuous service will
be eligible to receive a retirement benefit from each Putnam fund for which he
or she served as a Trustee. The amount and form of such benefit is subject to
determination annually by the Trustees and, unless otherwise determined by the
Trustees, will be an annual cash benefit payable for life equal to one-half of
the Trustee retainer fees paid by the Fund at the time of retirement. Several
retired Trustees are currently receiving benefits pursuant to the Guidelines and
it is anticipated that the current Trustees of the Fund will receive similar
benefits upon their retirement. A Trustee who retired in the most recent
calendar year and was eligible to receive benefits under these Guidelines would
have received an annual benefit of $60,425, based upon the aggregate retainer
fees paid by the Putnam funds for such year. The Trustees of the Fund reserve
the right to amend or terminate such Guidelines and the related payments at any
time, and may modify or waive the foregoing eligibility requirements when deemed
appropriate.
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.
INVESTMENT MANAGEMENT CONTRACT
Under a Management Contract between the Fund and Putnam, subject to
such policies as the Trustees may determine, Putnam, at its own 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
also places all orders for the purchase and sale of the Fund's portfolio
securities. Under the Management Contract, Putnam agrees to provide all
necessary investment personnel and related support services and to pay the costs
of their compensation, office space and equipment, as well as certain costs
associated with this offering as described in this Prospectus. The Fund will
pay for its organizational costs and certain other costs associated with this
offering, including the cost of printing prospectuses and sales literature, the
reimbursement of certain expenses incurred by the Underwriters, auditing and
legal fees and registration fees payable to the SEC and the New York Stock
Exchange. The Fund will also pay for all of its operating expenses to the extent
not otherwise borne by Putnam. See "Administrative Services Contract" below.
As compensation for the services rendered, facilities furnished, and
expenses borne by Putnam, the Fund will pay Putnam a quarterly fee based on the
Fund's average net asset value (determined as described below) at the annual
rate of ____%. Average net asset value is to be determined by taking the average
of the weekly determinations of the net asset value, determined at the close of
the last business day of each week, for each week which ends during the quarter
The combined investment management and administrative fees are higher than those
paid by most other investment companies.
The Management Contract provides that Putnam 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.
The Management Contract may be terminated without penalty by vote of
the Trustees or the shareholders of the Fund, or by Putnam, 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 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 1940 Act. See
"Investment Restrictions."
Putnam expects to enter into an agreement with [____________] for
various services, including services with respect to the Fund's market
performance and general economic and interest rate conditions. Putnam from its
own assets (and not from the assets of the Fund) will pay a fee for such
services in an amount up to .10% of the net assets of the Fund. No part of the
payments to be made by Putnam to in connection with such services will accrue to
or for the account of any of the other Underwriters. [________] will have no
responsibility with respect to the Fund's investments or administration.
ADMINISTRATIVE SERVICES CONTRACT
The Fund will pay Putnam a quarterly administrative service fee at the
annual rate of ____% of the Fund's average net asset value pursuant to an
Administrative Services Contract between the Fund and Putnam. Average net asset
value is to be determined by taking the average of the weekly determination of
net asset value, determined at the close of the last business day of each week,
for each week which ends during the quarter. The combined investment management
and administrative fees are higher than those paid by most other investment
companies.
Under the terms and conditions of the Administrative Services Contract,
in addition to the fee paid to Putnam, the Fund reimburses Putnam for a portion
of the compensation and related expenses of certain officers of the Fund and
their assistants who provide certain administrative services for the Fund and
the other funds in the Putnam family, each of which bears an allocated share of
the foregoing costs. The aggregate amount of all such payments and
reimbursements will be determined annually by the Trustees. Putnam pays all
other salaries of officers of the Fund. The Fund pays all expenses not otherwise
borne by Putnam including, without limitation, auditing, legal, custody, and
shareholder servicing expenses, fees of Trustees and costs of preparing and
mailing periodic reports and proxy statements to shareholders.
The Administrative Services Contract provides that Putnam 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.
PORTFOLIO TRANSACTIONS
Investment Decisions
Investment decisions for the Fund and for the other investment advisory
clients of Putnam and its affiliates, The Putnam Advisory Company, Inc. and
Putnam Fiduciary Trust Company, 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 clients are selling the security. In some instances, one client may sell
a particular security to another client. Sometimes, 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'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 and other agency transactions
involve the payment by the Fund of negotiated brokerage commissions. Such
commissions vary among different brokers. Also, a particular broker may charge
different commissions according to such factors as the difficulty and size of
the transaction. Transactions in foreign securities markets generally involve
the payment of fixed brokerage commissions, which are generally higher than
those in the United States. There is generally no stated commission in the case
of securities 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.
Putnam will place orders for the purchase and sale of portfolio
securities for the Fund and will buy and sell securities for the Fund through a
substantial number of broker-dealers. In so doing, Putnam will use its best
efforts to obtain for the Fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage commissions as
described below. In seeking the most favorable price and execution, Putnam,
having in mind the Fund's best interests, considers all factors it deems
relevant, including price, the size of the transaction, the nature of the market
for the security, the amount of the commission, the timing of the transaction
taking into account market prices and trends, the reputation, experience and
financial stability of the broker-dealer involved, and the quality of service
rendered by the broker-dealer in other transactions.
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) from broker-dealers which 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
receives brokerage and research services from many broker-dealers with which
Putnam places the Fund's portfolio transactions and from third parties with
which these broker-dealers have arrangements. These services include such
matters as general economic and security market reviews, industry and company
reviews, evaluations of securities, recommendations as to the purchase and sale
of securities, newspapers, magazines, pricing services, quotation services, news
services, and personal computers utilized by Putnam's managers and analysts.
Where the services referred to above are not used exclusively by Putnam for
research purposes, Putnam, 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 and its
affiliates, The Putnam Advisory Company, Inc. and Putnam Fiduciary Trust
Company, 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 and its
affiliates receive these services even though Putnam might otherwise be required
to purchase some of these services for cash.
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
as amended, and by the Management Contract, Putnam may cause the Fund to pay a
broker-dealer which provides brokerage and research services to Putnam an amount
of disclosed commission for effecting a securities transaction for the Fund in
excess of the commission which another broker-dealer would have charged for
effecting that transaction. Putnam's authority to cause the Fund to pay any such
greater commissions is also subject to such policies as the Trustees may adopt
from time to time.
The Management Contract provides that the fee payable to Putnam by the
Fund will be reduced by an amount equal to any commissions, fees, brokerage, or
similar payments received by Putnam or an affiliate in connection with the
purchase and sale of portfolio securities of the Fund, less any direct expenses
approved by the Trustees. Putnam seeks to reduce for the Fund soliciting dealer
fees on the tender of the Fund's portfolio securities in tender or exchange
offers. Any such reductions are likely to be minor in amount.
Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to seeking the most favorable price and
execution available and such other policies as the Trustees may determine,
Putnam may consider sales of Shares of the Fund by underwriters and dealers in
this offering (and, if permitted by law, sales of the other Putnam funds) as a
factor in the selection of broker-dealers to execute portfolio transactions for
the Fund.
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's policy to make monthly distributions to shareholders
from net investment income. The first distribution to shareholders is expected
to be paid within 90 days after the completion of the offering of the Fund's
Shares.
Net investment income of the Fund consists of all interest and other
income (excluding capital gains and losses) accrued on portfolio assets, less
all expenses of the Fund allocable thereto. Income and expenses of the Fund are
accrued each day. It is currently anticipated that amounts which economically
represent the excess of realized capital gains over realized capital losses, if
any, will be distributed to shareholders at least annually.
To permit the Fund to maintain a more stable monthly distribution, the
Fund may from time to time pay out less than the entire amount of available net
investment income to shareholders earned in any particular period. Any such
amount retained by the Fund would be available to stabilize future
distributions. As a result, the distributions paid by the Fund for any
particular period may be more or less than the amount of net investment income
actually earned by the Fund during such period. For information concerning the
tax treatment of distributions to shareholders, see "Taxation." The Fund
intends, however, to make such distributions as are necessary for it to qualify
as a regulated investment company that is not subject to federal tax.
Shareholders may have their dividend or distribution checks sent to
parties other than themselves. A "Dividend Order" form is available from Putnam
Investor Services, mailing address: P.O. Box 41203, Providence, Rhode Island
02940-1203. After Putnam Investor Services receives this completed form with all
registered owners' signatures guaranteed, the shareholder's distribution checks
will be sent to the bank or other person the shareholder has designated.
DIVIDEND REINVESTMENT PLAN
The Fund offers a Dividend Reinvestment Plan (the "Plan") for
shareholders pursuant to which shareholders will have all cash distributions
automatically reinvested in additional Shares by The First National Bank of
Boston as plan agent (the "Plan Agent"), unless they elect to receive all
distributions in cash. Pursuant to an agreement among the Fund, the Plan Agent,
and Putnam Investor Services, Putnam Investor Services, a division of Putnam
Fiduciary Trust Company, furnishes certain administrative and bookkeeping
services relating to the Plan. Shareholders who elect not to participate in the
Plan will receive all distributions in cash paid by check in U.S. dollars mailed
by Putnam Investor Services, as dividend disbursing agent, directly to the
shareholder of record or to the person designated by such shareholder in a
Dividend Order form (or, if the Shares are held in Street name, then to the
nominee). Shareholders whose Shares are held in the name of a broker or nominee
which provides a dividend reinvestment service should consult their broker or
nominee to ensure that an appropriate election is made on their behalf by the
nominee or broker and should similarly make such consultation in the event of
transfer of their Shares to a new broker or nominee. Shareholders whose Shares
are held by a broker or nominee which does not provide a dividend reinvestment
service may be required to have their Shares registered in their own names in
order to participate in the Plan.
If the Trustees declare a dividend or determine to make a capital gain
distribution payable either in Shares or in cash, as shareholders may have
elected, non-participants in the Plan will receive cash and participants in the
Plan will receive the equivalent in Shares. If the market price (plus estimated
brokerage commissions) of the Shares on the payment date for the dividend or
distribution is equal to or exceeds their net asset value as determined on the
payment date, participants will be issued Shares at a value equal to the higher
of net asset value and 95% of the market price. This discount reflects savings
in underwriting and other costs that the Fund would otherwise be required to
incur to raise additional capital. If the net asset value exceeds the market
price (plus estimated brokerage commissions) of the Shares at such time, or if
the Fund declares a dividend or other distribution payable only in cash, the
Plan Agent will, as agent for Plan participants, attempt for a specified period
(currently, seven days) to buy Shares in the open market, on the New York Stock
Exchange or elsewhere, for the participants' accounts at a discount from the
Shares' net asset value as determined from time to time during the period. If
the Plan Agent is unable to reinvest the entire amount of a dividend or
distribution payable either in Shares or in cash during the specified period in
Shares at a discount from net asset value, the portion of the dividend or
distribution not so reinvested will in general be invested in newly-issued
Shares at a value equal to the higher of their net asset value as of the last
day of the period and 95% of their market price on the last day of the period.
If, before the Plan Agent has completed reinvestment of the dividend or
distribution, the market price or net asset value of the Shares exceeds the net
asset value of the Shares on the payment date for the dividend or distribution,
the average per share purchase price paid by the Plan Agent for reinvestment of
the dividend or distribution may be higher than if the dividend or distribution
had been paid in Shares issued by the Fund on the payment date. Because the
first distribution paid by the Fund may be paid before the Plan becomes fully
operational, shareholders who are participants in the Plan may receive that
distribution in cash.
The Plan Agent will maintain all shareholders' accounts in the Plan and
will furnish written confirmation of all transactions in the account, including
information needed by shareholders for tax records. Shares in the accounts of
each Plan participant will be held by the Plan Agent in non-certificated form in
the name of the participant, and each shareholder's proxy will include those
Shares purchased pursuant to the Plan.
In the case of shareholders such as banks, brokers, or nominees which
hold Shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of Shares certified from time to
time by a record shareholder as representing the total amount registered in the
record shareholder's name and held for the account of beneficial owners who are
to participate in the Plan.
Each participant will pay a proportionate share of brokerage
commissions incurred with respect to the Plan Agent's open market purchases in
connection with the reinvestment of distributions. In each case, the cost per
Share purchased for each participant's account will be the average cost,
including brokerage commissions, of the Shares purchased in the open market.
Shares may be purchased through any of the Underwriters, acting as broker or
dealer.
The automatic reinvestment of dividends and distributions will not
relieve participants of any income taxes that may be payable (or required to be
withheld) on dividends or distributions.
Experience under the Plan may indicate that changes are desirable.
Accordingly, the Fund reserves the right to amend or terminate the Plan as
applied to any distribution paid subsequent to written notice of the change sent
to the participants in the Plan at least 30 days before the record date for such
distribution. The Plan may also be amended or terminated by the Plan Agent, with
the Fund's prior written consent, on at least 30 days' prior written notice to
participants in the Plan. There is no direct service charge to participants in
the Plan; however, the Fund reserves the right to amend the Plan to include a
service charge payable by the participants.
A shareholder participating in the Plan may withdraw from the Plan at
any time. There is no penalty for non-participation in or withdrawal from the
Plan, and shareholders who have previously withdrawn from the Plan may rejoin it
at any time. Upon termination of participation in the Plan, a shareholder will
receive a certificate or certificates for the full Shares held under the Plan,
and a cash adjustment for any fractional Shares. Changes in election must be in
writing and should include the name of the Fund and the shareholder's name and
address as they appear on the share certificate. Such elections, and all other
correspondence concerning the Plan, should be sent to Putnam Investor Services,
mailing address: P.O. Box 41203, Providence, Rhode Island 02940-1203, or
shareholders may call Putnam Investor Services at (800) 634-1587. An election to
withdraw from the Plan will, until such election is changed, be deemed to be an
election by a shareholder to take all subsequent distributions in cash.
TAXATION
The following discussion is based on the advice of Ropes & Gray,
counsel to the Fund, and reflects provisions of the Internal Revenue Code of
1986, as amended (the "Code"), existing Treasury regulations, rulings published
by the Internal Revenue Service, and other applicable authority as of the date
of this Prospectus. These authorities are subject to change by legislative or
administrative action. The following discussion is only a summary of some of the
important federal tax considerations generally applicable to investments in the
Fund. There may be other federal tax considerations applicable to particular
investors. In addition, income earned through an investment in the Fund may be
subject to state and local taxes. Prospective shareholders are therefore urged
to consult their tax advisors with respect to the tax consequences to them of an
investment in the Fund.
Taxation of the Fund
The Fund intends to qualify each year for taxation as a regulated
investment company under Subchapter M of the Code. If the Fund so qualifies, the
Fund will not be subject to federal income tax on income distributed timely to
its shareholders in the form of dividends or capital gain distributions.
Qualification for taxation as a regulated investment company under the
Code requires, among other things, that the Fund distribute to its shareholders
each year (or in distributions attributable to such year) at least 90% of the
sum of its net investment income (including, generally, interest, dividends and
certain other income, less certain expenses), and the excess, if any, of net
short-term capital gains over net long-term capital losses (the "Distribution
Requirement"). Because the Fund may in certain instances be required to accrue
income when it has not actually received cash (for example, in the case of
discount obligations, such as zero-coupon bonds, payment-in-kind bonds and
certain other obligations), the Fund may be required at times to liquidate other
investments in order to satisfy the Distribution Requirement. If the Fund does
not qualify for taxation as a regulated investment company, the Fund's income
will be taxed at the Fund level, and all distributions from earnings and
profits, including distributions of net capital gain, will be taxable to
shareholders as ordinary income. In addition, in order to requalify as a
regulated investment company, the Fund may be required to recognize unrealized
gains, pay substantial taxes and interest, and make certain distributions.
In general, if the Fund fails to distribute in a calendar year
substantially all of its net investment income and substantially all of the its
capital gain net income for the one-year period ending October 31 of such year
(plus any amount that was not distributed in previous taxable years), the Fund
will be subject to a 4% excise tax on the retained amounts. The Fund intends
generally to make distributions sufficient to avoid imposition of the 4% excise
tax.
The Fund's investments and hedging activities are subject to certain
special tax rules. One such rule provides that in order to qualify for taxation
as a regulated investment company, less than 30% of the Fund's gross income must
be derived from the sale or other disposition of certain assets (including
financial futures contracts and options) held for less than three months (the
"Three-Month Rule"). Accordingly, the Fund will be restricted in selling assets
held, or considered to have been held, for less than three months. Certain Code
rules governing the Fund's hedging transactions may affect the Fund's holding
periods in its assets and may, therefore, affect the Fund's ability to comply
with the Three-Month Rule. Code rules may also alter the timing and character of
certain income, gains and losses realized by the Fund with respect to its
transactions in futures contracts, options, and certain other investments. These
rules could affect the amount, timing and character of distributions to
shareholders. In addition, 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.
Taxation of Shareholders
Dividends and other Distributions. Distributions of net investment
income and the excess, if any, of net short-term capital gains over net
long-term capital losses, will be taxable to shareholders as ordinary income,
and are anticipated not to be eligible for the corporate dividends-received
deduction. Designated distributions of the excess, if any, of net long-term
capital gains over net short-term capital losses ("net capital gain") will be
taxable to Shareholders as long-term capital gains, without regard to how long a
shareholder has held Shares of the Fund, and will not qualify for the corporate
dividends-received deduction. Distributions in excess of the Fund's earnings and
profits will first reduce the adjusted tax basis of a holder's Shares and, after
such adjusted tax basis is reduced to zero, will constitute capital gains to
such holder (assuming such Shares are held as a capital asset).
Certain of the Fund's transactions (including, but not limited to,
transactions in foreign currency-denominated debt securities and holdings in
securities on which the issuer is in default and has suspended or ceased payment
of current interest) may produce a difference between its book income and its
taxable income. This difference may cause part or all of the Fund's income
distributions to constitute nontaxable returns of capital for tax purposes or,
conversely, require the Fund to make taxable distributions exceeding book income
in order to continue to qualify as a regulated investment company.
Dividend and capital gain distributions will be taxable as described
above whether received in cash or in Shares under the Dividend Reinvestment
Plan. The amount of a distribution received in the form of Shares under the
Dividend Reinvestment Plan will be reported for federal income tax purposes as
equal to the amount of cash allocated to the Shareholder for the purchase of
Shares on its behalf, notwithstanding whether Shares are actually purchased or
issued by the Fund.
Any dividend declared by the Fund in October, November or December and
payable to shareholders of record on a date in such a month generally is deemed
to have been received by the shareholders on December 31 of such year, provided
that the dividend actually is paid during January of the following year.
The Fund will notify Shareholders each year of the amount and tax
status of dividends and other distributions, including the amount of any
distribution of net capital gain.
Sales of Shares. Except as set forth below, in general, any gain or
loss realized upon a taxable disposition of Shares by a shareholder will be
treated as long-term capital gain or loss if the Shares have been held for more
than twelve months, and otherwise as short-term capital gain or loss assuming
such Shares are held as a capital asset. However, any loss realized upon a
taxable disposition of Shares held for six months or less will be treated as
long-term, rather than short-term, capital loss to the extent of any long-term
capital gain distributions received by the shareholder with respect to those
Shares. All or a portion of any loss realized upon a taxable disposition of
Shares will be disallowed if other Shares are purchased (including under the
Dividend Reinvestment Plan) 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.
From time to time the Fund may make a tender offer for its Shares. It
is expected that the terms of any such offer will require a tendering
shareholder to tender all Shares held, or considered under certain attribution
rules to be held, by such Shareholder. Shareholders who tender all Shares held,
or considered to be held, by them will be treated as having sold their Shares
and generally will realize a capital gain or loss. If a shareholder tenders some
but not all of its Shares such shareholder may be treated as having received a
taxable dividend upon the tender of its Shares. In such a case, there is a risk
that non-tendering shareholders will be treated as having received taxable
distributions from the Fund.
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 and other non-corporate shareholder who fails to furnish the Fund
with a correct taxpayer identification number, who has underreported dividends
or interest income, or who fails to certify to the Fund that he or she is not
subject to such withholding. An individual's taxpayer identification number is
his or her social security number. Withholding at a rate of 30% (or lesser rate
established by treaty) may apply to certain distributions to shareholders that
are nonresident aliens or foreign partnerships, trusts or corporations.
DESCRIPTION OF SHARES
The Trustees of the Fund have authority to issue an unlimited number of
shares of beneficial interest without par value. The Shares outstanding are, and
those offered hereby when issued will be, fully paid and nonassessable by the
Fund, except as set forth in the following paragraph. The Fund's Shares have no
preemptive, conversion, exchange or redemption rights. Each Share has one vote,
with fractional Shares voting proportionately. 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.
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 incurred by any
shareholder held personally liable for the obligations of the Fund. Thus, the
risk of a shareholder's 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.
The Fund has no present intention of offering additional shares, other
than Shares issued pursuant to the Fund's Dividend Reinvestment Plan. Other
offerings of its shares, if made, will require approval of the Trustees. Any
additional offering will not be sold at a price per share (exclusive of
underwriting discounts and commissions) below the then current net asset value
except in connection with an offering to existing shareholders or with the
consent of a majority of the Fund's outstanding Shares.
Certain Provisions in the Agreement and Declaration of Trust
The Agreement and Declaration of Trust includes provisions that could
have the effect of limiting the ability of other entities or persons to acquire
control of the Fund, or to cause it to engage in certain transactions or to
modify its structure. The Fund's Trustees are divided into three classes, having
initial terms of one, two and three years, respectively. At each annual meeting
of shareholders, the term of one class will expire and Trustees will be elected
to serve in that class for terms of three years. The classification of the
Trustees in this manner could delay for up to two years the replacement of a
majority of the Trustees. A Trustee may be removed from office only by a vote of
the holders of at least three-fourths of the Shares of the Fund entitled to vote
on the matter.
The affirmative vote of at least three-fourths of the outstanding
Shares is required to authorize any of the following actions: (1) merger or
consolidation of the Fund, (2) sale of all or substantially all of the assets of
the Fund, (3) liquidation or dissolution of the Fund, (4) conversion of the Fund
to an open-end investment company, or (5) amendment of the Agreement and
Declaration of Trust to reduce the three-quarters vote required to authorize the
actions in (1) through (5) above, unless with respect to any of the foregoing
such action has been authorized by the affirmative vote of three-fourths of the
total number of Trustees and three-fourths of the total number of Continuing
Trustees (as defined below), in which case the affirmative vote of a majority of
the outstanding voting securities of the Fund is required in connection with the
actions in (1) through (4) above, and the affirmative vote of a majority of the
outstanding Shares is required in connection with an amendment of the Agreement
and Declaration of Trust. A Continuing Trustee is a Trustee of the Fund (1) who
is not a person or an affiliate of a person who enters or proposes to enter into
a transaction resulting in a merger or consolidation of the Fund or the sale of
all or substantially all of the assets of the Fund (an "Interested Party") and
(2) who has been a Trustee for a period of at least twelve months (or since the
Fund's commencement of operations if that period is less than twelve months), or
is a successor of a Continuing Trustee who is unaffiliated with an Interested
Party and is recommended to succeed a Continuing Trustee by a majority of the
then Continuing Trustees. A "majority of the outstanding securities" of the Fund
is defined in the 1940 Act to mean the affirmative vote of the lesser of (1)
more than 50% of the outstanding Shares or (2) 67% or more of the Shares present
at a meeting if more than 50% of the outstanding Shares are represented at the
meeting in person or by proxy.
The Trustees have determined that the three-quarters voting
requirements described above, which are greater than the minimum requirements
under the 1940 Act, are in the best interests of the Fund and its shareholders
generally. Reference is made to the Agreement and Declaration of Trust of the
Fund, on file with the Securities and Exchange Commission, for the full text of
these provisions. These provisions could have the effect of depriving
shareholders of an opportunity to sell their Shares at a premium over prevailing
market prices by discouraging a third party from seeking to obtain control of
the Fund in a tender offer or similar transaction and may have the effect of
inhibiting the Fund's conversion to open-end status.
Principal Shareholder
As of the date of this Prospectus, Putnam Investments, Inc. owned all
the outstanding Shares of the Fund, which it purchased in connection with the
contribution of the initial capital of the Fund. Putnam Investments, Inc. has
represented that such Shares were purchased for investment purposes only and
will be sold only pursuant to an effective registration statement under the
Securities Act of 1933, as amended, or an applicable exemption therefrom.
REPURCHASE OF SHARES; CONVERSION TO OPEN-END STATUS
Shares of closed-end investment companies often trade at a discount to
their net asset values, and the Fund's Shares may likewise trade at a discount
to their net asset value. The market price of the Fund's Shares will be
determined by such factors as relative demand for and supply of such Shares in
the market, the Fund's net asset value, general market and economic conditions,
and other factors beyond the control of the Fund. See "Determination of Net
Asset Value." Although the Fund's shareholders will not have the right to redeem
their Shares, the Fund may take action to repurchase Shares in the open market
or make tender offers for its Shares at their net asset value. This may have the
effect of reducing any market discount from net asset value. The Fund may, by
vote of at least three-fourths of the outstanding Shares (or, under certain
circumstances, such lesser percentage as described above under "Description of
Shares -- Certain Provisions in the Agreement and Declaration of Trust") be
converted to an open-end investment company, which would make the Fund's Shares
redeemable upon demand of shareholders at the Shares' net asset value. Certain
provisions of the Fund's Agreement and Declaration of Trust discussed above may
have the effect of depriving shareholders of an opportunity to sell their Shares
at a premium over prevailing market prices and may have the effect of inhibiting
the Fund's conversion to open-end status.
The Fund has no present intention of taking any actions described in
the foregoing paragraph. There is no assurance that the Fund will, in fact,
decide to undertake any of these actions or, if action is undertaken to
repurchase or tender for Shares, that such action will result in the Shares'
trading at a price which approximates their net asset value. Although Share
repurchases and tender offers could have a favorable effect on the market price
of the Fund's Shares, it should be recognized that the acquisition of Shares by
the Fund will decrease the total assets of the Fund and, therefore, have the
effect of increasing the Fund's expense ratio. Any Share repurchases or tender
offers will be made in accordance with requirements of the Securities Exchange
Act of 1934, as amended, and the 1940 Act. If the Fund were to make a tender or
repurchase offer for its Shares, shareholders would receive any notice thereof
required by applicable law, including any required information describing the
offer and the means by which shareholders might submit their Shares. If the Fund
converted to an open-end company, it could be required to liquidate its
portfolio investments to meet requests for redemption, and its Shares would no
longer be listed on the New York Stock Exchange.
DETERMINATION OF NET ASSET VALUE
The Fund will determine the net asset value of its Shares at least once
each week as of the close of business on the last day on which the New York
Stock Exchange is open. Net asset value will be determined by dividing the value
of all assets of the Fund (including accrued interest and dividends), less all
liabilities (including accrued expenses), by the total number of Shares
outstanding. Securities and other assets for which quotations are readily
available are valued at market value, which is currently determined using the
last reported sale price or, if no sales are reported -- as in the case of some
securities traded over-the-counter -- the last reported bid price, except that
certain U.S. Government securities are stated at the mean between the last
reported bid and asked prices. Short-term investments having remaining
maturities of 60 days or less are stated at amortized cost, which approximates
market value. All other securities and assets are valued at their fair value
following procedures approved by the Trustees.
Reliable market quotations are not considered to be readily available
for long-term corporate bonds and notes, certain preferred stocks or certain
foreign securities. These investments are stated at fair value on the basis of
valuations furnished by pricing services approved by the Trustees, which
determine valuations for normal, institutional-size trading units of such
securities using methods based on market transactions for comparable securities
and various relationships between securities which are generally recognized by
institutional traders.
If any securities held by the Fund are restricted as to resale, Putnam
will determine their fair value following procedures approved by the Trustees.
The Trustees periodically review such valuations and procedures. The fair value
of such securities generally will be determined as the amount which the Fund
could reasonably expect to realize from an orderly disposition of such
securities over a reasonable period of time. The valuation procedures applied in
any specific instance are likely to vary from case to case. However,
consideration is generally given to the financial position of the issuer and
other fundamental analytical data relating to the investment and to the nature
of the restrictions on disposition of the securities (including any registration
expenses that might be borne by the Fund in connection with such disposition).
In addition, specific factors are also generally considered such as the cost of
the investment, the market value of any unrestricted securities of the same
class (both at the time of purchase and at the time of valuation), the size of
the holding, the prices of any recent transactions or offers with respect to
such securities, and any available analysts' reports regarding the issuer.
UNDERWRITING
The Underwriters named herein, for whom [__________],
[____________________] [and other underwriters] are acting as Representatives,
have severally agreed, subject to the terms and conditions contained in the
Underwriting Agreement, to purchase from the Fund the number of Shares set forth
below opposite their respective names:
<TABLE>
<CAPTION>
Underwriter Number of
Shares
<S> <C>
[_________________]
Total........................................ ___________
</TABLE>
The Underwriters, through their Representatives, have advised the Fund
that they propose to offer the Shares initially at the public offering price set
forth on the cover page of this Prospectus. There is no sales charge or
underwriting discount charged to investors on purchases of Shares in the
offering. Putnam or an affiliate has agreed to pay the Underwriters from its own
assets a commission in connection with sales of the Shares in the offering, in
the gross amount of $____ per Share. Such payment is equal to 6.00% of the
initial public offering price per Share. From this amount, the Underwriters may
allow to selected dealers a payment in the amount of $____ per Share sold by
such dealers and such dealers may reallow a payment of $____ per Share to
certain other dealers. The Underwriters reserve the right to reject orders in
whole or in part. After the initial offering, the offering price and other
selling terms may be changed by the Representatives. The Fund is obligated to
sell, and the Underwriters are obligated to purchase, all of the Shares offered
hereby (other than shares covered by the over-allotment option described below)
if any are sold.
Investors must pay for the Shares on the fifth business day following
the date of the final Prospectus. Investors should consult their broker
concerning the manner and method of payment.
The Fund has granted to the Underwriters an option, exercisable for 60
days from the date of this Prospectus, to purchase up to _________ additional
Shares at the initial public offering price, less underwriting discounts and
commissions, as set forth on the cover page of this Prospectus. Such option may
be exercised from time to time by the Underwriters during such 60-day period,
but not more than three times. The Underwriters may exercise such option solely
for the purpose of covering over-allotments incurred in the sale of the Shares
offered hereby. To the extent such option to purchase is exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional Shares as the number set
forth next to such Underwriter's name in the preceding table bears to
_____________.
The Fund and Putnam have each agreed to indemnify the several
Underwriters or contribute to losses arising out of certain liabilities,
including certain liabilities under the Securities Act of 1933, as amended.
The Representatives have informed the Fund that the Underwriters do not
intend to confirm sales to any accounts over which they exercise discretionary
authority.
In order to meet the requirements for listing of the Fund's Shares of
the New York Stock Exchange, the Underwriters will undertake to sell lots of 100
or more Shares to a minimum of 2,000 beneficial owners. The minimum investment
requirement is 100 Shares ($2,000).
Prior to this offering, there has been no public market for the Shares
of the Fund. Consequently, the initial public offering price has been determined
through negotiation among the Fund, Putnam and the Representatives. The Fund
intends to list the Shares for trading on the New York Stock Exchange under the
symbol "___".
The Underwriting Agreement provides that it may be terminated in the
absolute discretion of [ ] without liability on the part of any Underwriter to
the Fund or Putnam if prior to the closing date for the purchase of the Shares
or the closing date for the purchase of the Shares pursuant to the overallotment
option, as the case may be, (1) trading in securities generally on the New York
Stock Exchange, the American Stock Exchange, the Nasdaq National Market or the
Nasdaq Stock Market shall have been suspended or materially limited or trading
in Shares of the Fund shall have been suspended or materially limited; (2)
additional material governmental restrictions, not in force on the date of the
Underwriting Agreement, have been imposed upon trading in securities generally
or a general moratorium on commercial banking activities in New York or
Massachusetts shall have been declared by either Federal or state authorities;
or (3) any outbreak or escalation of hostilities or other international or
domestic calamity, crisis or change in political, financial or economic
conditions occurs, the effect of which is such as to make it in the judgment of
[ ] impracticable or inadvisable to commence or continue the offering of the
Shares at the offering price to the public set forth on the cover page of this
Prospectus or to enforce contracts for the resale of the Shares by the
Underwriters.
The Underwriters have taken certain actions to discourage short-term
trading of the Shares during a period of time following the initial offering
date. Included in these actions is the withholding of the concession to dealers
in connection with Shares which were sold by such dealers and which are
repurchased for the account of the Underwriters during such period. In addition,
physical delivery of certificates representing Shares is initially required to
transfer ownership.
The Fund anticipates that from time to time the Representatives of the
Underwriters and certain other Underwriters may act as brokers or dealers in
connection with the execution of its portfolio transactions after they have
ceased to be Underwriters and, subject to certain restrictions, may act as
brokers while they are Underwriters.
The Fund has agreed not to offer or sell any additional Shares, other
than Shares issued pursuant to the Fund's Dividend Reinvestment Plan, for a
period of 180 days after the date of the Underwriting Agreement, without the
prior written consent of the Underwriters.
Putnam will enter into an agreement to purchase various services from [
]. See "Investment Management Contract."
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND REGISTRAR
The Fund's custodian is Putnam Fiduciary Trust Company, an affiliate of
Putnam (the "Custodian"). The transfer agent, dividend disbursing agent and
registrar for the Shares is Putnam Investor Services, a division of Putnam
Fiduciary Trust Company (the "Transfer Agent"). The principal business address
of the Custodian and the Transfer Agent is One Post Office Square, Boston,
Massachusetts 02109. The Transfer Agent is responsible for, among other things,
establishing and maintaining shareholder accounts, issuing certificates for the
Shares, recording transactions in the Shares, monitoring the number of Shares
issued and outstanding from time to time, and effecting payments of dividends
and other distributions declared from time to time by the Trustees with respect
to the Shares. For these services, the Fund pays the Transfer Agent a monthly
fee based on the number of shareholder accounts and reimburses the Transfer
Agent for certain out-of-pocket expenses. All correspondence and shareholder
inquiries should be directed to Putnam Investor Services, mailing address: P.O.
Box 41203, Providence, Rhode Island 02940-1203; telephone: (800) 225-1581.
LEGAL MATTERS
Certain legal matters in connection with the Shares offered hereby will
be passed upon for the Fund by Ropes & Gray, Boston, Massachusetts and for the
Underwriters by Skadden, Arps, Slate, Meagher & Flom, Boston, Massachusetts.
Skadden, Arps, Slate, Meagher & Flom also acts as counsel to Putnam Investment
Management, Inc. and certain of its affiliates in connection with other matters.
EXPERTS
The financial statement included in this Prospectus and the
Registration Statement has been so included in reliance on the report of
_______________, independent accountants, given on the authority of said firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
Further information concerning these securities may be found in the
Registration Statement, of which this Prospectus constitutes a part, on file
with the Securities and Exchange Commission.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees of
Putnam Convertible Opportunities and Income Trust
We have audited the accompanying statement of assets and liabilities of
Putnam Convertible Opportunities and Income Trust as of April __, 1995. This
financial statement is the responsibility of the Fund's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the statement of assets and liabilities is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the statement of assets and
liabilities. Our procedures included the confirmation of cash held by the
custodian as of April __, 1995. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall statement of assets and liabilities presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the statement of assets and liabilities referred to
above presents fairly, in all material respects, the financial position of
Putnam Convertible Opportunities and Income Trust as of April __, 1995 in
conformity with generally accepted accounting principles.
Boston, Massachusetts
April __, 1995
<PAGE>
Putnam Convertible Opportunities and Income Trust
STATEMENT OF ASSETS AND LIABILITIES
April __, 1995
<TABLE>
Assets
<S> <C>
Cash................................................................................................ $100,000.00
Deferred organization expenses (Note 1)............................................................. $
Liabilities......................................................................................... $
Accrued expenses.................................................................................... $
Commitments (Notes 1 and 2)......................................................................... $
NET ASSETS, applicable to _____ common shares of beneficial interest without par
value issued and outstanding; unlimited number of common
shares authorized................................................................................ $
NET ASSET VALUE PER COMMON SHARE.................................................................... $
</TABLE>
Notes to Financial Statement
[To be supplied.]
<PAGE>
APPENDIX A o FIXED INCOME SECURITY RATINGS
Moody's Investors Service, Inc. describes its classifications of bonds as
follows:
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-edge." 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 risks appear somewhat larger than in 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 other 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 a 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.
Standard & Poor's Corporation describes its classifications of bonds as follows:
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differ from the highest rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher-rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for bonds in higher-rated categories.
BB-B-CCC--Debt rated BB, B or CCC is regarded, on balance, as predominantly
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligation. While such debt will
likely have some quality and protective characteristics, these are outweighed by
large uncertainties or major risk exposures to adverse conditions.
<PAGE>
APPENDIX B o OPTIONS AND FUTURES PORTFOLIO STRATEGIES
Purchasing and Selling Put and Call Options
The Fund may purchase put options on securities to protect its
portfolio securities against a substantial decline in market value. 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 its portfolio
securities by the premium paid for the put option and by transaction costs.
The Fund may also purchase call options on securities to hedge against
an increase in prices of portfolio securities that the Fund ultimately wants to
buy. 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. By using call options in this manner, the Fund
will reduce any profit it might have realized had it bought the portfolio
security at the time it purchased the call option by an amount equal to the
premium paid for the call option plus transaction costs.
The Fund will not purchase call options if, as a result, more than 5%
of its assets would at the time be invested in such options.
The Fund may, as a limited form of hedging, write covered call options
and covered put options on securities when, in the opinion of Putnam, such
transactions are consistent with the Fund's investment objectives and policies.
Call options written by the Fund give the purchaser the right to buy the
underlying securities from the Fund at a stated exercise price; put options give
the purchaser the right to sell the underlying securities to the Fund at a
stated price.
The Fund may write only covered options, which means that, so long as
the Fund is obligated as the writer of a call option, it will own the underlying
securities subject to the option (or comparable securities satisfying the cover
requirements of securities exchanges). In the case of put options, the Fund will
hold cash and/or high-grade short-term debt obligations equal to the price to be
paid if the option is exercised. In addition, the Fund will be considered to
have covered a put or call option if and to the extent that it holds an option
that offsets some or all of the risk of the option it has written. The Fund may
write combinations of covered puts and calls on the same underlying security.
The Fund will receive a premium from writing a put or call option. 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 if owned by the Fund. By writing a put option, the Fund assumes the
risk that it may be required to purchase the underlying security for an exercise
price higher than its then-current market value, resulting in a potential
capital loss unless the security subsequently appreciates in value.
The Fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction in which it purchases
an offsetting option. The Fund realizes a profit or loss from a closing
transaction if the cost of the transaction (option premium plus transaction
costs) is less or more than the premium received from writing the option.
Because increases in the market price of a call option generally reflect
increases in the market price of the security underlying the option, any loss
resulting from a closing purchase transaction may be offset in whole or in part
by unrealized appreciation of the underlying security owned by the Fund.
If the Fund writes an 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.
General Characteristics of Futures Contracts and Related Options
The Fund may purchase and sell financial futures contracts and related
options in order to hedge against a change in the values of securities that the
Fund owns or expects to purchase.
The sale of a financial futures contract generally 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. (As described
below, however, index futures contracts do not require actual delivery of
securities making up an index.) The purchase of a financial futures contract
creates an obligation by the purchaser to take delivery of the underlying
financial instrument in a specified delivery month at a stated price. The
specific instruments delivered or taken, respectively, at settlement date are
not determined until at or near that date. The determination is made in
accordance with the rules of the exchange or board of trade on which the sale or
purchase of the futures contract was made. Futures contracts are traded only on
commodity exchanges or boards of trade--known as "contracts markets"--approved
for such trading by the Commodity Futures Trading Commission, and must be
executed through a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market.
Although most futures contracts by their terms call for actual delivery
or acceptance of commodities or securities, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a futures contract
for the same aggregate amount of the specific type of financial instrument or
commodity and with the same delivery date. If the price of the initial sale of
the futures contract exceeds the price of the offsetting purchase, the seller is
paid the difference and realizes a gain. Conversely, if the price of the
offsetting purchase exceeds the price of the initial sale, the seller realizes a
loss. Similarly, the closing out of a futures contract purchase is effected by
the purchaser 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.
When the Fund purchases or sells a futures contract, it is required to
deposit with the Fund's custodian an amount of cash and/or securities. This
amount is known as "initial margin." The nature of initial margin is similar to
a performance bond or good faith deposit that is returned to the Fund upon
termination of the contract, assuming the Fund satisfies its contractual
obligations.
Subsequent payments to and from the broker involved in the transaction
occur on a daily basis in a process known as "marking to market." These payments
are called "variation margin" and are made as the value of the futures contract
fluctuates. For example, when the Fund has purchased a futures contract and the
price of the underlying index or security has risen, that position may have
increased in value, in which event the Fund would receive from the broker a
variation margin payment. Conversely, when the Fund has purchased a futures
contract and the price of the underlying index or security has declined, the
position may be less valuable, in which event the Fund would be required to make
a variation margin payment to the broker.
When the Fund terminates a position in a futures contract, a final
determination of variation margin is made, additional cash is paid by or to the
Fund, and the Fund realizes a loss or a gain. Such closing transactions involve
additional commission costs.
Index Futures Contracts and Options. An index futures contract is a
contract to buy or sell units of a specified 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 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 based on 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 investment objectives.
For example, the Standard & Poor's Composite 500 Stock Price Index
("S&P 500") is composed of 500 selected common stocks, most of which are listed
on the New York Stock Exchange. The S&P 500 assigns relative weightings to the
common stocks included in the index, and the value fluctuates with changes in
the market values of those common stocks. In the case of the S&P 500, contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500 were $150, one
contract would be worth $75,000 (500 units x $150). Index futures contracts
specify that no delivery of the actual securities 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 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 S&P 500 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).
Options on index futures contracts are similar to options on securities
except that options on index futures contracts give the purchaser (holder) 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), rather than to purchase or sell the futures contract, at the
specified exercise price at any time during the period of the option. Upon
exercise of the option, the delivery of the index 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 maintained with
respect to the option, 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
futures contract. If an option is exercised on the last trading day prior to the
expiration date of the option, the settlement will be made on the expiration
date entirely in cash based on the difference between the exercise price of the
option and the closing level of the index on which the futures contracts are
based. Purchasers of options who fail to exercise their options prior to
expiration suffer a loss of the premium paid.
As an alternative to purchasing and selling call and put options on
index futures contracts, 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 contracts.
U.S. Government securities futures contracts and options. The Fund may,
for hedging purposes, purchase and sell futures contracts and related options
with respect to U.S. Government securities, including U.S. Treasury notes, bills
and bonds, when, in the opinion of Putnam, price movements in such securities
and options will correlate closely with price movements of the securities which
are the subject of a hedge. U.S. Government securities futures contracts require
the seller to deliver, or the purchaser to take delivery of, the type of U.S.
Government security called for in the contract at a specified date and price.
Options on U.S. Government security futures contracts give the purchaser the
right in return for the premium paid to assume a position in a U.S. Government
futures contract at the specified option exercise price at any time during the
period of the option.
Special Risks of Transactions in Futures Contracts and Options
Hedging risks. There are several risks in connection with the use by
the Fund of futures contracts and options on such contracts as a hedging device.
One risk arises in connection with the use of index futures contracts and
options because of the imperfect correlation between movements in the prices of
the index futures contracts and movements in the prices of securities which are
the subject of a hedge. As a result, the Fund's hedging transactions based on
such indices may not achieve their intended purposes and may result in losses to
the Fund. Putnam will attempt to reduce these risks by purchasing and selling,
to the extent possible, futures contracts and options, the movements of which
will, in its judgment, correlate closely with movements in the prices of the
Fund's portfolio securities sought to be hedged.
Successful use of index futures contracts and related options by the
Fund for hedging purposes is also subject to Putnam's ability to predict
correctly 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 its futures positions and also experience a decline
in value in its portfolio securities. In addition, the prices of index futures
and related options 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 requirements. Such requirements may cause
investors to close futures contracts through offsetting transactions which could
distort the normal relationship between the index and futures markets. Second,
the margin requirements in the futures market are less onerous than margin
requirements in the securities market in general, 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 distortion, even a correct
forecast of general market trends by Putnam may still not result in a successful
hedging transaction over a short time period.
Similarly, successful use of U.S. Government security futures contracts
or options on U.S. Government securities by the Fund is subject to Putnam's
ability to predict correctly movements in the direction of interest rates and
other factors affecting markets for debt securities. For example, if the Fund
has sold U.S. Government security futures contracts or bought put options in
order to hedge against the possibility of an increase in interest rates which
would adversely affect securities held in its portfolio, and the price of such
portfolio securities increases 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 or options 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. Government security
futures contracts and options will not correlate closely with price movements in
the portfolio securities that are the subject of a hedge. For example, if the
Fund has hedged against a decline in the values of its portfolio securities by
selling U.S. Government security futures or buying put options and the values of
U.S. Government securities subsequently increase while values of such portfolio
securities decrease, the Fund would incur losses on both the futures contracts
written by it or put options bought by it and on such securities held in its
portfolio.
Compared to the purchase or sale of futures contracts, the purchase of
call or put options on securities, futures contracts, or securities indices
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 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 price of the underlying securities or index.
The writing of an option on a futures contract, security or securities index
involves risks similar to those risks relating to the sale of futures contracts.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain market clearing
facilities inadequate, and thereby result in the institution by exchanges of
special procedures which may interfere with the timely execution of customer
orders.
The Fund's use of hedging strategies may result in a higher portfolio
turnover rate and additional brokerage costs.
Liquidity risks. To reduce or eliminate a hedge position held by the
Fund (including for the purpose of taking a subsequent position in the same
futures contract), the Fund may seek to close out a position. Trading in certain
futures contracts and options began only recently. The ability to establish and
close out positions will be subject to the development and maintenance of a
liquid market. It is not certain that this market will develop or continue to
exist. Reasons for the absence of a liquid 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 market on that exchange (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. If a trading market were to become
unavailable, the Fund could no longer engage in closing transactions, and may be
required to maintain a position in a hedging instrument at a time when Putnam
would otherwise have closed out the position. As a result, the Fund may be
unable to limit the amount of any loss resulting from its positions in such an
instrument.
Regulatory Matters
The Fund will not enter into any transactions involving futures or
related options until it has received all necessary regulatory approvals,
including from the Commodity Futures Trading Commission. There can be no
assurance that such approvals will be obtained.
<PAGE>
APPENDIX C o FOREIGN CURRENCY TRANSACTIONS
Foreign Currency Exchange Transactions. The Fund may engage in currency
exchange transactions to protect against uncertainty in the level of future
currency exchange rates. In addition, the Fund may write covered call options on
foreign currencies for the purpose of increasing its current return. The Fund's
ability to engage in these transactions may be limited by the Rating Agency
Guidelines.
Generally, the Fund may engage in both "transaction hedging" and
"position hedging." When it engages in transaction hedging, the Fund enters into
foreign currency transactions with respect to specific receivables or payables
of the Fund generally arising in connection with the purchase or sale of its
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 declared, and the date on which such
payments are made or received.
The Fund may purchase or sell a foreign currency on a spot (or cash)
basis at the prevailing spot rate in connection with the settlement of
transactions in portfolio securities denominated in that foreign currency. The
Fund may also enter into contracts to purchase or sell foreign currencies at a
future date ("forward contracts") and purchase and sell foreign currency futures
contracts.
For transaction hedging purposes the Fund may also purchase
exchange-listed and over-the-counter call and put options on foreign currency
futures contracts and on foreign currencies. A put option on a futures contract
gives the Fund the right to assume a short position in the futures contract
until expiration of the option. A put option on currency gives the Fund the
right to sell a 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 currency gives the Fund the right to purchase a currency at the
exercise price until the expiration of the option.
When it engages in position hedging, the Fund enters into foreign
currency exchange transactions to protect against a decline in the values of the
foreign currencies in which its portfolio securities are denominated (or an
increase in the value of currency for securities which the Fund expects to
purchase, when the Fund holds cash or short-term investments). In connection
with position hedging, the Fund may purchase put or call options on foreign
currency futures contracts. The Fund may also purchase or sell foreign currency
on a spot basis.
The precise matching of the amounts of foreign currency exchange
transactions and the value of the portfolio securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value of
those securities between the dates the currency exchange transactions are
entered into and the dates they mature.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward or futures
contract. Accordingly, it may be necessary for the Fund to purchase additional
foreign currency on the spot market (and bear the expense of such purchase) if
the market value of the security or securities being hedged is less than the
amount of foreign currency the Fund is obligated to deliver and if 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 the Fund 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.
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.
Currency forward and futures contracts. A forward foreign currency
exchange involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
as agreed by the parties, at a price set at the time of the contract. In the
case of a cancelable forward contract, the holder has the unilateral right to
cancel the contract at maturity by paying a specified fee. The contracts are
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. A forward contract
generally has no deposit requirement, and no commissions are charged at any
stage for trades. A foreign currency futures contract is a standardized contract
for the future delivery of a specified amount of a foreign currency at a future
date at a price set at the time of the contract. Foreign currency futures
contracts traded in the United States are designed by and traded on exchanges
regulated by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the maturity date
of a forward contract may be any fixed number of days from the date of the
contract agreed upon by the parties, rather than a predetermined date in a given
month. Forward contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange contracts are traded
directly between currency traders so that no intermediary is required. A forward
contract generally requires no margin or other deposit.
At the maturity of a forward or futures contract, the Fund may either
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.
Positions in foreign currency futures contracts may be closed out only
on an exchange or board of trade which provides a secondary market in such
contracts. Although the Fund intends to purchase or sell foreign currency
futures contracts only on exchanges or boards of trade where there appears to be
an active secondary market, there is no assurance that a secondary market on an
exchange or board of trade will exist for any particular contract or at any
particular time. In such event, it may not be possible to close a futures
position and, in the event of adverse price movements, the Fund would continue
to be required to make daily cash payments of variation margin.
Foreign currency options. In general, options on foreign currencies
operate similarly to options on securities and are subject to many similar
risks. Foreign currency options are traded primarily in the over-the-counter
market, although options on foreign currencies have recently been listed on
several exchanges. Options are traded not only on the currencies of individual
nations, but also on the European Currency Unit ("ECU"). The ECU is composed of
amounts of a number of currencies, and is the official medium of exchange of the
European Economic Community's European Monetary System.
The Fund will only purchase or write foreign currency options when
Putnam believes that a liquid secondary market exists for such options. There
can be no assurance that a liquid secondary market will exist for a particular
option at any specific time. Options on foreign currencies are affected by all
of those factors which influence foreign exchange rates and investments
generally.
The value of any currency, including U.S. dollars and foreign
currencies, may be affected by complex political and economic factors applicable
to the issuing country. In addition, the exchange rates of foreign currencies
(and therefore the values of foreign currency options) may be significantly
affected, fixed, or supported directly or indirectly by government actions.
Government intervention may increase risks involved in purchasing or selling
foreign currency options, since exchange rates may not be free to fluctuate in
response to other market forces.
The value of a foreign currency option reflects the value of an
exchange rate, which in turn reflects relative values of two currencies, the
U.S. dollar and the foreign currency in question. Because foreign currency
transactions occurring in the interbank market involve substantially larger
amounts than those that may be involved in the exercise of foreign currency
options, investors may be disadvantaged by having to deal in an odd lot market
for the underlying foreign currencies in connection with options at prices that
are less favorable than for round lots. Foreign governmental restrictions or
taxes could result in adverse changes in the cost of acquiring or disposing of
foreign currencies.
There is no systematic reporting of last sale information for foreign
currencies and there is no regulatory requirement that quotations available
through dealers or other market sources be firm or revised on a timely basis.
Available quotation information is generally representative of very large
round-lot transactions in the interbank market and thus may not reflect exchange
rates for smaller odd-lot transactions (less than $1 million) where rates may be
less favorable. The interbank market in foreign currencies is a global,
around-the-clock market. To the extent that options markets are closed while the
markets for the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be reflected in
the options markets.
Settlement procedures. Settlement procedures relating to the Fund's
investments in foreign securities and to the Fund's foreign currency exchange
transactions may be more complex than settlements with respect to investments in
debt or equity securities of U.S. issuers, and may involve certain risks not
present in the Fund's domestic investments. For example, settlement of trades of
foreign securities or of foreign currency option exercises may occur within a
foreign country, and the Fund may be required to accept or make delivery of the
underlying securities or foreign 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 (or "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.
<PAGE>
No dealer, salesman or any other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus in connection with the offer contained herein and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Fund, Putnam or any of the Underwriters. This Prospectus does
not constitute an offer of any securities other than those to which it relates
or an offer to sell, or a solicitation of an offer to buy, those to which it
relates in any state to any person to whom it is not lawful to make such offer
in such state. The delivery of this Prospectus at any time does not imply that
the information herein is correct as of any time subsequent to its date.
However, if any material change occurs while this Prospectus is required by law
to be delivered, the Prospectus will be amended or supplemented accordingly.
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY.................................
EXPENSES SUMMARY.................................
THE FUND.........................................
INVESTMENT MANAGER AND ADMINISTRATOR.............
USE OF PROCEEDS..................................
INVESTMENT OBJECTIVES AND POLICIES...............
OTHER INVESTMENT PRACTICES.......................
SPECIAL CONSIDERATIONS AND
RISK FACTORS...................................
INVESTMENT RESTRICTIONS..........................
TRUSTEES AND OFFICERS............................
INVESTMENT MANAGEMENT CONTRACT...................
ADMINISTRATIVE SERVICES CONTRACT.................
PORTFOLIO TRANSACTIONS...........................
DIVIDENDS AND DISTRIBUTIONS......................
DIVIDEND REINVESTMENT PLAN.......................
TAXATION.........................................
DESCRIPTION OF SHARES............................
REPURCHASE OF SHARES; CONVERSION TO OPEN-END STATUS
DETERMINATION OF NET ASSET VALUE.................
UNDERWRITING.....................................
CUSTODIAN, TRANSFER AGENT, DIVIDEND DISBURSING
AGENT, AND REGISTRAR
LEGAL MATTERS....................................
EXPERTS..........................................
ADDITIONAL INFORMATION...........................
REPORT OF INDEPENDENT ACCOUNTANTS................
STATEMENT OF ASSETS AND LIABILITIES..............
APPENDIX A o FIXED INCOME SECURITY
RATINGS........................................
APPENDIX B o OPTIONS AND FUTURES
PORTFOLIO STRATEGIES...........................
APPENDIX C o FOREIGN CURRENCY TRANSACTIONS.......
Until _______________, 1995, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a Prospectus. This is in addition to the obligation of
dealers to deliver a Prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
_________ Shares
Putnam Convertible
Opportunities and
Income Trust
Beneficial Interest
PROSPECTUS
, 1995
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(1) Financial Statements included in Parts A and B:
(a) Report of Independent Accountants -- April __,
1995.
(b) Statement of Assets and Liabilities -- April __,
1995.
The Selected Financial Information, Statement of Operations,
Statement of Changes in Net Assets, and Schedules II through VII,
inclusive, are omitted because the required information is
included in the financial statement included in Parts A or B, or
because the conditions requiring their filing do not exist.
(2) Exhibits
(a) -- Agreement and Declaration of Trust
(b) -- Bylaws
(c) -- Inapplicable
(d)(1) -- Form of Certificate representing shares
of beneficial interest
(2) -- Portions of Agreement and Declaration of
Trust Relating to Shareholders' Rights
(3) -- Portions of Bylaws Relating to
Shareholders' Rights
(e)(1) -- Form of Terms and Conditions of Dividend
Reinvestment Plan*
(2) -- Form of Dividend Reimbursement Plan
Agency Agreement*
(f) -- Inapplicable
(g) -- Form of Management Contract
(h)(1) -- Form of Master Agreement Among
Underwriters*
(2) -- Form of Underwriting Agreement*
(3) -- Form of Master Selected Dealers
Agreement*
(i) -- Inapplicable
(j) -- Form of Custodian Contract*
(k) -- Form of Investor Servicing Agreement*
(l) -- Opinion and Consent of Ropes & Gray*
(m) -- Inapplicable
(n) -- Consent of Independent Accountants*
(o) -- Inapplicable
(p) -- Form of Initial Capital Agreement*
(q) -- Inapplicable
(r) -- Inapplicable
* To be filed by amendment
Item 25. Marketing Arrangements
Reference is made to the Form of Underwriting Agreement for
Registrant's shares of beneficial interest to be filed by
amendment to this Registration Statement.
Item 26. Other Expenses of Issuance and Distribution
Securities and Exchange Commission fee $ 25,043
NASD fees . . . . . . . . . . . . . .. $ *
New York Stock Exchange Listing Fee. . . $ *
Printing . . . . . . . . . . . . . . . . $ *
Accounting fees and expenses . . . . . . $ *
Legal fees . . . . . . . . . . . . . . . $ *
Blue Sky fees and expenses . . . . . . . $ *
Miscellaneous. . . . . . . . . . . . . . $ *
Total . . . . . . . . . . . . . . . $ *
* To be furnished by amendment
Item 27. Persons Controlled by or under Common Control with
Registrant
None.
Item 28. Number of Holders of Securities
None.
Item 29. Indemnification
Article VIII of the Registrant's Agreement and Declaration
of Trust provides as follows:
Section 1. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person")
against all liabilities and expenses, including, but not limited
to, amounts paid in satisfaction of judgments, in compromise or
as fines and penalties, and counsel fees reasonably incurred by
any Covered Person in connection with the defense or disposition
of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body,
in which such Covered Person may be or may have been involved as
a party or otherwise or with which such Covered Person may be or
may have been threatened, while in office or thereafter, by
reason of being or having been such a Covered Person except with
respect to any matter as to which such Covered Person shall have
been finally adjudicated in any such action, suit or other
proceeding (a) not to have acted in good faith in the reasonable
belief that such Covered Person's action was in the best
interests of the Trust or (b) to be liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office. Expenses, including
counsel fees so incurred by any such Covered Person (but
excluding amounts paid in satisfaction of judgments, in
compromise or as fines or penalties), shall be paid from time to
time by the Trust in advance of the final disposition of any such
action, suit or proceeding upon receipt of an undertaking by or
on behalf of such Covered Person to repay amounts so paid to the
Trust if it is ultimately determined that indemnification of such
expenses is not authorized under this Article; provided, however,
that either (a) such Covered Person shall have provided
appropriate security for such undertaking, (b) the Trust shall be
insured against losses arising from any such advance payments or
(c) either a majority of the disinterested Trustees acting on the
matter (provided that a majority of the disinterested Trustees
then in office acts on the matter), or independent legal counsel
in a written opinion, shall have determined, based upon a review
of readily available facts (as opposed to a full trial type
inquiry), that there is reason to believe that such Covered
Person will be found entitled to indemnification under this
Article.
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise)
without an adjudication by a court, or by any other body before
which the proceeding was brought, that such Covered Person either
(a) did not act in good faith in the reasonable belief that his
or her action was in the best interests of the Trust or (b) is
liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office,
indemnification shall be provided if (a) approved as in the best
interests of the Trust, after notice that it involves such
indemnification, by at least a majority of the disinterested
Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office acts on the matter) upon a
determination, based upon a review of readily available facts (as
opposed to a full trial type inquiry), that such Covered Person
acted in good faith in the reasonable belief that his or her
action was in the best interests of the Trust and is not liable
to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office, or (b)
there has been obtained an opinion in writing of independent
legal counsel, based upon a review of readily available facts (as
opposed to a full trial type inquiry), to the effect that such
Covered Person appears to have acted in good faith in the
reasonable belief that his or her action was in the best
interests of the Trust and that such indemnification would not
protect such Covered Person against any liability to the Trust to
which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office. Any
approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person
in accordance with this Section as indemnification if such
Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in the
best interests of the Trust or to have been liable to the Trust
or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of such Covered Person's office.
Section 3. The right of indemnification hereby provided
shall not be exclusive of or affect any other rights to which
such Covered Person may be entitled. As used in this Article
VIII, the term "Covered Person" shall include such person's
heirs, executors and administrators, and a "disinterested
Trustee" is a Trustee who is not an "interested person" of the
Trust as defined in Section 2(a)(19) of the 1940 Act (or who has
been exempted from being an "interested person" by any rule,
regulation or order of the Securities and Exchange Commission)
and against whom none of such actions, suits or other proceedings
or another action, suit or other proceeding on the same or
similar grounds is then or has been pending. Nothing contained
in this Article shall affect any rights to indemnification to
which personnel of the Trust, other than Trustees or officers,
and other persons may be entitled by contract or otherwise under
law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of any such person.
Section 4. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his or
her being or having been a Shareholder and not because of his or
her acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or, in the case of
a corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and
indemnified against all loss and expense arising from such
liability.
-------------------
Reference is made to the Underwriting Agreement, to be filed by
amendment to this Registration Statement, which contains
provisions for the indemnification by the Underwriters and Putnam
Investment Management, Inc. of the Registrant and Trustees,
officers and controlling persons of the Registrant under certain
circumstances. Insofar as indemnification for liability arising
under the Securities Act of 1933 may be permitted to Trustees,
officers and controlling persons of the Registrant pursuant to
the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or
paid by a Trustee, officer or controlling person of the
Registrant in the successful defense of any action, suit or
proceeding) is asserted by such Trustee, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
<PAGE>
Item 30. Business and Other Connections of Investment Adviser
Except as set forth below, the directors and officers
of the Registrant's investment adviser have been engaged during
the past two fiscal years in no business, vocation or employment
of a substantial nature other than as directors or officers of
the investment adviser or certain of its corporate affiliates.
Certain officers of the investment adviser serve as officers of
some or all of the Putnam funds. The address of the investment
adviser, its corporate affiliates and the Putnam funds is One
Post Office Square, Boston, Massachusetts 02109.
Name Non-Putnam business and other
connections
John V. Adduci Prior to July, 1993, Human Resources
Assistant Vice President Manager, First Security Services, 80
Main St., Reading, MA 01867
Gail S. Attridge Prior to November, 1993, International
Vice President Analyst, Keystone Custodian Funds,
200 Berkley Street, Boston, MA 02116
James D. Babcock Prior to June, 1994, Interest
Assistant Vice President Supervisor, Salomon Brothers, Inc.
7 World Trade Center, New York, NY
10048
Prior to June, 1993, Audit Manager,
Coopers & Lybrand, One Sylvan Way,
Parsipanny, NJ 07054
Robert K. Baumbach Prior to August, 1994, Vice President
Vice President and Analyst, Keystone Custodian
Funds, 200 Berkley St., Boston, MA
02110
Sharon A. Berka Prior to January, 1994, Vice
Vice President President - Compensation Manager,
BayBanks, Inc., 175 Federal Street,
Boston, MA 02110
Thomas Bogan Prior to November, 1994, Analyst
Senior Vice President Lord, Abbett & Co., 767 Fifth
Avenue, New York, NY 10153
Michael F. Bouscaren Prior to May, 1994, President and
Senior Vice President Chairman of the Board of Directors
at Salomon Series Funds, Inc. and a
Director of Salomon Brothers Asset
Management, 7 World Trade Center,
New York, NY 10048
Brett Browchuk Prior to April, 1994, Managing
Managing Director Director, Fidelity Investments, 82
Devonshire St., Boston, MA 02109
Carolyn S. Bunten Prior to July, 1993, Assistant Trader,
Assistant Vice President Scudder Stevens & Clark, Inc., 175
Federal St., Boston, MA 02110
Andrea Burke Prior to August, 1994, Vice President
Vice President and Portfolio Manager, Back Bay
Advisors, 399 Boylston St., Boston,
MA 02116
John M. Burton Prior to June, 1994, Manager --
Assistant Vice President Marketing Asset Management Pension
Services, The Travelers, Inc., 1
Tower Square, Hartford, CT 06183
Patricia A. Carey Prior to May, 1993, Research Analyst,
Assistant Vice President John Hancock Financial Services, 100
Clarendon St., Boston, MA 02116
Peter Carman Prior to August, 1993, Chief
Senior Managing Director Investment Officer, Chairman, U.S.
Equity Investment Policy Committee,
Member of Board of Directors,
Sanford C. Bernstein & Co., Inc.,
767 Fifth Avenue, New York, NY 10153
Steven Cheshire Prior to January, 1994, Assistant
Vice President Vice President, Wellington
Management, 75 State Street, Boston,
MA 02109
Anna Coppola Prior to May, 1993, Associate,
Assistant Vice President Heidrick & Struggles, One Post
Office Square, Boston, MA 02109
Kenneth L. Daly Prior to August, 1993, Vice
Senior Vice President President, Fidelity Investments,
82 Devonshire St., Boston, MA 02109
John A. DeTore Prior to January, 1994, Director of
Managing Director Quantitative Portfolio Management,
Wellington Management, 75 State
Street, Boston, MA 02109
Theodore J. Deutz Prior to January, 1995, Senior Vice
Vice President President, Metropolitan West
Securities, Inc. 10880 Wilshire
Blvd., Suite 200, Los Angeles, CA
90024
Michael G. Dolan Prior to February, 1994, Senior
Assistant Vice President Financial Analyst, General Electric
Company, 1000 Western Ave., Lynn, MA
01905
Joseph J. Eagleeye Prior to August, 1994, Associate,
Assistant Vice President David Taussig & Associates, 424
University Ave., Sacramento, CA
95813
Michael T. Fitzgerald Prior to September, 1994, Senior
Senior Vice President Vice President, Vantage Global
Advisers, 1201 Morningside Dr.,
Manhattan Beach, CA 90266
Jonathan H. Francis Prior to March, 1993, President,
Senior Vice President J.H. Francis & Co., N. Pheasant
Lane, Westport, CT 06880
James F. Giblin Prior to April, 1993, Managing
Senior Vice President Director, CIGNA Corp. Investments,
Inc., 900 Cottage Grove Rd.
Bloomfield, CT 06152
Thomas C. Goggins Prior to June, 1993, Portfolio
Vice President Manager, Transamerica Investment
Services, 1150 South Olive Street,
Los Angeles, CA 90015
Mark D. Goodwin Prior to May, 1994, Manager, Audit &
Assistant Vice President Operations Analysis, Mitre
Corporation, 202 Burlington Rd.,
Bedford, MA 01730
Stephen A. Gorman Prior to July, 1994, Financial
Assistant Vice President Analyst, Boston Harbor Trust
Company, 100 Federal St., Boston, MA
02110
Kimberly A. Gravel Prior to March, 1993, Account Manager,
Assistant Vice President Estee Lauder Corp. - Prescriptives
Division, 767 Fifth Ave., New York,
NY 10153
Daniel J. Grim Prior to May 1993, Consultant,
Vice President Connie Lee, 2445 M Street N.W.,
Washington, D.C. 20037;
Chief Operating Officer, Boardwalk,
Inc., Minocqua, WI 54548
Deborah R. Healey Prior to June, 1994, Senior Equity
Senior Vice President Trader, Fidelity Management &
Research Company, 82 Devonshire St.,
Boston, MA 02109
Lisa Heitman Prior to July, 1994, Securities
Vice President Analyst, Lord, Abbett & Company, 767
Fifth Ave., New York, NY 10153
Michael F. Hotchkiss Prior to May, 1994, Vice President,
Vice President Massachusetts Financial Services,
500 Boylston St., Boston, MA 02116
Walter Hunnewell, Jr. Prior to April, 1994, Managing
Vice President Director, Veronis, Suhler &
Associates, 350 Park Avenue, New
York, NY 10022
Joseph Joseph Prior to October, 1994, Managing
Vice President Director, Vert Independent Capital
Research, 53 Wall St., New York, NY
10052
Prior to August, 1993, Manager,
Price Waterhouse, 6th Avenue, New
York, NY 10036
Jeffrey L. Knight Prior to March, 1993, Teacher,
Assistant Vice President Greater Newburyport Educational
Collaborative, Newburyport, MA 01950
Jeffrey J. Kobylarz Prior to May, 1993, Credit Analyst,
Vice President Dean Witter Reynolds, Inc.,
Two World Trade Center,
New York, NY 10048
D. William Kohli Prior to September, 1994, Executive
Senior Vice President Vice President and Co-Director of
Global Bond Management; Prior to
1993, Portfolio Manager, Franklin
Advisors/Templeton Investment
Counsel, 777 Mariners Island Blvd.,
San Mateo, CA 94404
Karen R. Korn Prior to June, 1994, Vice President,
Vice President Assistant to the President, Designs,
Inc. 1244 Boylston St., Chestnut
Hill, MA 02167
Prior to March, 1993, Vice President,
Paine Webber, Inc., 265 Franklin
St., Boston, MA 02110
Peter B. Krug Prior to January, 1995, Owner and
Vice President Director, Griswold Special Care, 42
Ethan Allen Drive, Acton, MA 01720
Lawrence J. Lasser Director, Marsh & McLennan Companies,
President, Director Inc., 1221 Avenue of the Americas,
and Chief Executive New York, NY 10020
Officer Director, INROADS/Central New England,
Inc., 99 Bedford St., Boston,
MA 02111
Jeffrey R. Lindsay Prior to April, 1994, Vice President
Vice President and Board Member, Strategic
Portfolio Management, 900 Ashwood
Parkway, Suite 290, Atlanta, GA
30338
Michael Martino Prior to January, 1994, Executive
Senior Vice President Vice President and Chief Investment
Officer until 1992; Senior Vice
President and Portfolio Manager from
1990 to 1992, Back Bay Advisors, 399
Boylston St, Boston, MA 02116
Andrew S. Matteis Prior to March, 1993, Vice President,
Vice President Fitch Investors Service, One
State Street Plaza, New York,
NY 10004
Susan A. McCormack Prior to May, 1994, Associate
Vice President Investment Banker, Merrill Lynch &
Co., 350 South Grand Ave., Suite
2830, Los Angeles, CA 90071
Maziar Minovi Prior to January, 1995, Associate
Vice President Privatization Specialist, The
International Bank for
Reconstruction and Development, 1818
H St. N.W., Washington, DC 20433
Michael J. Mufson Prior to June, 1993, Senior Equity
Vice President Analyst, Stein Roe & Farnham,
One South Wacker Drive, Chicago, Il
60606
Paul G. Murphy Prior to January, 1995, Section
Assistant Vice President Manager, First Data Corp., 53 State
Street, Boston, MA 02109
Warren S. Naphtal Prior to January, 1994, Managing
Senior Vice President Director, Continental Bank, 231
So. Lasalle St., Chicago, IL 60697
C. Patrick O'Donnell, Jr. Prior to May, 1994, President,
Managing Director Exeter Research, Inc., 163 Water
Street, Exeter, New Hampshire, 03833
Brian O'Keefe Prior to December, 1993, Vice
Vice President President - Foreign Exchange Trader,
Bank of Boston, 100 Federal Street,
Boston, MA 02109
Pat G. Patel Prior to April, 1993, Regional
Vice President Manager, Zacks Investment Research,
155 N. Wacker Drive, Chicago,
IL 60606
Margaret Pietropaolo Prior to January, 1994, Data Base/
Assistant Vice President Production Analyst, Wellington
Management, 75 State Street, Boston,
MA 02109
George Putnam Chairman and Director, Putnam Mutual
Chairman and Director Funds Corp.
Director, The Boston Company, Inc.,
One Boston Place, Boston, MA 02108
Director, Boston Safe Deposit and
Trust Company, One Boston Place,
Boston, MA 02108
Director, Freeport-McMoRan, Inc., 200
Park Avenue, New York, NY 10166
Director, General Mills, Inc., 9200
Wayzata Boulevard, Minneapolis,
MN 55440
Director, Houghton Mifflin Company,
One Beacon Street, Boston, MA 02108
Director, Marsh & McLennan Companies,
Inc., 1221 Avenue of the Americas,
New York, NY 10020
Director, Rockefeller Group, Inc.,
1230 Avenue of the Americas,
New York, NY 10020
Robert M. Shafto Prior to January, 1995, Account
Assistant Vice President Manager, IBM Corporation, 404 Wyman
St., Waltham, MA 02254
Mark J. Siegel Prior to June, 1993, Vice President,
Vice President Salomon Brothers International,
Ltd., Victoria Plaza, 111 Buckingham
Palace Road, London SW1W 0SB,
England
Joanne Soja Prior to June, 1993, Managing
Senior Vice President Director/Portfolio Manager,
Chancellor Capital Management,
153 East 53rd Street, New York, NY
10002
Steven Spiegel Prior to January, 1995, Managing
Senior Managing Director Director/Retirement, Lehman
Brothers, Inc., 200 Vesey St., World
Financial Center, New York, NY 10285
George W. Stairs Prior to July, 1994, Equity Research
Vice President Analyst, ValueQuest Limited,
Roundy's Hill, Marblehead, MA 01945
Roger Sullivan Prior to December, 1994, Vice
Senior Vice President President, State Street Research &
Management Co., One Financial
Center, Boston, MA 02111
Hillary F. Till Prior to May, 1994, Fixed-Income
Vice President Derivative Trader, Bank of Boston,
100 Federal Street, Boston, MA 02109
Prior to December, 1993, Equity
Analyst, Harvard Management Company,
600 Atlantic St., Boston, MA 02109
Bonnie L. Troped Prior to May, 1993, Assistant Vice
Vice President President/Director of Corporate
Events, The Boston Company, One
Boston Place, Boston, MA 02108
Elizabeth A. Underhill Prior to August, 1994, Vice President
Vice President and Senior Equity Analyst, State
Street Bank and Trust Company, 225
Franklin St., Boston, MA 02110
Charles C. Van Vleet Prior to August, 1994, Vice President
Senior Vice President and Fixed-Income Manager, Alliance
Capital Management, 1345 Avenue of
the Americas, New York, NY 10105
Francis P. Walsh Prior to November, 1994, Research
Vice President Analyst, Furman, Selz, Inc. 230 Park
Avenue, New York, NY 10169
Prior to December, 1993, Strategic
Marketing Analyst, Lotus
Development, Corporation 55
Cambridge Parkway, Cambridge, MA
02142
Michael R. Weinstein Prior to March, 1994, Management
Vice President Consultant, Arthur D. Little, Acorn
Park, Cambridge, MA 02140
Item 31. Location of Accounts and Records
Persons maintaining physical possession of accounts, books
and other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated
thereunder are Registrant's Clerk, Beverly Marcus; Registrant's
investment adviser, Putnam Investment Management, Inc.;
Registrant's transfer agent, dividend disbursing agent and
registrar, Putnam Investor Services; and Registrant's custodian,
Putnam Fiduciary Trust Company. The address of the Clerk,
investment adviser, custodian and transfer agent, dividend
disbursing agent and registrar is One Post Office Square, Boston,
Massachusetts 02109.
Item 32. Management Services
None.
Item 33. Undertakings
(1) The Registrant undertakes to suspend offering of its
shares until it amends its prospectus if (1) subsequent
to the effective date of its Registration Statement,
the net asset value declines more than 10 percent from
its net asset value as of the effective date of the
Registration Statement or (2) the net asset value
increases to an amount greater than its net proceeds as
stated in the prospectus.
(2) Inapplicable
(3) Inapplicable
(4) Inapplicable
(5) The undersigned registrant hereby undertakes that:
(a) For purposes of determining any liability under
the Securities Act of 1933, the information omitted
from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the
registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of
the registration statement as of the time it was
declared effective.
(b) For the purpose of determining any liability under
the Securities Act of 1933, each post-effective
amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to
the securities offered therein, and the offering of
such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(6) Inapplicable
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust of Putnam
Convertible Opportunities and Income Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf
of the Registrant by an officer of the Registrant as an officer
and not individually and that the obligations of or arising out
of this instrument are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon
the assets and property of the Registrant.
<PAGE>
POWER OF ATTORNEY
We, the undersigned Trustee and Officers of Putnam
Convertible Opportunities and Income Trust, hereby severally
constitute and appoint George Putnam, Charles E. Porter,
Gordon H. Silver, Edward A. Benjamin, Timothy W. Diggins and
John W. Gerstmayr, and each of them singly, our true and lawful
attorneys, with full power to them and each of them, to sign for
us, and in our names and in the capacities indicated below, the
Registration Statement on Form N-2 of Putnam Convertible
Opportunities and Income Trust and any and all amendments
(including post-effective amendments) to said Registration
Statement and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto our said attorneys, and each
of them acting alone, full power and authority to do and perform
each and every act and thing requisite or necessary to be done in
the premises, as fully to all intents and purposes as he might or
could do in person, and hereby ratify and confirm all that said
attorneys or any of them may lawfully do or cause to be done by
virtue thereof.
WITNESS OUR HANDS AND COMMON SEAL ON THE DATE SET FORTH
BELOW.
Signature Title Date
\s\ George Putnam Principal Executive February 23, 1995
George Putnam Officer, President
and Chairman of the
Trustees
\s\ John D. Hughes Principal Financial February 23, 1995
John D. Hughes Officer, Treasurer
and Vice President
\s\ Paul G. Bucuvalas Principal Accounting February 23, 1995
Paul G. Bucuvalas Officer and
Assistant Treasurer
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant has duly
caused this Registration Statement to be signed on behalf of the
undersigned, thereunto duly authorized, in the City of Boston,
and The Commonwealth of Massachusetts, on the 24th day of
February, 1995.
PUTNAM CONVERTIBLE OPPORTUNITIES
AND INCOME TRUST
By:\s\ George Putnam
Name: George Putnam
Title: President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following
persons in the capacities indicated on the 24th day of February,
1995.
Signature Title
\s\ George Putnam President and Chairman of the
George Putnam Board; Principal Executive
Officer; Trustee
\s\ John D. Hughes Treasurer and Principal
John D. Hughes Financial Officer
\s\ Paul G. Bucuvalas Assistant Treasurer and
Paul G. Bucuvalas Principal Accounting Officer
<PAGE>
PUTNAM CONVERTIBLE OPPORTUNITIES AND INCOME TRUST
Index to Exhibits
Exhibit Title of Exhibit Page
3.1 Agreement and Declaration of Trust
3.2 Bylaws
4.1 Form of Certificate representing shares
of beneficial interest
4.2 Portions of Agreement and Declaration of
Trust Relating to Shareholders' Rights
4.3 Portions of Bylaws Relating to
Shareholders' Rights
PUTNAM CONVERTIBLE OPPORTUNITIES AND INCOME TRUST
AGREEMENT AND DECLARATION OF TRUST
AGREEMENT AND DECLARATION OF TRUST made at Boston,
Massachusetts, this 23rd day of February, 1995, by the
Trustee hereunder and by the holders of shares of beneficial
interest to be issued hereunder as hereinafter provided
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the
business of an investment company; and
WHEREAS, the Trustees have agreed to manage all property
coming into their hands as trustees of a Massachusetts
voluntary association with transferable shares in accordance
with the provisions hereinafter set forth;
NOW, THEREFORE, the Trustees hereby declare that they
will hold all cash, securities and other assets, which they
may from time to time acquire in any manner as Trustees
hereunder, IN TRUST to manage and dispose of the same upon
the following terms and conditions for the benefit of the
holders from time to time of Shares in this Trust as
hereinafter set forth.
ARTICLE I
Name and Definitions
Name
Section 1. This Trust shall be known as "Putnam
Convertible Opportunities and Income Trust", and the Trustees
shall conduct the business of the Trust under that name or
any other name as they may from time to time determine.
Definitions
Section 2. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts
business trust established by this Agreement and
Declaration of Trust, as amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust
named herein or elected in accordance with
Article IV;
(c) "Shares" means the equal proportionate
transferable units of interest into which the
beneficial interest in the Trust shall be divided
from time to time or, if more than one class or
series of Shares is authorized by the Trustees, the
equal proportionate transferable units into which
each class or series of Shares shall be divided
from time to time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment
Company Act of 1940 and the Rules and Regulations
thereunder, all as amended from time to time;
(f) The terms "Affiliated Person", "Assignment",
"Commission", "Interested Person", "Principal
Underwriter", "Majority Shareholder Vote" (the 67%
or 50% requirement of the third sentence of Section
2(a)(42) of the 1940 Act, whichever may be
applicable) and "Person" shall have the meanings
given them in the 1940 Act;
(g) "Declaration of Trust" shall mean this
Agreement and Declaration of Trust as amended or
restated from time to time;
(h) "Bylaws" shall mean the Bylaws of the Trust as
amended from time to time;
(i) The term "class" or "class of Shares" refers
to the division of Shares into two or more classes
as provided in Article III, Section 1 hereof;
(j) The term "series" or "series of Shares" refers to
the division of Shares representing any class into two
or more series as provided in Article III, Section 1
hereof; and
(k) "Continuing Trustee" shall mean any Trustee (i) who
is not a Person or an Affiliated Person of a Person who
enters or proposes to enter into any transaction with
the Trust described in Section 5 of Article IX hereof
(an "Interested Party") and (ii) who has been a Trustee
for a period of at least twelve months (or since the
commencement of the Trust's operations if that period is
less than twelve months), or is a successor to a
Continuing Trustee who is not an Interested Party and is
recommended to succeed a Continuing Trustee by a
majority of the then Continuing Trustees.
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a
managed investment primarily in securities, debt instruments
and other instruments and rights of a financial character.
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Trustees may, without Shareholder
approval, authorize one or more classes of Shares (which
classes may be divided into two or more series), Shares of
each such class or series having such preferences, voting
powers and special or relative rights or privileges
(including conversion rights, if any) as the Trustees may
determine and as shall be set forth in the Bylaws. The
number of Shares of each class or series authorized shall be
unlimited except as the Bylaws may otherwise provide. The
Trustees may from time to time divide or combine the Shares
of any class or series into a greater or lesser number
without thereby changing the proportionate beneficial
interest in the class or series.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on
the books of the Trust or a transfer or similar agent. No
certificates certifying the ownership of Shares shall be
issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates,
the transfer of Shares and similar matters. The record books
of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are
the Shareholders of each class or series and as to the number
of Shares of each class or series held from time to time by
each Shareholder.
Investment in the Trust
Section 3. The Trustees shall accept investments in the
Trust from such persons and on such terms and for such
consideration, which may consist of cash or tangible or
intangible property or a combination thereof, as they or the
Bylaws from time to time authorize.
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other
securities issued by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal
property giving only the rights provided in this Declaration
of Trust or the Bylaws. Every Shareholder by virtue of
having become a Shareholder shall be held to have expressly
assented and agreed to the terms of this Declaration of Trust
and the Bylaws and to have become a party hereto and thereto.
The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting
or to take any action in court or elsewhere against the Trust
or the Trustees, but only to the rights of said decedent
under this Trust. Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of
the Trust property or right to call for a partition or
division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners.
Neither the Trust nor the Trustees, nor any officer, employee
or agent of the Trust shall have any power to bind personally
any Shareholder, nor except as specifically provided herein
to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.
ARTICLE IV
The Trustees
Election
Section 1. Subject to the voting powers of one or more
classes or series of Shares as set forth in the Bylaws, in
each year beginning in 1996, at the annual meeting of
Shareholders or at any special meeting held in lieu thereof,
or at any special meeting held before 1996, the Shareholders
shall fix the number of and elect a Board of not less than
three Trustees. Prior to any sale of Shares pursuant to a
public offering, the Trustees shall be classified, with
respect to the time for which they severally hold office,
into three classes, as nearly equal in number as possible,
one class whose term expires at the 1996 annual meeting of
Shareholders, another class whose term expires at the 1997
annual meeting of Shareholders and another class whose term
expires at the 1998 annual meeting of Shareholders, with each
Trustee holding office until the expiration of the term of
the relevant class and the election and qualification of his
or her successor, or until he or she sooner dies, resigns or
is removed. At each annual meeting of Shareholders beginning
with the 1996 annual meeting of Shareholders, the successors
of the class of Trustees whose term expires at that meeting
shall be elected to hold office for a term expiring at the
annual meeting of Shareholders held in the third year
following the year of their election, with each Trustee
holding office until the expiration of the term of the
relevant class and the election and qualification of his or
her successor, or until he or she sooner dies, resigns or is
removed. The Trustees shall assign from their number
Trustees to each of the three classes, and if the number of
Trustees is changed, any increase or decrease shall be
apportioned by them among the classes so as to maintain a
number of Trustees in each class as nearly equal as possible.
In no case shall a decrease in the number of Trustees shorten
the term of any incumbent Trustee. Subject to any
limitations imposed by the 1940 Act and subject to the voting
powers of one or more classes or series of shares as set
forth in the Bylaws, any vacancy, including any vacancy
resulting from an increase in the number of Trustees, may be
filled by a majority of the Trustees then in office, whether
or not sufficient to constitute a quorum, or by a sole
remaining Trustee. A Trustee elected to fill any vacancy
shall hold office for the remainder of the full term of the
relevant class and until the election and qualification of
his or her successor, or until he or she sooner dies, resigns
or is removed. At any meeting called for the purpose and
subject to the voting powers of one or more classes of Shares
as set forth in the Bylaws, a Trustee may be removed by vote
of the holders of three-fourths of the outstanding Shares
entitled to vote, except that a Trustee elected by the
holders of one or more classes of Shares may be removed only
by vote of the holders of three-fourths of the Shares
entitled to vote for such Trustee. The initial Trustees,
each of whom shall serve until the first meeting of
Shareholders at which Trustees are elected and until his or
her successor is elected and qualified, or until he or she
sooner dies, resigns or is removed, shall be George Putnam
and such other persons as the Trustee or Trustees then in
office shall, prior to any sale of Shares pursuant to a
public offering, elect.
Effect of Death, Resignation, etc. of a Trustee
Section 2. The death, declination, resignation,
retirement, removal or incapacity of the Trustees, or any one
of them, shall not operate to annul the Trust or to revoke
any existing agency created pursuant to the terms of this
Declaration of Trust.
Powers
Section 3. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be
managed by the Trustees, and they shall have all powers
necessary or convenient to carry out that responsibility.
Without limiting the foregoing, the Trustees may adopt Bylaws
not inconsistent with this Declaration of Trust providing for
the conduct of the business of the Trust and may amend and
repeal them to the extent that such Bylaws do not reserve
that right to the Shareholders of one or more classes or
series. Subject to the voting power of one or more classes
or series of Shares as set forth in the Bylaws, the Trustees
may fill vacancies in or add to their number, and may elect
and remove such officers and appoint and terminate such
agents as they consider appropriate; they may appoint from
their own number, and terminate, any one or more committees
consisting of two or more Trustees, including an executive
committee which may, when the Trustees are not in session,
exercise some or all of the power and authority of the
Trustees as the Trustees may determine; they may employ one
or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to
deposit all or any part of such assets in a system or systems
for the central handling of securities, retain a transfer
agent or a Shareholder servicing agent, or both, provide for
the distribution of Shares by the Trust, through one or more
principal underwriters or otherwise, set record dates for the
determination of Shareholders with respect to various
matters, and in general delegate such authority as they
consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the
Trust or to any such custodian or underwriter.
Without limiting the foregoing, the Trustees shall have
power and authority:
(a) To invest and reinvest cash, and to hold cash
uninvested;
(b) To sell, exchange, lend, pledge, mortgage,
hypothecate, write options on and lease any or all
of the assets of the Trust except as otherwise
provided in Article IX, Section 5;
(c) To vote or give assent, or exercise any rights
of ownership, with respect to stock or other
securities or property; and to execute and deliver
proxies or powers of attorney to such person or
persons as the Trustees shall deem proper, granting
to such person or persons such power and discretion
with relation to securities or property as the
Trustees shall deem proper;
(d) To exercise powers and rights of subscription
or otherwise which in any manner arise out of
ownership of securities;
(e) To hold any security or property in a form not
indicating any trust, whether in bearer,
unregistered or other negotiable form, or in the
name of the Trustees or of the Trust or in the name
of a custodian, subcustodian or other depositary or
a nominee or nominees or otherwise;
(f) To the extent necessary or appropriate to give
effect to the preferences and special or relative rights
or privileges of any classes or series of Shares, to
allocate assets, liabilities, income and expenses of the
Trust to a particular class or classes or series of
Shares or to apportion the same among two or more
classes or series;
(g) To consent to or participate in any plan for
the reorganization, consolidation or merger of any
corporation or issuer, any security of which is or
was held in the Trust; to consent to any contract,
lease, mortgage, purchase or sale of property by
such corporation or issuer, and to pay calls or
subscriptions with respect to any security held in
the Trust;
(h) To join other security holders in acting
through a committee, depositary, voting trustee or
otherwise, and in that connection to deposit any
security with, or transfer any security to, any
such committee, depositary or trustee, and to
delegate to them such power and authority with
relation to any security (whether or not so
deposited or transferred) as the Trustees shall
deem proper, and to agree to pay, and to pay, such
portion of the expenses and compensation of such
committee, depositary or trustee as the Trustees
shall deem proper;
(i) To compromise, arbitrate or otherwise adjust
claims in favor of or against the Trust or any
matter in controversy, including but not limited to
claims for taxes;
(j) To enter into joint ventures, general or
limited partnerships and any other combinations or
associations;
(k) To borrow funds;
(l) To endorse or guarantee the payment of any
notes or other obligations of any person; to make
contracts of guaranty or suretyship, or otherwise
assume liability for payment thereof; and to
mortgage and pledge the Trust property or any part
thereof to secure any or all of such obligations;
(m) To purchase and pay for entirely out of Trust
property such insurance as they may deem necessary
or appropriate for the conduct of the business of
the Trust, including, without limitation, insurance
policies insuring the assets of the Trust and
payment of distributions and principal on its
portfolio investments, and insurance policies
insuring the Shareholders, Trustees, officers,
employees, agents, investment advisers or managers,
principal underwriters, or independent contractors
of the Trust individually against all claims and
liabilities of every nature arising by reason of
holding, being or having held any such office or
position, or by reason of any action alleged to
have been taken or omitted by any such person as
Shareholder, Trustee, officer, employee, agent,
investment adviser or manager, principal
underwriter, or independent contractor, including
any action taken or omitted that may be determined
to constitute negligence, whether or not the Trust
would have the power to indemnify such person
against such liability;
(n) To pay pensions for faithful service, as
deemed appropriate by the Trustees, and to adopt,
establish and carry out pension, profit-sharing,
share bonus, share purchase, savings, thrift and
other retirement, incentive and benefit plans,
trusts and provisions, including the purchasing of
life insurance and annuity contracts as a means of
providing such retirement and other benefits, for
any or all of the Trustees, officers, employees and
agents of the Trust; and
(o) To purchase or otherwise acquire Shares.
The Trustees shall not in any way be bound or limited by
any present or future law or custom in regard to investments
by trustees. Except as otherwise provided herein or from
time to time in the Bylaws, any action to be taken by the
Trustees may be taken by a majority of the Trustees present
at a meeting of the Trustees (a quorum being present), within
or without Massachusetts. Except as otherwise provided
herein or from time to time in the Bylaws, any action to be
taken by the Trustees may be taken at a meeting held by means
of a conference telephone or other communications equipment
by means of which all persons participating in the meeting
can hear each other at the same time and participation by
such means shall constitute presence in person at a meeting,
or by written consent of a majority of the Trustees then in
office (or such greater number as may be required by this
Declaration of Trust or the Bylaws).
Payment of Expenses by Trust
Section 4. The Trustees are authorized to pay, or to
cause to be paid out of the assets of the Trust, all
expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with
the management thereof, including, but not limited to, the
Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment
adviser or manager, principal underwriter, auditor, counsel,
custodian, transfer agent, Shareholder servicing agent, and
such other agents or independent contractors and such other
expenses and charges as the Trustees may deem necessary or
proper to incur.
Ownership of Assets of the Trust
Section 5. Title to all of the assets of the Trust
shall at all times be considered as vested in the Trustees.
Advisory, Management and Distribution
Section 6. Subject to a favorable Majority Shareholder
Vote, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or
management services with any corporation, trust, association
or other organization (the "Manager"), every such contract to
comply with such requirements and restrictions as may be set
forth in the Bylaws; and any such contract may contain such
other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine,
including, without limitation, authority to determine from
time to time what investments shall be purchased, held, sold
or exchanged and what portion, if any, of the assets of the
Trust shall be held uninvested and to make changes in the
Trust's investments. The Trustees may also, at any time and
from time to time, contract with the Manager or any other
corporation, trust, association or other organization,
appointing it exclusive or nonexclusive distributor or
principal underwriter for the Shares, every such contract to
comply with such requirements and restrictions as may be set
forth in the Bylaws; and any such contract may contain such
other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers
of the Trust is a shareholder, director, officer,
partner, trustee, employee, manager, adviser,
principal underwriter or distributor or agent of or
for any corporation, trust, association, or other
organization, or of or for any parent or affiliate
of any organization, with which an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder
servicing or other agency contract may have been or
may hereafter be made, or that any such
organization, or any parent or affiliate thereof,
is a Shareholder or has an interest in the Trust,
or that
(ii) any corporation, trust, association or other
organization with which an advisory or management
contract or principal underwriter's or
distributor's contract, or transfer, Shareholder
servicing or other agency contract may have been or
may hereafter be made also has an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder
servicing or other agency contract with one or more
other corporations, trusts, associations, or other
organizations, or has other business or interests
shall not affect the validity of any such contract or
disqualify any Shareholder, Trustee or officer of the Trust
from voting upon or executing the same or create any
liability or accountability to the Trust or its Shareholders.
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting powers of one or more
classes or series of Shares as set forth in this Declaration
of Trust or in the Bylaws, the Shareholders shall have power
to vote only (i) for the election of Trustees as provided in
Article IV, Section 1, (ii) for the removal of Trustees as
provided in Article IV, Section 1, (iii) with respect to any
Manager as provided in Article IV, Section 6, (iv) with
respect to any termination of this Trust to the extent and as
provided in Article IX, Section 4, (v) with respect to any
merger, consolidation or sale of assets of the Trust to the
extent and as provided in Article IX, Section 5, (vi) with
respect to any conversion of the Trust to the extent and as
provided in Article IX, Section 6, (vii) with respect to any
amendment of this Declaration of Trust to the extent and as
provided in Article IX, Section 9, (viii) to the same extent
as the stockholders of a Massachusetts business corporation
as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or
as a class action on behalf of the Trust or the Shareholders,
and (ix) with respect to such additional matters relating to
the Trust as may be required by this Declaration of Trust,
the Bylaws or any registration of the Trust with the
Securities and Exchange Commission (or any successor agency)
or any state, or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as
to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate
fractional vote. Notwithstanding any other provision of this
Declaration of Trust, on any matter submitted to a vote of
Shareholders, all Shares of the Trust then entitled to vote
shall, except as otherwise provided in the Bylaws, be voted
in the aggregate as a single class without regard to classes
or series of Shares. There shall be no cumulative voting in
the election of Trustees. Shares may be voted in person or
by proxy. A proxy with respect to Shares held in the name of
two or more persons shall be valid if executed by any one of
them unless at or prior to exercise of the proxy the Trust
receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until
Shares of any class or series are issued, the Trustees may
exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws to
be taken by Shareholders as to such class or series.
Voting Power and Meetings
Section 2. There shall be an annual meeting of the
Shareholders in each year beginning in 1996 on the date fixed
in the Bylaws at the office of the Trust in Boston,
Massachusetts, or at such other place as may be designated in
the call thereof, which call shall be made by the Trustees.
In the event that such meeting is not held in any year on the
date fixed in the Bylaws, whether the omission be by
oversight or otherwise, a subsequent special meeting may be
called by the Trustees and held in lieu of the annual meeting
with the same effect as though held on such date. Special
meetings of Shareholders of any or all classes or series may
also be called by the Trustees from time to time for the
purpose of taking action upon any matter requiring the vote
or authority of the Shareholders of such class or series as
herein provided or upon any other matter deemed by the
Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given
by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating the time, place
and purpose of the meeting, to each Shareholder entitled to
vote at such meeting at the Shareholder's address as it
appears on the records of the Trust. If the Trustees shall
fail to call or give notice of any meeting of Shareholders
for a period of 30 days after written application by
Shareholders holding at least 25% of the then outstanding
Shares of all classes and series entitled to vote at such
meeting requesting a meeting to be called for a purpose
requiring action by the Shareholders as provided herein or in
the Bylaws, then Shareholders holding at least 25% of the
then outstanding Shares of all classes and series entitled to
vote at such meeting may call and give notice of such
meeting, and thereupon the meeting shall be held in the
manner provided for herein in case of call thereof by the
Trustees. Notice of a meeting need not be given to any
Shareholder if a written waiver of notice, executed by him or
her before or after the meeting, is filed with the records of
the meeting, or to any Shareholder who attends the meeting
without protesting prior thereto or at its commencement the
lack of notice to him or her.
Quorum and Required Vote
Section 3. A majority of Shares entitled to vote on a
particular matter shall be a quorum for the transaction of
business on that matter at a Shareholders' meeting, except
that where the Bylaws require that holders of any class or
series shall vote as an individual class or series, then a
majority of the aggregate number of Shares of that class or
series entitled to vote shall be necessary to constitute a
quorum for the transaction of business by that class or
series. Any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original
meeting, without the necessity of further notice. Except
when a different vote is required by any provision of this
Declaration of Trust or the Bylaws, a majority of the Shares
voted shall decide any questions and a plurality shall elect
a Trustee, provided that where the Bylaws require that the
holders of any class or series shall vote as an individual
class or series, a majority of the Shares of that class or
series voted on the matter (or a plurality with respect to
the election of a Trustee) shall decide that matter insofar
as that class or series is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such different proportion
thereof as shall be required by any express provision of this
Declaration of Trust or the Bylaws) consent to the action in
writing and such written consents are filed with the records
of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of
Shareholders.
Additional Provisions
Section 5. The Bylaws may include further provisions,
not inconsistent with this Declaration of Trust, regarding
Shareholders' voting powers, the conduct of meetings and
related matters.
ARTICLE VI
Distributions
The Trustees may each year, or more frequently if they
so determine, distribute to the Shareholders of each class or
series such amounts as the Trustees may determine, subject to
the preferences and special or relative rights or privileges
of the various classes or series of Shares. Any such
distribution to the Shareholders of a particular class or
series shall be made to said Shareholders pro rata in
proportion to the number of Shares of such class or series
held by each of them. Such distributions shall be made in
cash or Shares or other property or a combination thereof as
determined by the Trustees.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
Compensation
Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the
amount of their compensation. Nothing herein shall in any
way prevent the employment of any Trustee for advisory,
management, legal, accounting, investment banking or other
services and payment for the same by the Trust.
Limitation of Liability
Section 2. The Trustees shall not be responsible or
liable in any event for any neglect or wrongdoing of any
officer, agent, employee, manager or principal underwriter of
the Trust, nor shall any Trustee be responsible for the act
or omission of any other Trustee, but nothing herein
contained shall protect any Trustee against any liability to
which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed
or done by or on behalf of the Trust or the Trustees or any
of them in connection with the Trust shall be conclusively
deemed to have been executed or done only in or with respect
to their or his or her capacity as Trustees or Trustee, and
such Trustees or Trustee shall not be personally liable
thereon.
ARTICLE VIII
Indemnification
Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its
Trustees and officers (including persons who serve at the
Trust's request as directors, officers or trustees of another
organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to
as a "Covered Person") against all liabilities and expenses,
including, but not limited to, amounts paid in satisfaction
of judgments, in compromise or as fines and penalties, and
counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action,
suit or other proceeding, whether civil or criminal, before
any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a
party or otherwise or with which such Covered Person may be
or may have been threatened, while in office or thereafter,
by reason of being or having been such a Covered Person
except with respect to any matter as to which such Covered
Person shall have been finally adjudicated in any such
action, suit or other proceeding (a) not to have acted in
good faith in the reasonable belief that such Covered
Person's action was in the best interests of the Trust or (b)
to be liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such
Covered Person's office. Expenses, including counsel fees so
incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines
or penalties), shall be paid from time to time by the Trust
in advance of the final disposition of any such action, suit
or proceeding upon receipt of an undertaking by or on behalf
of such Covered Person to repay amounts so paid to the Trust
if it is ultimately determined that indemnification of such
expenses is not authorized under this Article; provided,
however, that either (a) such Covered Person shall have
provided appropriate security for such undertaking, (b) the
Trust shall be insured against losses arising from any such
advance payments or (c) either a majority of the
disinterested Trustees acting on the matter (provided that a
majority of the disinterested Trustees then in office acts on
the matter), or independent legal counsel in a written
opinion, shall have determined, based upon a review of
readily available facts (as opposed to a full trial type
inquiry), that there is reason to believe that such Covered
Person will be found entitled to indemnification under this
Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or
otherwise) without an adjudication by a court, or by any
other body before which the proceeding was brought, that such
Covered Person either (a) did not act in good faith in the
reasonable belief that his or her action was in the best
interests of the Trust or (b) is liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved
in the conduct of his or her office, indemnification shall be
provided if (a) approved as in the best interests of the
Trust, after notice that it involves such indemnification, by
at least a majority of the disinterested Trustees acting on
the matter (provided that a majority of the disinterested
Trustees then in office acts on the matter) upon a
determination, based upon a review of readily available facts
(as opposed to a full trial type inquiry), that such Covered
Person acted in good faith in the reasonable belief that his
or her action was in the best interests of the Trust and is
not liable to the Trust or its Shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his or her
office, or (b) there has been obtained an opinion in writing
of independent legal counsel, based upon a review of readily
available facts (as opposed to a full trial type inquiry), to
the effect that such Covered Person appears to have acted in
good faith in the reasonable belief that his or her action
was in the best interests of the Trust and that such
indemnification would not protect such Covered Person against
any liability to the Trust to which he or she would otherwise
be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in
the conduct of his or her office. Any approval pursuant to
this Section shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in
accordance with this Section as indemnification if such
Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in
the best interests of the Trust or to have been liable to the
Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's
office.
Indemnification Not Exclusive
Section 3. The right of indemnification hereby provided
shall not be exclusive of or affect any other rights to which
such Covered Person may be entitled. As used in this Article
VIII, the term "Covered Person" shall include such person's
heirs, executors and administrators, and a "disinterested
Trustee" is a Trustee who is not an "interested person" of
the Trust as defined in Section 2(a)(19) of the 1940 Act (or
who has been exempted from being an "interested person" by
any rule, regulation or order of the Securities and Exchange
Commission) and against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding
on the same or similar grounds is then or has been pending.
Nothing contained in this Article shall affect any rights to
indemnification to which personnel of the Trust, other than
Trustees or officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust
to purchase and maintain liability insurance on behalf of any
such person.
Shareholders
Section 4. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by
reason of his or her being or having been a Shareholder and
not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her
heirs, executors, administrators or other legal
representatives or, in the case of a corporation or other
entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all
loss and expense arising from such liability.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust shall look only to
the assets of the Trust for payment under such credit,
contract or claim, and neither the Shareholders nor the
Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally
liable therefor. Nothing in this Declaration of Trust shall
protect any Trustee against any liability to which such
Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office
of Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officer
or officers shall give notice that this Declaration of Trust
is on file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustee or
Trustees or as officer or officers and not individually and
that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, and may
contain such further recital as he or she or they may deem
appropriate, but the omission thereof shall not operate to
bind any Trustee or Trustees or officer or officers or
Shareholder or Shareholders individually.
Trustee's Good Faith Action, Expert Advice, No Bond or Surety
Section 2. The exercise by the Trustees of their powers
and discretions hereunder shall be binding upon everyone
interested. A Trustee shall be liable for his or her own
willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office
of Trustee, and for nothing else. The Trustees may take
advice of counsel or other experts with respect to the
meaning and operation of this Declaration of Trust, and shall
be under no liability for any act or omission in accordance
with such advice or for failing to follow such advice. The
Trustees shall not be required to give any bond as such, nor
any surety if a bond is required.
Liability of Third Persons Dealing with Trustees
Section 3. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to
the application of any payments made or property transferred
to the Trust or upon its order.
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the
Trust shall continue without limitation of time. Subject to
the voting powers of one or more classes or series of Shares
as set forth in the Bylaws, the Trust may be terminated at
any time (i) by vote of Shareholders holding at least three-
fourths of the Shares entitled to vote (except if such
termination is recommended by at least three-fourths of the
total number of the Trustees then in office and by at least
three-fourths of the total number of Continuing Trustees then
in office, a Majority Shareholder Vote shall be sufficient
authorization) or (ii) by the Trustees by written notice to
the Shareholders, provided that at least three-fourths of the
total number of Trustees then in office and at least three-
fourths of the total number of Continuing Trustees then in
office have approved such action. Upon termination of the
Trust, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or
anticipated, of the Trust as may be determined by the
Trustees, the Trust shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining
assets to distributable form in cash or shares or other
property, or any combination thereof, and distribute the
proceeds to the Shareholders, ratably according to the number
of Shares held by the several Shareholders on the date of
termination, except to the extent otherwise required or
permitted by the preferences and special or relative rights
or privileges of any classes or series of Shares.
Merger, Consolidation and Sale of Assets
Section 5. The Trust may merge or consolidate with any
other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of
its assets, including its good will, upon such terms and
conditions and for such consideration when and as authorized
at any meeting of Shareholders called for the purpose, or may
liquidate or dissolve when and as authorized, by the
affirmative vote of the holders of not less than three-
fourths of the Shares entitled to vote; provided, however,
that if such merger, consolidation, sale, lease, exchange,
liquidation or dissolution is recommended by at least three-
fourths of the total number of Trustees then in office and by
at least three-fourths of the total number of Continuing
Trustees then in office, a Majority Shareholder Vote shall be
sufficient authorization. Nothing contained herein shall be
construed as requiring approval of the Shareholders for any
sale of assets in the ordinary course of business of the
Trust. The provisions of this Section shall be subject to
the voting powers of one or more classes or series of Shares
as set forth in the Bylaws.
Conversion
Section 6. Subject to the voting powers of one or more
classes or series of Shares as set forth in the Bylaws, the
Trust may be converted at any time from a "closed-end
company" to an "open-end company" as those terms are defined
in Section 5(a)(2) and 5(a)(1) of the 1940 Act, respectively,
as in effect on the date of the execution hereof, upon the
approval of such a proposal, together with any necessary
amendments to the Declaration of Trust to permit such a
conversion, by the holders of three-fourths of the Shares
entitled to vote; provided, however, that if such proposal is
recommended by at least three-fourths of the total number of
Trustees then in office and by at least three-fourths of the
total number of Continuing Trustees then in office, such
proposal may be adopted by a Majority Shareholder Vote. Upon
the adoption of such proposal and related amendments by the
Trust's Shareholders as provided above, the Trust shall, upon
complying with any requirements of the 1940 Act and state
law, become an "open-end" investment company. Such
affirmative vote or consent shall be in addition to the vote
or consent of the holders of the Shares otherwise required by
law, the Bylaws or any agreement between the Trust and any
national securities exchange.
Filing and Copies, References, Headings
Section 7. The original or a copy of this instrument
and of each amendment hereto shall be kept at the office of
the Trust where it may be inspected by any Shareholder. A
copy of this instrument and of each amendment hereto shall be
filed by the Trust with the Secretary of State of The
Commonwealth of Massachusetts and with the Boston City Clerk,
as well as any other governmental office where such filing
may from time to time be required. Anyone dealing with the
Trust may rely on a certificate by an officer of the Trust as
to whether or not any such amendments have been made and as
to any matters in connection with the Trust hereunder, and,
with the same effect as if it were the original, may rely on
a copy certified by an officer of the Trust to be a copy of
this instrument or of any such amendments. In this
instrument and in any such amendment, references to this
instrument and all expressions like "herein", "hereof" and
"hereunder" shall be deemed to refer to this instrument as
amended or affected by any such amendments. Headings are
placed herein for convenience of reference only and shall not
be taken as a part hereof or control or affect the meaning,
construction or effect of this instrument. This instrument
may be executed in any number of counterparts each of which
shall be deemed an original.
Applicable Law
Section 8. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is
to be governed by and construed and administered according to
the laws of said Commonwealth. The Trust shall be of the
type commonly called a Massachusetts business trust, and
without limiting the provisions hereof, the Trust may
exercise all powers which are ordinarily exercised by such a
trust.
Amendments
Section 9. Subject to the voting powers of one or more
classes or series of Shares, as set forth in the Bylaws, this
Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then
Trustees (a) when authorized to do so by vote of Shareholders
holding a majority of the Shares entitled to vote, except
that an amendment amending or affecting the provisions of
Section 2(k) of Article I, Section 1 of Article IV, Section
4, 5 or 6 of this Article IX or this sentence shall require
the vote of Shareholders holding three-fourths of the Shares
entitled to vote if such amendment has not been recommended
by at least three-fourths of the total number of Trustees
then in office and by at least three-fourths of the total
number of Continuing Trustees then in office, or (b) without
Shareholder approval as may be necessary or desirable in
order to authorize one or more classes or series of Shares as
provided in Section 1 of Article III. Amendments having the
purpose of changing the name of the Trust or of supplying any
omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision
contained herein shall not require authorization by
Shareholder vote.
<PAGE>
IN WITNESS WHEREOF, the undersigned has hereunto set his
hand and seal in the City of Boston, Massachusetts for
himself and his assigns, as of the day and year first above
written.
/s/ George Putnam
George Putnam
THE COMMONWEALTH OF MASSACHUSETTS
Suffolk, ss. Boston, February 23, 1995
Then personally appeared the above-named George Putnam
and acknowledged the foregoing instrument to be his free act
and deed, before me,
/s/ Anne B. McCarthy
Notary Public
My Commission Expires: 10/25/96
Trustee and Address
George Putnam
36 Procter Street
Manchester, MA 01944
Trust Address
Putnam Convertible Opportunities
and Income Trust
One Post Office Square
Boston, MA 02109
BYLAWS
OF
PUTNAM CONVERTIBLE OPPORTUNITIES AND INCOME TRUST
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 Agreement and Declaration of Trust. These Bylaws shall
be subject to the Agreement and Declaration of Trust, as from
time to time in effect (the "Declaration of Trust"), of the
Massachusetts business trust established by the Declaration of
Trust (the "Trust").
1.2 Principal Office of the Trust. The principal office of
the Trust shall be located in Boston, Massachusetts.
ARTICLE 2
Meetings of Trustees
2.1 Regular Meetings. Regular meetings of the Trustees may
be held without call or notice at such places and at such times
as the Trustees may from time to time determine, provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees.
2.2 Special Meetings. Special meetings of the Trustees may
be held at any time and at any place designated in the call of
the meeting when called by the Chairman of the Trustees, the
President or the Treasurer or by two or more Trustees, sufficient
notice thereof being given to each Trustee by the Clerk or an
Assistant Clerk or by the officer or the Trustees calling the
meeting.
2.3 Notice of Special Meetings. It shall be sufficient
notice to a Trustee of a special meeting to send notice by mail
at least forty-eight hours or by telegram at least twenty-four
hours before the meeting addressed to the Trustee at his or her
usual or last known business or residence address or to give
notice to him or her in person or by telephone at least twenty-
four hours before the meeting. Notice of a special meeting need
not be given to any Trustee if a written waiver of notice,
executed by him or her before or after the meeting, is filed with
the records of the meeting, or to any Trustee who attends the
meeting without protesting prior thereto or at its commencement
the lack of notice to him or her. Neither notice of a meeting
nor a waiver of a notice need specify the purposes of the
meeting.
2.4 Quorum. At any meeting of the Trustees a majority of
the Trustees then in office shall constitute a quorum. Any
meeting may be adjourned from time to time by a majority of the
<PAGE>
votes cast upon the question, whether or not a quorum is present,
and the meeting may be held as adjourned without further notice.
2.5 Notice of Certain Actions by Consent. If in accordance
with the provisions of the Declaration of Trust any action is
taken by the Trustees by written consent of less than all of the
Trustees, then prompt notice of any such action shall be
furnished to each Trustee who did not execute such written
consent, provided that the effectiveness of such action shall not
be impaired by any delay or failure to furnish such notice.
ARTICLE 3
Officers
3.1 Enumeration; Qualification. The officers of the Trust
shall be a Chairman of the Trustees, a President, a Treasurer, a
Clerk and such other officers, if any, as the Trustees from time
to time may in their discretion elect. The Trust may also have
such agents as the Trustees from time to time may in their
discretion appoint. The Chairman of the Trustees and the
President shall be a Trustee and may but need not be a
shareholder; and any other officer may but need not be a Trustee
or a shareholder. Any two or more offices may be held by the
same person. A Trustee may but need not be a shareholder.
3.2 Election. The Chairman of the Trustees, the President,
the Treasurer and the Clerk shall be elected by the Trustees upon
the occurrence of any vacancy in any such office. Other
officers, if any, may be elected or appointed by the Trustees at
any time. Vacancies in any such other office may be filled at
any time.
3.3 Tenure. The Chairman of the Trustees, the President,
the Treasurer and the Clerk shall hold office in each case until
he or she dies, resigns, is removed or becomes disqualified.
Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
3.4 Powers. Subject to the other provisions of these
Bylaws, each officer shall have, in addition to the duties and
powers herein and in the Declaration of Trust set forth, such
duties and powers as are commonly incident to the office occupied
by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 Chairman; President. Unless the Trustees otherwise
provide, the Chairman of the Trustees or, if there is none or in
the absence of the Chairman of the Trustees, the President shall
preside at all meetings of the shareholders and of the Trustees.
Unless the Trustees otherwise provide, the President shall be the
chief executive officer.
<PAGE>
3.6 Treasurer. Unless the Trustees shall provide
otherwise, the Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the
provisions of the Declaration of Trust and to any arrangement
made by the Trustees with a custodian, investment adviser or
manager, or transfer, shareholder servicing or similar agent, be
in charge of the valuable papers, books of account and accounting
records of the Trust, and shall have such other duties and powers
as may be designated from time to time by the Trustees or by the
President. The chief accounting officer of the Trust shall be
elected by the Trustees and shall have tenure as provided in
Paragraph 3.3 of these Bylaws.
3.7 Clerk. The Clerk shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which
books or a copy thereof shall be kept at the principal office of
the Trust. In the absence of the Clerk from any meeting of the
shareholders or Trustees, an Assistant Clerk, or if there be none
or if he or she is absent, a temporary Clerk chosen at such
meeting shall record the proceedings thereof in the aforesaid
books.
3.8 Resignations and Removals. Any Trustee or officer may
resign at any time by written instrument signed by him or her and
delivered to the Chairman of the Trustees, the President or the
Clerk or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some
other time. The Trustees may remove any officer elected by them
with or without cause. Except to the extent expressly provided
in a written agreement with the Trust, no Trustee or officer
resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or
removal, or any right to damages on account of such removal.
ARTICLE 4
Committees
4.1 Quorum; Voting. A majority of the members of any
Committee of the Trustees shall constitute a quorum for the
transaction of business, and any action of such a Committee may
be taken at a meeting by a vote of a majority of the members
present (a quorum being present) or evidenced by one or more
writings signed by such a majority. Members of a Committee may
participate in a meeting of such Committee by means of a
conference telephone or other communications equipment by means
of which all persons participating in the meeting can hear each
other at the same time and participation by such means shall
constitute presence in person at a meeting.
<PAGE>
ARTICLE 5
Reports
5.1 General. The Trustees and officers shall render
reports at the time and in the manner required by the Declaration
of Trust or any applicable law. Officers and Committees shall
render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
ARTICLE 6
Fiscal Year
6.1 General. Except as from time to time otherwise
provided by the Trustees, the initial fiscal year of the Trust
shall end on such date as is determined in advance or in arrears
by the Treasurer, and subsequent fiscal years shall end on such
date in subsequent years.
ARTICLE 7
Seal
7.1 General. The seal of the Trust shall consist of a
flat-faced die with the word "Massachusetts", together with the
name of the Trust and the year of its organization cut or
engraved thereon but, unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on, and its absence
shall not impair the validity of, any document, instrument or
other paper executed and delivered by or on behalf of the Trust.
ARTICLE 8
Execution of Papers
8.1 General. Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other
manner, all deeds, leases, contracts, notes and other obligations
made by the Trustees shall be signed by the President, Vice
Chairman, a Vice President or the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
Issuance of Shares and Share Certificates
9.1 Sale of Shares. Except as otherwise determined by the
Trustees, the Trust will issue and sell for cash or securities
from time to time, full and fractional shares of its shares of
beneficial interest, such shares to be issued and sold at a price
of not less than the par value per share, if any, and not less
than the net asset value per share, if any, as from time to time
determined in accordance with the Declaration of Trust and these
Bylaws and, in the case of fractional shares, at a proportionate
reduction in such price. In the case of shares sold for
securities, such securities shall be valued in accordance with
<PAGE>
the provisions for determining the value of the assets of the
Trust as stated in the Declaration of Trust and these Bylaws.
The officers of the Trust are severally authorized to take all
such actions as may be necessary or desirable to carry out this
Paragraph 9.1.
9.2 Share Certificates. In lieu of issuing certificates
for shares, the Trustees or the transfer agent may either issue
receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled
to a certificate stating the number of shares owned by him or
her, in such form as shall be prescribed from time to time by the
Trustees. Such certificate shall be signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer.
Such signatures may be facsimile if the certificate is signed by
a transfer agent or by a registrar. In case any officer who has
signed or whose facsimile signature has been placed on such
certificate shall cease to be such officer before such
certificate is issued, it may be issued by the Trust with the
same effect as if he or she were such officer at the time of its
issue.
9.3 Loss of Certificates. The transfer agent of the Trust,
with the approval of any two officers of the Trust, is authorized
to issue and countersign replacement certificates for the shares
of the Trust which have been lost, stolen or destroyed upon (i)
receipt of an affidavit or affidavits of loss or non-receipt and
of an indemnity agreement executed by the registered holder or
his or her legal representative and supported by an open penalty
surety bond, said agreement and said bond in all cases to be in
form and content satisfactory to and approved by the President or
the Treasurer, or (ii) receipt of such other documents as may be
approved by the Trustees.
9.4 Issuance of New Certificate to Pledgee. A pledgee of
shares transferred as collateral security shall be entitled to a
new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured
thereby. Such new certificate shall express on its face that it
is held as collateral security, and the name of the pledgor shall
be stated thereon, who alone shall be liable as a shareholder and
entitled to vote thereon.
<PAGE>
9.5 Discontinuance of Issuance of Certificates. The
Trustees may at any time discontinue the issuance of share
certificates and may, by written notice to each shareholder,
require the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
ARTICLE 10
Provisions Relating to the Conduct of the Trust's Business
10.1 Certain Definitions. When used herein the following
words shall have the following meanings: "Distributor" shall
mean any one or more corporations, firms or associations which
have distributor's or principal underwriter's contracts in effect
with the Trust. "Manager" shall mean any corporation, firm or
association which may at the time have an advisory or management
contract with the Trust.
10.2 Limitations on Dealings with Officers or Trustees.
The Trust will not lend any of its assets to the Distributor or
Manager or to any officer or director of the Distributor or
Manager or any officer or Trustee of the Trust, and shall not
permit any officer or Trustee of the Trust or any officer or
director of the Distributor or Manager to deal for or on behalf
of the Trust with himself or herself as principal or agent, or
with any partnership, association or corporation in which he or
she has a financial interest; provided, however, that the
foregoing provisions shall not prevent (a) officers and Trustees
of the Trust or officers and directors of the Distributor or
Manager from buying, holding or selling shares in the Trust or
from being partners, officers or directors or otherwise
financially interested in the Distributor or the Manager; (b)
purchases or sales of securities or other property if such
transaction is permitted by or is exempt or exempted from the
provisions of the Investment Company Act of 1940 or any Rule or
Regulation thereunder, all as amended from time to time, and if
such transaction does not involve any commission or profit to any
security dealer who is, or one or more of whose partners,
shareholders, officers or directors is, an officer or Trustee of
the Trust or an officer or director of the Distributor or
Manager; (c) employment of legal counsel, registrar, transfer
agent, shareholder servicing agent, dividend disbursing agent or
custodian who is, or has a partner, shareholder, officer or
director who is, an officer or Trustee of the Trust or an officer
or director of the Distributor or Manager; and (d) sharing
statistical, research, legal and management expenses and office
hire and expenses with any other investment company in which an
officer or Trustee of the Trust or an officer or director of the
Distributor or Manager is an officer or director or otherwise
financially interested.
<PAGE>
10.3 Securities and Cash of the Trust to be held by
Custodian Subject to Certain Terms and Conditions.
(a) All securities and cash owned by the Trust shall
be held by or deposited with one or more banks or trust
companies having (according to its last published report)
not less than $5,000,000 aggregate capital, surplus and
undivided profits (any such bank or trust company, being
hereby designated as "Custodian"), provided such a Custodian
can be found ready and willing to act. Subject to such
rules, regulations and orders, if any, as the Securities and
Exchange Commission may adopt, the Trust may, or may permit
any Custodian to, deposit all or any part of the securities
owned by the Trust in a system for the central handling of
securities pursuant to which all securities of any
particular class or series of any issue deposited within the
system may be transferred or pledged by bookkeeping entry,
without physical delivery. The Custodian may appoint,
subject to the approval of the Trustees, one or more
subcustodians.
(b) The Trust shall enter into a written contract with
each Custodian regarding the powers, duties and compensation
of such Custodian with respect to the cash and securities of
the Trust held by such Custodian. Said contract and all
amendments thereto shall be approved by the Trustees.
(c) The Trust shall upon the resignation or inability
to serve of any Custodian or upon the change of any
Custodian:
(i) in case of such resignation or inability to
serve, use its best efforts to obtain a successor
Custodian;
(ii) require that the cash and securities owned
by the Trust be delivered directly to the successor
Custodian; and
(iii) in the event that no successor Custodian
can be found, submit to the shareholders, before
permitting delivery of the cash and securities owned by
the Trust otherwise than to a successor Custodian, the
question whether the Trust shall be liquidated or shall
function without a Custodian.
10.4 Reports to Shareholders. The Trust shall send to each
shareholder of record at least semi-annually a statement of the
condition of the Trust and of the results of its operations,
containing all information required by applicable laws or
regulations.
<PAGE>
10.5 Valuation of Assets. In valuing the portfolio
investments of the Trust, securities for which market quotations
are readily available shall be valued at prices which, in the
opinion of the Trustees or the person designated by the Trustees
to make the determination, most nearly represent the market value
of such securities, and other securities and assets shall be
valued at their fair value as determined by or pursuant to the
direction of the Trustees, which in the case of debt obligations,
commercial paper and repurchase agreements may, but need not, be
on the basis of yields for securities of comparable maturity,
quality and type, or on the basis of amortized cost. Expenses
and liabilities of the Trust shall be accrued each day.
Liabilities may include such reserves for taxes, estimated
accrued expenses and contingencies as the Trustees or their
designates may in their sole discretion deem fair and reasonable
under the circumstances. No accruals shall be made in respect of
taxes on unrealized appreciation of securities owned unless the
Trustees shall otherwise determine.
ARTICLE 11
Shareholders
11.1 Annual Meeting. The annual meeting of the
shareholders of the Trust shall be held on the last Friday in
April in each year or on such other day as may be fixed by the
Trustees. The meeting shall be held at such time as the Chairman
of the Trustees or the Trustees may fix in the notice of the
meeting or otherwise. Purposes for which an annual meeting is to
be held, additional to those prescribed by law or these Bylaws,
may be specified by the Chairman of the Trustees or by the
Trustees.
11.2 Record Dates. For the purposes of determining the
shareholders of any series or class of shares of the Trust who
are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to receive payment of any dividend
or of any other distribution, the Trustees may from time to time
fix a time, which shall be not more than 90 days before the date
of any meeting of shareholders or more than 60 days before the
date of payment of any dividend or of any other distribution, as
the record date for determining the shareholders of such series
or class having the right to notice of and to vote at such
meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of
record on such record date shall have such right notwithstanding
any transfer of shares on the books of the Trust after the record
date; or without fixing such record date the Trustees may for any
such purposes close the register or transfer books for all or
part of such period.
<PAGE>
11.3 Proxies. The placing of a shareholder's name on a
proxy pursuant to telephone or electronically transmitted
instructions obtained pursuant to procedures reasonably designed
to verify that such instructions have been authorized by such
shareholder shall constitute execution of such proxy by or on
behalf of such shareholder.
ARTICLE 12
Amendments to the Bylaws
12.1 General. Except as otherwise expressly stated herein,
these Bylaws may be amended or repealed, in whole or in part, by
a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.
PUTNAM CONVERTIBLE OPPORTUNITIES AND INCOME TRUST
CERTIFICATE
ACCOUNT NO. ________ _____ SHARES
CERTIFICATE NO. ________ CUSIP ______
This certifies __________________________________________________
_________________________________________________________________
_________________________________________________________________
is the owner of ____________________ shares of beneficial
interest in Putnam Convertible Opportunities and Income Trust,
fully paid and nonassessable, the said shares being issued,
received and held under and subject to the terms of and
provisions of the Agreement and Declaration of Trust dated as of
February 23, 1995, establishing Putnam Convertible Opportunities
and Income Trust, and all amendments thereto, copies of which are
on file with the Secretary of State of The Commonwealth of
Massachusetts. The said owner by accepting this certificate
agrees to and is bound by all of the said terms and provisions.
The shares represented hereby are transferable in writing by the
owner thereof in person or by attorney upon surrender of this
certificate to the Trustees properly endorsed for transfer. This
certificate is executed on behalf of the Trustees as Trustees and
not individually and the obligations hereof are not binding upon
any of the Trustees or shareholders individually but are binding
only upon the assets and property of the Trust. This certificate
is not valid unless countersigned by the Investor Servicing
Agent.
In Witness Whereof the Trustees of Putnam Convertible
Opportunities and Income Trust have caused the following
facsimile signatures to be affixed to this certificate.
Dated __________ ___, ______
COUNTERSIGNED:
INVESTOR SERVICING AGENT
BY __________________________
AUTHORIZED SIGNATURE
________________________
FOR THE TRUSTEES
(PORTIONS OF AGREEMENT AND DECLARATION OF TRUST OF
PUTNAM CONVERTIBLE OPPORTUNITIES AND INCOME TRUST
RELATING TO SHAREHOLDERS' RIGHTS)
******
ARTICLE I
Name and Definitions
******
(c) "Shares" means the equal proportionate
transferable units of interest into which the
beneficial interest in the Trust shall be divided
from time to time or, if more than one class or
series of Shares is authorized by the Trustees, the
equal proportionate transferable units into which
each class or series of Shares shall be divided
from time to time;
(d) "Shareholder" means a record owner of Shares;
******
(i) The term "class" or "class of Shares" refers
to the division of Shares into two or more classes
as provided in Article III, Section 1 hereof;
(j) The term "series" or "series of Shares" refers to
the division of Shares representing any class into two
or more series as provided in Article III, Section 1
hereof; and
******
ARTICLE III
Shares
Division of Beneficial Interest
Section 1. The Trustees may, without Shareholder
approval, authorize one or more classes of Shares (which
classes may be divided into two or more series), Shares of
each such class or series having such preferences, voting
powers and special or relative rights or privileges
(including conversion rights, if any) as the Trustees may
determine and as shall be set forth in the Bylaws. The
number of Shares of each class or series authorized shall be
unlimited except as the Bylaws may otherwise provide. The
Trustees may from time to time divide or combine the Shares
of any class or series into a greater or lesser number
without thereby changing the proportionate beneficial
interest in the class or series.
Ownership of Shares
Section 2. The ownership of Shares shall be recorded on
the books of the Trust or a transfer or similar agent. No
certificates certifying the ownership of Shares shall be
issued except as the Trustees may otherwise determine from
time to time. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates,
the transfer of Shares and similar matters. The record books
of the Trust as kept by the Trust or any transfer or similar
agent, as the case may be, shall be conclusive as to who are
the Shareholders of each class or series and as to the number
of Shares of each class or series held from time to time by
each Shareholder.
******
No Preemptive Rights
Section 4. Shareholders shall have no preemptive or
other right to subscribe to any additional Shares or other
securities issued by the Trust.
Status of Shares and Limitation of Personal Liability
Section 5. Shares shall be deemed to be personal
property giving only the rights provided in this Declaration
of Trust or the Bylaws. Every Shareholder by virtue of
having become a Shareholder shall be held to have expressly
assented and agreed to the terms of this Declaration of Trust
and the Bylaws and to have become a party hereto and thereto.
The death of a Shareholder during the continuance of the
Trust shall not operate to terminate the same nor entitle the
representative of any deceased Shareholder to an accounting
or to take any action in court or elsewhere against the Trust
or the Trustees, but only to the rights of said decedent
under this Trust. Ownership of Shares shall not entitle the
Shareholder to any title in or to the whole or any part of
the Trust property or right to call for a partition or
division of the same or for an accounting, nor shall the
ownership of Shares constitute the Shareholders partners.
Neither the Trust nor the Trustees, nor any officer, employee
or agent of the Trust shall have any power to bind personally
any Shareholder, nor except as specifically provided herein
to call upon any Shareholder for the payment of any sum of
money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay.
ARTICLE IV
The Trustees
******
Powers
Section 3. Subject to the provisions of this
Declaration of Trust, the business of the Trust shall be
managed by the Trustees, and they shall have all powers
necessary or convenient to carry out that responsibility.
Without limiting the foregoing, the Trustees may adopt Bylaws
not inconsistent with this Declaration of Trust providing for
the conduct of the business of the Trust and may amend and
repeal them to the extent that such Bylaws do not reserve
that right to the Shareholders of one or more classes or
series. Subject to the voting power of one or more classes
or series of Shares as set forth in the Bylaws, the Trustees
may fill vacancies in or add to their number, and may elect
and remove such officers and appoint and terminate such
agents as they consider appropriate; they may appoint from
their own number, and terminate, any one or more committees
consisting of two or more Trustees, including an executive
committee which may, when the Trustees are not in session,
exercise some or all of the power and authority of the
Trustees as the Trustees may determine; they may employ one
or more custodians of the assets of the Trust and may
authorize such custodians to employ subcustodians and to
deposit all or any part of such assets in a system or systems
for the central handling of securities, retain a transfer
agent or a Shareholder servicing agent, or both, provide for
the distribution of Shares by the Trust, through one or more
principal underwriters or otherwise, set record dates for the
determination of Shareholders with respect to various
matters, and in general delegate such authority as they
consider desirable to any officer of the Trust, to any
committee of the Trustees and to any agent or employee of the
Trust or to any such custodian or underwriter.
******
ARTICLE V
Shareholders' Voting Powers and Meetings
Voting Powers
Section 1. Subject to the voting powers of one or more
classes or series of Shares as set forth in this Declaration
of Trust or in the Bylaws, the Shareholders shall have power
to vote only (i) for the election of Trustees as provided in
Article IV, Section 1, (ii) for the removal of Trustees as
provided in Article IV, Section 1, (iii) with respect to any
Manager as provided in Article IV, Section 6, (iv) with
respect to any termination of this Trust to the extent and as
provided in Article IX, Section 4, (v) with respect to any
merger, consolidation or sale of assets of the Trust to the
extent and as provided in Article IX, Section 5, (vi) with
respect to any conversion of the Trust to the extent and as
provided in Article IX, Section 6, (vii) with respect to any
amendment of this Declaration of Trust to the extent and as
provided in Article IX, Section 9, (viii) to the same extent
as the stockholders of a Massachusetts business corporation
as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or
as a class action on behalf of the Trust or the Shareholders,
and (ix) with respect to such additional matters relating to
the Trust as may be required by this Declaration of Trust,
the Bylaws or any registration of the Trust with the
Securities and Exchange Commission (or any successor agency)
or any state, or as the Trustees may consider necessary or
desirable. Each whole Share shall be entitled to one vote as
to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate
fractional vote. Notwithstanding any other provision of this
Declaration of Trust, on any matter submitted to a vote of
Shareholders, all Shares of the Trust then entitled to vote
shall, except as otherwise provided in the Bylaws, be voted
in the aggregate as a single class without regard to classes
or series of Shares. There shall be no cumulative voting in
the election of Trustees. Shares may be voted in person or
by proxy. A proxy with respect to Shares held in the name of
two or more persons shall be valid if executed by any one of
them unless at or prior to exercise of the proxy the Trust
receives a specific written notice to the contrary from any
one of them. A proxy purporting to be executed by or on
behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of
proving invalidity shall rest on the challenger. Until
Shares of any class or series are issued, the Trustees may
exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws to
be taken by Shareholders as to such class or series.
Voting Power and Meetings
Section 2. There shall be an annual meeting of the
Shareholders in each year beginning in 1996 on the date fixed
in the Bylaws at the office of the Trust in Boston,
Massachusetts, or at such other place as may be designated in
the call thereof, which call shall be made by the Trustees.
In the event that such meeting is not held in any year on the
date fixed in the Bylaws, whether the omission be by
oversight or otherwise, a subsequent special meeting may be
called by the Trustees and held in lieu of the annual meeting
with the same effect as though held on such date. Special
meetings of Shareholders of any or all classes or series may
also be called by the Trustees from time to time for the
purpose of taking action upon any matter requiring the vote
or authority of the Shareholders of such class or series as
herein provided or upon any other matter deemed by the
Trustees to be necessary or desirable. Written notice of any
meeting of Shareholders shall be given or caused to be given
by the Trustees by mailing such notice at least seven days
before such meeting, postage prepaid, stating the time, place
and purpose of the meeting, to each Shareholder entitled to
vote at such meeting at the Shareholder's address as it
appears on the records of the Trust. If the Trustees shall
fail to call or give notice of any meeting of Shareholders
for a period of 30 days after written application by
Shareholders holding at least 25% of the then outstanding
Shares of all classes and series entitled to vote at such
meeting requesting a meeting to be called for a purpose
requiring action by the Shareholders as provided herein or in
the Bylaws, then Shareholders holding at least 25% of the
then outstanding Shares of all classes and series entitled to
vote at such meeting may call and give notice of such
meeting, and thereupon the meeting shall be held in the
manner provided for herein in case of call thereof by the
Trustees. Notice of a meeting need not be given to any
Shareholder if a written waiver of notice, executed by him or
her before or after the meeting, is filed with the records of
the meeting, or to any Shareholder who attends the meeting
without protesting prior thereto or at its commencement the
lack of notice to him or her.
Quorum and Required Vote
Section 3. A majority of Shares entitled to vote on a
particular matter shall be a quorum for the transaction of
business on that matter at a Shareholders' meeting, except
that where the Bylaws require that holders of any class or
series shall vote as an individual class or series, then a
majority of the aggregate number of Shares of that class or
series entitled to vote shall be necessary to constitute a
quorum for the transaction of business by that class or
series. Any lesser number shall be sufficient for
adjournments. Any adjourned session or sessions may be held,
within a reasonable time after the date set for the original
meeting, without the necessity of further notice. Except
when a different vote is required by any provision of this
Declaration of Trust or the Bylaws, a majority of the Shares
voted shall decide any questions and a plurality shall elect
a Trustee, provided that where the Bylaws require that the
holders of any class or series shall vote as an individual
class or series, a majority of the Shares of that class or
series voted on the matter (or a plurality with respect to
the election of a Trustee) shall decide that matter insofar
as that class or series is concerned.
Action by Written Consent
Section 4. Any action taken by Shareholders may be
taken without a meeting if a majority of Shareholders
entitled to vote on the matter (or such different proportion
thereof as shall be required by any express provision of this
Declaration of Trust or the Bylaws) consent to the action in
writing and such written consents are filed with the records
of the meetings of Shareholders. Such consent shall be
treated for all purposes as a vote taken at a meeting of
Shareholders.
Additional Provisions
Section 5. The Bylaws may include further provisions,
not inconsistent with this Declaration of Trust, regarding
Shareholders' voting powers, the conduct of meetings and
related matters.
ARTICLE VI
Distributions
The Trustees may each year, or more frequently if they
so determine, distribute to the Shareholders of each class or
series such amounts as the Trustees may determine, subject to
the preferences and special or relative rights or privileges
of the various classes or series of Shares. Any such
distribution to the Shareholders of a particular class or
series shall be made to said Shareholders pro rata in
proportion to the number of Shares of such class or series
held by each of them. Such distributions shall be made in
cash or Shares or other property or a combination thereof as
determined by the Trustees.
******
ARTICLE VIII
Indemnification
******
Shareholders
Section 4. In case any Shareholder or former
Shareholder shall be held to be personally liable solely by
reason of his or her being or having been a Shareholder and
not because of his or her acts or omissions or for some other
reason, the Shareholder or former Shareholder (or his or her
heirs, executors, administrators or other legal
representatives or, in the case of a corporation or other
entity, its corporate or other general successor) shall be
entitled to be held harmless from and indemnified against all
loss and expense arising from such liability.
ARTICLE IX
Miscellaneous
Trustees, Shareholders, etc. Not Personally Liable; Notice
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust shall look only to
the assets of the Trust for payment under such credit,
contract or claim, and neither the Shareholders nor the
Trustees, nor any of the Trust's officers, employees or
agents, whether past, present or future, shall be personally
liable therefor. Nothing in this Declaration of Trust shall
protect any Trustee against any liability to which such
Trustee would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of the office
of Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officer
or officers shall give notice that this Declaration of Trust
is on file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or
made by or on behalf of the Trust or by them as Trustee or
Trustees or as officer or officers and not individually and
that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding
only upon the assets and property of the Trust, and may
contain such further recital as he or she or they may deem
appropriate, but the omission thereof shall not operate to
bind any Trustee or Trustees or officer or officers or
Shareholder or Shareholders individually.
******
Duration and Termination of Trust
Section 4. Unless terminated as provided herein, the
Trust shall continue without limitation of time. Subject to
the voting powers of one or more classes or series of Shares
as set forth in the Bylaws, the Trust may be terminated at
any time (i) by vote of Shareholders holding at least three-
fourths of the Shares entitled to vote (except if such
termination is recommended by at least three-fourths of the
total number of the Trustees then in office and by at least
three-fourths of the total number of Continuing Trustees then
in office, a Majority Shareholder Vote shall be sufficient
authorization) or (ii) by the Trustees by written notice to
the Shareholders, provided that at least three-fourths of the
total number of Trustees then in office and at least three-
fourths of the total number of Continuing Trustees then in
office have approved such action. Upon termination of the
Trust, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or
anticipated, of the Trust as may be determined by the
Trustees, the Trust shall, in accordance with such procedures
as the Trustees consider appropriate, reduce the remaining
assets to distributable form in cash or shares or other
property, or any combination thereof, and distribute the
proceeds to the Shareholders, ratably according to the number
of Shares held by the several Shareholders on the date of
termination, except to the extent otherwise required or
permitted by the preferences and special or relative rights
or privileges of any classes or series of Shares.
Merger, Consolidation and Sale of Assets
Section 5. The Trust may merge or consolidate with any
other corporation, association, trust or other organization
or may sell, lease or exchange all or substantially all of
its assets, including its good will, upon such terms and
conditions and for such consideration when and as authorized
at any meeting of Shareholders called for the purpose, or may
liquidate or dissolve when and as authorized, by the
affirmative vote of the holders of not less than three-
fourths of the Shares entitled to vote; provided, however,
that if such merger, consolidation, sale, lease, exchange,
liquidation or dissolution is recommended by at least three-
fourths of the total number of Trustees then in office and by
at least three-fourths of the total number of Continuing
Trustees then in office, a Majority Shareholder Vote shall be
sufficient authorization. Nothing contained herein shall be
construed as requiring approval of the Shareholders for any
sale of assets in the ordinary course of business of the
Trust. The provisions of this Section shall be subject to
the voting powers of one or more classes or series of Shares
as set forth in the Bylaws.
Conversion
Section 6. Subject to the voting powers of one or more
classes or series of Shares as set forth in the Bylaws, the
Trust may be converted at any time from a "closed-end
company" to an "open-end company" as those terms are defined
in Section 5(a)(2) and 5(a)(1) of the 1940 Act, respectively,
as in effect on the date of the execution hereof, upon the
approval of such a proposal, together with any necessary
amendments to the Declaration of Trust to permit such a
conversion, by the holders of three-fourths of the Shares
entitled to vote; provided, however, that if such proposal is
recommended by at least three-fourths of the total number of
Trustees then in office and by at least three-fourths of the
total number of Continuing Trustees then in office, such
proposal may be adopted by a Majority Shareholder Vote. Upon
the adoption of such proposal and related amendments by the
Trust's Shareholders as provided above, the Trust shall, upon
complying with any requirements of the 1940 Act and state
law, become an "open-end" investment company. Such
affirmative vote or consent shall be in addition to the vote
or consent of the holders of the Shares otherwise required by
law, the Bylaws or any agreement between the Trust and any
national securities exchange.
******
Amendments
Section 9. Subject to the voting powers of one or more
classes or series of Shares, as set forth in the Bylaws, this
Declaration of Trust may be amended at any time by an
instrument in writing signed by a majority of the then
Trustees (a) when authorized to do so by vote of Shareholders
holding a majority of the Shares entitled to vote, except
that an amendment amending or affecting the provisions of
Section 2(k) of Article I, Section 1 of Article IV, Section
4, 5 or 6 of this Article IX or this sentence shall require
the vote of Shareholders holding three-fourths of the Shares
entitled to vote if such amendment has not been recommended
by at least three-fourths of the total number of Trustees
then in office and by at least three-fourths of the total
number of Continuing Trustees then in office, or (b) without
Shareholder approval as may be necessary or desirable in
order to authorize one or more classes or series of Shares as
provided in Section 1 of Article III. Amendments having the
purpose of changing the name of the Trust or of supplying any
omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision
contained herein shall not require authorization by
Shareholder vote.
******
(PORTIONS OF BYLAWS OF PUTNAM CONVERTIBLE OPPORTUNITES
AND INCOME TRUST RELATING TO SHAREHOLDERS' RIGHTS)
**********
ARTICLE 9
Issuance of Shares and Share Certificates
9.1 Sale of Shares. Except as otherwise determined by the
Trustees, the Trust will issue and sell for cash or securities
from time to time, full and fractional shares of its shares of
beneficial interest, such shares to be issued and sold at a price
of not less than the par value per share, if any, and not less
than the net asset value per share, if any, as from time to time
determined in accordance with the Declaration of Trust and these
Bylaws and, in the case of fractional shares, at a proportionate
reduction in such price. In the case of shares sold for
securities, such securities shall be valued in accordance with
the provisions for determining the value of the assets of the
Trust as stated in the Declaration of Trust and these Bylaws.
The officers of the Trust are severally authorized to take all
such actions as may be necessary or desirable to carry out this
Paragraph 9.1.
9.2 Share Certificates. In lieu of issuing certificates
for shares, the Trustees or the transfer agent may either issue
receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled
to a certificate stating the number of shares owned by him or
her, in such form as shall be prescribed from time to time by the
Trustees. Such certificate shall be signed by the President or a
Vice President and by the Treasurer or an Assistant Treasurer.
Such signatures may be facsimile if the certificate is signed by
a transfer agent or by a registrar. In case any officer who has
signed or whose facsimile signature has been placed on such
certificate shall cease to be such officer before such
certificate is issued, it may be issued by the Trust with the
same effect as if he or she were such officer at the time of its
issue.
9.3 Loss of Certificates. The transfer agent of the Trust,
with the approval of any two officers of the Trust, is authorized
to issue and countersign replacement certificates for the shares
of the Trust which have been lost, stolen or destroyed upon (i)
receipt of an affidavit or affidavits of loss or non-receipt and
of an indemnity agreement executed by the registered holder or
his or her legal representative and supported by an open penalty
surety bond, said agreement and said bond in all cases to be in
form and content satisfactory to and approved by the President or
the Treasurer, or (ii) receipt of such other documents as may be
approved by the Trustees.
9.4 Issuance of New Certificate to Pledgee. A pledgee of
shares transferred as collateral security shall be entitled to a
new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured
thereby. Such new certificate shall express on its face that it
is held as collateral security, and the name of the pledgor shall
be stated thereon, who alone shall be liable as a shareholder and
entitled to vote thereon.
9.5 Discontinuance of Issuance of Certificates. The
Trustees may at any time discontinue the issuance of share
certificates and may, by written notice to each shareholder,
require the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
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10.4 Reports to Shareholders. The Trust shall send to each
shareholder of record at least semi-annually a statement of the
condition of the Trust and of the results of its operations,
containing all information required by applicable laws or
regulations.
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Article 11
Shareholders
11.1 Annual Meeting. The annual meeting of the
shareholders of the Trust shall be held on the last Friday in
April in each year or on such other day as may be fixed by the
Trustees. The meeting shall be held at such time as the Chairman
of the Trustees or the Trustees may fix in the notice of the
meeting or otherwise. Purposes for which an annual meeting is to
be held, additional to those prescribed by law or these Bylaws,
may be specified by the Chairman of the Trustees or by the
Trustees.
11.2 Record Dates. For the purposes of determining the
shareholders of any series or class of shares of the Trust who
are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to receive payment of any dividend
or of any other distribution, the Trustees may from time to time
fix a time, which shall be not more than 90 days before the date
of any meeting of shareholders or more than 60 days before the
date of payment of any dividend or of any other distribution, as
the record date for determining the shareholders of such series
or class having the right to notice of and to vote at such
meeting and any adjournment thereof or the right to receive such
dividend or distribution, and in such case only shareholders of
record on such record date shall have such right notwithstanding
any transfer of shares on the books of the Trust after the record
date; or without fixing such record date the Trustees may for any
such purposes close the register or transfer books for all or
part of such period.
11.3 Proxies. The placing of a shareholder's name on a
proxy pursuant to telephone or electronically transmitted
instructions obtained pursuant to procedures reasonably designed
to verify that such instructions have been authorized by such
shareholder shall constitute execution of such proxy by or on
behalf of such shareholder.
ARTICLE 12
Amendments to the Bylaws
12.1 General. Except as otherwise expressly stated herein,
these Bylaws may be amended or repealed, in whole or in part, by
a majority of the Trustees then in office at any meeting of the
Trustees, or by one or more writings signed by such a majority.